This translation is furnished for information purposes only. The original German text is binding in all respects. Act on the Supervision of Insurance Undertakings 1 (German Insurance Supervision Act, Versicherungsaufsichtsgesetz – VAG) “Ins urance Supervision Act of 1 April 2015 (Federal Law Gazette I page 434), as most recently a mended by Article 2 of the Act of 19 December 2018 (Federal Law Gazette I, page 2672)” Table of Contents Part 1 General provisions Secti on 1 Scope Secti on 2 Schemes governed by public law Secti on 3 Exemptions from the s upervision requirement, authorisation to issue statutory orders Secti on 4 Deci sion as to whether a n undertaking is subject to supervision Secti on 5 Di s cretionary exemption from supervision Secti on 6 Res trictions on the use of terms Secti on 7 Defi nitions Part 2 Provisions governing primary insurance and reinsurance Chapter 1 Business activities Segment 1 Authorisation to ca rry on business activities Secti on 8 Authorisation; separation of lines of business Secti on 9 Appl ication Secti on 10 Scope of a uthorisation Secti on 11 Refusal a nd restriction of a uthorisation Secti on 12 Cha nges to the business plan and to enterprise a greements Secti on 13 Tra nsfers of portfolios Secti on 14 Tra nsformations Secti on 15 Non-i nsurance business Secti on 15a Cons umer mortgage loans; power to issue s tatutory orders Segment 2 Qua lifying holdings Secti on 16 Hol ders of qualifying holdings Secti on 17 Noti fication of qualifying holdings Secti on 18 Prohi bition or restriction of a qualifying holding Secti on 19 Prohi bition of the exercise of voting rights Secti on 20 Audi t of the holder of a qualifying holding Secti on 21 Cooperation with the competent authorities in other member s tates or EEA signatory s tates Secti on 22 Authorisation to issue statutory orders Segment 3 Bus iness organisation Secti on 23 General business organisation requirements; product a pproval process Secti on 24 Requirements for persons who effectively run the undertaking or assume responsibility for other key ta s ks Secti on 25 Remuneration Secti on 26 Ri s k management Secti on 27 Ri s k a nd solvency assessment Secti on 28 Externa l credit ra ting Secti on 29 Internal control s ystem Secti on 30 Internal audit Secti on 31 Actua rial function Secti on 32 Outs ourcing Secti on 33 Appl ication of company law provisions, with the necessary modifications, Secti on 34 Authorisation to issue statutory orders Segment 4 General reporting obligations Subsegment 1 Annual audit Secti on 35 Duti es of the official a uditor Secti on 36 Noti fication by the official auditor to the supervisory a uthority; a udit engagement Secti on 37 Submission to the s upervisory a uthority Secti on 38 Accounting a nd auditing of public law i nsurance undertakings Secti on 39 Authorisation to issue statutory orders Subsegment 2 Report on solvency a nd financial position – Page 2 of 207 – Secti on 40 Sol vency a nd financial position report Secti on 41 Non-disclosure of information Secti on 42 Upda tes to the solvency a nd financial position report Subsegment 3 Information to be provided for supervisory purposes Secti on 43 Duti es to inform; calculations Secti on 43a Reporting requirements for fi nancial stability purposes; power to issue s tatutory orders Secti on 44 Projecti ons Secti on 45 Exemption from reporting obligations Secti on 46 Duti es to inform BaFin Secti on 47 Noti fication requirements Segment 5 Ins urance distribution Secti on 48 Requirements for i nsurance distribution Secti on 48a Di s tribution remuneration and avoidance of conflicts of interest Secti on 48b Prohi bition on the passing on of special allowances and commissions Secti on 48c Pa s s-through provision on crediting customers with commissions i ncluded i n premiums Secti on 49 Li a bility for cancellation Secti on 50 Fee for the mediation of s ubstitutive health i nsurance contracts Secti on 51 Compl aints a bout i nsurance intermediaries Segment 6 Prevention of money l aundering and terrorist financing Secti on 52 Obl i ged undertakings Secti on 53 Internal controls and safeguards Secti on 54 General due diligence requirements relating to beneficiaries Secti on 55 Enha nced due diligence Secti on 56 (Repealed) Segment 7 Cros s -border business activities Subsegment 1 Cros s -border provision of s ervices, branches Secti on 57 Opera tion of insurance business vi a branches or cross-border provision of s ervices – Page 3 of 207 – Secti on 58 Setti ng up a branch Secti on 59 Cros s -border provision of s ervices Secti on 60 Sta tistical information regarding cross-border a ctivities Subsegment 2 Undertakings domiciled i n a member s tate of the European Union or a nother s ignatory s tate to the Agreement on the European Economic Area (EEA) Secti on 61 Acti vi ties via a branch or cross-border provision of services Secti on 62 Supervision of business a ctivities Secti on 63 Tra nsfers of portfolios Secti on 64 Ll oyd's underwriters Secti on 65 Bra nch Secti on 66 Cros s -border provision of s ervices; co-insurance Subsegment 3 Undertakings with their registered office outs ide of the European Economic Area Secti on 67 Authorisation; separation of lines of business Secti on 68 Bra nch; authorised agent Secti on 69 Appl ication; procedure Secti on 70 Rel ief measures for undertakings that are already a uthorised i n another member state or EEA signatory s ta te Secti on 71 Revoca tion of a uthorisation Secti on 72 Ins urance for risks in Germany Secti on 73 Portfol io tra nsfer Chapter 2 Financial adequacy Segment 1 Sol vency s tatement Secti on 74 As s essment of the assets and l iabilities Secti on 75 General regulations for the recognition of technical provisions Secti on 76 Va l ue of the technical provisions Secti on 77 Bes t estimate Secti on 78 Ri s k margin Secti on 79 General principles for the calculation of the technical provisions Secti on 80 Ma tchi ng adjustment to the relevant risk-free interest rate term structure Secti on 81 Ca l culation of the matching adjustment – Page 4 of 207 – Secti on 82 Vol atility adjustment Secti on 83 Technical i nformation to be ta ken into account Secti on 84 Addi tional circumstances to be considered in the calculation of the technical provisions Secti on 85 Fi nancial guarantees a nd contractual options in i nsurance contracts Secti on 86 Recoverables from reinsurance contracts and in relation to s pecial purpose entities (SPEs) Secti on 87 Compa rison with empirical data Secti on 88 Regulatory powers of the supervisory a uthority related to technical provisions; a uthorisation to issue s ta tutory orders Segment 2 Sol vency requirements Subsegment 1 Determination of own funds Secti on 89 Own funds Secti on 90 Approva l for a ncillary own funds Secti on 91 Cl a ssification of the own fund components Secti on 92 Cri teri a for classification Secti on 93 Cl a ssification of the own fund components Secti on 94 Own funds for the purposes of compliance with the s olvency ca pital requirement Secti on 95 Own funds for the purposes of compliance with the minimum ca pital requirement Subsegment 2 Sol vency ca pital requirement Secti on 96 As certainment of the s olvency ca pital requirement Secti on 97 Ca l culation of the solvency ca pital requirement Secti on 98 Frequency of calculation Secti on 99 Structure of the s tandard formula Secti on 100 Des ign of the basic solvency capital requirement Secti on 101 Non-life underwriting risk module Secti on 102 Li fe underwriting risk module Secti on 103 Hea lth underwriting risk module Secti on 104 Ma rket risk module Secti on 105 Counterparty default risk module Secti on 106 Equi ty ri sk module Secti on 107 Ca pi tal requirement for operational risk Secti on 108 Adjus tment for the loss-absorbing ca pacity of technical provisions a nd deferred taxes Secti on 109 Devi ations from the standard formula Secti on 110 Si gnificant deviations from the assumptions underlying the standard formula calculation – Page 5 of 207 – Subsegment 3 Internal models Secti on 111 Us e of internal models Secti on 112 Internal models in the form of partial internal models Secti on 113 Res ponsibility of the management board; i nvolvement of third parties Secti on 114 Non-compliance with the requirements for the internal model Secti on 115 Us a ge test Secti on 116 Sta tistical quality s tandards for probability distribution forecasts Secti on 117 Other s tatistical quality s tandards Secti on 118 Ca l ibration standards Secti on 119 Profi t a nd loss attribution Secti on 120 Va l idation standards Secti on 121 Documentation s tandards Subsegment 4 Mi ni mum capital requirement Secti on 122 Determining the minimum ca pital requirement; a uthorisation to issue statutory orders Secti on 123 Ca l culation frequency; reporting obligations Segment 3 Investments; guarantee assets Secti on 124 Investment principles Secti on 125 Gua rantee assets Secti on 126 Register of assets Secti on 127 Addi tions to guarantee assets Secti on 128 Gua rantee asset trustee Secti on 129 Protecti ng the guarantee assets Secti on 130 Wi thdrawals from the guarantee assets Secti on 131 Authorisation to issue statutory orders Segment 4 Ins urance undertakings i n s pecial situations Secti on 132 Identification a nd notification of a deteriorating fi nancial position Secti on 133 Ina dequate level of technical provisions Secti on 134 Non-compliance with the solvency ca pital requirement Secti on 135 Non-compliance with the minimum ca pital requirement – Page 6 of 207 – Secti on 136 Recovery plan and finance scheme Secti on 137 Progressive deterioration i n solvency Chapter 3 Special regulations for individual classes of insurance Segment 1 Li fe i nsurance Secti on 138 Premi um calculation i n life i nsurance; equal treatment Secti on 139 Profi t participation Secti on 140 Provi s ion for bonuses Secti on 141 Appointed actuary i n life insurance Secti on 142 Trus tees i n life insurance Secti on 143 Special notification obligations in life insurance Secti on 144 Information about occupational retirement provision Secti on 145 Authorisation to issue statutory orders Segment 2 Hea lth insurance Secti on 146 Subs titutive health insurance Secti on 147 Other health insurance Secti on 148 Long-term ca re insurance Secti on 149 Premi um supplement i n substitutive health insurance Secti on 150 Credi t for provision for increasing age; direct credit Secti on 151 Profi t participation for the insured Secti on 152 Ba s ic tariff Secti on 153 Ha rdship ta riff Secti on 154 Ri s k equalisation Secti on 155 Premi um adjustments Secti on 156 Appointed actuary i n health insurance Secti on 157 Trus tees i n health i nsurance Secti on 158 Special notification obligations in health insurance; benefits i n the basic and hardship tariff Secti on 159 Sta tistical data Secti on 160 Authorisation to issue statutory orders Segment 3 Other non-life i nsurance Secti on 161 Acci dent insurance with premium refunds Secti on 162 Premi um reserve for a nnuity obligations i n third-party liability a nd accident i nsurance – Page 7 of 207 – Secti on 163 Cl a ims representatives in motor vehicle liability i nsurance Secti on 164 Los s adjustment i n legal expenses insurance Segment 4 Rei nsurance Secti on 165 Run-off in reinsurance undertakings Secti on 166 Portfol io tra nsfers; transformations Secti on 167 Fi nancial reinsurance Secti on 168 Special purpose i nsurance companies Secti on 169 Rei nsurance undertakings domiciled in another member s tate or EEA s ignatory state Secti on 170 Authorisation to issue statutory orders Chapter 4 Mutual societies Secti on 171 Lega l personality Secti on 172 Appl ication of the German Commercial Code Secti on 173 Arti cl es of association Secti on 174 Compa ny name Secti on 175 Li a bilities Secti on 176 Membership Secti on 177 Equa l treatment Secti on 178 Ini tial fund Secti on 179 Contri butions Secti on 180 Li a bility to pay contributions of former or s ubsequent members Secti on 181 Prohi bition of setting-off Secti on 182 Ca l l for cost allocations or s upplementary contributions Secti on 183 Publ ication of notices Secti on 184 Governing bodies Secti on 185 Commercial register a pplication Secti on 186 Registration documents Secti on 187 Entry i n the commercial register Secti on 188 Ma na gement board Secti on 189 Supervisory board Secti on 190 Li a bility for damages Secti on 191 Senior representative body Secti on 192 Mi nority ri ghts Secti on 193 Los s reserve Secti on 194 Us e of surplus Secti on 195 Amendments to the articles of association – Page 8 of 207 – Secti on 196 Registering amendments to the a rticles of association Secti on 197 Amendments to the general policy conditions Secti on 198 Di ssolution of the society Secti on 199 Di ssolution resolution Secti on 200 Portfol io tra nsfer Secti on 201 Los s of membership Secti on 202 Registration of dissolution Secti on 203 Run-off Secti on 204 Run-off procedure Secti on 205 Repayment of the initial fund; distribution of assets Secti on 206 Conti nuation of the s ociety Secti on 207 Li a bility to pay contributions during i nsolvency proceedings Secti on 208 Ra nking of creditor claims in insolvency Secti on 209 Supplementary contributions and cost a llocations in insolvency proceedings Secti on 210 Sma ll mutual associations Chapter 5 Small insurance undertakings and funeral expenses funds Segment 1 Sma ll insurance undertakings Secti on 211 Sma ll insurance undertakings Secti on 212 Appl icable provisions Secti on 213 Sol vency a nd minimum ca pital requirement Secti on 214 Own funds Secti on 215 Investment principles for guarantee assets Secti on 216 Noti fication requirements Secti on 217 Authorisation to issue statutory orders Segment 2 Funeral expenses funds Secti on 218 Funeral expenses funds Secti on 219 Appl icable provisions Secti on 220 Authorisation to issue statutory orders Part 3 Guarantee schemes Secti on 221 Compulsory membership – Page 9 of 207 – Secti on 222 Ma i ntenance of i nsurance contracts Secti on 223 Gua rantee s chemes Secti on 224 As s ignment of duties a nd powers to persons under priva te law Secti on 225 Supervision Secti on 226 Fi nancing Secti on 227 Gua rantee s cheme a ccounting Secti on 228 Duty to cooperate Secti on 229 Excl usion Secti on 230 Duty of confidentiality Secti on 231 Enforcement Part 4 Institutions for occupational retirement provision Chapter 1 Pensionskassen Segment 1 Di fferentiation versus other l ife i nsurance undertakings Secti on 232 Pensionskassen Secti on 233 Regulated Pensionskassen Secti on 234 Special requirements relating to business activities that do not relate to governance Segment 2 Special requirements rel ating to governance Secti on 234a Supplementary general requirements Secti on 234b Special requirements relating to key functions Secti on 234c Ri s k management Secti on 234d Own-ri sk assessment Secti on 234e Supplementary requirements relating to outsourcing Segment 3 Special requirements relating to financial adequacy Secti on 234f General Secti on 234g Sol vency ca pital requirement, minimum capital requirement and own funds Secti on 234h Supplementary general investment rules Secti on 234i Investment policy Secti on 234j Special requirements relating to guarantee assets – Page 10 of 207 – Segment 4 Information required to be gi ven to members a nd beneficiaries Secti on 234k Requirements relating to the i nformation to be given Secti on 234l General i nformation on a pension scheme Secti on 234m Information to be provided to members at the beginning of the pension a rrangement Secti on 234n Information to be provided before enrolment in the pension scheme Secti on 234o Information to be provided to members during the pre-retirement phase Secti on 234p Information to be given to beneficiaries Segment 5 Authorisation to issue statutory orders Secti on 235 Authorisation to issue statutory orders regarding financial supervision Secti on 235a Power to i ssue statutory orders on the information requirements Chapter 2 Pensionsfonds Secti on 236 Pensionsfonds Secti on 237 Appl icable provisions Secti on 238 Fi nancial adequacy Secti on 239 Investments Secti on 240 Authorisation to issue statutory orders Chapter 3 Cross-border business activities of institutions for occupational retirement provision and cross-border transfer of portfolios Secti on 241 Cros s -border business activities Secti on 242 Cros s -border business activities of Pensionskassen and Pensionsfonds Secti on 243 Cros s -border business activities of institutions whose home country is a nother member s tate or EEA s i gnatory s tate Secti on 243a Tra nsfer of portfolios to a Pensionskasse or Pensionsfonds Secti on 243b Tra nsfer of portfolios to a n institution whose home country i s another member state or EEA signatory s ta te Secti on 244 (Repealed) Part 4a – Page 11 of 207 – Pure defined contribution schemes in occupational retirement provision Secti on 244a Scope Secti on 234b Obl i gations Secti on 234c Gua rantee assets Secti on 234d Authorisation to issue statutory orders Part 5 Groups Chapter 1 Supervision of insurance undertakings in a group Secti on 245 Appl ication of group-wide s upervision Secti on 246 Scope of group-wide supervision Secti on 247 Ul ti mate parent undertaking at the l evel of the member state or EEA signatory s tate Secti on 248 Ul ti mate parent undertaking at national level Secti on 249 Pa rent undertakings covering several member states or EEA signatory s tates Chapter 2 Financial position Segment 1 Group s olvency Secti on 250 Supervision of group solvency Secti on 251 Frequency of calculation Secti on 252 Determining the method Secti on 253 Incl usion of the proportional share Secti on 254 El i mination of double use of eligible own funds Secti on 255 El i mination of i ntra-group creation of capital Secti on 256 Affi liated i nsurance undertakings Secti on 257 Intermediate i nsurance holding companies Secti on 258 Affi liated third country insurance undertakings Secti on 259 Affi liated credit institutions, investment firms a nd financial i nstitutions Secti on 260 Non-availability of the necessary information Secti on 261 Accounting consolidation method Secti on 262 Group i nternal model Secti on 263 Ca pi tal a dd-on for a group undertaking Secti on 264 Ca pi tal a dd-on for the group Secti on 265 Deduction and aggregation method Secti on 266 Group s olvency of a n insurance holding company or a mixed financial holding company – Page 12 of 207 – Secti on 267 Condi tions applicable to s ubsidiaries of a n insurance undertaking Secti on 268 Supervision in the case of centralised risk management Secti on 269 Determination of the solvency ca pital requirement for a subsidiary Secti on 270 Non-compliance with the capital requirement for a s ubsidiary Secti on 271 End of derogations for a s ubsidiary Secti on 272 Subsidiaries of an insurance holding company or a mixed financial holding company Segment 2 Ri s k concentration a nd i ntra-group transactions Secti on 273 Supervision of risk concentration Secti on 274 Supervision of intra-group tra nsactions Segment 3 Governance, reporting requirements Secti on 275 Supervision of the s ystem of governance Secti on 276 Excha nge of i nformation Secti on 277 Report on group s olvency a nd financial position Secti on 278 Group s tructure Chapter 3 Measures to facilitate group-wide supervision Secti on 279 Res ponsibility for group-wide supervision Secti on 280 Determining the group s upervisory a uthority Secti on 281 Duti es and powers of the group supervisory a uthority Secti on 282 Exemption from the reporting requirement a t group level Secti on 283 Col l ege of supervisors Secti on 284 Cooperation in group-wide supervision Secti on 285 Cons ultation between supervisory authorities Secti on 286 Cooperation in the ca se of affiliated undertakings Secti on 287 Effecti ve enforcement of regulatory measures Chapter 4 Third countries Secti on 288 Pa rent undertakings domiciled in a third country Secti on 289 Equi valence Secti on 290 Abs ence of equivalence – Page 13 of 207 – Secti on 291 Level of s upervision Chapter 5 Insurance holding companies and mixed financial holding companies Secti on 292 Intra -group tra nsactions Secti on 293 Supervision Part 6 Supervision: duties and general powers, organisation Chapter 1 Duties and general provisions Secti on 294 Duti es Secti on 295 Competent a uthority i n relation to EU Regulations Secti on 296 Pri nci ple of proportionality Secti on 297 Di s cretion Secti on 298 General supervisory powers Secti on 299 Extension of supervisory powers Secti on 300 Amendment of the business plan Secti on 301 Ca pi tal a dd-on Secti on 302 Prohi bition of participating interests Secti on 303 Di s missal of people with key ta sks, warnings Secti on 303a Di s qualification of natural persons Secti on 304 Revoca tion of a uthorisation Secti on 305 Survey, duty of disclosure Secti on 305a Powers and measures against supervised contributors a nd users of indices within the meaning of Regulation (EU) 2016/1011 Secti on 306 Entry a nd examination of premises; asset seizure Secti on 307 Special commissioner Secti on 308 Una uthorised insurance tra nsactions Secti on 308a Mea sures relating to PRIIP manufacturers and sellers Secti on 308b Mea sures relating to mortgage l ending; power to issue s tatutory orders Secti on 308c i n the case of i nfringements of Regulation (EU) 2017/2402 Secti on 309 Duty of confidentiality Secti on 310 Anci llary provisions; exclusion of suspensory effect Chapter 2 Security measures – Page 14 of 207 – Secti on 311 Noti fication of i nsolvency Secti on 312 Opening of i nsolvency proceedings Secti on 313 Provi s ion of information to creditors Secti on 314 Prohi bition of payments; reduction of benefits Secti on 315 Trea tment of insurance-related cl aims Secti on 316 La pse of certain i nsurance contracts Secti on 317 Gua rdian i n i nsolvency Chapter 3 Published information Secti on 318 Publ ished i nformation Secti on 319 Publ ication of measures Secti on 319a Publ ication of measures and penalties due to i nfringements of Regulation (EU) No. 2015/2365, Regulation (EU) 2016/1011 a nd Regulation (EU) 2017/2402 Chapter 4 Remit Segment 1 Federal Supervision Secti on 320 Federal Financial Supervisory Authority (BaFin) Secti on 321 Tra nsfer of supervision to a state supervisory authority Secti on 322 Tra nsfer of supervision to BaFin Secti on 323 Procedure Secti on 324 Cooperation between s upervisory a uthorities Secti on 325 Ins urance Advisory Council Segment 2 Supervision in the European Economic Area Secti on 326 General principles for cooperation between the supervisory authorities Secti on 327 Cooperation in local audits Secti on 328 Noti fications Secti on 329 Cooperation with the European Insurance and Occupational Pensions Authority Secti on 330 Noti fications to the European Commission Part 7 Regulations regarding criminal penalties and administrative fines Secti on 331 Cri mi nal penalties – Page 15 of 207 – Secti on 332 Admi nistrative fines Secti on 333 Competent a dministrative authority Secti on 334 Invol vement of the supervisory a uthority a nd notifications i n criminal matters Part 8 Transitional and concluding provisions Secti on 335 Conti nuation of business operations Secti on 336 Conti nued a pplication of approved business plans in life i nsurance Secti on 337 Trus tees i n health i nsurance Secti on 338 Loa ding in health insurance Secti on 339 Provi s ions relating to accident i nsurance sub-portfolios Secti on 340 Gra ndfathering provision for reinsurance undertakings Secti on 341 Report on solvency a nd financial position Secti on 342 Compl iance with the minimum capital requirement Secti on 343 Di s continuation of business operations Secti on 344 Ti me limits for s atisfying reporting a nd disclosure requirements Secti on 345 Own funds Secti on 346 Investments i n credit securitisations Secti on 347 Sta ndard parameters Secti on 348 Sol vency ca pital requirement Secti on 349 Pa rti al internal model for a subgroup Secti on 350 Group provisions Secti on 351 Ri s k-free i nterest rates Secti on 352 Technical provisions Secti on 353 Pl a n concerning the gradual introduction of transitional measures for risk-free interest rates and technical provisions Secti on 354 Revi ew of l ong-term guarantees and measures against equity ri sk Secti on 355 Deci sions by the supervisory a uthority resulting from the entry i nto force of this Act Secti on 356 Tra nsitional provision on s ection 35 (1) s entence 1 numbers 5 to 8 Annex 1 Cl a ssification of risks by class of i nsurance Annex 2 Des cription of authorisations granted for more than one cl ass of i nsurance Annex 3 Sta ndard formula for calculating the s olvency ca pital requirement (SCR) Part 1 General provisions Section 1 Scope (1) The following a re subject to supervision under this Act: – Page 16 of 207 – 1. i ns urance undertakings as defined i n section 7 nos. 33 a nd 34, 2. i ns urance holding companies as defined in section 7 no. 31 a nd undertakings within the meaning of s ection 293 (4), 3. s pecial purpose i nsurance companies within the meaning of section 168; 4. gua rantee s chemes within the meaning of section 223, a nd 5. pension funds within the meaning of section 236 (1). (2) 1The businesses listed under nos. 22 to 24 of Annex 1 do not fall within the scope of this Act unless operated by i ns urance undertakings authorised for one of the cl asses of insurance specified i n nos. 19 to 21 of Annex 1; i n s uch cases, thes e businesses a re treated i n the same way as life insurance business. 2Ca pital redemption operations (no. 23 of Annex 1) refer to a ny business operations in which an a ctuarial calculation is used to determine in a dvance the duration a nd a mount of s ingle or regular premiums and the commitments assumed by the operation. 3Business within the meaning of no. 24 of Annex 1 refers to the a dministration of s chemes that pay death or s urvival benefits or that provide benefits in the event of discontinuation of employment or reduction of earning capacity; this business includes the investment and ma nagement of the assets. 4In the case of business referred to i n sentence 3, the insurance undertakings may, i n connection with the administration of such business, also issue guarantees that the capital will be protecte d and that a mi nimum ra te of return will be achieved. (3) 1For ci vi l service or church insurance undertakings governed by public law that exclusively provide retirement and i nva lidity benefits or benefits for s urviving dependants, only s ection 12 (1), s ections 13, 37 (1), s ection 38 (1), s ections 39, 47 no. 12, s ecti ons 294 to 298, 300, 302, 305 to 307, s ections 310 to 312 a nd section 314 a pply. 2For insurance undertakings established under federal state law a nd s ubject to supervision at state level, alternative provisions may be s pecified under federal s tate law. (4) 1Secti on 12 (1), s ections 13, 37 (1), s ection 38 (1), s ection 39, a nd s ections 294 to 298, 300, 302, 305 to 307, 310, 312 a nd 314 a pply, wi th the necessary modifications, to i nstitutions or s chemes of the nature specified in section 140 (1) of the Seventh Book of the German Social Security Code (Sozialgesetzbuch – SGB). 2Resolutions passed by the representatives’ meeting relating to these institutions or schemes, or to their a rticles of association or business plans, require the approval of the supervisory a uthority; s ection 8 (1), s ection 9 (1) to (4) a nd section 11 a pply i n this regard, wi th the necessary modifications. Section 2 Schemes governed by public law (1) 1If s chemes governed by public law, including the legally dependent l ocal a uthority a nd church supplementary benefit funds (Zusatzversorgungskassen) and the Federal and Länder Pension Institution (Versorgungsanstalt des Bundes und der Länder), offer retirement provisions by wa y of voluntary i nsurance, a ri ng-fenced fund must be established for the a ssets a nd liabilities relating to this business. 2The liabilities a nd assets must be managed and organised separately from the other business of the scheme, without the possibility of transfer. 3The provisions of this Act governing the bus iness of “Pensionskassen” must be applied, with the necessary modifications, to the ring-fenced fund; to this extent, the s chemes are also subject to insurance supervision. (2) For s chemes governed by public law established under federal s tate law and subject to s upervision at s tate l evel, a l ternative provisions may be s pecified under federal s tate law. Section 3 Exemptions from the supervision requirement, authorisation to issue statutory orders (1) The following a re not subject to s upervision under this Act: 1. bodies of persons that grant their members benefits without the members having a legal cl aim to such benefits, i n pa rti cular s upport funds and support structures operated by professional associations; 2. “Unterstützungskassen” (s upport funds) established by guilds under the German Skilled Trades Regulation (Handwerksordnung – HwO); – Page 17 of 207 – 3. confederations, with legal ca pacity, of chambers of commerce and industry wi th trade associations if the purpose o f s uch confederations is to settle their members’ pension liabilities arising from pension commitments by means of a pa y-as-you-go s ystem and if such confederations were gra nted their s tatus as l egal entities by the government; 4. confederations, without l egal capacity, of local authorities if their purpose is to settle, by means of a pay-as-you-go s ys tem, the cost of the following l osses resulting from risks assumed by their members or by undertakings operated to provi de public services, in which one or several local government members or – i n the case of b) – other regional or l oca l authorities hold an i nterest of a t least 50 per cent: a ) l osses for which the members or their staff may be held answerable by third parties on the basis of the statutory l i ability provisions, b) l osses resulting from holding motor vehicles, c) benefits paid under the l ocal government accident compensation scheme; 5. corpora te bodies a nd i nstitutions governed by public law s ubject to an i nsurance relationship i mposed directly b y l a w or arising as a result of statutory obligation; 6. hea lthcare schemes governed by public law operated by the Federal Railways Fund ( Bundeseisenbahnvermögen) and the Pos tal Workers Health Insurance Fund (Postbeamtenkrankenkasse); 7. the Federal and Länder Pension Institution (Versorgungsanstalt des Bundes und der Länder), Deutsche Rentenversicherung Knappschaft-Bahn-See (part of the German s tatutory pension i nsurance scheme) a nd the Deutsche Bundespost Pension Institution (Versorgungsanstalt der Deutschen Bundespost); 8. undertakings operating within narrow territorial limits that, in return for payment of a lump s um, provide benefits s hould a contingent event materialise, provided such benefits do not take the form of cash payments, assumption of res ponsibility for costs or i ndemnification of third parties. (2) The Federal Ministry of Finance is authorised to determine, by way of a s tatutory order not requiring the consent of the Bundesrat, that all the insurance business or certain kinds of insurance business with the group of persons specified under Article I (1) (a) to (c) of the Agreement between the Pa rties to the North Atlantic Treaty regarding the Status of thei r Forces dated 19 June 1951 (Federal Law Gazette 1961 II, pages 1183, 1190) i s or are exempted, either i n full or i n pa rt, from the provisions of this Act, provided that this does not, within the scope of this Act, prejudice the interests of other i nsured or the undertaking’s ability to fulfil i ts obligations under i ts other insurance contra cts at all ti mes. Section 4 Decision as to whether an undertaking is subject to supervision 1The s upervisory authority decides whether a n undertaking is subject to supervision. 2This decision is binding on the a dministrative authorities. 3A decision made by a court or a n a dministrative a uthority before 1 April 1931 does not precl ude a ny new decision made by the s upervisory a uthority. Section 5 Discretionary exemption from supervision (1) 1The s upervisory a uthority may exempt mutual societies that are not required to be registered from ongoing s upervision under this Act i f the nature of their business a nd other ci rcumstances are s uch that supervision i s deemed to be unnecessary to s afeguard the interests of the i nsureds. 2In particular, these requirements may be met by funeral expenses funds a nd by s ocieties whose business is limited to a specific geographical area, that have a small number of members and that receive minimal premium income. 3The exemption must be revoked if the s upervisory a uthority becomes a ware that the fund or s ociety concerned no longer s atisfies the criteria for exemption. (2) If the s upervisory a uthority has granted an exemption in accordance with subsection (1) above, the provisions of s ections 12, 13, 178 (4), s ections 193, 213 to 217, 220 a nd 234j (1) a nd (3), s ections 234g a nd 235, part 2 chapter 2, part – Page 18 of 207 – 3 a nd part 6, wi th the exception of sections 305, 306 a nd 310, do not a pply i f a ncillary exemption provisions or the rights of the s upervisory authority s pecified i n sections 305 a nd 306 a re to be enforced; a ny tra nsformation under the German Tra nsformation Act (Umwandlungsgesetz – UmwG) is prohibited. (3) The Federal Ministry of Finance is authorised to exempt, by way of a s tatutory order not requiring the consent of the Bundesrat, i nsurance undertakings governed by public law within the meaning of section 1 (3) a nd schemes within the mea ning of s ection 2 that a re not subject to s upervision at s tate l evel from supervision under this Act i f, taking i nto a ccount the s tatutory provisions for the establishment of s uch undertakings or the agreements existing between the undertakings and their s ponsoring a gencies, supervision is deemed unnecessary to s afeguard the interests of the i ns ured. Section 6 Restrictions on the use of terms (1) 1The terms “Versicherung”, “Versicherer”, “Assekuranz”, “Rückversicherung”, “Rückversicherer” or their equivalents i n a foreign language, or terms in which these words appear, may only be used i n the registered name, as an a ddition to the registered name, to describe the purpose of the business or for advertising purposes, by insurance undertakings wi thin the meaning of s ection 1 (1) a nd (3) a nd by their associations, unless otherwise provided for by legislation. 2Ins urance intermediaries may only use the terms in s entence 1 a bove with an a ddition clarifying the activity as a n i ntermediary. (2) 1In ca ses of doubt, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht; hereinafter referred to as “BaFin”) decides i f a n undertaking is permitted to use the terms s pecified i n subsection (1) a bove. 2It must communicate its decisions to the Registration Court. (3) In Registration Court proceedings relating to the registration or a mendment of the legal status or registere d name of a n undertaking that is using terms that a re unlawful under subsection (1) a bove, BaFin has the right to file applications a nd l odge appeals as permitted by the German Act on Proceedings in Family Ma tters and Ma tters Relating to Voluntary Juri s diction (Gesetz über das Verfahren in Familiensachen und in den Angelegenheiten der freiwilligen Gerichtsbarkeit – Fa mFG). (4) 1If a n undertaking uses a registered name, or a n addition thereto, that is unlawful under s ubsection (1) above, or a n undertaking makes use of s uch an unlawful term when describing the purpose of the business, the Registration Court mus t officially ca ncel and delete that registered name, a ddition or term designating the purpose of the business; s ection 395 of the German Act on Proceedings in Family Ma tters and Matters Relating to Voluntary Jurisdiction a pplies, wi th the necessary modifications. 2The undertaking must be required to discontinue the use of the registered name or a ddition thereto or term designating the purpose of the business by the i mposition of an administrative fine; section 392 of the Act on Proceedings in Family Ma tters and Matters Relating to Voluntary Jurisdiction a pplies, with the necessary modi fications. Section 7 Definitions The following definitions a pply i n this Act: 1. Supervisory a uthority: the authority or a uthorities responsible for s upervision of the undertakings s pecified i n s ection 1 (1) on the basis of sections 320 to 322 of this Act or on the basis of other legal or a dministrative provi sions. 2. Outs ourcing: an agreement of any ki nd between a n insurance undertaking and a service provider on the basis of whi ch the service provider, directly or through further outsourcing, carries out a process, service or a ctivity that woul d otherwise be carried out by the insurance undertaking i tself; the s ervice provider may or ma y not be an undertaking s ubject to supervision. 3. Qua lifying holding: a direct or indirect holding equivalent to at l east 10 per cent of the capital or voting rights of a n undertaking or other a rrangement in which significant influence ca n be exercised over the management of the undertaking concerned; in connection with the calculation of the relevant proportion of voting rights, s ection 33 (1) i n conjunction with a s tatutory order under subsection (5), section 34 (1) a nd 2, s ection 35 (1) to (3) i n conjunction with a statutory order under subsection (6) a nd section 36 of the German Securities Trading Act (Wertpapierhandelsgesetz) apply, with the necessary modifications; voti ng ri ghts or s hares i n the capital that – Page 19 of 207 – i nvestment s ervices enterprises or credit i nstitutions hold as part of underwriting business i n accordance with s ection 1 (1) s entence 2 no. 10 of the German Banking Act (Kreditwesengesetz) are not taken into a ccount provi ded that these ri ghts are not exercised or otherwise used to intervene in the management of the i ssuer and a re s old within one year of the date of acquisition. 4. Pa rti cipating undertaking: a parent undertaking or other undertaking that holds a holding or that is affili ated wi th a nother undertaking by vi rtue of a relationship as described in section 271 (1) of the German Commercial Code (Handelsgesetzbuch – HGB); holdings for the purposes of this definition a re holdings equivalent to at least 20 per cent of the voting ri ghts or ca pital of a n undertaking; for the purposes of s upervision under sections 245 to 287, a holding is also deemed to i nclude a direct or i ndirect holding of voting ri ghts or ca pital of an undertaking over which the holder effectively exercises significant influence in the opinion of the supervisory a uthorities: for the purposes of supervision under sections 245 to 287, a pa rticipating undertaking is also an undertaking that forms part of a horizontal corporate group within the meaning of number 15. 5. Di versification effects: a reduction i n the potential ri sk faced by i nsurance undertakings and groups as a result of the di versification of business a ctivi ties; such diversification means that the negative impact from one risk ca n be offset by a more favourable impact from another risk where the correlation between the ri sks involved is low. 6. Thi rd country: a ny country that is not a member s tate or EEA signatory s tate within the meaning of no. 22; a qua si-governmental entity with independent regulatory po wers is also deemed to be a third country, provided the s tipulations under European Union law concerning the freedom of movement, the right of establishment a nd the freedom to provi de services do not apply. 7. Cl os e links: a situation in which at l east two natural or legal persons are l inked by control or participation with ea ch other as a result of a holding or control relationship, or a s ituation in which at least two natural or l egal pers ons are permanently linked to the same person by a control relationship. 8. Externa l rating agency: a rating agency a pproved or certified in accordance with Regulation (EC) No. 1060/2009 of the European Parliament a nd of the Council of 16 September 2009 on credit rating agencies (OJ L 302 of 17 November 2009, page 1), as most recently amended by Regulation (EU) No. 462/2013 (OJ L 146 of 31 Ma y 2013, pa ge 1), or a central bank that issues ratings and is exempted from the provisions of the a forementioned Regulation. 9. Functi on: a n internal ca pacity wi thin a business organisation that assumes responsibility for certain practical ta s ks; key functions include: a ) the i ndependent risk control function, b) the compliance function, c) the i nternal a udit function, d) the a ctuarial function. 10. Mi xed financial holding company: a parent undertaking that is not a supervised undertaking in a financial congl omerate within the meaning of section 2 (1) of the German Supervision of Financial Conglomerates Act (Finanzkonglomerate-Aufsichtsgesetz – FKAG) but that, together with its subsidiaries, of which at least one is a s upervised undertaking i n a financial conglomerate with a registered office in Germany or i n another member s ta te or EEA signatory s tate, and with other undertakings forms a financial conglomerate. 11. Mi xed-activity i nsurance holding company: a parent undertaking a ) tha t i s not an insurance undertaking, a third country i nsurance undertaking, a n insurance holding company wi th the meaning of no. 31 or a mixed financial holding company within the meaning of no. 10 a nd b) whos e subsidiaries include at least one insurance undertaking. 12. Fundamental spread: the s pread decided upon and published a t least on a quarterly basis by the European Ins urance and Occupational Pensions Authority concerning each relevant duration, credit q uality and asset cl ass for the ca lculation of the matching adjustment as specified in Arti cle 77e (1b) of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up a nd pursuit of the business of i ns urance and reinsurance (Solvency II) (OJ L 335 of 17 December 2009, pa ge 1), a s most recently a mended by Di rective 2014/51/EU (OJ L153 of 22 Ma y 2014, pa ge 1). 13. Group: a combination of undertakings that – Page 20 of 207 – a ) compri ses a participating undertaking, i ts subsidiaries a nd undertakings in which the participating undertaking or i ts subsidiaries hold a holding and undertakings that form part of a horizontal corporate group as defined in no. 15, or b) i s based on the establishment of contractual or other s trong, sustainable financial relationships between all thes e undertakings a nd ca n include mutual or similar s ocieties provi ded that aa) one of these undertakings exercises, by means of central coordination, control over the decisions of a l l the undertakings in the group, i ncluding financial decisions; a nd bb) for the purposes of this Act, the prior consent of the group’s s upervisory a uthority is required before s uch relationships can be established or dissolved; the undertaking responsible for exercising the central coordination is deemed to be the parent undertaking; the other undertakings are deemed subsidiaries. 14. Intra -group tra nsactions: tra nsactions by which, in order to fulfil a n obligation, an i nsurance undertaking relies ei ther directly or i ndirectly on the support of other undertakings within the same group or on the support of na tural or legal persons linked to the undertakings i n the group by cl ose l inks, regardless of whether this support i s of a contractual or non-contractual nature or whether or not it is remunerated. 15. Hori zontal corporate group: a group i n which a n undertaking is affiliated to one or more other undertakings where a ) a l l of the undertakings concerned are s ubject to common control based on a provision in the a rticles of a s sociation or on a contract; or b) the ma jority of the persons on the a dministrative, management and s upervisory bodies i n office during the fi nancial year a nd for the time periods s et out in s ection 290 (1) of the German Commercial Code are the s a me persons, regardless of whether the group is required to prepare consolidated financial statements or not. 16. Control : the exercise of control within the meaning of section 290 of the German Commercial Code. 17. Concentration risk: all risk exposures with a l oss potential that i s large enough to threaten the solvency or the fi nancial position of insurance undertakings. 18. Credi t ri sk: the risk of loss or adverse change in financial position arising from fluctuations in the credit quality of i s suers of securities, counterparties or other debtors to which insurance undertakings are exposed, i n the form of counterparts default risk, spread risk or market risk concentrations. 19. Li quidity risk: the risk that an insurance undertaking will not be in a position to realise investments or other a s sets so that it can meet its financial obligations when they fall due. 20. Ma rket risk: the risk of loss or adverse change in financial position arising directly or i ndirectly from fluctuations i n the level and volatility of market prices for assets, liabilities and financial instruments. 21. Rel evant risk-free reference rate: the interest ra te decided upon a nd published at l east on a quarterly basis by the European Insurance and Occupational Pensions Authority i n accordance with Article 77e(1)(a) o f Directive 2009/138/EC. 22. Member state or EEA signatory s tate: a member s tate of the European Union or another signatory s tate to the Agreement on the European Economic Area (EEA). 23. Pa rent undertaking: a parent undertaking as defied in Article 1 of D irective 83/349/EEC; for the purposes of s upervision under s ections 245 to 287, a parent undertaking is a lso defined as any undertaking that effectively exercises control i n the view of the s upervisory a uthorities. 24. Opera tional ri sk: the risk of l oss a rising from inadequate or failed internal processes, personnel or s ystems, or from external events. 25. Qua lifying central counterparty: a central counterparty that is either a uthorised in accordance with Article 14 of Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, centra l counterparties a nd tra de repositories (OJ L 201 of 27 Jul y 2012, pa ge 1) or recognised i n accordance with Arti cl e 25 of the same Regulation. – Page 21 of 207 – 26. Ri s k concentration: any exposure of undertakings i n a group or a financial conglomerate within the meaning of s ection 1 (2) of the German Supervision of Financial Conglomerates Act that is subject to default ri sk and large enough to threaten the solvency or the general financial position of one or more of the supervised financial congl omerate undertakings or supervised group undertakings, by which the default risk arises or may a rise from counterparty default risk, credit risk, i nvestment risk, insurance ri sk, market risk, other risk, a combination of thes e risks or from a ny i nteraction between these ri sks. 27. Ri s k measure: a mathematical function that assigns a monetary a mount to a given probability distribution forecast a nd i ncreases monotonically with the l evel of risk exposure underlying that probability distribution forecast. 28. Ri s k mitigation techniques: all techniques that enable an insurance undertaking to tra nsfer part or all of i ts ri sks to a nother party. 29. Subsidiary: a subsidiary within the meaning of s ection 290 of the German Commercial Code, i ncluding a s ubsidiary’s own subsidiaries; for the purposes of s upervision under sections 245 to 287, a s ubsidiary i s also defined as any undertaking over which a parent undertaking effectively exercises control in the vi ew of the s upervisory a uthorities concerned. 30. Affi liated undertaking: a subsidiary or other undertaking i n which a nother undertaking has a holding or an undertaking that forms part of a horizontal corporate group as defined i n no. 15. 31. Ins urance holding company: a parent undertaking that is not a mixed financial holding company wi thin the mea ning of no. 10 a nd whose main a ctivity i s to acquire a nd hold participations i n subsidiaries, where those s ubsidiaries are exclusively or mainly i nsurance undertakings or third country i nsurance undertakings, and at l east one of those s ubsidiaries is an i nsurance undertaking. 32. Underwriting risk: the risk of loss or adverse change in the va lue of i nsurance liabilities due to i nadequate pricing a nd provisioning assumptions. 33. Ins urance undertaking: a primary i nsurance undertaking or reinsurance undertaking that carries on i nsurance bus iness a nd is not a social i nsurance institution; the purpose of a reinsurance undertaking is s olely to ca rry on rei nsurance business. 34. Thi rd country insurance undertaking: a primary i nsurance undertaking or reinsurance undertaking that has its regi stered office in a third country a nd would require official authorisation in accordance with Article 14 (1) of Di rective 2009/138/EC i f i t had i ts registered office i n a s tate within the EEA. 34a . Ins urance distribution: i nsurance distribution a ctivities and reinsurance distribution a ctivities as defined i n Arti cl e 2(1) numbers 1 a nd 2 of Directive (EU) 2016/97 of the European Parliament and of the Co uncil of 20 Ja nuary 2016 on i nsurance distribution (recast) (OJ L 26 of 2 February 2016, pa ge 19). 34b. Di s tribution remuneration: any commission, fee, charge or other payment, i ncluding an economic benefit of any ki nd or any other financial or non-financial advantage or i ncentive offered or given in respect of insurance di s tribution a ctivities, with the exception of those relating to reinsurance activities. 35. Vol atility adjustment: adjustment to the relevant ri sk-free i nterest ra te term structure adopted a nd published at l east on a quarterly basis by the European Insurance a nd Occupational Pensions Authority i n a ccordance with Arti cl e 77e(1)(c) of Directive 2009/138/EC. 36. Proba bility distribution forecast: a mathematical function that assigns a probability of realisation to an exha ustive set of mutually exclusive future events. 37. Home country: the member state or EEA signatory s tate i n which a ) a n i nsurance undertaking to which Directive 2009/138/EC a pplies has its head office, b) a n i nstitution for occupational retirement provision is a uthorised or registered in a national register in a ccordance with Arti cle 9(1) of Directive (EU) 2016/2341 of the European Parliament a nd of the Council of 14 December 2016 on the a ctivi ties and supervision of institutions for occupational retirement provision (IORPs ) (recast) (OJ L 354 of 23 December 2016, page 37). Part 2 Provisions governing primary insurance and reinsurance – Page 22 of 207 – Chapter 1 Business activities Segment 1 Authorisation to carry on business activities Section 8 Authorisation; separation of lines of business (1) Ins urance undertakings may not ca rry on business without authorisation from the s upervisory a uthority. (2) The a uthorisation may only be granted to public limited companies i ncluding those i ncorporated in the form of a European Company, mutual societies a nd corporations a nd i nstitutions governed by public law. (3) The head office must be l ocated in Germany. (4) 1A rei nsurance undertaking will only be authorised to ca rry on reinsurance business. 2In the case of primary i nsurance undertakings, the authorisation to ca rry on l ife i nsurance business within the meaning of Annex 1 nos. 19 to 24 a nd the a uthorisation to carry on other classes of insurance a re mutually exclusive; the same applies to the a uthori sation to ca rry on health insurance within the meaning of section 146 (1) a nd the a uthorisation to carry on other classes of i ns urance. (5) 1The s upervisory a uthority will publish the granting or revocation of an authorisation electronically as s pecified i n s ection 318 (3) a nd will report such granting or revocation of an a uthorisation to the European Insurance a nd Occupa tional Pensions Authority. 2If such information relates to a n insurance undertaking s ubject to guarantee requirements under section 221, the supervisory a uthority must also inform the guarantee scheme. Section 9 Application (1) The business plan must be s ubmitted together with the application for authorisation; i t must disclose the purpose a nd structure of the undertaking, the region in which business is to be conducted and explain the financial circumstances tha t wi ll enable the undertaking to meet i ts future obligations over the l ong term. (2) The following must be submitted as part of the business plan: 1. the a rticles of association to the extent that they do not refer to general policy conditions; 2. i nformation a bout the classes of insurance that are to be provided and which risks of a class of i nsurance are to be covered; in the ca se of undertakings that only i ntend to carry on reinsurance business, the undertaking concerned mus t i nstead provide information on the risks that are to be covered by the reinsurance a nd on the types of rei nsurance contract that the reinsurance undertaking intends to enter i nto with the ceding insurers; 3. the ma in features of the reinsurance and retrocession; 4. i nformation on the basic components of own funds i ntended to cover the absolute minimum capital requirement; a nd 5. a n estimate of expenses for s etting up a dministration and the sales network; the undertaking must prove that i t has the necessary funds for this purpose (organisational funds); if an a pplication is filed for a uthorisation to carry on i ns urance business in the class under no. 18 of Annex 1, i nformation a bout the resources available to the undertaking to enable it to provide the promised assistance. – Page 23 of 207 – (3) 1In a ddition, the i nsurance undertaking must submit the following i tems as part of the business plan, i n each case coveri ng the first three financial years: 1. a budgeted balance sheet a nd a budgeted income statement; 2. es timates of the future solvency ca pital requirement on the basis of the budgeted balance sheet a nd i ncome s ta tement specified in no. 1, together with the methodology used to determine the estimates; 3. es timates of the future minimum ca pital requirement on the basis of the budgeted balance sheet a nd income s ta tement specified in no. 1, together with the methodology used to determine the estimates; 4. a n estimate of the financial resources expected to be available a ) to cover technical provisions, b) to ens ure compliance with the minimum capital requirement a nd the solvency ca pital requirement; 5. for non-life insurance and reinsurance, a ) a n overview of the projected a dministrative expenses, in particular the ongoing overhead expenses and commi ssions, excluding the costs of setting up the administration, b) a n overview of the projected premium i ncome and the a nticipated cl aims expenditures, a nd 6. for l i fe insurance, a plan showing detailed estimates for i ncome and expenditure relating to primary insurance bus iness a nd also to inward a nd outward reinsurance business. 2If the undertaking is not required to prepare a s olvency s tatement under chapter 2 pa rt 2, the estimate under sentence 1 number 4 (a ) must be submitted s olely for the technical provisions under the German Commercial Code. (4) In a ddition, the following must be submitted: 1. deta ils on the nature and scope of the business organisation, including a ) i nformation that is essential to enable the s upervisory a uthority to assess whether the requirements s pecified in s ection 24 a re satisfied; this a pplies in respect of the members of the senior management, other persons who effectively run the undertaking, the members of the supervisory board, the a ppointed actuary a nd a ny other pers ons responsible for other key ta sks; b) deta ils of enterprise agreements as s pecified under s ections 291 a nd 292 of the German Stock Corporation Act (Aktiengesetz – AktG); a nd c) deta ils of contracts for the outsourcing of key functions or a ctivi ties; 2. i f other parties have qualifying holdings in the i nsurance undertaking, a ) the na mes of the holders and the amounts of the holdings; b) the i nformation necessary to assess i f the requirements under section 16 a re met; c) i f the holders of such qualifying holdings are required to prepare annual financial statements, the annual fi nancial statements for the previous three financial years, i ncluding the a udit reports by i ndependent auditors provi ded that such reports are to be prepared; and d) i f the holders belong to a group, details of the group s tructure a nd, if consolidated financial statements are to be prepared, the consolidated financial s tatements for the previous three financial years, including the audit reports by i ndependent a uditors provided that such reports are to be prepared a nd there are no provisions under German l aw barring their release to the a pplicant; 3. deta ils of a ny i ndication of close links between the i nsurance undertaking and other natural persons or undertakings; 4. for compulsory i nsurance, the general i nsurance policy conditions; 5. for health i nsurance within the meaning of section 146 (1), a ) the pri nciples used for calculating the premiums and technical provisions within the meaning of sections 341e to 341h of the German Commercial Code, i ncluding the a ctuarial assumptions, mathematical formulas, a ctual – Page 24 of 207 – ca l culations made and statistical evidence used; b) the general insurance policy conditions; and 6. for covera ge of the risks s pecified in no. 10 (a) of Annex 1, the names and addresses of the claims representatives to be a ppointed i n accordance with section 163. (5) 1Except i n the case of applications for a uthorisation to carry on insurance business a s a funeral expenses fund or a s one of the schemes s pecified in section 1 (4), the supervisory a uthority must consult the competent authorities in the other member s tates or EEA signatory s tates before granting authorisation i f the undertaking concerned is 1. a s ubsidiary or sister company of a n insurance undertaking, a CRR credit institution within the meaning of section 1 (3d) s entence 1 of the German Banking Act, a n electronic money i nstitution within the meaning of section 1 (3d) s entence 6 of the German Banking Act, or a securities tra ding fi rm within the m eaning of section 1 (3d) s entence 4 of the German Banking Act a nd i ts parent company or the other sister undertaking is already a uthorised to ca rry on bus iness i n another member state or EEA signatory s tate; or 2. controlled by the same natural persons or undertakings that control an i nsurance undertaking, CRR credit institution, el ectronic money institution or s ecurities trading firm domiciled in another member s tate or EEA s ignatory state. 2The relevant competent authorities a re the authorities in the member states or EEA signatory states in which the parent undertaking, the sister company or the controlling undertaking has its head office or i n which the habitual residence of the controlling persons i s located. 3Sister companies within the meaning of s entence 1 no. 1 a bove are undertakings that ha ve a common parent undertaking. 4The consultation must cover, i n particular, the i nformation necessary for assessing whether the persons referred to i n section 24 a re fit a nd proper, and for assessing compliance w ith the fit and proper requirement for the holders of qualifying holdings in undertakings belonging to the same group within the meaning of s entence 1 a bove that a re domiciled in the relevant member state or EEA s ignatory state, as well a s the i nformation concerning own funds. Section 10 Scope of authorisation (1) 1The s upervisory a uthority grants the authorisation for a n unlimited period of time unless otherwise provided for in the business plan. 2The authorisation is valid for the territory covered by a ll member s tates or EEA signatory s tates. (2) 1In the case of undertakings that intend to ca rry on primary i nsurance business alone or to ca rry on both primary i ns urance and reinsurance business, the authorisation is issued separately for each of the classes of insurance s pecified i n Annex 1. 2It covers the entire class of insurance unless the undertaking i ntends to cover only part of the ri sks of s uch cl a ss of i nsurance according to i ts business plan. 3The a uthorisation may also be granted jointly for several classes of i ns urance under the designations specified i n Annex 2. (3) 1In the case of undertakings that intend to ca rry on reinsurance business alone, the authorisation is granted for property a nd casualty reinsurance including personal reinsurance other than life reinsurance (non-life reinsurance), for l i fe reinsurance or for all classes of reinsurance. 2Unless otherwise indicated in the a pplication or business plan, the a uthorisation is issued for all cl asses of reinsurance. (4) 1The a uthorisation granted for one or s everal classes of insurance also includes coverage of a dditional ri sks of other cl a sses of insurance i f these risks relate to a ri sk of a class of insurance operated, concern the same object of the i ns urance and are covered by the same contract. 2Risks from the classes of insurance specified i n nos. 14, 15 a nd 17 of Annex 1 a re not covered as a dditional ri sks by an authorisation granted for other cl asses of insurance. 3Risks from the cl a ss of i nsurance specified in Annex 1 no. 17 that meet the requirements of sentence 1 a bove, however, a re covered by a n a uthorisation gra nted for other classes of i nsurance if they refer to disputes or claims arising from the operation of s hi ps a t sea or relating to s uch operation or i f the a uthorisation is granted for carryi ng on the class of insurance business under Annex 1 no. 18a. – Page 25 of 207 – Section 11 Refusal and restriction of authorisation (1) The s upervisory a uthority must refuse to grant an authorisation if 1. the business plan and documents s ubmitted i n accordance with section 9 (2) to (4) do not provide sufficient evi dence that the obligations under the insurance contracts can be fulfilled at all times; 2. there is evidence to suggest that the members of the senior management or the members of the supervisory board do not s atisfy the requirements in section 24; or 3. there is evidence to suggest that the holder of a qualifying holding in the insurance undertaking, or i f such holder is a l egal person, a legal representative or representative a ccording to the articles of association, or, i f s uch holder i s a commercial partnership, a partner in this partnership, is not a fit and proper person or for a ny other reason does not meet the demands required i n the interest of ensuring a s ound and prudent management of the insurance undertaking; this also applies if there is evidence to suggest that the funds raised in order to purchase the qualifyi ng hol ding have been acquired by an action that objectively constitutes a criminal offence; 4. i n the case of primary i nsurance undertakings, over a nd a bove the cri teria specified in nos. 1 to 3; a ) the business plan and documents s ubmitted i n accordance with section 9 (2) to (4) do not provide sufficient evi dence that the interests of the insured are a dequately s afeguarded; b) a fter a n authorisation has already been issued, the insurance undertaking becomes a subsidiary of an insurance hol ding company or of a mixed financial holding company a nd there is evidence to suggest that a person who a ctually manages the i nsurance holding company or mixed financial holding company i n practice is not a fit a nd proper person to manage the business affairs of the i nsurance holding company or mixed financial holding compa ny; or c) i n the case of the operation of health i nsurance business, there is evidence to suggest that the undertaking will i ntroduce premium rates granting insurance cover that is similar within the meaning of section 204 of the Germa n Insurance Contract Act (Versicherungsvertragsgesetz – VVG) to that provided under the premium ra tes offered by another a ffiliated insurance undertaking where the interests of the insured are not a dequately s a feguarded in connection with the introduction of s uch premium ra tes. (2) 1The a uthorisation may be refused if there i s evidence to s uggest that effective supervision of the i nsurance undertaking will be hindered. 2This is the case, in particular, i f 1. the i nsurance undertaking is affiliated or cl osely l inked with other persons or undertakings through corporate links whi ch, due to the complex web of ownership or poor economic transparency, hinder the effective s upervision of the i ns urance undertaking; 2. effective supervision of the i nsurance undertaking is hindered as a result of the s tatutory provisions or a dministrative regulations i n a third country a pplicable to persons or undertakings in a ccordance with no. 1; or 3. the effective supervision of the insurance undertaking is hindered due to a l ack of effective s upervision over persons or undertakings i n accordance with no. 1 i n the states where they have their registered office or head office, or due to unwillingness by their competent authority to cooperate satisfactorily with the supervisory a uthority. 3The a uthorisation may a lso be refused if, contrary to section 9 (4), i nsufficient information or documents have been s ubmitted with the a pplication. (3) Authorisation may not be refused for reasons other than those given under subsections (1) a nd (2) above. Section 12 Changes to the business plan and to enterprise agreements (1) 1Any cha nges to the components of a primary i nsurance undertaking’s business plan as specified in s ection 9 (2) no. 1 a nd 2, a ny extension of i ts business operations to a territory outside the member states or EEA s ignatory s tates a nd the pri mary i nsurance undertaking’s enterprise agreements within the meaning of section 9 (4) no. 1 (b) or any changes – Page 26 of 207 – thereto must first be approved by the supervisory a uthority before they ca n come into effect. 2The same applies to any extension of a reinsurance undertaking's operations to cover a territory outside the member states or EEA s ignatory s ta tes or to cover other cl asses of reinsurance. 3Sentence 1 does not a pply to a mendments to the a rticles of a ssociation i ntended to permit a capital increase. 4Section 11 must be a pplied, with the necessary modifications. (2) If business operations a re to be extended to other classes of i nsurance or other classes of reinsurance, the documentation under section 9 (2) to (4) must be s ubmitted. (3) If business operations a re to be extended to cover a territory outside the member states or EEA signatory states, the fol lowing must be submitted: 1. i nformation on the classes of insurance a nd i nsurance segments or classes of reinsurance in which the undertaking i ntends to operate; and 2. documentary evidence demonstrating that the insurance undertaking a ) wi l l satisfy the provisions on capital adequacy i n the member states and EEA s ignatory s tates even after the i ntended extension of the operating territory; a nd b) i n the case of the establishment of a branch i n a territory outside the member states and EEA s ignatory s tates, tha t the insurance undertaking has been granted any business operation authorisation necessary i n the territory concerned or that such a uthorisation is not required. Section 13 Transfers of portfolios (1) 1Any contra ct by which the insurance portfolio of a primary i nsurance undertaking is to be transferred wholly or pa rtl y to another i nsurance undertaking is subject to a pproval by the s upervisory a uthorities responsible for the undertakings in question. 2Such approval must be given i f the i nterests of the insured a re safeguarded a nd there is s ufficient evidence that the obligations under the i nsurance contracts ca n be fulfilled at all ti mes; section 9 (5) regarding cons ultation with the competent authorities in a nother member s tate or EEA s ignatory s tate and section 8 (4) a pply, wi th the necessary modifications. (2) 1If a domestic primary i nsurance undertaking wholly or partly tra nsfers to an i nsurance undertaking d omiciled in a member state or EEA signatory s tate a portfolio of i nsurance contracts entered into vi a a branch or through the provi sion of cross-border servi ces under s ection 57, only the approval of the tra nsferor insurance undertaking’s competent supervisory a uthority i s required, in derogation of subsection (1) s entence 1 a bove. 2Approval will be granted i f the cri teria specified in subsection (1) sentence 2 a re satisfied and i f 1. evi dence is provided i n the form of certification from the supervisory a uthority i n the tra nsferee i nsurance undertaking's country of domicile that the tra nsferee i nsurance undertaking will have adequate eligible own funds a fter the tra nsfer to comply with the solvency capital requirement; 2. the s upervisory a uthorities of the member states or EEA s ignatory states in which the ri sks in the i nsurance portfolio a re s ituated have given their approval, and 3. i n the case of a n insurance portfolio tra nsfer from a branch, the supervisory a uthority of the member state or EEA s i gnatory s tate where the branch is located has been consulted. 3 Sentences 1 a nd 2 no. 1 a bove also a pply to the tra nsfer of a portfolio of insurance-related contracts acquired in Germa ny. 4In the cases of sentences 1 a nd 3, s ubsection (5) applies, with the necessary modifications; s ubsections (3) a nd (4) remain unaffected. (3) If members of a mutual society l ose some or all of their ri ghts as members of the society as a result of the transfer of the portfolio, the approval can only be granted if the portfolio transfer agreement provides for a ppropriate compensation unless the transferee i nsurance undertaking is also a mutual society and the members of the transferor i ns urance undertaking affected by the transfer of the portfolio become members of the tra nsferee i nsurance undertaking. (4) 1If wi th-profits insurance contracts are i nvolved, the transfer ca n only be a pproved i f the value of the profit pa rti cipation attributable to the insured persons of both the transferor i nsurance undertaking and the transferee i ns urance undertaking after the transfer is not lower than the equivalent value before the transfer. 2For this purpose, – Page 27 of 207 – the a ssets a nd liabilities of the tra nsferor i nsurance undertaking and the transferee insurance undertaking must, to the extent that these assets a nd liabilities can i nfluence the profit participation, be compared at their fair values whereby the a ssets a nd liabilities of the tra nsferor i nsurance undertaking are measured as i f the i nsurance contracts concerned conti nued to be operated by the transferor i nsurance undertaking and the assets and liabilities of the tra nsferee i ns urance undertaking are measured on the assumption that the tra nsferee i nsurance undertaking takes over the i ns urance contracts in a ccordance with the transfer agreement for which approval is sought. (5) As pa rt of the portfolio tra nsfer, the ri ghts a nd obligations of the tra nsferor insurance undertaking under the i ns urance contracts in relation to the policyholders a re also transferred to the transferee insurance undertaking; s ection 415 of the German Ci vil Code (Bürgerliches Gesetzbuch – BGB) must not be applied. (6) The portfolio transfer agreement must be i n writing; s ection 311b (3) of the German Ci vil Code must not be applied. (7) 1Approval of the portfolio transfer must be published i n the German Federal Gazette (Bundesanzeiger). 2As soon as the portfolio tra nsfer comes into effect, the tra nsferee i nsurance undertaking must inform the policyholders of the ca us e, s tructure a nd consequences of the portfolio transfer a nd, i n p articular, must provide information on any resulting cha nge in the competent authorities responsible for legal or fi nancial supervision and/or a ny change affecting a claim a ga inst a guarantee scheme in the event of insolvency on the part of the i nsurance u ndertaking. 3If there is a change in the competent authority responsible for financial supervision, the policyholder may terminate the i nsurance contract wi th i mmediate effect within one month of receiving the notification from the insurer. 4In the notification, the insurer mus t draw the policyholder's a ttention to the right to termination. Section 14 Transformations (1) 1Any tra ns formation of a primary i nsurance undertaking under s ections 1 a nd 122a of the German Transformation Act i s subject to a pproval by the supervisory a uthority. 2Section 13 (1) s entence 2 a nd (2), (4) and (5) applies, with the necessary modifications. (2) The s upervisory a uthority may a lso refuse approval if the rules governing transformation have not been observed. Section 15 Non-insurance business (1) 1Beyond i nsurance business, primary i nsurance undertakings a re only permitted to tra nsact s uch other business as is di rectly related with i nsurance business. 2Such a relationship is deemed to exist i n the case of dealings in futures, options a nd similar financial i nstruments i f these instruments are intended as hedges a gainst price a nd i nterest ra te risks in connection with existing assets or future purchases of securities or i f a n additional i ncome is to be generated on existing s ecurities without causing the possibility of underfunding in respect of the guarantee assets on settlement. 3In the case of debt taken on by a n insurance undertaking, there is generally no direct relationship within the meaning of s entence 1. 4In the case of any other business, s uch a relationship must only be deemed to exist i f the business does not involve a ny a dditional fi nancial risk. (2) 1Rei nsurance undertakings are only permitted to conduct reinsurance business, together with associated business a nd servi ces. 2Holding company functions and a ctivi ties in relation to undertakings i n the financial s ector within the mea ning of s ection 2 (3) of the German Supervision of Financial Conglomerates Act a re also deemed to be business a s sociated with reinsurance business. (3) Ins urance distribution as defined i n section 7 number 34a belongs to an i nsurance contract’s business operations. – Page 28 of 207 – Section 15a Consumer mortgage loans; power to issue statutory orders (1) 1Secti on 18a (1) to (10) of the Banking Act a pplies to the granting of consumer mortgage loans, with the necessary modi fications. 2Credit checks carried out by undertakings that are not supervised by the s upervisory a uthorities of the federal s tates are s ubject to the guidelines of the s tatutory order issued under s ection 18a (10a) of the Banking Act, wi th the necessary modifications. (2) 1The Federal Ministry of Finance is authorised, by way of a statutory order requiring the consent of the Bundesrat, to a dopt more detailed requirements governing the knowledge a nd competence of i nternal and external staff i nvolved in gra nting consumer mortgage l oans required under section 1 i n conjunction with section 18a (6) of the Banking Act. 2The Federal Mi nistry of Finance may delegate the authority under sentence 1 to Ba Fin by way of a statutory order requiring the consent of the Bundesrat. Segment 2 Qualifying holdings Section 16 Holders of qualifying holdings 1The holders of qualifying holdings as defined in section 7 no. 3 i n i nsurance undertakings must meet the demands required in the interest of ensuring a sound and prudent management of the undertaking; in particular, they must be fit a nd proper persons. 2If the holding is a ttributable to l egal entities or tra ding partnerships, the same applies to the na tural persons who have been appointed by vi rtue of law, the a rticles of association or the partnership agreement to ma nage the business a ffairs a nd represent the legal entity or pa rtnership concerned a nd to the personally l iable pa rtners. Section 17 Notification of qualifying holdings (1) Any na tural or legal person or a ny tra ding partnership must notify the s upervisory a uthority in writing without delay i f i t i ntends 1. to a cquire, alone or i n conjunction with other persons or undertakings, a qualifying holding in a n insurance undertaking (prospective acquirer); wi th the notification, the prospective acquirer must s ubmit the i nformation a nd documents necessary to enable the s upervisory a uthority to verify the amount of the holding, establish whether there is significant i nfluence, assess whether the prospective acquirer i s a fit and proper person and review the other cri teria for a prohibition under s ection 18 (1); the prospective acquirer must also provide details of the persons from whom, a nd the undertakings from which, i t intends to a cquire the holding concerned; i f the prospective a cquirer is a l egal person or a tra ding partnership, the prospective a cquirer must include in the notification the material facts necessary to enable the supervisory authority to assess whether the prospective acquirer's legal representative or representative in a ccordance with the a rticles of association or personally l iable partner is a fit and proper person; 2. to i ncrease, alone or in conjunction with other persons or u ndertakings, the amount of the qualifying holding s uch tha t the threshold of 20 per cent, 30 per cent or 50 per cent of the voting ri ghts or of the nominal capital is reached or exceeded or s uch that control over the i nsurance undertaking is exercised as d efined in section 7 no. 16; or 3. to gi ve up a qualifying holding in a n insurance undertaking or reduce the amount of a qualifying holding below the thres hold of 20 per cent, 30 per cent or 50 per cent of the voting rights or of the ca pital, or change the holding such tha t no control is exercised over the insurance undertaking; the remaining amount of the holding must be s pecified; the s upervisory a uthority ma y set a deadline date by which the person or tra ding partnership s ubmitting the noti fication must i nform the s upervisory a uthority as to whether the i ntended reduction or change has been carried out or not. (2) The holder of a qualifying holding must notify the s upervisory a uthority in writing without delay of any newly a ppointed legal representative or representative in a ccordance with the a rticles of association or any new personally l i able partner and must include with the notification the material facts necessary to enable the supervisory a uthority to – Page 29 of 207 – a s sess whether the person concerned is fit a nd proper. (3) The s upervisory a uthority must send the person or undertaking s ubject to notification requirement written confi rmation of receipt of a complete notification under s ubsection (1) nos. 1 or 2, s uch confirmation to be sent without del ay, but no later than two working days after receipt of the notification by the supervisory a uthority. (1a ) 1The s upervisory a uthority must review a notification sent i n accordance with subsection (1) nos. 1 or 2 wi thin 60 worki ng days of the date of the letter in which the supervisory a uthority confirmed in writing receipt of the complete noti fication (review period). 2In the confirmation sent i n accordance with subsection (3), the supervisory a uthority must i nform the person or undertaking subject to notification requirement of the date on which the review period will end. 3 No l a ter than the 50th working day of the review period, the supervisory a uthority may request further i nformation necessary to complete the review. 4Such request must be made in writing, specifying the information that is a dditionally required. 5The supervisory a uthority must send the person or undertaking s ubject to notification requirement written confi rmation of receipt of the additional i nformation within two working days of receipt of the i nforma tion by the s upervisory a uthority. 6The review period is suspended from the date of the request for further i nformation until the i nformation is received by the s upervisory a uthority. 7In the event of a suspension i n accordance with sentence 6, the revi ew period must not exceed 80 working days. 8The supervisory a uthority ma y request additions or clarifications i n rel ation to this information; this does not l ead to a new suspension of the review period. 9In derogation of sentence 7, the revi ew period may be extended in the event of a s uspension to a maximum of 90 working days i f the person or undertaking s ubject to notification requirement 1. i s domiciled or s upervised outside the European Economic Area or 2. i s a natural person or undertaking not subject to supervision under one of the following Directives: a ) 2009/65/EC of the European Pa rliament a nd of the Council of 13 Jul y 2009 on the coordination of laws, regulations a nd administrative provisions relating to undertakings for collective i nvestment in tra nsferable s ecurities (UCITS) (OJ L 302 of 17 November 2009, pa ge 32); b) 2004/39/EC of the European Pa rliament a nd of the Council of 21 Apri l 2004 on markets i n financial i nstruments a mending Council Directives 85/611/EEC a nd 93/6/EEC a nd Directive 2000/12/EC of the European Parliament a nd of the Council and repealing Council Directive 93/22/EEC (OJ L 145 of 30 Apri l 2004, pa ge 1, L 45 of 16 February 2005, pa ge 18); c) 2006/48/EC of the European Pa rliament a nd of the Council of 14 June 2006 relating to the ta king-up and pursuit of the business of credit institutions (OJ L 177 of 30 June 2006, pa ge 1); or d) 2009/138/EC. Section 18 Prohibition or restriction of a qualifying holding (1) Wi thin the review period, the s upervisory a uthority may prohibit the i ntended a cquisition of or i ncrease i n the qua lifying holding if there is evi dence to suggest that 1. the person or undertaking s ubject to notification requirement or, if the undertaking subject to the notification requirement is a l egal person, a legal representative or representative a ccording to the articles of association or, i f the undertaking s ubject to the notification requirement is a commercial partnership, a partner, is not fit a nd proper or for a ny other reason does not meet the demands required in the i nterest of ensuring a sound a nd prudent ma nagement of the insurance undertaking; this also applies i f the a cquirer of the qualifyi ng holding is unable to provi de evi dence that is has adequate business plans for the continuation a nd development of the business of the i ns urance undertaking and that the i nterests of the i nsured or the legitimate i nterests of the ceding i nsurers a re a dequately safeguarded; moreover, section 11 (1) no. 3 s econd half-sentence a pplies, with the necessary modi fications; 2. the i nsurance undertaking is not or will not remain i n a position to satisfy the s upervisory requirements or the i ns urance undertaking would, through the acquirer's acquisition of or i ncrease in the holding, become a ffiliated with the holder of the qualifying holding with corporate ties that, due to the complex web of ownership or poor economic tra ns parency, could hinder the effective supervision of the i nsurance undertaking, adversely i mpact effective i nformation-sharing between the competent a uthorities or make it difficult to divide responsibilities between these competent authorities; – Page 30 of 207 – 3. the a cquisition of or increase in the qualifying holding would make the insurance undertaking a subsidiary of a n i ns urance undertaking that has its registered office i n a third country a nd the parent undertaking is not effectively s upervised in the country where it has i ts registered office or head office or the competent supervisory a uthority i n the country concerned is not willing to cooperate satisfactorily; 4. the future member or members of the senior management a re not fit and proper persons; 5. i n connection with the i ntended acquisition of or i ncrease i n the holding, there is or has been money l aundering or terrori st financing within the meaning of Article 1 of Directive 2005/60/EC of the European Pa rliament and of the Counci l of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering a nd terrorist financing (OJ L 309 of 25 November 2005, page 15), such offences have been attempted or the i ntended a cquisition of or i ncrease i n the holding could increase the ri sk of such a ctivi ty; or 6. the person or undertaking s ubject to the notification requirement does not have the necessary financial strength, in pa rti cular with regard to the nature of the actual and planned business to be carried on by the i nsurance undertaking; this applies especially i f the person or undertaking s ubject to notification requirement does not have the ca pital adequacy or assets to meet those particular requirements of the insurance undertaking related to capital a dequacy or ca sh and cash equivalents, ensuring that the undertaking can at all times fulfil its obligations under the i ns urance contracts and/or a void liquidity bottlenecks. (2) The s upervisory a uthority ca n also prohibit the a cquisition of or the increase in the holding if the details under s ection 17 (1) no. 1 a nd 2 or the additional information requested under s ection 17 (4) s entence 3 i s incomplete or i na ccurate; the supervisory a uthority may not specify conditions precedent relating to the amount of the intended a cquisition of or i ncrease i n the holding, nor may i t base i ts review on the economic needs of the market. (3) 1If, on completion of the review, the s upervisory a uthority decides to prohibit the a cquisition of or the increase in the hol ding, it must i nform the person or undertaking subject to notification requirement in writing, specifying the reasons for the decision, within two working days and in compliance with the review period d eadline. 2Comments and res ervations made by the competent a uthority relevant to the person or undertaking s ubject to notification requirement mus t be set out in the decision; the a cquisition of or i ncrease i n the holding may only be prohibited for the reas ons s pecified in subsections (1) and (2). 3If the a cquisition of or the i ncrease in the holding is not prohibited in wri ting within the revi ew period, the a cquisition or the i ncrease ca n be carried out; this does not affect the ri ghts of the supervisory a uthority under section 20. 4If the a cquisition of or the increase in the holding is not prohibited, the s upervisory a uthority may s pecify a period at the end of which the person or undertaking subject to notification requirement must i nform the s upervisory a uthority without delay whether the intended acquisition or increase has been ca rried out or not. Section 19 Prohibition of the exercise of voting rights (1) The s upervisory a uthority may prohibit the holder of a qualifying holding, as well as the underta kings it controls, from exercising its voting rights and stipulate that control over or use of the shares be subject to the approval of the s upervisory a uthority if 1. the cri teria for a prohibition order under s ection 18 (1) or (2) a bove are satisfied; 2. the holder of the qualifying holding has not fulfilled the duty under section 17 (1) nos. 1 or 2 to notify the s upervisory a uthority beforehand a nd has not s ubsequently s ubmitted such notification within a period of time set by the s upervisory a uthority; or 3. the holding has not been a cquired or i ncreased within the period s pecified i n accordance with section 18 (3) s entence 4 or has been acquired or increased despite a n enforceable prohibition under section 18 (1) or (2). (2) 1In the event of a prohibition under subsection (1) a bove, the court a t the location of the registered office of the i ns urance undertaking must, at the request of the s upervisory a uthority, the insurance undertaking or one of the i ns urance undertaking's s hareholders, appoint a trustee to whom the court then transfers responsibility for exercising the voti ng ri ghts. 2In exercising the voting ri ghts, the trustee must ta ke into account the need to ensure sound and prudent management of the i nsurance undertaking. 3Over a nd a bove the a ction specified in s ubsection (1), the s upervisory a uthority can instruct a trustee to sell the shares, to the extent that they constitute a qualifying holding, i f the holder of the qualifying holding does not provi de proof of a reliable buyer to the supervis ory a uthority wi thin a rea sonable period to be s et by the latter; the holders of the shares must cooperate i n the sale to the extent necessary. 4 If the cri teria i n subsection (1) a re no longer met, the s upervisory a uthority must apply for the appointment o f the trus tee to be withdrawn. 5The trustee is entitled to be refunded for reasonable expenses and to receive remuneration – Page 31 of 207 – for s ervices rendered. 6The court determines the amount of the expenses a nd remuneration at the request of the trus tee; no a ppeal a gainst the s pecified remuneration is permissible. 7The i nsurance undertaking and the relevant holder of a ma jority holding a re jointly a nd severally l iable for the costs arising as a result of the a ppointment of the trustee and for the remuneration a nd expenses to be paid to the trustee. 8The Federal Government advances the expenses and the remuneration. Section 20 Audit of the holder of a qualifying holding If there i s evidence to s uggest that the holder of a qualifying holding does not satisfy the requirements specified in s ection 16 or that the affiliation with other persons or undertakings could hinder effective supervision of the insurance undertaking due to the complex web of ownership or poor economic tra nsparency, the supervisory a uthority ma y s ti pulate that the holder of the qualifying holding must submit the documents s pecified in section 9 (4) nos. 2c a nd 2d a nd have these documents audited by an independent a uditor to be determined by the supervisory a uthority, s uch audit to be a t the expense of the holder of the qualifying holding. Section 21 Cooperation with the competent authorities in other member states or EEA signatory states (1) When assessing the acquisition, the supervisory a uthority must work in cl ose cooperation with the competent a uthorities in the other member states or EEA signatory states if the person or undertaking subject to notification requirement is 1. a CRR credit i nstitution, an electronic money i nstitution or a securities tra ding firm, a n insurance undertaking or a ma nagement company within the meaning of Arti cle 2 (1b) of Directive 2009/65/EC that is a uthorised to operate in a member state or sector other than the state or s ector of the intended acquisition; 2. a pa rent undertaking of a CRR credit i nstitution, electronic money i nstitution or s ecurities tra ding firm, i nsurance undertaking or management company within the meaning of Arti cle 2 (1b) of Directive 2009/65/EC that is a uthorised to operate in a member state or s ector other than the state or sector of the i ntended a cquisition; or 3. a na tural or legal person that controls a CRR credit i nstitution, a n electronic money i nstitution or a securities tra ding fi rm, a n insurance undertaking or a management company within the meaning of Article 2 (1b) of Directive 2009/65/EC tha t i s authorised to operate in a member s tate or s ector other than the state or sector of the intended a cquisition. (2) 1The competent a uthorities must ensure that they send each other without delay a ny i nformation that is material or rel evant to the assessment. 2The competent a uthorities must notify each other on request of all relevant i nformation a nd must send all material information without the need for a request. 3All remarks or reservations made by the competent authority responsible for the prospective a cquirer must be noted i n the decision by the competent authority tha t a uthorised the i nsurance undertaking in which the holding is intended to be acquired. Section 22 Authorisation to issue statutory orders 1The Federal Mi nistry of Finance is authorised to issue a statutory order governing the nature, s cope, timing and form of s ubmission for the i nformation to be provided in accordance with section 17 (1) a nd (2) above if this is required to ena ble the supervisory a uthority to fulfil i ts duties. 2For i nsurance undertakings that are not subject to supervision by the s upervisory a uthorities in the federal s tates, the statutory order may i nclude a s tipulation s pecifying that, either generally or on a case-by-case basis, prospective acquirers must s ubmit the documents specified i n section 9 (4) nos. 2c a nd 2d and have these documents audited by an independent auditor to be determined by the s upervisory a uthority, s uch a udit to be a t the expense of the prospective acquirer. 3This a uthorisation may be delegated by s tatutory order to Ba Fin. 4Statutory orders under s entences 1 to 3 do not require the consent of the Bundesrat. Segment 3 Business organisation – Page 32 of 207 – Section 23 General business organisation requirements; product approval process (1) 1Ins urance undertakings must have a proper, effective business organisation that is appropriate for the nature, scope a nd complexity of their activities. 2The business organisation must ensure both compliance with the laws, regulations a nd supervisory requirements applicable to insurance undertakings and sound, prudent management of the undertaking. 3This i ncludes not only compliance with the requirements i n this segment, but also, in particular, an a ppropriate, tra nsparent organisational structure with clear assignment of functions, a n appropriate segregation of res ponsibilities a nd a n effective internal communications system. (1a ) 1Undertakings that manufacture insurance products for sale must maintain, operate a nd regularly review a process for i nternal a pproval for distribution of each insurance product or a ny significant modification of existing i nsurance products (product a pproval process). 2The process must ensure that an identified target market is specified for each i ns urance product before i t is distributed to clients. 3Al l relevant risks for the identified target market must be assessed when the target market is specified. 4The process must also ensure that the i ntended distribution strategy is consistent wi th the i dentified ta rget market. 5Undertakings must have an a ppropriate business organisation which ensures that the i ns urance products a re distributed to the i dentified ta rget market. (1b) 1Undertakings must regularly review the insurance products. 2They must take into account any event that could ma terially a ffect the potential risk to the identified target market and assess a t least whether the insurance product rema ins consistent with the needs of the identified target market a nd whether the intended distribution strategy rema ins appropriate. (1c) 1Undertakings that manufacture insurance products must make a vailable to a ll distributors all appropriate i nformation on the i nsurance product and the product a pproval process, including the identified target market of the i ns urance product. 2Where a n undertaking distributes or advises on i nsurance products that it does not manufacture, it mus t have i n place a dequate arrangements to obtain the information referred to i n sentence 1 a nd to understand the cha ra cteristics and i dentified ta rget market. (1d) Subsections (1a) to (1c) do not a pply to i nsurance products that consist of the i nsurance of large risks within the mea ning of s ection 210 (2) of the Insurance Contract Act a nd do not apply to reinsurance undertakings. (2) The ma nagement board must ensure that the business organisation is subject to a regular internal review. (3) 1Undertakings must prepare i nternal guidelines that are s ubject to prior approval by the board of management, and whos e implementation must be ensured. 2As a minimum, such guidelines must include requirements relating to risk ma nagement, the internal control system, i nternal audit a nd, where relevant, the outsourcing of functions and activities. 3They must be reviewed at least once a year. 4They must be modified accordingly i n the event of significant changes in the business units or systems to which they relate. (4) Undertakings must i mplement appropriate precautionary measures, i ncluding the development of contingency plans, to ens ure that business continuity is maintained and that activities are properly conducted a t all times. (5) 1The rules and regulations governing the organisational a nd operational structures, together with the details of the i nternal control system, must be documented such that they a re comprehensible for third parties. 2The documentation mus t be retained for six years; section 257 (3) a nd (5) of the German Commercial Code applies, with the necessary modi fications. (6) Undertakings must establish a process that allows its employees, while preserving the confidentiality of their i dentity, to report potential or actual breaches 1. of thi s Act, 2. of s ta tutory orders adopted on the basis of this Act, 3. of Regulation (EU) No 596/2014 of the European Pa rliament and of the Council of 16 April 2014 on market abuse (ma rket a buse regulation) a nd repealing Directive 2003/6/EC of the European Parliament and of the Council a nd Commi ssion Directives 2003/124/EC, 2003/125/EC a nd 2004/72/EC (OJ L 173 of 12 June 2014, page 1), 4. of Regulation (EU) No. 1286/2014 of the European Pa rliament and of the Council of 26 November 2014 on key i nformation documents for packaged retail and insurance-based investment products (PRIIPs) (OJ L 352 of 9 December 2014, page 1; L 358 of 13 December 2014, page 50), as amended, – Page 33 of 207 – a nd a ny cri minal offences within the undertaking to a n appropriate organisational unit. Section 24 Requirements for persons who effectively run the undertaking or assume responsibility for other key tasks (1) 1Pers ons who effectively run the undertaking or assume responsibility for other key tasks must be fit a nd proper. 2 The fi t and proper requirement includes a requirement for professional skills a nd qualifications, knowledge and experience that ensures sound, prudent management of the undertaking. 3This requires appropriate theoretical and pra cti cal knowledge of i nsurance business and, if the person concerned is to ta ke on management responsibilities, a dequate management experience. 4A person can generally be deemed to have adequate management experience if the pers on concerned can demonstrate that he/she has held a managerial position i n an insurance undertaking of compa rable size and with a comparable type of business for at l east three years. (2) 1Pers ons who effectively run the undertaking i nclude, i n addition to the members of the senior management, persons who a re a uthorised to make material decisions for the undertaking. 2Members of the s enior management are those na tural persons a ppointed by vi rtue of law or the articles of association or as authorised agents of a branch i n a member s ta te or EEA signatory s tate to manage the business affairs a nd represent the insurance undertaking. (3) 1Pers ons who a re already members of the senior management of two insurance undertakings, pension funds, i ns urance holding companies or s pecial purpose insurance companies cannot be appointed as a member of the senior ma nagement of a further i nsurance undertaking. 2If the insurance undertaking i nvolved forms part of the same i ns urance or corporate group, the s upervisory a uthority ma y permit persons to hold f urther senior management pos itions. 3Appointment as a member of the senior management does not preclude the exercise of a function as defined i n s ection 7 s entence 1 no. 9. (4) 1If a person has been a member of the senior management of an undertaking, s uch person ca nnot become a member of the a dministrative or supervisory a uthority of the same undertaking if two former members of the senior ma nagement of the undertaking are already members of the a dministrative or supervisory authority concerned. 2A pers on who already holds five supervisory authority positions in undertakings subject to supervision by Ba Fin cannot be a ppointed to a further administrative or supervisory a uthority; i n this regard, positions held on administrative or s upervisory bodies i n undertakings in the same insurance or corporate group are disregarded i n determining the number of positions held. Section 25 Remuneration (1) The remuneration s ystems for members of the s enior management, employees and members of the supervisory boa rd of i nsurance undertakings must be reasonable, tra nsparent and aimed a t achieving sustainable development of the undertaking. (2) Ins urance undertakings may only a ward remuneration to members of the senior management and members of the s upervisory board for other activities that they carry out for the undertaking concerned if this is compatible with their ta s ks as members of the governing bodies. (3) 1Superordinate undertakings in a group must ensure that the remuneration systems for members of the senior ma nagement, employees a nd members of the supervisory board within the overall group a re reasonable, transparent a nd aimed at a chieving s ustainable development of the undertaking. 2The superordinate company i n a group within the mea ning of this subsection is the undertaking a t the head of the group and can be either a n i nsurance undertaking itself or a n i nsurance holding company. (4) 1Subject to the preconditions s pecified i n section 134 (1), the supervisory authority s hould s tipulate that the i ns urance undertaking must limit the total a nnual amount that it a llocates for the va riable remuneration to be granted to a l l members of the senior management a nd employees (total a mount of va riable remuneration) to a certain proportion of the profit for the year or that the i nsurance undertaking must withdraw such va riable remuneration i n full. 2Subject to the preconditions specified i n section 134 (1), the supervisory a uthorities s hould also prohibit the payment of va ri a ble remuneration components or limit them to a certain pro portion of the profit for the year. 3The a uthority to i s sue stipulations, prohibitions and limitations as set out i n sentences 1 a nd 2 must be taken into account in relevant contra ctual agreements between insurance undertakings and members of their s enior management, employees and – Page 34 of 207 – members of their supervisory boards. 4If contractual agreements governing the granting of va riable remuneration are not consistent with a s tipulation, prohibition or limitation issued i n accordance with sentence 1 or 2, no ri ghts can be cl a imed on the basis of such contractual a greements. (5) Subsections (1), (3) and (4) do not a pply i f the remuneration is agreed by collective a greement or within the ambit of s uch collective a greement through a greement by the parties to the employment contract on the application of collective a greement regulations or in a works or s ervice agreement based on a collective agreement. (6) For the conclusion or mediation of consumer mortgage l oans, the s tructure of the remuneration of the i ntermediaries may not impair their a bility to a ct in the best interests of the consumer, a nd i n particular i t may not be l i nked to sales ta rgets. Section 26 Risk management (1) 1Ins urance undertakings must have a n effective risk management s ystem that is well i ntegrated i nto the orga nisational structure and decision-making processes of the undertaking a nd that, by means of an appropriate internal reporting s ystem, duly ta kes i nto a ccount the i nformation needs of the persons who effectively run the undertaking or a re responsible for the key functions. 2The risk management system must encompass the strategies, processes and i nternal reporting procedures that are necessary to ensure that the risks to which the undertaking is or could be exposed ca n be identified, assessed, monitored and controlled and to ensure that these risks ca n be reported i n a meaningful wa y. 3The system must enable the undertaking to manage the risks continuously, both i ndividually and on an aggregated ba sis, taking i nto account the interdependencies between the risks. 4At the request of the supervisory a uthority, i ns urance undertakings must prepare a recovery plan (general recovery plan). 5The general recovery plan must describe s cenarios that could represent a risk to the undertaking and describe the corrective measures i ntended to combat such ri s ks. (2) The s trategies to be developed by a n undertaking include, in particular, a risk strategy a ligned with the management of the undertaking, taking into account the nature, scope a nd complexity of the business operated a nd the associated ri s ks. (3) If i nsurance undertakings apply the matching a djustment as specified in s ection 80 or the volatility a djustment in a ccordance with s ection 82, they must draw up a l iquidity plan with a projection of the cash i nflows and outflows i n rel ation to the assets and l iabilities on which these adjustments a re based. (4) If a n undertaking a pplies the volatility adjustment in accordance with section 82, the guiding principles specified in wri ti ng for the ri sk management system under section 23 (3) must i nclude guiding principles relating to the criteria for the a pplication of the volatility adjustment. (5) 1The ri sk management system must encompass all the i nsurance undertaking's risks a nd, i n particular, cover the fol lowing areas: 1. the underwriting of insurance risks and the recognition of provisions; 2. a s set liability management; 3. i nvestments, in particular derivatives a nd i nstruments of similar complexity; 4. the ma nagement of liquidity a nd concentration ri sk; 5. the ma nagement of operational risk; and 6. rei nsurance and other risk mitigation techniques. 2As a mi nimum, the internal guiding principles for risk management must s pecify requirements for the a reas referred to a bove. (6) In relation to i nvestment risk, the insurance undertaking must demonstrate that i t is complying with the requirements in section 124. – Page 35 of 207 – (7) 1In relation to asset liability management, a n insurance undertaking must regularly a nalyse 1. the s ensitivity of its technical provisions and eligible own funds i n relation to the assumptions on which the extra polation of the relevant risk-free interest ra te term structure under section 7 no. 21 i s based; 2. i f the matching adjustment in a ccordance with s ection 80 i s applied, a ) the s ensitivity of its technical provisions and eligible own funds i n relation to the assumptions on which the ca l culation of the matching a djustment is based, including the calculation of the underlyi ng s pread in accordance wi th s ection 81 no. 2 a nd the potential impact from the forced sale of assets on its eligible own funds; b) the s ensitivity of its technical provisions and eligible own funds i n relation to changes i n the composition of the a s signed asset portfolio; c) the i mpact from a reduction in the matching adjustment to zero; 3. i f the volatility a djustment i n accordance with section 82 i s a pplied, a ) the s ensitivity of its technical provisions and eligible own funds i n relation to the assumptions on which the ca l culation of the volatility adjustment is based a nd the potential i mpact from the forced divestiture of assets on i ts eligible own funds; b) the i mpact from a reduction in the volatility a djustment to zero. 2Ins urance undertakings must send the a nalyses specified in sentence 1 to the supervisory a uthority a nnua lly as part of the i nformation to be submitted under s ection 43. 3If a reduction of the matching adjustment or volatility a djustment to zero would lead to a failure to comply wi th the solvency ca pital requirement, the undertaking concerned must also s ubmit a n analysis of the corrective action i t could take in a situation of this nature to increase the eligible own funds to the l evel required to ensure compliance with the s olvency ca pital requirement or to reduce the risk profile such that compliance with the s olvency ca pital requirement is restored. (8) 1The i nsurance undertaking must s et up an i ndependent risk control function, structured such that i t significantly a dva nces the implementation of the risk management system. 2In i nsurance undertakings that use a n internal model, the ri sk control function must also have responsibility for developing, implementing, testing a nd va lidating the internal model as well as documenting the model, including a ny s ubsequent changes. 3The function must also analyse the effi ciency of the internal model, report a summary of this a nalysis to the management board, submit proposals to the ma nagement board for i mproving the model and keep the management board up to date a bout a ny corrective action ta ken i n respect of weaknesses or deficiencies that have been identified. Section 27 Risk and solvency assessment (1) 1The ri sk management system must include an own risk and s olvency a ssessment (ORSA), which insurance undertakings must carry out both regularly and without delay in the event of material changes i n their ri sk profile. 2The own ri sk and s olvency a ssessment must be a fixed component of the undertaking's business strategy a nd must be ta ken i nto a ccount a t all times in strategic decision-making. 3Insurance undertakings must i nform the s upervisory a uthority of the fi ndings within 14 days of completing each own risk and s olvency a ssessment. (2) As a mi nimum, the own ri sk and solvency assessment must i nclude: 1. a di screte assessment of the solvency needs, taking into accou nt the undertaking's specific risk profile, its specified ri s k tolerance l imits a nd i ts business s trategy; 2. a n a ssessment, i n the solvency statement and within ri sk-bearing ca pacity, a s to whether the regulatory own funds requirements and the requirements for technical provisions ca n be satisfied at all times; a nd 3. a n a ssessment of the materiality of a ny deviations in the undertaking's risk profile from the assumptions on which the ca lculation of the solvency ca pital requirement with the standard formula or with the i nternal model is based. (3) 1For the assessment specified in s ubsection (2) no. 1, a n undertaking must have processes that are a ppropriate to the – Page 36 of 207 – na ture, scope and complexity of its risks a nd that enable the undertaking concerned to i dentify and assess in a proper ma nner all risks to which it i s or could be exposed over both the s hort a nd long terms. 2These processes i nclude, i n pa rti cular, a n undertaking's processes for ca rrying out its own independent s tress tests and scenario analyses. (4) Ins urance undertakings must explain the methods used to assess the solvency needs in a ccordance with s ubsection (2) no. 1. (5) If a n i nternal model is used, the assessment in the cases specified in s ubsection (2) no. 3 must be ca rried out together wi th a recalibration in which the results from the internal model a re transferred to the risk measure a nd the calibration of the s olvency capital requirement. (6) 1Undertakings that provide l ong-term guarantees must, as part of the assessment i n accordance with subsection (2) no. 2, a l so ta ke into account the long-term ri sk-bearing capacity of the undertaking. 2If the insurance undertaking applies the ma tching adjustment in a ccordance with s ection 80, the volatility a djustment i n a ccordance with section 82 or the tra nsitional measures i n accordance with sections 351 a nd 352, compliance with the ca pital requirement in a ccordance wi th s ubsection (2) no. 2 must be assessed with and without the inclusion of these a djustments or tra nsitional measures. Section 28 External credit rating (1) In order to a void excessive trust being placed on external credit assessment institutions, when they use external credi t ra tings to calculate technical provisions a nd s olvency ca pital requirement in the course of their ri sk mana gement i ns urance undertakings examine the a ppropriateness of such external ra tings by calculating additional assessments as much a s they practically a nd possibly ca n to prevent an a utomatic dependence on external credit ratings. (2) The companies within the scope of Regulation (EC) No. 1060/2009 that are s ubject to supervision under this Act must compl y with the obligations resulting from that Regulation, as amended. Section 29 Internal control system (1) 1Ins urance undertakings must have an effective i nternal control system, which includes a t a minimum administrative a nd a ccounting procedures, a n internal framework for control and appropriate internal company reporting at all corpora te levels. 2The i nternal control system must also have a function for monitoring compliance with the requirements (compliance function). (2) 1The ta sks of the compliance function include advising the board of management i n relation to compliance with the l a ws and a dministrative regulations which apply to the pursuit of insurance business. 2The compliance function must a l so evaluate the potential effects of changes to the l egal environment for the undertaking and i dentify and assess the ri s k associated with a breach of the legal regulations (compliance risk). (3) Ins urance undertakings must have appropriate systems and structures i n place i n order to meet the requirements i n s ections 40 to 42 a nd be a ble to provide the information which needs to be transmitted to the s upervisory a uthorities in a ccordance with this Act. (4) The undertakings must use internal guidelines approved by the board of management in order to determine how the s ui tability of the i nformation to be published and transmitted must be guaranteed on a continuous basis. Section 30 Internal audit (1) Ins urance undertakings must implement a n effective i nternal audit which reviews the s uitability a nd effectiveness of the entire business organisation, and i n particular the internal control system. (2) 1The i nternal audit must be objective a nd i ndependent of other operational activities. 2It must report the results and – Page 37 of 207 – recommendations from i ts a udit directly to the board of management. 3The board of management must decide which mea sures must be taken based on the determinations of the audit reports and will ensure that these measures are i mplemented. Section 31 Actuarial function (1) 1Ins urance undertakings must have a n effective actuarial function i n place. 2In relation to the technical functions, this functi on must be responsible for 1. coordi nating the calculation; 2. gua ranteeing the suitability of the methods a pplied and the underlying model along with the assumptions made; 3. eva l uating the adequacy and quality of the underlying data; 4. compa ring the estimated va lues with the empirical values; 5. noti fying the board of management of the reliability a nd suitability of the calculation; a nd 6. moni toring the ca lculation i n the cases stated in s ection 79. (2) 1Furthermore the a ctuarial function must provide an opinion regarding the general signature and acceptance policy a nd the suitability of the reinsurance agreements. 2It contributes to the effective i mplementation of the risk ma nagement s ystem. 3This a pplies in particular to the development of new models. 4The a ctuarial function also contri butes to risk and solvency assessments. (3) Any i ndividual who exercises the a ctuarial function must have knowledge of insurance a nd financial mathematics tha t i s appropriate for the type, scope a nd complexity of the risks of the insurance undertaking, a nd be able to demonstrate relevant experience with the essential professional and other standards. Section 32 Outsourcing (1) Any i ns urance undertaking which outsources functions or i nsurance activities must remain responsible for fulfilling all of the regulations and requirements applicable under supervisory law. (2) 1The proper execution of functions and i nsurance activities outsourced, the governance and control options for the boa rd of management along with the a udit and control rights of the s upervisory a uthority must not be impaired as a res ult of the outsourcing. 2In particular, in relation to the functions a nd i nsurance activities a ffected by the outsourcing, the outsourcing company must ensure that 1. the company i tself, i ts official a uditors and the supervisory authority a re able to access all of the data; 2. the s ervi ce provider cooperates with the supervisory a uthority; a nd 3. the s upervisory a uthority gains ri ghts of access to the s ervice provider’s premises which either i t or a third party is a bl e to exercise. (3) In the event that important functions and insurance activities a re outsourced, i nsurance undertakings must also ens ure that any essential impairment of the quality of the business organisation, excess i ncrease i n operational ri sk or a ny ri sk to continuous a nd satisfactory s ervice to the policyholder a re avoided. (4) 1The outsourcing insurance undertaking must i n particular guarantee the required ri ghts related to information and to i s suing instructions by contract and i nclude the outsourced functions a nd i nsurance activities i n its risk management. 2A ri ght to i ssue instructions is not required if an i nsurance undertaking outsources functions to a parent enterprise as pa rt of a consolidated entity for ta x purposes and in terms of exercising the functions or insurance a ctivities this parent enterprise is subject contractually to the same requirements under supervisory l aw which also a pply to the outsourcing compa ny. – Page 38 of 207 – Section 33 Application of company law provisions, with the necessary modifications (1) Secti on 188 (1) s entence 1 a nd section 195 (3) also a pply to i nsurance stock corporations, with the necessary modi fications. (2) 1If thi s Act i ncludes provisions relating to the management board or supervisory board, and insurance undertakings under public law do not have governing bodies so designated, the releva nt executive body ta kes the place of the board of ma nagement, and the relevant supervisory a uthority ta kes the place of the s upervisory board. 2With respect to the executive body of public l aw insurance undertakings, sections 80 a nd 91 (2) of the German Stock Corporation Act a pply, wi th the necessary modifications. 3With respect to the supervisory a uthority of public law insurance undertakings, s ection 80 of the German Stock Corporation Act a pplies, with the necessary modifications. Section 34 Authorisation to issue statutory orders (1) 1In the case of i nsurance undertakings not subject to supervision by the supervisory a uthorities of the individual federal s tates, the Federal Mi nistry of Finance i s authorised to issue further provisions by s tatutory order concerning the content of the general restructuring plans in a ccordance with s ection 26 (1). 2This a uthorisation may be delegated by s ta tutory order to BaFin. 3The Insurance Advisory Council is to be consulted before the regulations are i ssued. 4Statutory orders under sentences 1 to 3 do not require the consent of the Bundesrat. (2) 1The Federal Mi nistry of Finance is authorised to s tipulate, by s tatutory order, further details on the configuration, moni toring, further development and tra nsparency of the remuneration s ystems within the meaning of section 25, i ncl uding the decision-making processes and responsibilities, the composition of the remuneration, the positive a nd negative remuneration parameters, the payment periods and the disclosure of the configuration of the remuneration s ys tems and the remuneration paid, the disclosure medium a nd the frequency of the disclosure, along with the a dmissibility of other remuneration within the meaning of s ection 25 (2). 2The regulations must be based in particular on the s ize and remuneration s tructure of the undertaking along with the type, scope, complexity, risk content and i nternationality of the business activities as a whole. 3In the case of undertakings which belong to an i nsurance group, the regulations must also be based on the size of the group a long with the type, scope, complexity, risk content and i nternationality of the business activities of the group. 4Within the framework of the provisions under s entence 1, the commercial l aw provisions related to the disclosure of remuneration i n accordance with section 341a (1) and (2) in conjunction with section 341l (1) sentence 1 of the Commercial Code remain unaffected. 5This a uthorisation may be del egated by s tatutory order to BaFin. 6Statutory orders under sentences 1 to 5 do not require the consent of the Bundesrat. Segment 4 General reporting obligations Subsegment 1 Annual audit Section 35 Duties of the official auditor (1) 1Wi th the audit of the annual financial statements the auditor must determine whether the i nsurance undertaking ha s fulfilled the following notification requirements a nd other requirements: 1. the notification requirements in a ccordance with section 47 numbers 1 to 5 a nd 7 to 9, s ection 58 (1) a nd (4) a nd s ection 59 (1) a nd (4); 2. the notification requirements of section 28 (5) of the German Supervision of Financial Conglomerates Act; 3. the requirements i n accordance with Article 4(1), (2) and (3) subparagraph 2, Arti cle 9(1) to (4) as well a s Arti cle 11(1) to (11) s ubparagraph 1 a nd (12) of Regulation (EU) No. 648/2012, 4. the requirements i n accordance with Article 4(1) subparagraph 1, Arti cle 5a (1) as well as Arti cles 8b to 8d of Regulation (EU) No. 1060/2009, as amended, – Page 39 of 207 – 5. the requirements i n accordance with Article 4(1) to (5) and Article 15 of Regulation (EU) 2015/2365 of the European Pa rl iament and of the Council of 25 November 2015 on tra nsparency of securities financing tra nsactions and of reus e and amending Regulation (EU) No. 648/2012 (OJ L 337 of 23 December 2015, pa ge 1), a s amended, 6. the requirements i n accordance with Article 16(1) to (4), Article 23(3) sentence 1, pa ragraphs (5), (6) and (10), Article 28(2) a nd Arti cle 29 of Regulation (EU) 2016/1011 of the European Pa rliament and of the Council of 8 June 2016 on i ndices used as benchmarks in financial instruments and financial contracts or to measure the performance of i nvestment funds a nd amending Directives 2008/48/EC a nd 2014/17/EU and Regulation (EU) No. 596/2014 (OJ L 171 of 29 June 2016, pa ge 1), 7. the requirements i n accordance with Article 28(1) to (3) of Regulation (EU) No. 600/2014 of the European Parliament a nd of the Council of 15 Ma y 2014 on ma rkets in fi nancial instruments and amending Regulation (EU) No. 648/2012 (OJ L 173 of 12 June 2014, page 84; L 6 of 10 Ja nuary 2015, page 6; L 270 of 15 October 2015, pa ge 4) a nd 8. the requirements i n accordance with Articles 5 to 9, 18 to 26, 27(1) a nd (4) and Article 43(5) and (6) of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 l aying down a general fra mework for securitisation a nd creating a specific framework for simple, tra nsparent and standardised s ecuritisation, and amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU a nd Regulations (EC) No. 1060/2009 a nd (EU) No. 648/2012 (OJ L 347 of 28 December 2017, page 35). 2 The result must be included in the a udit report. (2) The a uditor will review the s olvency s heet at the individual and group levels a nd provide a s eparate report on the fi ndings. (3) The a uditing requirement under section 317 (4) of the Commercial Code a pplies to all insurance undertakings s ubject to s ection 91 (2) of the German Stock Corporation Act. (4) 1The a uditor i s required report to the supervisory a uthority wi thout delay a ll facts a nd decisions i n relation to the a udited undertaking of which they become aware while exercising their ta sks and which affect the following: 1. a breach of the legal or i nsurance regulations which govern the certification co nditions or which a pply to the exercise of the undertaking’s a ctivity; 2. a n i mpairment to the continuation of the company’s a ctivities; 3. rejecti on of the confirmation of proper accounting or reservations; 4. non-compliance with the solvency ca pital requirement or 5. non-compliance with the minimum capital requirement. 2Sentence 1 a pplies, with the necessary modifications, to facts and decisions of which the auditor becomes aware i n exercising their responsibilities at a n insurance undertaking which maintains a cl ose link to the audited insurance undertaking as a result of a control relationship. 3Notifications in a ccordance with sentences 1 a nd 2 a re not considered to be a breach of a duty of confidentiality s tipulated by contract or through the legal or a dministrative regulations, unl ess they a re not made i n good faith. (5) 1In the case of i nsurance undertakings within the meaning of section 52 the auditor must also review whether these ha ve fulfilled their obligations in accordance with sections 53 to 56 a s well as under the German Money Laundering Act (Geldwäschegestz - GwG). 2A separate report must be provi ded on the audit. Section 36 Notification of the auditor to the supervisory authority; audit engagement (1) 1The management board must immediately notify the s upervisory a uthority of the auditor a ppointed by the s upervisory board. 2The s upervisory a uthority may, i f i t has any objections to the a uditor of the annual financial s ta tements, require that a different a uditor be a ppointed within a reasonable period of time. 3If no new a ppointment is ma de or i f the s upervisory a uthority also has objections to the newly a ppointed a uditor, i t must itself appoint an auditor. – Page 40 of 207 – 4 In this case, section 318 (1) s entence 4 of the Commercial Code applies, subject to the proviso that the legal representatives must i mmediately issue the audit engagement to the auditor a ppointed by the supervisory a uthority. (2) Subsection (1) does not a pply to i nsurance undertakings that are exempt from the requirement to have their annual fi nancial statements audited in a ccordance with section 330 (1), (3) a nd (4) of the Commercial Code a nd on the statutory order enacted based upon this authorisation. Section 37 Submission to the supervisory authority (1) 1Ins urance undertakings must immediately s ubmit to the s upervisory a uthority the annual financial statements prepared by the legal representatives and later the adopted annual financial statements and management report. 2 Ins urance undertakings that prepare consolidated financial statements or a group management report must submit thes e documents to the supervisory a uthority i mmediately. (2) Ins urance undertakings must submit the audited s olvency s heet and the audit report for the solvency overvi ew (s ection 35 (2)) to the s upervisory a uthority without delay i n each case. (3) Ins urance undertakings must send every i nsured, on request, the a nnual financial s tatements a nd management report i n the financial year following the year under review. (4) The provisions under s ubsections (1) a nd (3) apply to separate financial s tatements within the meaning of s ection 325 (2a ) of the Commercial Code. (5) 1Immediately a fter the audit report has been a dopted, the board of management must submit a copy of the report, wi th the notes and remarks of the management a nd supervisory boards, to the supervisory a uthority. 2The supervisory a uthority may discuss the report with the auditor and, if necessary, require additional audits a nd supplements to the report a t the expense of the insurance undertaking. (6) Subsection (4) does not a pply to the undertakings stated in section 36 (2). Section 38 Accounting and auditing of public law insurance undertakings (1) The provisions of the second subsegment of the fourth segment in conjunction with the provisi ons of the first a nd s econd parts of the third book of the Commercial Code a pply, with the necessary modifications, to undertakings under public law which ca rry on i nsurance business and are not s ocial i nsurance institutions. (2) Secti ons 36 a nd 37 do not apply to public law i nsurance undertakings established under the laws of the indivi dual federal s tates and subject to supervision at s tate level, for which additional requirements with respect to the a uditing of the a nnual financial statements i n accordance with section 341k of the Commercial Code have been imposed under the l a ws of the individual federal s tates. Section 39 Authorisation to issue statutory orders (1) 1The Federal Mi nistry of Finance is authorised to issue, by s tatutory order, provisions for i nsurance undertakings not s ubject to supervision by the supervisory authorities of the individual federal s tates with respect to 1. the bookkeeping, contents, form, period a nd number of copies of the i nternal report to be submitted to the s upervisory a uthority, comprising the balance sheet, broken down for s upervisory purposes, profit and l oss a ccount broken down by cl asses a nd types of insurance a nd special explanatory notes to the balance s heet and profit a nd l oss a ccount i f required for s upervisory purposes in a ccordance with this Act; – Page 41 of 207 – 2. the contents, form a nd number of copies of the i nternal interim report to be submitted to the supervisory a uthority qua rterly, comprising a compilation of the latest accounting a nd portfolio data a nd i nformation a bout the number of cl a ims, i f required for s upervisory purposes in a ccordance with this Act; 3. the content, form and period of the audit reports under section 35 (1) a nd (5) and section 341k of the Commercial Code, i f required for supervisory purposes in accordance with this Act, i n particular i n order to obtain consistent documentation for the purposes of evaluating the insurance business ca rried out by the i nsurance undertakings; 4. the a uditing by a n i ndependent expert of the annual financial statements an d management report of insurance undertakings not s ubject to section 341k of the Commercial Code, as well as the contents and the deadlines for the report’s s ubmission if required for supervisory purposes i n accordance with this Act; 5. the contents, form a nd number of copies of the s olvency s heet to be compiled along with the ti meline for s ubmission to the supervisory a uthority; 6. the ti melines for the transmission of i nformation which must be transmitted based on delegated legislative a cts i n a ccordance with Arti cle 35 (9) a nd technical i mplementation s tandards in a ccordance with Arti cle 35 (10) of Directive 2009/138/EC; a nd 7. the type a nd manner of the data tra nsmission, the data formats to be used, the data quality to be complied with and the company name to be provided. 2 The Insurance Advisory Council is to be consulted before the regulations are issued. 3This authorisation may be del egated by s tatutory order to BaFin. 4Statutory orders under sentences 1 to 3 do not require the consent of the Bundesrat. 5Statutory orders i n accordance with sentence 1 numbers 1, 3 a nd 4 a nd with sentence 3 a re promulgated i n cons ultation with the Federal Ministry of Justice and for Consumer Protection, provided that they i nclude the a uthorisation under sentence 1 numbers 1, 3 a nd 4. (2) 1The governments of the i ndividual federal states may, i n consultation with BaFin, enact regulations via statutory order i n a ccordance with s ubsection (1) above, which a re applicable to insurance undertakings subject to s upervision by the s upervisory a uthorities of the individual federal states. 2They may delegate this power by statutory order to the s upervisory a uthority of the federal s tate. Subsegment 2 Report on solvency and financial position Section 40 Solvency and financial position report (1) 1Ins urance undertakings must publish a solvency a nd financial position report a t least once per a nnum, and no later tha n 14 weeks following the end of the fi nancial year. 2The deadline must be extended by s ix weeks for the report at group l evel. 3The report must be a pproved by the executive body prior to disclosure. 4The report must be sent to the s upervisory a uthority without delay following disclosure. (2) 1The s olvency a nd financial position report must i nclude essential i nformation o n the i nsurance undertaking’s s ol vency a nd financial position. 2In terms of the l evel of detail the statements i n this report must be determined in a ccordance with the type, s cope and complexity of the business activities a nd the risks of the undertaking, and be generally understandable. 3The following must be specified here: 1. the business activity a nd tra ding results of the undertaking; 2. the business organisation with assessment of i ts suitability for the undertaking’s risk profile; 3. the ri sk potential, risk concentration, risk mitigation measures and risk sensitivity s eparately for each risk ca tegory; 4. s eparately i n each ca se the bases and methods used to evaluate the assets, technical provisions a nd other liabilities i n a ccordance with the solvency sheet, together with a n explanation of the crucial differences with the bases a nd methods used to evaluate these in the a nnual financial s tatements; a long with – Page 42 of 207 – 5. the ca pital management with details a t least on the s tructure a nd the amount of own funds and their quality a long wi th the a mounts of the solvency capital requirement a nd the minimum ca pital requirement. (3) 1If the matching adjustment stated in s ection 80 i s applicable, the description s tated i n subsection (2) number 4 must i ncl ude a description of the matching a djustment, the portfolio of obligations a nd the assets allocated to which the ma tching adjustment is applied, along with quantification of the effects of the change of the matching a djustment to zero on a n undertaking’s fi nancial position. (3) 2The description stated in s ubsection (2) number 4 must also include a n expl anation regarding whether the volatility a djustments stated i n section 82 i s used by the undertaking, along with a qua ntification of the effects of the change of the matching adjustment to zero on an undertaking’s financial position. (4) 1The description of own funds must i nclude 1. a n a nalysis of all essential changes as compared with the reporting period for the previous year; 2. a n explanation of all greater differences in relation to the va lue of the own funds components in the annual financial s ta tements; a nd 3. a bri ef presentation of the tra nsferability of the capital. 2 Ins urance undertakings which use an i nternal or partially i nternal model to calculate the solvency ca pital requirement mus t also provide adequate i nformation explaining the main differences between the assumptions underlying the s ta ndard formula and its model. (5) If there has been a failure to comply with the minimum ca pital requirement or an essential failure to comply with the s ol vency ca pital requirement during the reporting period, then 1. the ma ximum amount of the shortfall below the relevant ca pital requirement must be provided, 2. the reasons a nd consequences of the failure to comply must be exp lained a nd 3. the remedies that a re planned or have been taken must be i llustrated. (6) 1If a ca pital a dd-on has been determined then this must be s tated s eparately. 2Furthermore the amount that has been determined in a ccordance with the regulations on the calculation of the s olvency ca pital requirement must also be s ta ted. 3If the i nsurance undertaking is required to use company-specific parameters to calculate the solvency ca pital requirement upon the orders of the supervisory a uthority, the effects of th ese on the calculation must be quantified in deta il a nd also stated separately. 4In both cases the reasons stated by the s upervisory a uthority for the measure taken mus t be a ddressed. (7) If the s upervisory a uthority is still reviewing the final amount of the solvency capital requirement then this must be poi nted out in the disclosure i n accordance with section (1). (8) 1Wi th the consent of the s upervisory a uthority statements i n the report may be replaced with references to i nformation which has been published within the framework of other general or s upervisory l aw regulations. 2Consent wi l l be given provided that the i nformation which is intended to be referenced is equivalent in terms of type a nd s cope. Section 41 Non-disclosure of information (1) 1Sta tements may be dispensed with in the solvency a nd financial position report with the approval of the supervisory a uthority; this does not apply to the statements in a ccordance with s ection 40 (2) s entence 3 number 5, (4) s entence 2 a nd (5). 2In this case the reason why the statements have not been i ncluded must be outlined in the s olvency a nd fi nancial position report. (2) The s upervisory a uthority will provide the a pproval under subsection (1) i f the disclosure would result i n 1. competitors of the undertaking gaining a crucial unfair a dvantage or – Page 43 of 207 – 2. the breach of one of the undertaking’s obligations of confidentiality or s ecrecy in relation to the policyholders or ba sed on a relationship with other counterparties. Section 42 Updates to the solvency and financial position report (1) 1In the event that a significant development considerably changes the i mportance of the information published in the s ol vency a nd financial position report, the relevant i nsurance undertaking will publish appropria te statements regarding the type a nd effects of the significant development. 2A significant development occurs in particular if 1. a fa ilure to comply with the minimum ca pital requirement i s determined and either the s upervisory a uthority is of the opinion that the relevant insurance undertaking is unable to submit a realistic s hort-term financing plan or no s uch plan has been submitted within one month of the determination of the failure to comply with the minimum ca pi tal requirement; 2. a n essential failure to comply with the s olvency ca pital requirement is determined and the s upervisory a uthority does not receive a restructuring plan within twelve months of the determination of the non -compliance that it cons iders to be realistic. 3Inthe cases under sentence 2 the amount of the non-compliance, the explanation for i ts reasons and effects along with remedies that have been i mplemented or are planned must i n each case at a minimum be published without delay. (2) 1Information must also be published i f 1. the fa ilure to comply with the minimum capital requirement has not been rectified within three months following determination of this or 2. the essential failure to comply wi th the solvency ca pital requirement has not been rectified six months following determination of this. 2 The disclosure must state which remedies have already been i mplemented and which are s till being planned. 3The di s closure must be made a t the end of three months in the event of a failure to comply with the minimum capital requirement or otherwise at the end of a six-month period. Subsegment 3 Information to be provided for supervisory purposes Section 43 Duties to inform; calculations (1) Ins urance undertakings must transmit s uch i nformation to the supervisory a uthorities in a ccordance with this Act whi ch they require in order to fulfil their responsibilities under this Act (section 294 (1)). (2) 1The i nformation must be complete, current and precise. 2It must take a ccount of the type, scope and complexity of the business activities of the relevant undertaking and i n particular the risks associated with this business a ctivity. 3The undertakings must submit the information to the supervisory authority i n good time and in a comprehensible format. Section 43a Reporting requirements for financial stability purposes; power to issue statutory orders (1) The s upervisory a uthority ca n require supervised undertakings and s upervised groups to provide i nformation – Page 44 of 207 – 1. tha t i t needs to perform i ts functions under s ection 294 (2) s entences 3 a nd 4 or 2. tha t i t must provide to the European Insurance and Occupational Pensions Authority under Arti cle 35 of Regulation (EU) No. 1094/2010 of the European Pa rliament and of the Council of 24 November 2010 establishing a European s upervisory a uthority (European Insurance and Occupational Pensions Authority), a mending Decision No. 716/2009/EC a nd repealing Commission Decision 2009/79/EC (OJ L 331 of 15 December 2010, pa ge 48), a s amended by Di rective 2014/51/EU (OJ L 153 of 22 Ma y 2014, pa ge 1). (2) 1The Federal Ministry of Finance is authorised to adopt provisions by way of statutory orders that establish reporting requirements under subsection (1) for s upervised undertakings and supervised groups that are not s ubject to s upervision by the s upervisory a uthorities of the federal states, and to determine the content, the format of the i nformation to be provi ded and the period for s ubmission to BaFin. 2This authorisation may be delegated by s tatutory order to BaFin. 3Statutory orders under sentences 1 a nd 2 do not require the consent of the Bundesrat. Section 44 Projections 1Thes upervisory authority may demand calculations from the supervised undertaking which include projections if this is required for financial supervision. 2Projections may relate to the following i n particular: 1. The projected business results to the end of the current financial year or future financial years; for l ife insurance undertakings together with a s tatement of the surplus participation already declared or expected fo r future financial yea rs ; 2. The i nsurance undertaking’s risk-bearing capacity i n stress situations. 3 In s uch cases, the s upervisory a uthority must determine the parameters, relevant dates a nd calculation methods, as wel l as the form and the deadline for the projections. 4The supervisory a uthority permits the insurance undertaking to us e its own methods of calculation, provided these do not hinder assessment of the undertaking or the insurance ma rket. 5It may require the calculations to be based on certain assumptions. Section 45 Exemption from reporting obligations (1) 1If reports must be s ubmitted to the supervisory a uthority more frequently than once per year based on delegated l egislative acts in accordance with Article 35 (9) a nd technical i mplementation standards in accordance with Article 35 (10) of Di rective 2009/138/EC, the s upervisory a uthority may exempt insurance undertakings from this reporting obl igation i n whole or i n part if 1. tra ns mission of this i nformation would be associated with disproportionately high effort i n relation to the type, s cope and complexity of the risks associated with the business; a nd 2. the i nformation is s ubmitted a t least once per year. 2An exemption i s excluded in the event of quarterly reporting for the purposes of calculating the minimum capital requirement under s ection 123 (1) s entence 1. 3An exemption is also excluded if the insurance undertaking belongs to a group as defined in section 7 number 13, unless the undertaking demonstrates that regular reporting throughout the yea r i s unreasonable considering the type, scope and complexity of the risks associated with the group’s business. (2) 1The s upervisory a uthority may exempt insurance undertakings from regular reporting obligations based on del egated l egislative acts in accordance with Article 35 (9) or technical implementation standards in accordance with Arti cl e 35 (10) of Directive 2009/138/EC i n whole or i n part if 1. tra ns mission of the relevant i nformation would be associated with disproportionately high ef fort considering the type, s cope a nd complexity of the risks associated with the undertaking’s business; a nd – Page 45 of 207 – 2. tra ns mission of the relevant i nformation i s not required for effective s upervision of the undertaking; 3. the exemption does not adversely a ffect the stability of the relevant financial systems i n the union; a nd 4. the undertaking is ca pable of tra nsmitting the information without delay upon request. 2 An exemption i s excluded if the i nsurance undertaking belongs to a group as defined i n section 7 number 13, unless the undertaking demonstrates that regular reporting throughout the year is unreasonable considering the type, s cope and compl exity of the risks associated with the group’s business with due regard to the objective of financial stability. (3) 1The proportion of all i nsurance undertakings within the non-life i nsurance market that are exempted from reporting obl igations in accordance with subsections (1) and (2) may not exceed a market share of 20 per cent in each case. 2The s a me applies to the proportion of all insurance undertakings within the life insurance market. 3The market s hare must be determined based on the booked gross premiums for the non -life i nsurance market and based on technical gross provi sions for the life i nsurance market. (4) The s upervisory a uthority will give priority to the undertakings with the lowest market shares when providing exemptions for undertakings. (5) The s upervisory a uthority will consider the following criteria at a minimum when reviewing whether the effort i nvolved in tra nsmitting information would be disproportionately high in relation to the type, scope and complexity of the undertaking’s risks: 1. the vol ume of the premiums, technical provisions and assets of the undertaking; 2. the vol atility of the insurance benefits covered by the undertaking; 3. the ma rket ri sks that a rise as a result of the undertaking’s investments; 4. the a mount of the risk concentrations; 5. the total number of classes of i nsurance for which a l icence has been issued; 6. the potential effects on the financial s tability of administration of the undertaking’s assets; 7. the undertaking’s systems a nd structures for tra nsmitting i nformation for the supervisory purposes a nd the gui delines set out i n writing that are stated in s ection 29 (4); 8. the s uitability of the undertaking’s governance system; 9. the l evel of own funds for compliance with the solvency ca pital requirement and the minimum ca pital requirement; and 10. whether the undertaking is a ca ptive insurance undertaking which only covers risks associated with the industrial or tra di ng group to which i t belongs. Section 46 Duties to inform BaFin (1) 1Al l undertakings subject to s upervision under this Act must s ubmit the required s tatistical information about their bus iness operations to BaFin. 2The Insurance Advisory Council must be consulted with respect to the nature of this i nformation. (2) Upon request, public law i nsurance undertakings that a re not subject to s upervision under this Act must s ubmit to Ba Fin the same statistical i nformation a bout their business operations as insurance undertakings that are subject to s upervision under this Act. Section 47 Notification requirements Ins urance undertakings must notify the supervisory a uthority without delay i n relation to the foll owing: 1. the a ppointment of a member to the s upervisory board along with the intention to appoint a manager and the – Page 46 of 207 – further i ndividuals who a re responsible for key tasks, with details on the facts that are essential for the purposes of eva l uating whether they are fit a nd proper persons (section 24 (1)); 2. the fa ct that one of the i ndividuals s tated in number 1 has left the undertaking or their a uthority to represent the i ns urance undertaking has been withdrawn, with the reasons provi ded in each case, provided that these are s i gnificant i n terms of assessing whether they a re fit and proper persons (section 24 (1)); 3. a mendments to the articles of association, with the purpose of a ca pital i ncrease; 4. i f the undertaking is a reinsurance undertaking, a ny change to the s ections of the business plan s tated in section 9 (2) numbers 1 a nd 2, a ny change to the actual field of business, any change to company a greements of the type des ignated i n sections 291 a nd 292 of the German Stock Corporation Act a long with an i ntention to i mplement a tra ns formation under s ections 1 a nd 122a of the Transformation Act, unless s ubject to mandatory a pproval i n a ccordance with s ection 166 (3); 5. the a cquisition or disposal of a qualified participating interest in the own insurance undertaking, reaching, exceeding or falling below the thresholds of 20 percent, 30 percent and 50 percent of the voting rights or capital, a s well as the fact that the insurance undertaking will become a subsidiary of another undertaking, as soon as the cha nge in ownership structure becomes known to the insurance undertaking; 6. the existence, modification or termination of any cl ose link as defined i n section 7 number 7 wi th another natural pers on or undertaking; 7. the na me a nd address of the holder of a qualified participating i nterest i n the insurance undertaking a nd the a mount of that participating interest annually, as s oon as the undertaking has received this knowledge; 8. the i ntention to outsource i mportant functions or i nsurance activities with submission of the draft contract; 9. es sential ci rcumstances which a rise after formation of the contract related to important outsourced functions a nd i ns urance activities; 10. the i ndirect or direct hedging of claims ri sks or other risks i f based on the issuing of debt securities or other fi nancing mechanisms and with the participation of a company which exists exclusively for s uch purposes; the i s sue prospectus, the contractual regulations underlying the ri sk transfer and a s chedule of the i dentified risks to the undertaking resulting from the tra nsaction must be i ncluded i n the notification; 11. i f the undertaking is a primary i nsurance undertaking, the acquisition of participating interests; however, if these pa rti cipating interests consist of shares and other participating i nterests, only i f the i nterests exceed 10 percent of the nominal ca pital of the other undertaking; for the purpose of this provision, the interests of several insurance undertakings belonging to a group within the meaning of section 18 of the German Stock Corporation Act a nd of the controlling entity i n a nother undertaking a re consolidated; 12. i f the undertaking is a primary i nsurance undertaking, statements related to an affiliated company within the mea ning of s ection 15 of the German Stock Corporation Act; a nd 13. wi th respect to compulsory i nsurance, the i ntended use of new or amended general policy conditions, with s ubmission of the relevant documents. Segment 5 Insurance distribution Section 48 Requirements for insurance distribution (1) Ins urance undertakings are required to cooperate only wi th professional insurance i ntermediaries who 1. a re a uthorised under section 34d (1) of the Trade Regulation Code, are exempted from the authorisation – Page 47 of 207 – requirement in accordance with section 34d (6) of the Tra de Regulation Code or are not s ubject to the authorisation requirement under s ection 34d (7) sentence 1 number 1 or (8) of the Trade Regulation Code a nd 2. a re entitled to receive assets from or for the benefit of the policyholder or can provide proof of a financial gua rantee, i f s uch a guarantee is required by a statutory order under s ection 34e (1) s entence 1 no. 2 (b) of the Tra de Regulation Code. (2) 1Ins urance undertakings must ensure that their employees who are directly o r significantly involved in the di s tribution of insurance products are fit and proper persons, have well-ordered finances, are a dequately qualified to mediate the relevant i nsurance product(s) and participate i n regular training a ctivities. 2Insurance undertakings may only cooperate with professional i nsurance intermediaries who 1. a re not subject to the a uthorisation requirement under section 34d (7) sentence 1 number 1 of the Tra de Regulation Code or 2. a re exempted from the a uthorisation requirement i n accordance with section 34d (6) of the Trade Regulation Code a nd ca rry on their insurance mediation activities on behalf of one or more insurance undertakings, i f those insurance intermediaries meet the conditions set out in sentence 1. 3The adequacy of the intermediaries’ qua lifications depends on the requirements concerning the products they s ell. 4Sentences 1 to 3 do not apply to persons wi thin the meaning of s ection 24 to the extent that those persons meet the fit and proper requirements set out there. 5 The content, s cope and documentation of qualification measures to be documented must comply with s ection 1 of the Regulation on Insurance Mediation. (2a ) 1Insurance undertakings must ensure that appropriate measures a re in place in their system of governa nce to ens ure that the requirements of s ubsections (1) a nd (2) a re met, monitored and documented in respect of their employees a nd i ntermediaries i n accordance with subsection (1) numbers 1 a nd 2 a nd their employees directly or s i gnificantly i nvolved in the distribution of insurance products, to the extent that compliance with these requirements i s not a l ready ensured by a uthorisation procedures under the Tra de Regulation Code. 2For this purpose, they must issue corres ponding internal guidelines, establish adequate internal processes and establish a function that ensures proper i mplementation. (3) Ins urance undertakings may only cooperate with i nsurance intermediaries from other member s tates or EEA s i gnatory s tates i f the intermediaries a re authorised to mediate insurance contracts in accordance with the regulations of their home country. (4) 1At the i nitiative of an i nsurance intermediary under s ection 34d (7) sentence 1 number 1 of the Trade Regulation Code, the insurance undertaking or undertakings on whose behalf the i nsurance intermediary a cts on a n exclusive basis mus t communicate to the registration authority the data required to be recorded under section 11a (1) of the Trade Regulation Code. 2The insurance undertaking or undertakings must ensure that the requirements s et forth in section 34d (7) s entence 1 number 1 of the Tra de Regulation Code have been met. (5) The i nsurance undertakings must i nform the registration authority under s ection 11a (1) of the Trade Regulation Code wi thout delay of the termination of cooperation with a n i nsurance intermediary not subject to the a uthorisation requirement under s ection 34d (7) sentence 1 number 1 of the Trade Regulation Code a nd request that the i ntermediary concerned be deleted from the register. (6) 1Secti ons 48a to 50 do not apply to the distribution of reinsurance products. 2Sections 48 a nd 51 do not a pply to the di s tribution of reinsurance products relating to ri sks that a re not located i n a member state or EEA signatory s tate. Section 48a Distribution remuneration and avoidance of conflicts of interest (1) 1The distribution remuneration of insurance undertakings a nd their employees may not conflict with their duty to act i n the best i nterests of their clients. 2Insurance undertakings must not make a ny a rrangement by way of distribution remuneration, sales ta rgets or otherwise that could provide a n incentive to itself or its insurance i ntermediaries to recommend a particular i nsurance product to a client when they could offer a different insurance product which would – Page 48 of 207 – better meet the client’s needs. (2) 1An i nsurance undertaking carryi ng on the distribution of insurance-based investment products must maintain and operate effective organisational a nd administrative a rrangements with a vi ew to taking a ll reasonable s teps designed to prevent conflicts of i nterest from adversely a ffecting the i nterests of its clients. 2Those a rrangements must be proportionate to the activities performed and the insurance products sold. (3) Confl icts of interest under subsection (2) a re those that can arise between insurance i ntermediaries a nd i nsurance undertakings themselves, i ncluding their managers and employees, or any person directly or i ndirectly l inked to them by control , and their clients, or between one client and another, in the course of carrying out a ny i nsurance distribution a cti vi ties. (4) Where organisational or administrative a rrangements made by the insurance undertaking i n accordance with s ubsection (2) to manage conflicts of interest are not s ufficient to ensure, with reasonable confidence, that risks of da mage to client interests will be prevented, the i nsurance undertaking must clearly disclose to the client the general na ture or s ources of the conflicts of interest, in good time before the conclusion of an i nsurance contract. (5) Di s closure of the general nature of s ources of conflicts of interest must 1. be ma de i n a durable medium and 2. i ncl ude sufficient detail, ta king into account the nature of the client, to enable that client to take an i nformed deci sion with respect to the i nsurance distribution a ctivities in the context of which the conflict of i nterest a rises. (6) Ins urance undertakings that pay or a re paid a ny fee or commission, or provide or a re provided with any non- monetary benefit i n connection with the distribution of an insurance-based i nvestment product or a n ancillary servi ce, to or by a ny pa rty except the cl ient or a person a cting on behalf of the client must ensure that the fee or commission or the benefit does not have a detrimental i mpact on the quality of the relevant service to the client a nd does not impair compliance with the i nsurance undertaking’s duty to act honestly, fairly a nd professionally in accordance with the best i nterests of its clients. Section 48b Prohibition on the passing on of special allowances and commissions (1) 1Ins urance undertakings and insurance i ntermediaries within the meaning of s ection 59 (1) of the Insurance Contract Act a re prohibited from granting or promising special allowances to policyholders, i nsureds or beneficiaries under a n i ns urance contract. 2This prohibition also applies to the employees of insurance undertakings and insurance i ntermediaries. 3Any contractual a rrangement to the contrary is i neffective. (2) 1A s pecial allowance means any direct or i ndirect inducement in a ddition to the benefit a greed i n the insurance contra ct, i n particular a ny 1. pa ssing on of commissions i n full or in part, 2. a ny benefit in kind or s ervice that does not relate to the i nsurance benefit, 3. reba tes granted on goods or services, to the extent that i t is not of low value. 2Low-value inducements mean rewards or gifts for initiating or concluding a contra ct, provided that they do not exceed a total value of EUR 15 per i nsurance relationship and calendar yea r. (3) The gra nting of commissions to policyholders who are also i ntermediaries of the insurance undertaking concerned does not qualify a s a special allowance unless the mediation relationship was only established to provide such i nducements to them for the undertaking’s own insurance products. (4) 1Subs ection (1) does not apply i f the s pecial allowance is used to permanently i ncrease the benefits or reduce the premiums for the contract concerned. 2This is without prejudice to section 138 (2), s ection 146 (2) s entence 1, s ection – Page 49 of 207 – 161 (1) a nd section 177 (1). Section 48c Pass-through provision on crediting clients with commissions included in premiums (1) 1As s oon as the i nsurance consultant informs the i nsurance undertaking in accordance with section 34d (2) sentence 6 of the Tra de Regulation Code that the consultant has mediated to the policyholder a n insurance product containing i nducements that do not benefit the insurance contract (gross premium rate), the i nsurance undertaking is required to di s burse that i nducement to the policyholder without undue delay. 2The disbursement must be made in the form of a credi t to a premium a ccount to be maintained for the contract for the policyholder. 3The credit amount is a maximum of 80 per cent of the relevant inducement up to the equivalent of 80 per cent of the premiums payable in the first five yea rs after the contract was concluded. 4The credit balance on the premium a ccount must be used exclusively to s ettle the policyholder’s obligation to pay the premiums and must be credited i n the amount of 80 per cent of the premium pa ya ble for the relevant insurance period. 5By way of derogation from sentences 2 to 4, the disbursement may a lso be ma de by reducing the premiums for the mediated contract i n accordance with section 48b (4). 6Sentences 1 to 5 a pply, wi th the necessary modifications, if, in the case of the provision of a dvice within the meaning of section 34d (2) s entence 2 number 1 of the Trade Regulation Code, the policyholder submits to the i nsurance undertaking before the contract is concl uded a certificate issued by the insurance consultant concerning the provision of advi ce on the i nsurance policy. 7 The certi ficate must s tate the date on which the advice was provided. 8There must be no more than six months between the date on which the a dvice was provided a nd the date of the application to conclude the i nsurance contract. (2) The i nsurance undertaking must document the disbursement of the inducement a ppropriately a nd notify the pol icyholder of the disbursement, i n the case of s ubsection (1) sentence 2 by provi ding a premium account statement a t l east once a year until its balance has been reduced to zero i n accordance with subsection (1) s entence 4. (3) 1Inducements within the meaning of this provision mean the cost of i nsurance mediation, in particular commissions, fees or other cash payments and any non-cash benefits, regardless of when they become due. 2The i nducements must be estimated by a pplying prudent commercial judgement. 3To the extent that s tatutory provisions contain requirements governing the calculation of distribution costs for a n insurance product, these may be applied instead of the requirements of sentences 1 a nd 2. Section 49 Liability for cancellation (1) 1The i nsurance undertakings must ensure that, a t least i n the event of a termination of a contract by the policyholder, unl ess this relates to a termination in a ccordance with s ection 205 (2) of the German Insurance Contract Act, or i n the event of a s uspension in payments in a ccordance with s ection 193 (6) s entence 4 of the German Insurance Contract Act or a premium exemption i n accordance with section 165 (1) of the German Insurance Contract Act i n the first five years fol lowing formation of the contract, the insurance i ntermediary only retains the commission accrued for mediating a contra ct for substitutive health insurance or l ife i nsurance up to the amount which would been a ccrued i f there had been a n equal distribution of the commission over the first five years s ince formatio n of the contract until the time of its termi nation, the suspension or the premium exemption. 2If the agreed term for the payment of premiums i s less than fi ve years then this term may be applied. (2) Any contra ctual arrangement to the contrary between the i nsurance undertaking and the i nsurance intermediary is i neffective. Section 50 Fee for the mediation of substitutive health insurance contracts – Page 50 of 207 – (1) 1In connection with the conclusion of substitutive health insurance contracts in a financial year, i nsura nce undertakings must not grant insurance intermediaries a ny i nitial commission or other fees that in total exceed 3 per cent of the total gross premiums for the new i nsurance contracts. 2The total gross premiums equate to the i nitial premium extra polated over 25 yea rs excluding the loading specified in s ection 149. 3The payments a nd other non-cash benefits gra nted to an i ndividual insurance i ntermediary i n a financial year in return for the conclusion of substitutive health i ns urance contracts must not exceed 3.3 per cent of the total gross premiums generated from the business brokered by the i nsurance intermediary concerned. 4The initial commission and other fees gra nted in each i ndividual case in return for the conclusion of a contract must not exceed 3.3 per cent of the total gross premiums for the contract concerned. (2) 1If a n insurance undertaking uses insurance i ntermediary s ervices that extend beyond those involved i n brokering i ns urance contracts and s uch extended s ervices a re in connection with contracts for work or services, rental agreements, l eases or other contracts of a similar nature, the charge must be limited to the a mount which a prudent a nd cons cientious manager would also negotiate with a non-affiliated undertaking, ta king into account the interests of the i ns ured. 2Contracts under s entence 1 a bove are to be concluded i n writing. 3If the insurance undertaking pays an a dva nce on the basis of a ny s uch contract, this is deemed to be other remuneration within the meaning of s ubsection (1). 4In a ddition, a payment for s ervices or other non-cash benefit may only be granted i f the a greed s ervices have l ed to a corresponding saving in costs for the i nsurance undertaking. (3) Any a greement between the insurance undertaking and the i nsurance intermediary that is inconsistent with the requirements of subsection (1) sentences 2 to 4 or s ubsection (2) is invalid. Section 51 Complaints about insurance intermediaries 1 Ins urance undertakings must respond to complaints by clients about insurance i ntermediaries or other insurance undertakings that mediate their insurance products. 2Consumer associations are also entitled to make complaints. 3Ins urance undertakings must inform the competent authority under s ection 34d (1) sentence 1 of the Tra de Regulation Code of repeated complaints that ca n be of significant i mportance for assessing the reliability of an i ntermediary. Segment 6 Prevention of money laundering and terrorist financing Section 52 Obliged undertakings The requirements of this segment a pply to all i nsurance undertakings defined in section 2 (1) number 7 of the Money La undering Act (Geldwäschegesetz). Section 53 Internal controls and safeguards (1) 1In i ndividual cases, the obliged undertakings may communicate i nformation to each other if there are a ctual i ndications that the recipient of the information needs i t to assess whether there is a requirement to report a matter in a ccordance with s ection 43 (1) of the Money La undering Act to the Financial Intelligence Unit or a cri minal complaint has to be ma de under s ection 158 of the Code of Cri minal Procedure (Strafprozessordnung). 2The recipient may use the i nformation s olely for preventing money laundering, terrorist financing or other cri minal offences, or for making criminal complaints under s ection 158 of the Code of Cri minal Procedure. 3The recipient may only use the information under the conditions s tipulated by the i nsurance undertaking communicating the i nformation. (2) If the obliged undertakings have a n internal a udit function, th ey must ensure that a report on the result of an audit by the i nternal audit function under section 6 (2) number 7 of the Money La undering Act i s submitted promptly in each – Page 51 of 207 – ca s e to the management, the money l aundering officer and the supervisory authority. Section 54 General due diligence requirements relating to beneficiaries (1) 1Wi thout prejudice to section 10 (1) number 2 of the Money La undering Act, a n obliged undertaking is also required when entering i nto a business relationship to establish the identity of a beneficiary under the i nsurance contract who di ffers from the policyholder i n accordance with section 11 (5) of the Money La undering Act. 2In cases where beneficiaries a re identified by characteristics, by ca tegories or by other means, th e obliged undertaking must obtain s ufficient information about them i n order to ensure that i t is able a t the date of payment to establish a nd review their i dentity. 3If the policyholder or a beneficiary who differs from the policyholder i s a legal person or a n association of pers ons, obliged undertakings must also i dentify their beneficial owners, i f a pplicable, in accordance with section 11 (5) of the Money La undering Act. (2) 1An obl iged undertaking must also fulfil the obligation under s ection 10 (1) number 4 of the Money Laundering Act i n res pect of the beneficiary differing from the policyholder a nd, i f a pplicable, i n respect of its beneficial owner. 2By wa y of derogation from section 11 (1) of the Money La undering Act, i n the case of the partial or co mplete assignment of an i ns urance policy to a third party, i nsurance undertakings must also establish the identity of the third party a fter being i nformed of the assignment and, if applicable, the i dentity of its beneficial owner if claims under the tra nsferred policy a re a ssigned. 3The establishment of the i dentity of a beneficiary differing from the policyholder a nd, i f a pplicable, the i dentity of its beneficial owner, can also be completed after the business relationship has been entered i nto, but i n any event no later than the ti me when the payment is made or the beneficiary i ntends to assert i ts rights under the i ns urance contract. (3) 1The obliged undertaking must record and store the data collected and information obtained under sentences 1 a nd 2 i n a ccordance with section 8 of the Money La undering Act. 2Section 43 (1) of the Money La undering Act a pplies, with the necessary modifications. Section 55 Enhanced due diligence If the beneficiary differing from the contracting party or, i f applicable, the beneficiary’s beneficial owner, is a politically exposed person, i ts family members or a person known to be a cl ose associate in a ccordance with s ection 1 (12), (13) or (14) of the Money La undering Act, obliged undertakings must carry out the following in addition to the obligations under s ection 15 (4) of the Money La undering Act i f they i dentify a higher risk of money laundering or terrorist fi nancing: 1. i nform a member of the management level before any payout, 2. conduct enhanced scrutiny of the entire business relationship with the policyholder, 3. exa mine whether the conditions for a report under the Money La undering Act are met. Section 56 (Repealed) – Page 52 of 207 – Segment 7 Cross-border business activities Subsegment 1 Cross-border provision of services, branches Section 57 Operation of insurance business via branches or cross-border provision of services (1) In a ccordance with sections 58 a nd 59, primary i nsurance undertakings may operate i nsurance business in the other member states or EEA signatory s tates via branches or as a cross-border provision of s ervices. (2) 1An a gency or branch office of a primary i nsurance undertaking in the territory of another member state or EEA s i gnatory s tate is considered a branch. 2It is also considered to be a branch i f i nsurance business is operated through a pers on who is i ndependent, but permanently i n charge of such business, from a permanent establishment in s uch other member state or EEA signatory s tate. (3) 1A cros s -border provision of s ervices within the meaning of this Act is deemed to exist if, from its registered office or bra nch in a member s tate or EEA s ignatory s tate, the primary insurance undertaking domiciled in a member s tate or EEA s i gnatory s tate covers risks situated in another member s tate or EEA s ignatory s tate, without the undertaking making us e of a branch in that s tate. 2A member s tate or EEA signatory s tate where the risk is situated is 1. a s regards the coverage of ri sks relating to i mmovables, i n particular buildings, plants a nd thei r installations covered by the s ame contract, the member s tate or EEA s ignatory s tate where these are situated, 2. a s regards the coverage of ri sks relating to vehicles of any kind, which must be entered i nto a n official or officially recognised register a nd a re provided with an i dentifier i n a member state or EEA signatory s tate, s uch member state or EEA s i gnatory s tate; by way of derogation from this, the destination member state or destination EEA s ignatory s ta te must be considered to be the member s tate or EEA s ignatory s tate in which the risk is situated i f a vehicle whi ch is transferred from one member s tate or EEA signatory s tate to a nother, for a period of 30 da ys following a cquisition of the vehicle by the purchaser, 3. a s regards the coverage of tra vel and tourism risks in insurance contracts with a maximum term of four months, the member state or EEA signatory s tate i n which the policyholder performed the a ctions legally required for formation of the contract, and 4. i n a ll other cases, a ) i f the policyholder is a natural person, the member s tate or EEA signatory s tate where the policyholder has his ha bitual residence, and b) i f the policyholder is not a natural person, the member s tate or EEA s ignatory s tate where the undertaking, permanent establishment or relevant facility to which the contract refers is l ocated. Section 58 Setting up a branch (1) 1The primary i nsurance undertaking must notify the s upervisory a uthority of the intended establishment, indicating the res pective member s tate or EEA s ignatory s tate. 2The notification must contain: 1. the i nformation a nd estimates under section 9 (2) nos. 1 a nd 2 a nd subsection (3) nos. 5 a nd 6 a bove; if the undertaking is to be a ctive in the health i nsurance business within the meaning of Article 206 (2) of Directive 2009/138/EC, then i n addition to the information under section 9 (4) no. 5 (a ): 2. i nformation a bout the organisational structure, 3. the na me of the designated a uthorised agent who possesses sufficient authority to bind the undertaking i n relation to thi rd parties a nd to represent it vi s-à-vis the administrative a uthorities and courts of the other member state or EEA s i gnatory s tate, – Page 53 of 207 – 4. the prospective a ddress, which must also be the business a ddress of the authorised agent, and 5. i f the risks defined in no. 10 (a) of Annex 1 a re to be covered through the branch, a declaration to the effect that the undertaking has become a member of the national guarantee fund for the victims of road accidents caused by uni nsured or unidentified motor ve hicles, a nd of the national insurers’ bureau i n the other member s tate or EEA s i gnatory s tate. (2) 1For the purpose of the above, within a period of three months of receiving the documents mentioned under s ubsection (1) sentence 2 a bove, the supervisory a uthority must assess the lawfulness, as well as the a dequacy of the bus iness organisation a nd financial position of the undertaking, and whether the authorised agent and responsible ma nagers of the branch meet the requirements of section 24 (1). 2Provi ded that there are then no objections before the a bove period expires, it must s end the following to the supervisory a uthority of the other member state or EEA signatory s ta te 1. thes e documents a nd 2. A certi fication that the undertaking has eligible own funds for compliance with the solvency ca pital requirement or the mi nimum a mount of the minimum ca pital requirement required for the classes of insurance operated, i n the event that this minimum a mount is higher, a nd notify the undertaking accordingly. 3Otherwise, it must i nform the undertaking before the above period expires that a pproval for the establishment of a branch will not be gra nted, naming the grounds for refusal. 4If the undertaking’s fi nancial position has deteriorated within the meaning of section 132 (2), this suggests that a certification under s entence 2 no. 2 s hould not be i ssued, if the ri ghts of the policyholder a re at risk. (3) In the case of s ubsection (2) sentence 2 a bove, the branch may be s et up and start operating i f two months have el apsed since the undertaking received the notification, unless the s upervisory a uthority of the other member s tate or EEA s i gnatory s tate has specified an earlier date. (4) 1The i nsurance undertaking must report to the s upervisory a uthority any changes in the i nformation provided i n a ccordance with s ubsection (1) sentence 2 nos. 1 to 4 a bove, no later than one month before s uch changes are to be put i nto effect. 2In all other respects, subsection (2) a bove a pplies, with the necessary modifications. Section 59 Cross-border provision of services (1) 1The primary i nsurance undertaking must notify the s upervisory a uthority of its intention to provide cross -border s ervi ces, naming the relevant member s tate or EEA signatory s tate. 2It must also state which classes of insurance i t i ntends to operate and which risks of an i nsurance class i t intends to cover there; if the undertaking intends to conduct hea lth insurance business within the meaning of Arti cle 206 (2) of Directive 2009/138/EC, the i nformation under section 9 (4) no. 5 mus t also be provided. 3As regards the coverage of ri sks under no. 10 (a ) of Annex 1, the notification must a l so i nclude the following: 1. A declaration to the effect that the undertaking has become a member of the national guarantee fund for the vi cti ms of road accidents caused by uninsured or unidentified motor vehicles, a nd of the national insurers’ bureau i n the other member s tate or EEA signatory s tate, a nd 2. The na me and business address of a representative (claims representative) residing or established in the other member state or EEA signatory s tate to whom section 24 (1) s entence 1 a pplies, with the necessary modifications, a nd who a ) col l ects all the necessary i nformation a bout l osses and has the necessary fa cilities for th is purpose, b) ha s sufficient powers to represent the undertaking vis-à-vis persons making damages claims in or out of court, in pa rti cular before a dministrative authorities and to confer powers of a ttorney i n this context, c) ha s sufficient powers until final settlement of the damages claims to pay the amounts due i n relation to s uch cl a ims, a nd – Page 54 of 207 – d) ha s the power to represent the undertaking vis-à-vis the authorities of the other member s tate or EEA signatory s ta te as regards the existence a nd va lidity of the insurance contracts. (2) 1Wi thin a period of one month from receipt of the documents mentioned in subsection (1) sentences 2 a nd 3 a bove, the s upervisory a uthority must assess the lawfulness of the i ntended business. 2Provided that there are then no objections before the above period expires, i t must send the following to the s upervisory a uthority of the other member s ta te or EEA signatory s tate 1. These documents, 2. A certi ficate s pecifying the classes of i nsurance the undertaking is permitted to operate and the risks of a n insurance cl a ss it is permitted to cover, and 3. A certi fication that the undertaking has eligible own funds for compliance with the solvency ca pital requirement or the mi nimum a mount of the minimum ca pital requirement required for the classes of insurance operated, i n the event that this minimum a mount is higher, a nd notify the undertaking accordingly. 3Otherwise, it must i nform the undertaking before the above period expires that the a pproval to provide cross-border primary insurance services will not be granted, naming the grounds for refusal. 4 Approval is deemed to have been refused if the supervisory a uthority has not made a decision by the end of the a bove peri od. 5If the undertaking’s financial position has deteriorated within the meaning of s ection 132 (2), this suggests that a certi fication under sentence 2 no. 3 s hould not be issued, if the rights of the policyholder are a t risk. (3) In the case of s ubsection (2) sentence 2 a bove, the undertaking may commence i ts a ctivities u pon receipt of the rel evant notification. (4) Subsections (1) to (3) above also a pply i f the undertaking wishes to operate additional classes of insurance or cover a dditional risks or appoint another claims representative. Section 60 Statistical information regarding cross-border activities (1) 1Every pri mary i nsurance undertaking must notify the supervisory a uthority of the following for the transactions ca rri ed out within the scope of freedom of establishment a nd on a freedom of s ervices basis 1. the booked premium amounts, 2. the a mount of reimbursements and 3. the a mount of commissions wi thout deduction of reinsurance, and cl assified by Member State. 2In relation to the i ndustry s tated in no. 10 of Annex 1 – wi th the exception of the liability of the freight forwarder – the undertaking will also notify the supervisory authority of the frequency and average costs of the reimbursements. (2) Upon request the supervisory a uthority will provide a summary of the details s tated in s ubsection (1) to t he s upervisory bodies i n each relevant member state within a reasonable period. Subsegment 2 Undertakings domiciled in a member state of the European Union or another signatory state to the Agreement on the European Economic Area (EEA) – Page 55 of 207 – Section 61 Activities via a branch or cross-border provision of services (1) 1Pri ma ry i nsurance undertakings domiciled in a nother member s tate or EEA signatory s tate may, wi th the exception of the undertakings mentioned in section sections 65 a nd 66, ca rry on insurance business i n Germany via a branch or under the freedom to provide cross-border s ervices only i n a ccordance with s ubsections (2) to (4) below. 2Section 57 (2) a nd (3) apply, with the necessary modifications. (2) 1If the undertaking i ntends to operate via a branch, the s upervisory a uthority of the home member state must forwa rd to BaFin the information specified i n Article 145 (2) a nd (3) of Directive 2009/138/EC while notifying the undertaking. 2The branch may not commence business operations until a period of two months has elapsed from the da te on which s uch notification is received by the undertaking. 3This only a pplies if BaFin has not notified the undertaking of an earlier a pproved commencement date. 4The undertaking must inform BaFin a nd the supervisory a uthority of the country where i t has its registered office of a ny changes to the content of the information referred to i n Arti cl e 145 (2) (b), (c) or (d) of Directive 2009/138/EC one month before these changes are to become effective. 5If these cha nges a re associated with a n expansion of business operations, such expansion will only be permissible a fter one month has passed since BaFin's receipt of the notification from the undertaking. (3) The s tart or change of the undertaking’s a ctivities in cross-border provision of s ervices is only permitted once the s upervisory a uthority of the home country has tra nsmitted to BaFin the details designated i n Article 148 (1) a nd (2) of Di rective 2009/138/EC a nd has notified the undertaking of this fact. (4) The operation of health insurance within the meaning of section 146 (1) a nd of compulsory i nsurance in the cases referred to in subsections (2) and (3) a bove is only permitted once the undertaking has s ubmitted its general policy conditions to BaFin. (5) 1Ba Fin must i nform the s upervisory a uthorities of the other member s tates or EEA signatory s tates on an ongoing ba sis about those provisions that the insurance undertakings domiciled i n these s tates must observe if they ca rry on bus iness i n accordance with subsection (1), a nd with regard to which the supervisory a uthority monitors compliance wi thin the framework of its supervisory duties, with the exception of financial s upervision. 2BaFin must i nform the s upervisory a uthority of the undertaking’s home country of a ny provisions that have not been disclosed under sentence 1 wi thin a period of two months from receipt of the i nformation s pecified i n subsection (2) or (3). Section 62 Supervision of business activities (1) 1Fi nancial s upervision of any business within the meaning of section 61 i s the sole responsibility of the s upervisory a uthority of the home country, while all other s upervision is also the responsibility of BaFin. 2For the purpose of s upervision by BaFin under sentence 1, the following a pply, with the necessary modifications, in a ddition to the provi sions of section 61 (1) a nd (2) above: 1. s ection 1 (1) a nd (2) as well as sections (3) and (4) from the general regulations; 2. s ection 68 (2) s entence 4 of the regulations on cross-border business activities; 3. s ections 48 to 49 of the provisions governing business activities a nd, for undertakings that carry out business through a branch, a dditionally s ection 15a (1) a nd section 25 (6); 4. from the regulations on the prevention of money laundering and terrorist financing, section 53 (1) to (3) a s well as s ections 54 a nd 55, provided that this i nvolves branches within the meaning of section 57 (2) which transact business a s s tated i n section 52; 5. from the regulations for indivi dual s ectors, sections 142, 144, 146, 147, 149 a nd 150 (1) to (3), s ection 152 (1) to (4), s ections 155 a nd 156 (1), s ection 157 (1), s ection 159 wi th the exception of the reference to section 160; 6. from the regulations on s upervision, section 294 (2) sentences 2 to 4, s ections 298 a nd 299 no. 1, s ections 303, 305 (1), (2) nos . 1 a nd 2, (3) to (5), s ection 306 (1) s entence 1 nos. 1 to 3, (2) s entence 1 nos. 1 a nd 2, (4) to (8) as well as s ections 308 a nd 310, a long with 7. s ection 17 of the German Act Establishing the Federal Financial Supervisory Authority (Finanzdienstleistungsaufsichtsgesetz - FinDAG). (2) If Ba Fin has reasons to believe that the financial s ecurity of an undertaking ca rrying on business in accordance with – Page 56 of 207 – s ection 61 (1) could be i mpaired, i t must inform the competent a uthority i n the home country responsible for financial s upervision. (3) 1If, i n the case of the business specified in s ection 61 (1), a primary i nsurance undertaking does not comply wi th Ba Fin’s requirements or orders to rectify an irregularity (section 298 (1)), BaFin must i nform the supervisory a uthority of the home country concerning the measures it i ntends to take i n a ccordance with sentence 2, a nd ask it for its cooperation. 2If this request is unsuccessful and if attempts to enforce orders via coercive measures or coercive penalties are futile or unsuccessful, BaFin may prohibit the undertaking from continuing to do business i n Germany, wholly or pa rtly, i f other measures a re also ineffective or i nfeasible. 3In urgent cases the orders referred to i n sentence 2 ma y be promulgated without i nforming the supervisory authority of the home country. 4BaFin may a lso address the ma tter to the European Insurance and Occupational Pensions Authority under Arti cle 19 of Regulation (EU) No. 1094/2010 a nd ask that a uthority for s upport. (4) If the a uthorisation of a n undertaking that carries on business in Germany i n accordance with section 61 (1) is revoked, BaFin must, a fter i t has been informed by the s upervisory a uthority of the home country, impose the measures deemed appropriate and necessary to prevent any further business activities i n Germany. Section 63 Transfers of portfolio 1 Any contra ct by which a primary i nsurance undertaking domiciled i n another member state or EEA signatory s tate i ntends to transfer to an undertaking domiciled in a member s tate or EEA s ignatory s tate part or a ll of its portfolio of i ns urance contracts that it has concluded i n accordance with section 61 (1) vi a a branch or through cross -border provi sion of servi ces requires the consent of BaFin before the contract can be authorised by the competent supervisory a uthority i n the home country responsible for the tra nsferor undertaking. 2Such consent must be given if the interests of the i nsured are safeguarded and there is sufficient evidence that the obligations under the insurance contracts can be ful filled at all times; s ection 13 (4), (5) a nd (7) sentence 1 a pply, with the necessary modifications. (2) If the i nsurance portfolio of a branch does not cover a ny risks s ituated in Germ any, BaFin merely s tates i ts opinion on the contract. (3) If Ba Fin does not comment on the request for consent or for an opinion within a period of three months, this will be deemed a tacit a pproval or positive statement of opinion. (4) In the event that the competent supervisory a uthority responsible for the authorisation within the meaning of s ubsection (1) sentence 1 a bove requests the certification under s ection 13 (2) s entence 2 no. 1 from BaFin, section 58 (2) s entence 4 a nd s ection 59 (2) s entence 5 a pply, with the necessary modifications. Section 64 Lloyd's underwriters (1) The i ndivi dual underwriters of the Ll oyd's association of underwriters may only conduct business if, in i nstances where there is a writ of execution against the assets of Ll oyd's underwriters l ocated in Germany, the association waivers on behalf of the underwriters a ny ri ghts that could be derived from the fact that this execution would also be against a s sets of the underwriters to which the executory writ does not apply; the waiver must be irrevocable until the i ns urance contracts concluded in Germany have been processed to completion. (2) 1Any cl a ims a rising from insurance business ca rried on by the underwriters of the Lloyd's association of underwriters through a branch i n Germany may only be enforced by l egal action by a nd against the authorised agent. 2An executory wri t obtained under sentence 1 a bove is va lid for a nd a gainst the i ndividual underwriters ta king part i n the insurance tra nsaction. 3Section 727 of the German Code of Ci vil Procedure applies, with the necessary modifications. 4If an executory wri t is obtained against the authorised agent, it is possible to execute against the assets of all underwriters of the Ll oyd's association of underwriters managed by him a nd located in Germany. – Page 57 of 207 – Section 65 Branch (1) 1Ins urance undertakings domiciled in a nother member s tate or EEA signatory s tate to which Directive 2009/138/EC does not a pply a nd which wish to ca rry on direct insurance business through a branch are subject to a utho risation. 2 Ba Fin decides on the application. (2) Secti on 67 (2) a nd (3) as well as s ection 68 (2) a pply, with the necessary modifications, to these undertakings subject to the fa ct that 1. the a rticles of association of the undertaking, together with the balance sheet a nd profit and loss account for each of the preceding three financial years, must a lso be s ubmitted; i f the undertaking has been in business for less than three years, these documents only need to be submitted for each of the concluded financial years that i t has been in bus iness; 2. the na mes of the members of the governing body a uthorised to l egally represent the undertaking must be disclosed; 3. the documents concerning the branch must be retained there a nd 4. Secti on 13 (2) i s not a pplicable. (3) Subsections (1) a nd (2) above also apply if business is to be carried on by wa y of the cross -border provision of s ervi ces; however, the provisions of subsection (2) related to the existence of a branch do not apply. Section 66 Cross-border provision of services; co-insurance (1) Pri ma ry i nsurance undertakings that, i n the cross-border provision of services, only write the classes of i nsurance mentioned in nos. 4 to 7 a nd no. 12 of part A of Annex 1 a nd only take on the types of risks s pecified under no. 10 (b) are not s ubject to the provisions of this Act. (2) Furthermore, primary i nsurance undertakings that conduct the sort of insurance business s pecified in section 210 (2) of the German Insurance Contract Act a s co-insurance a re not subject to the provisions of this Act, provided that they do not conduct their business via a registered office or branch in Germany, except vi a the l ead insurer, a nd s uch co - i ns urance does not relate to compulsory third party l iability i nsurance in connection with l osses caused by nuclear energy or medications. (3) 1If a primary i nsurance undertaking abuses the possibility under subsection (2) as lead insurer to have i nsurance undertakings from other member s tates or other EEA countries participate i n co -insurance contracts, the supervisory a uthority may gi ve a ny order necessary to remedy the a buse with respect to this undertaking. 2In serious ca ses, the s upervisory a uthority may also prohibit the undertaking from concluding such co -insurance contracts or ta ke the mea sures specified under section 304 (3). 3Section 304 (4) to (6) a pplies, with the necessary modifications. 4Abuse, i n pa rti cular, i s deemed to exist in cases where an undertaking does not fulfil the duties generally a ttributable to a l ead i ns urer or where i t invites i nsurance undertakings that are not authorised to do s o in accordance with subsection (2) to pa rti cipate i n the contract. (4) The Federal Ministry of Finance is authorised to declare, by statutory order not requiring the consent of the Bundesrat, that: 1. s ubsections (1) a nd (2) a bove a re applicable to third country i nsurance undertakings if the interests of the insured a re a dequately safeguarded and the interests of the Federal Republic of Germany do not preclude such action, a nd 2. the provisions relating to foreign insurance undertakings domiciled in another member state or EEA signatory s tate a re a lso applicable to undertakings domiciled i n a third country, to the extent that this is required under a greements of the European Union. (5) If the requirements of subsection (4) no. 1 a bove have been met, BaFin may also grant exemptions in i ndividual cases by mea ns of an a dministrative act. Subsegment 3 Undertakings with their registered office outside of the European Economic Area – Page 58 of 207 – Section 67 Authorisation; separation of lines of business (1) 1Thi rd country i nsurance undertakings that intend to carry on primary i nsurance business or reinsurance business i n Germa ny through intermediaries are s ubject to authorisation from the s upervisory a uthority. 2Sentence 1 does not apply to thi rd country i nsurance undertakings that conduct only reinsurance business in Germany from their registered office, i f the European Commission has decided under Arti cle 172 (2) or (4) of Directive 2009/138/EC that the solvency s ys tems for rei nsurance activities by companies i n this third country are equivalent to the system described i n this Directive; i n thi s case reinsurance contracts with these undertakings must be treated i n exactly the same way as reinsurance contra cts with undertakings that a re authorised in a member s tate or EEA s ignatory s tate. (2) 1The s pecial regulations of this subsegment apply to undertakings i n accordance with subsection (1) sentence 1 a nd the remaining regulations of this Act a nd the l egislative acts, technical regulation s tandards and technical i mplementation standards enacted based on Directive 2009/138/EC also apply, wi th the necessary modifications, to s uch undertakings. 2The regulations under part 2 cha pter 2 s egment 3 a pply, wi th the necessary modifications, to the i ns urance business concluded i n accordance with subsection (1) sentence 1. (3) 1Pri ma ry i nsurance undertakings operating life insurance together with other classes of insurance ca nnot be a uthorised to operate life i nsurance business in Germany. 2Pri mary i nsurance undertakings operating health insurance together with other classes of insurance ca nnot be a uthorised to operate health i nsurance under section 146 (1) i n Germa ny. (4) The requirements of this subsegment a pply, with the necessary modifications, to institutions for occupational reti rement provision as defined i n Article 6 number 1 of Di rective (EU) 2016/2341 whose registered office is i n a third country. Section 68 Branch; authorised agent (1) 1The undertakings to which section 67 (1) a pplies must establish a branch in Germany, where they must retain all records concerning the branch. 2The provisions of s ections 13d to 13f of the German Commercial Code relating to bra nches apply, with the necessary modifications. 3Separate accounts must be kept for the business a ctivi ties of the bra nch. 4Section 37, s ection 38 (1) a nd s ection 39 as well as section 43 (1) a pply subject to the fact that 1. on request, the annual financial statements and management report of the head office are also s ent in German to every i nsured and 2. the i nternal report comprises the a nnual financial s tatements a nd management report published i n the home country of the undertaking in the language of the home country a nd i n German and the report s ubmitted to the s upervisory a uthority of the home country i n the language of the home country. (2) 1An a uthorised agent whose domicile and permanent residence is i n Germany must be appointed for the branch. 2 Thi s a gent is s ubject to the same obligations and personal requirements that this Act prescribes for the management boa rd of a n undertaking domiciled in Germany. 3The authorised agent is deemed empowered to bind the undertaking i n rel ation to third parties, in particular to write i nsurance contracts with policyholders in Germany a nd i n relation to real es tate l ocated in Germany, as well as to represent the undertaking vi s-à-vis the a uthorities and courts. 4The authorised a gent must be registered a nd entered in the commercial register. (3) If col lateral has to be furnished in a ccordance with the provisions below, BaFin may reserve the ri ght in the conditions for the return of the collateral to take control of such collateral in the i nterest of the insured. Section 69 Application; procedure (1) 1The a pplication under s ection 67 must be made to BaFin. 2The following must be submitted together with the – Page 59 of 207 – a pplication: 1. the business plan in a ccordance with s ection 9 (2) a nd (3) a nd the information and documents referred to in section 9 (4) for the branch and the a rticles of association of the undertaking; a t the same ti me, the members of the body cha rged with legal representation of the undertaking a nd of a s upervisory a uthority must be designated; 2. a certi ficate from the competent authority i n the home country stating a ) tha t the undertaking may, at the place of its registered office, acquire ri ghts a nd i ncur liabilities, sue a nd be sued i n court, under its own name, a nd b) whi ch classes of i nsurance the undertaking is authorised to operate a nd which types of risks it a ctually covers a nd 3. the balance s heet and the profit and loss account for each of the preceding three financial years; i f the undertaking ha s been in business for less than three years, these documents must only be submitted for each of the concluded fi nancial years that it has been i n business. (2) 1The requirements related to financial a dequacy a re based on part 2 cha pter 2 s egments 1 a nd 2. 2These are ca l culated i n accordance with the scope of the business operated by the branch. 3The assets which constitute the equivalent value for the solvency ca pital requirement must be situated in Germany a t least for the amount of the mi nimum ca pital requirement, with any further amounts situated in the territory of the member states or EEA signatory s ta tes. 4They may not fall below 50 per cent of the absolute floor for the minimum ca pital requirement set out in a ccordance with the statutory i nstrument under section 122 (2). 5Moreover, the undertaking must furnish collateral (fi xed guarantee deposit). 6The fixed guarantee deposit must amount to at least 25 per cent of the a bsolute floor of the mi nimum ca pital requirement. 7The fixed guarantee deposit is counted towards the own funds. (3) Authorisation may be granted i f 1. none of the grounds in section 11 a bove for refusal of the authorisation exists, 2. the requirements of section 68 (1) a nd (2) above have been met, and 3. the a mount required as a fixed guarantee deposit has been provided. (4) If business operations a re to be extended to other classes of i nsurance o r to another area i n Germany, s ubsections (1) to (3) a bove a pply, with the necessary modifications. (5) Subsection (2) sentences 5 a nd 6, s ubsection (3) no. 3, s ubsection (4), section 70 (1) s entence 1 no. 2 a nd section 71 s entence 1 no. 2 do not apply to German branches of reinsurance undertakings domiciled in a third country. Section 70 Relief measures for undertakings that are already authorised in another member state or EEA signatory state (1) 1For a n undertaking that has been authorised or has a pplied for a uthorisation to carry on business in another member state or EEA signatory s tate, a revocable authorisation may be granted upon a pplication to the effect that 1. the s olvency ca pital requirement is calculated based on i ts overall business activities i n the member s tates or EEA s i gnatory s tates, 2. the undertaking is exempted from the obligation to provide a guarantee deposit i n Germany or 3. a s sets which constitute the equivalent va lue for the minimum ca pital requirement can be situated i n another member state or EEA signatory s tate i n which the undertaking conducts its business. 2The relief measures may only be granted together. 3The application must be made to the supervisory a uthorities of all member states or EEA signatory s tates in which the insurance undertaking is a uthorised to conduct business or has a pplied for a uthorisation to conduct business. 4The application must s tate the authority which is due to monitor the ca pi tal adequacy for the entire business a ctivity i n the member states or EEA signatory states in future (selected s upervisory a gency); grounds must be provided for the choice of supervisory a uthority. 5The guarantee deposit within the meaning of section 69 (2) s entence 5 must be deposited i n the member s tate of the selected supervisory a uthority. 6The a pproval may only be granted if all a uthorities to which the application was made provide their consent. 7It will be – Page 60 of 207 – gra nted at the point in time at which the selected supervisory a uthority has stated that it is prepared to monitor the ca pi tal adequacy to the other supervisory a uthorities. 8The relief measures must be revoked simultaneously by a ll s upervisory a uthorities following a demand by a t least one of the authorities that approved the a pplication. (2) 1If Ba Fin is the s elected s upervisory a uthority, i t must inform the competent a uthorities of the member s tates or EEA s i gnatory s tates concerned of the measures taken i n accordance with section 134 (7) a nd section 135 (3). 2It may request thes e authorities to take the same measures. 3If a different authority is the selected supervisory a uthority then BaFin mus t provide all information required for it to monitor the overall solvency requirement; i f i t has imposed statutory res tri ctions on the assets of the undertaking due to insufficient own funds, BaFin must, at the request of this competent a uthority, ta ke corresponding action with respect to the assets located i n Germany. 4This is without prejudice to s ections 133 to 137. Section 71 Revocation of authorisation 1Ba Fin must revoke the authorisation i f 1. the undertaking l oses its authorisation to carry on business in i ts home country, or 2. i n the case under section 70 the selected s upervisory a gency revokes the a uthorisation to carry on business because the own funds ca lculated i n accordance with section 70 (1) sentence 1 no. 1 a re insufficient. 2 Thi s is without prejudice to section 304. Section 72 Insurance for risks in Germany Thi rd country primary i nsurance undertakings that have been granted the a uthorisation to carry on business i n a ccordance with s ection 67 a re permitted to conclude insurance contracts with policyholders who have their habitual res idence in Germany, as well as insurance contracts covering real estate located therein, only through authorised a gents residing within Germany. Section 73 Portfolio transfer (1) 1Any contra ct by which the portfolio of i nsurance-related contracts of a German branch within the meaning of s ection 68 (1) is tra nsferred in whole or in part to 1. a n i nsurance undertaking domiciled in member state or EEA signatory s tate or 2. the foreign branch of a third country i nsurance undertaking, mus t be a pproved by BaFin. 2The approval may only be granted if the transferee i n the third country or the transferee i ns urance undertaking domiciled in a member state or EEA signatory s tate provi des evidence that it has sufficient eligible own funds to comply with the s olvency ca pital requirement following the transfer. 3The evidence must be provided by wa y of a certificate 1. from the competent authority of the other member state or EEA signatory s tate, if the transferee has its registered offi ce i n another member state or EEA signatory s tate, or 2. from the s elected s upervisory a uthority as defined in section 70 (1) s entence 4, i f the ca pital a dequacy of the third country bra nch is monitored by this. 4Secti on 63 (4) a pplies, with the necessary modifications, to primary i nsurance undertakings. – Page 61 of 207 – (2) 1In the event that the assets covered by the approval include primary i nsurance contracts, the a pproval ca n only be gra nted if the supervisory a uthorities i n the countries to which the risks in the i nsurance portfolio pertain also provide thei r consent. 2Consent is deemed to have been provided if these s upervisory a uthorities have not responded within three months following receipt of the application. (3) 1The portfolio transfer must be concluded in writing; s ection 311b (3) of the German Ci vil Code does not apply. 2For the purpose of the portfolio transfer, the rights and obligations of the transferor under th e i nsurance or reinsurance contra cts, also in relation to the policyholders or the ceding i nsurers, a re transferred to the transferee; section 415 of the German Ci vil Code does not apply. 3Approval of the portfolio transfer must be published in the Federal Gazette. 4Once the portfolio transfer has taken effect, the tra nsferee branch must notify the policyholders or the ceding insurers of the portfolio transfer in writing or electronically without delay. (4) If the i nsurance portfolio of a branch in Germany i s transferred to the German branch of a nother third country i ns urance undertaking, and if the capital a dequacy of the branch of such a n insurance undertaking is monitored by the s upervisory a uthority of another member s tate or EEA s ignatory s tate, the collateral furnished by a branch for the tra ns ferred portfolio must remain i n place unless otherwise s pecified by the s upervisory a uthority responsible for the tra ns feree. Chapter 2 Financial adequacy Segment 1 Solvency statement Section 74 Assessment of the assets and liabilities (1) 1Under subsections (2) and (3) as well as s ections 75 to 87, i nsurance undertakings must prepare a comparison of the ba lance sheet assets and liabilities for the purposes of determining the existing own funds (solvency stateme nt). 2This is wi thout prejudice to the provisions of this Act regarding own funds along with the a ccounting obligations under commercial l aw. (2) The a ssets must be assessed in the s olvency s tatement at a n amount at which they may be exchanged between expert i ndependent business partners willing to enter i nto a contract. (3) 1The l iabilities must be assessed at a n amount at which they may be transferred or settled between expert i ndependent business partners willing to enter i nto a contract. 2There must be no adjustment to the assessment for the purposes of accounting for the creditworthiness of the i nsurance undertaking. Section 75 General regulations for the recognition of technical provisions (1) 1Technical provisions must be recognised i n the solvency statement for all insurance commitments to policyholders a nd those entitled to benefits. 2These must be calculated in a careful, reliable and objective manner. (2) The va lue of the technical provisions must equate to the current amount that insurance undertakings would have to pa y i f they were to immediately tra nsfer their i nsurance commitments to another insurance undertaking. (3) When calculating the technical provisions the insurance undertakings must partition their i nsurance commitments i nto homogeneous risk groups which are a t l east divided a ccording to business units. (4) The technical provisions must be calculated with due regard to the i nformation provi ded by the financial markets and to generally a vailable data regarding underwriting risks a nd this calculation must be consistent with these (market cons istency). (5) The pri nciples stated i n section 74 (3) must be observed when calculating the technical provisions. – Page 62 of 207 – Section 76 Value of the technical provisions (1) 1The va lue of the technical provisions must equate to the total sum of 1. the best estimate calculated i n a ccordance with section 77 a nd 2. the ri sk margin calculated i n accordance with section 78. 2 The best estimate a nd the risk margin must be calculated separately. (2) 1In the event that future payments associated with insurance commitments with financial instruments for which a rel iable market va lue must be ascertained can be reliably reproduced, then the va lue of the technical provisions a s sociated with these future payments must be determined based on the market va lue of these financial i nstruments. 2Subsection (1) s entence 2 does not apply i n this case. Section 77 Best estimate (1) The best estimate equates to the probability-weighted average of future payments with due regard to the current va l ue of the monetary funds (projected cash value of future payments) and with application of the relevant risk-free i nterest rate term structure. (2) 1The best estimate must be calculated based on current and credible i nformation along with realistic assumptions. 2It mus t also be based on appropriate, suitable and reasonable a ctuarial and statistical methods. (3) Al l i ncoming a nd outgoing payments that a re required to account for insurance l iabilities over their term must be ta ken i nto account i n projecting future payments. (4) 1The best estimate must be calculated with no deduction made for a mounts recoverable from reinsurance contracts a nd by s pecial purpose entities. 2These a mounts a re calculated separately i n a ccordance with s ection 86. (5) In the case of currencies a nd internal markets for which the a djustment stated i n Article 77e (1) (c) of Di rective 2009/138/EC is not i ncluded i n the implementing acts under Arti cle 77e (2) of Directive 2009/138/EC, no vol a tility a djustment to the relevant risk-free interest rate term s tructure is a pplied in order to calculate the best es timate. Section 78 Risk margin (1) The ri sk margin ensures that the value of the technical provisions equates to the amount that the insurance undertakings would demand i n order to be able to assume a nd fulfil the i nsurance commitments. (2) 1The ri sk margin is calculated by determining the costs that are required i n order to provi de an a mount of eligible own funds. 2This amount must meet the solvency ca pital requirement which is required i n order to cover the i nsurance commi tments over their term. 3If the European Commission stipulates a capital cost ra te for the provision of eligible own funds in accordance with Article 86 (d) of Directive 2009/138/EC then this must be a pplied. Section 79 General principles for the calculation of the technical provisions (1) Ins urance undertakings must have internal processes and procedures i n order to guarantee the a ccuracy, compl eteness and appropriateness of the data used to ca lculate the technical provisions. (2) If the i nsurance undertakings do not have adequate i nformation a vailable of a n appropriate quality i n order to apply a rel iable a ctuarial method to a group or s ubgroup of their insurance commitments or to recoverable a mounts from rei nsurance contracts and towards special purpose entities, the insurance undertakings may use appropriate a pproximate va lues including i ndividual case analyses for the calculation. – Page 63 of 207 – Section 80 Matching adjustment to the relevant risk-free interest rate term structure (1) 1Wi th the approval of the s upervisory a gency, i nsurance undertakings may ca rry out a matching adjustment to the rel evant risk-free interest rate term structure in order to ca lculate the best estimate of the portfolio of life insurance or rei nsurance commitments, including pension i nsurance, which originate from non -life i nsurance or reinsurance contra cts. 2The a pproval will be provided i f the following requirements are met: 1. the i nsurance undertaking has determined a portfolio of assets consisting of bonds and other assets with s imilar pa yment characteristics i n order to cover the best estimate of the portfolio of insurance or reinsurance commi tments a nd retains this a mount that has been determined while the commitments remain in place, unless there is a variance in order to maintain the replication of the expected payments between assets and liabilities i f the pa yments have essentially changed; 2. the portfolio of insurance or reinsurance commitments for which the matching a djustment is s uppos ed to be carried out a nd the allocated portfolio of assets are i dentified, organised a nd managed separately from the undertaking’s other a ctivities, and the allocated portfolio of assets ca nnot be used for the purposes of covering losses from the undertaking’s other a ctivities; 3. the projected payment flows for the allocated asset portfolio replicate all future payment flows for the portfolio of i ns urance or reinsurance commitments i n the same currency and there are no essential risks involved i n any mi s matches as compared with the ri sks inherent in the i nsurance or reinsurance business for which a matching a djustment is i mplemented; 4. the i nsurance and reinsurance contracts underlying the portfolio of commitments do not result in future premium pa yments; 5. the only underwriting risks associated with the portfolio of insurance or reinsurance commitments are the l ongevity ri s k, the cost risk, the revision ri sk and the mortality ri sk; 6. the mortality risk is part of the underwriting risks a ssociated with th e portfolio of i nsurance or reinsurance commi tments a nd the best estimate of the portfolio of i nsurance or reinsurance commitments does not i ncrease by more than 5 per cent under a mortality risk stress which is calibrated in a ccordance with s ection 97; 7. the contracts underlying the portfolio of i nsurance and reinsurance commitments do not contain a ny options for the pol icyholder or merely a redemption option, for which the redemption va lue does not exceed the value of the assets a s sessed i n accordance with section 74, which cover the insurance or reinsurance commitments at the time that the redemption option is exercised; 8. the a ssets of the allocated asset portfolio generate fixed payment flows which cannot be changed by the issuers of the a ssets or third parties; a nd 9. the i nsurance or reinsurance commitments i n an i nsurance or reinsurance contract are not divided i nto different pa rts when the portfolio of insurance or reinsurance commitments is assembled for the purposes of this s ubsection. 3Wi thout prejudice to sentence 2 no. 8, i nsurance undertakings may use assets whose payment flows a re fixed without rega rd to inflation dependency, i f these assets replicate the inflation contained in the payment flows of the portfolio of i nflation-dependent insurance or reinsurance commitments. 4If issuers or third parties are entitled to modify payment fl ows for assets in s uch a way that the i nvestor receives a dequate compensation i n order to receive the same payment fl ow by way of reinvestment i n assets of equal o r better credit quality, the ri ght to modify payment flows does not excl ude the asset from admissibility for the portfolio under sentence 2 no. 8. (2) 1Ins urance or reinsurance undertakings that carry out the matching a djustment for a portfolio of insurance or rei nsurance commitments may not revert to a n approach which does not i nclude a matching a djustment. 2If a n i ns urance or reinsurance undertaking that ca rries out the matching adjustment is no longer a ble to fulfil the conditions s ta ted i n subsection (1), it must notify the supervisory authority of this fact without delay a nd ta ke the measures required in order for these conditions to be fulfilled once again. 3If the undertaking is unable to fulfil the conditions once a ga in within two months from the point i n time of the failure to comply with the conditions s tated i n subsection (1), it ma y not ca rry out any further matching adjustments for its insurance or reinsurance commitments and may only resume the ma tching adjustment after a further 24 months. (3) The ma tching a djustment may not be applied to insurance or reinsurance commitments for which the relevant risk- free i nterest rate term s tructure for calculation of the best estimate for these commitments includes a volatility a djustment under section 82 or a tra nsitional measure to the ri sk free i nterest rates under section 351. – Page 64 of 207 – Section 81 Calculation of the matching adjustment The ma tching adjustment under section 80 must be calculated in accordance with the following principles for every currency: 1. the ma tching adjustment corresponds with the difference between a ) the effective annual i nterest rate that is calculated as a constant discount rate, which a pplied to the payment fl ows for the portfolio of the insurance or reinsurance commitments results in a value which corresponds with the va l ue under section 74 of the portfolio of the allocated assets; b) the effective annual i nterest rate that is calculated as a constant discount rate, which a pplied to the payment fl ows for the portfolio of the insurance or reinsurance commitments results in a value which corresponds with the best estimate of the portfolio of the i nsurance or reinsurance commitments i f the ti me value of money is ta ken i nto account with the underlying risk-free interest ra te term structure applied; 2. the ma tching adjustment does not include the underlying s pread which reflects the risks retained by the insurance undertaking; 3. wi thout prejudice to no. 1 the underlying spread is i ncreased as required in order to ensure that the matching a djustment for assets whose credit quality i s below the investment grade, is not higher than the matching a djustment for assets whose credit quality has been categorised as investment grade which feature the same dura tion and which belong to the same category of assets; 4. a ny us e of external ratings i n calculating the matching adjustment must be in line with the delegated l egislative acts ena cted by the European Commission under Arti cle 111 (1) (n) of Directive 2009/138/EC. Section 82 Volatility adjustment (1) Wi th the a pproval of the supervisory a uthority, i nsurance undertakings may ca rry out a volatility a djustment of the rel evant risk-free interest rate term structure in order to ca lculate the best estimate under section 77. (2) The vol atility adjustment may not be ca rried out for insurance commitments for which the relevant risk-free i nterest ra te term structure for ca lculation of the best estimate for these commitments i ncludes a matching adjustment under s ection 80. (3) By wa y of derogation from s ection 97 the s olvency ca pital requirement does not cover the risk of l oss for basic own funds from modifications to the volatility a djustment. Section 83 Technical information to be taken into account (1) If i mplementing l egislative acts a re enacted by the Commission under Arti cle 77e (2) of Directive 2009/138/EC with the technical i nformation s tated in Arti cle 77e (1), the insurance undertakings must use this technical information for the purposes of calculating the best estimate under section 77, the matching adjustment under section 80 a nd the volatility a djustment under section 82. (2) If the Commission publishes a higher volatility a djustment for a country, the insurance undertakings making use of s ection 82 must apply this in order to calculate the best estimate for i nsurance and reinsurance commitments from contra cts which a re sold on the i nsurance market for this country. (3) If no technical information is published under s ubsections (1) or (2), i nsurance undertakings must reproduce the deri vations underlying this i nformation as best as possible for their own calculations. Section 84 Additional circumstances to be considered in the calculation of the technical provisions – Page 65 of 207 – (1) The following ci rcumstances must also be observed when ca lculating the technical provisions: 1. a l l expenditures i ncurred i n servi cing the insurance commitments, 2. i nflation along with inflation for the expenditures and the insurance claims as well as 3. a l l payments to policyholders a nd those entitled to benefits, i ncluding future profit participation which the insurance undertakings expect to implement, i rrespective of whether they are guaranteed by contract or otherwise. (2) In the case of l ife i nsurance, health insurance pursued on a similar technical basis to that of life insuran ce (SLT health) a nd a ccident insurance with return of premium, future payment fl ows to policyholders and those entitled to benefits from the part of the existing provision for bonuses as at the assessment date which may be used i n part in order to compensate for losses and which is not attributable to bonuses that have been determined, are not to be considered as expected payments within the meaning of subsection (1) no. 3. Section 85 Financial guarantees and contractual options in insurance contracts (1) When calculating the technical provisions the value of the financial guarantees and other contractual options that are the s ubject matter of the insurance contracts must be taken into account. (2) The a ssumptions related to the probability that the policyh olders will exercise their contractual options including the ca ncellation a nd redemption rights must be made realistically a nd must be based on current a nd credible information. (3) The a ssumptions must explicitly or i mplicitly account for the effects that future amendments to the financial and non-financial conditions may have on exercising these options. Section 86 Recoverables from reinsurance contracts and in relation to special purpose entities (SPEs) (1) Secti on 1 Recoverables from reinsurance contracts and i n relation to s pecial purpose entities (SPEs) are i n accordance wi th s ections 75 to 85. (2) The ti me difference between receipt of the amounts a nd the disbursements to the claimant must be ta ken i nto a ccount when calculating these recoverables. (3) 1The result of this calculation must be adjusted i n order to account for the expected losses i n the event of default by the counterparty. 2The a djustment is based on an estimate of the probability of default by the counterparty a nd the a vera ge l oss resulting from this. Section 87 Comparison with empirical data (1) Ins urance undertakings must use a ppropriate processes a nd procedures to ensure that the best estimates and the a s sumptions underlying their ca lculations a re compared with empirical data on a regular basis. (2) If the comparison shows a systematic deviation between the calculations for the best estimate and the empirical da ta , the relevant undertaking must i mplement corresponding adjustments to the actuarial methods used or to the underlyi ng assumptions. Section 88 Regulatory powers of the supervisory authority related to technical provisions; authorisation to issue statutory orders (1) Fol lowing a request from the s upervisory a uthority the insurance undertakings must provide evi dence of the fol lowing: 1. the a ppropriateness of the level of its technical provisions, 2. the s uitability a nd the relevance of the methods used as well as – Page 66 of 207 – 3. the a ppropriateness of the statistical base data used. (2) If the calculation of the technical provision ca rried out by the insurance undertaking does not comply with the regulations under s ections 75 to 87, the supervisory a uthority may order that the a mount of technical provisions be i ncreased to the l evel provided for in accordance with the stated regulations. (3) 1The Federal Mi nistry of Finance is authorised i n consultation with the Federal Mi nistry of Justice and for Consumer Protecti on to issue s tatutory orders s pecifying the following for the purpose of calculating the premium reserve in a ccordance with German Generally Accepted Accounting Principles: 1. for i nsurance contracts with i nterest guarantee, one or several maximum technical interest ra tes, 2. further s pecifications for the purposes of a scertaining the discounting ra te under section 341f (2) of the Commercial Code, 3. the ma ximum amounts for zillmerisation a nd 4. the a ctuarial calculation assumptions a nd valuation methods for the premium reserve. 2Sentence 1 a pplies, with the necessary modifications, toa ccident insurance as defined in section 161, a s well as to pension benefits paid on the classes of i nsurance named in section 162. 3In consultation with the Federal Mi nistry of Jus tice a nd for Consumer Protection this power may be delegated by s tatutory order to BaFin. 4Statutory orders under s entences 1 to 3 do not require the consent of the Bundesrat. Segment 2 Solvency requirements Subsegment 1 Determination of own funds Section 89 Own funds (1) 1Ins urance undertakings must in all cases have eligible own funds at the l evel of the solvency ca pital requirement. 2They must i n all cases have allowable basic own funds at the level of the minimum capital requirement. 3Own funds are a l lowable i f they comply with the requirements under sections 94 a nd 95. (2) An i nsurance undertaking’s own funds comprise its basic own funds and the ancillary own funds. (3) Ba sic own funds consist of: 1. the s urplus of the assets over the l iabilities minus the amount of own shares in the solvency s tatement and 2. s ubordinated liabilities. (4) 1The a ncillary own funds are those funds that a re not part of the basic own funds a nd that may be recovered i n order to offs et losses. 2They may i nclude the following components: 1. the portion of the unpaid share ca pital, i nitial capital or the i tem at i nsurance undertakings under public law corres ponding to the s hare capital of public limited companies that has not been recovered, 2. for mutual societies with variable additional payment liabilities, the future receivables that the society has against its members if it recovers the additional payments within the next twelve months, 3. l etters of credit and warranties as well as 4. a l l other l egally binding payment obligations from third parties to the insurance undertaking. (5) Once a component of the ancillary own funds has been paid i n or recovered, i t must be treated as a n asset for the purposes of the solvency statement a nd form part of the basic own funds. – Page 67 of 207 – Section 90 Approval for ancillary own funds (1) Anci llary own funds may only be assessed with the prior a pproval of the supervisory a uthority. (2) 1The s upervisory a uthority will approve either an a mount for each a ncillary component of the own funds or a method for determining the amount of each component of the own funds. 2In the latter case, the approval will only be provided for a certa in period and will also cover the a mount ascertained using this method. (3) 1The a mount i mputed to the i ndividual ancillary components of the own funds reflects the component’s ability to offs et losses and is based on prudent and realistic assumptions. 2If a component of the own funds has a fixed nominal a mount then the amount for this component corresponds with i ts nominal a mount if this a mount reflects i ts a bility to offs et losses in a suitable manner. (4) The s upervisory a uthority will consider the following in its decision regarding the request for a n assessment of a ncillary own funds: 1. the a bility a nd readiness of the counterparties to effect payment, 2. the recoverability of the funds with due regard to the l egal arrangement of the component and any other ci rcumstances which may prevent successful payment in or recovery of this component and 3. a ny i nformation regarding the result of existing demands from the insurance undertaking for ancillary own funds of thi s type, provided that this i nformation ca n be used reliably i n order to assess the projected results of future demands. Section 91 Classification of the own fund components (1) Ins urance undertakings must classify their own fund components i n three tiers. (2) Cl a ssification of the own fund components is determined based on whether these involve basic own funds or a ncillary own funds and the extent to which they 1. a re a vailable or recoverable for the purposes of offsetting losses completely for a going concern and in the event of l i quidation and 2. a re s ubordinated to all other liabilities i n the event of a liquidation. (3) 1The relevant term must be considered i n the assessment regarding the extent to which own fund components fea ture the characteristics stated in s ubsection (2) for the present and the future. 2In the event of a limited term, a compa rison of the limited term with the average term of the undertaking’s insurance commitments must also be i ncl uded i n the consideration. (4) Cons ideration is also required regarding whether, and the extent to which, an own fund component i s free from 1. commi tments or i ncentives to repay the nominal amount, 2. fi xed mandatory costs and 3. other encumbrances. (5) 1The cl assification requires the a pproval of the supervisory a uthority. 2This does not a pply to own fund components whos e classification is published in delegated l egislative acts of the European Commission. Section 92 Criteria for classification (1) Ba sic own funds are classified as tier 1 i f they largely feature the characteristics s tated i n section 91 (2) nos. 1 a nd 2 wi th due regard in addition to section 91 (3) a nd (4). (2) Ba sic own funds are classified as tier 2 i f they largely feature the characteristics s tated i n section 91 (2) no. 2 wi th due rega rd in a ddition to section 91 (3) a nd (4). – Page 68 of 207 – (3) Anci llary own funds are classified as tier 2 i f they largely feature the characteristics s tated i n section 91 (2) nos. 1 a nd 2 wi th due regard in a ddition to section 91 (3) a nd (4). (4) Al l other basic own funds and ancillary own funds that do not come under subsections (1) to (3) must be classified as ti er 3. Section 93 Classification of the own fund components (1) The probability-weighted average of future payments to policyholders a nd those entitled to benefits must be cl a ssified as tier 1, wi th due regard to the current value of the monetary funds (projected cash va lue of future payments) a nd with a pplication of the relevant risk-free i nterest rate term structure from the part of the provision for bonuses a va ilable at the valuation date which may be used to cover l osses and is not attributable to with-profit bonuses that ha ve been determined 1. for l i fe insurance, 2. for SLT health i nsurance and 3. for a cci dent insurance with premium refunds. (2) The following must be classified as tier 2: 1. l etters of credit and warranties that a re held in trust by an independent trustee for the i nsurance creditors and have been provided by credit i nstitutions a uthorised under Directive 2006/48/EC, a nd 2. a l l future receivables which ca n be claimed by mutual societies formed by s hipping companies against their members by way of requests for back payments within the next twelve months, with va riable premium income whi ch only insure the ri sks stated in Appendix 1 nos. 6, 12 a nd 17. Section 94 Own funds for the purposes of compliance with the solvency capital requirement (1) For the purposes of compliance with the solvency ca pital requirement, the eligible own funds consist of the own funds from tier 1 a nd the eligible own funds from tiers 2 a nd 3. (2) The own fund components from tiers 2 a nd 3 a re only eligible if they meet the following terms a nd conditions: 1. the own fund components in ti er 1 a mount to at l east one third of the solvency ca pital requirement and 2. the eligible a mount of own fund components i n tier 3 a mounts to less than one third of the solvency ca pital requirement. Section 95 Own funds for the purposes of compliance with the minimum capital requirement (1) For the purposes of compliance with the minimum ca pital requirement the e ligible own funds consist solely of the own funds from tier 1 a nd the eligible basic own funds from ti er 2. (2) The own fund components in tier 1 must cover at least half of the minimum capital requirement. Subsegment 2 Solvency capital requirement – Page 69 of 207 – Section 96 Ascertainment of the solvency capital requirement (1) 1The s olvency ca pital requirement may be ascertained using a standard formula or an internal model. 2In both ca ses the regulations of section 97 a pply to a scertainment of the s olvency ca pital requirement. (2) If the i nsurance undertaking’s risk profile differs significantly from the assumptions underlying the ca lculation using the s tandard formula, the s upervisory a uthority may order the i nsurance undertaking to develop a nd use an i nternal model to calculate the solvency ca pital requirement or the relevant risk modules for this requirement within a rea sonable period. Section 97 Calculation of the solvency capital requirement (1) The s olvency capital requirement must be calculated based on the assum ption of a going concern. (2) 1The s olvency ca pital requirement must be calibrated i n such a way that all quantifiable risks to which an i nsurance undertaking is exposed a re reflected. 2The volume of the business as well as the new business expected i n the next twel ve months must both be ta ken as a basis for this. 3In relation to the current volume of business, the s olvency ca pital requirement only covers unexpected losses. 4It corresponds with the va lue at risk (VAR) of the basic own funds of an i ns urance undertaking at a confidence level of 99.5 per cent over a period of one year. (3) 1The a mount of the solvency ca pital requirement must cover the following risks at a minimum: 1. the non-life i nsurance underwriting risk, 2. the l ife insurance underwriting risk, 3. the health insurance underwriting ri sk, 4. the ma rket ri sk, 5. the credit risk und 6. the operational risk. 2 The operational risk also includes l egal risks. 3However, it does not include reputational ri sks or risks arising from s tra tegic decisions. (4) The effects of techniques aimed a t risk mitigation must be ta ken i nto account i n ascertaining the solvency ca pital requirement, provided that the credit risk a nd other ri sks that could a rise from using these techniques are adequately ta ken i nto account i n the solvency capital requirement. Section 98 Frequency of calculation (1) 1Ins urance undertakings must calculate the solvency ca pital requirement at least once per year a nd report the result of thi s calculation to the supervisory a uthority. 2Insurance undertakings must monitor the l evel of the s olvency ca pital requirement and the amount of the existing eligible own funds on an ongoing basis. (2) If a n i nsurance undertaking’s ri sk profile deviates significantly from the assumptions that formed the bas is of the last reported solvency capital requirement, then the undertaking must recalculate the solvency capital requirement without del ay and report this new calculation to the s upervisory a uthority. (3) If there a re facts that justify the assumption that the i nsurance undertaking’s ri sk profile has changed significantly s i nce the last solvency ca pital requirement reported, the supervisory a uthority may require a recalculation of the s ol vency ca pital requirement from the undertaking. Section 99 Structure of the standard formula If the s olvency ca pital requirement is calculated using the standard formula, then i t must consist of the following – Page 70 of 207 – components: 1. the basic solvency ca pital requirement in a ccordance with s ections 100 to 106, 2. the ca pital requirement for operational risk as s et out in s ection 107 a nd 3. the a djustment for the loss-absorbing capacity of technical provisions and deferred taxes in a ccordance with s ection 108. Section 100 Design of the basic solvency capital requirement (1) 1The basic solvency ca pital requirement must comprise i ndividual risk modules, which are aggregated in a ccordance wi th Appendix 3. 2It must consist of at least the following risk modules: 1. the non-life i nsurance underwriting risk, 2. the l ife insurance underwriting risk, 3. the health insurance underwriting ri sk, 4. ma rket risk; a nd 5. counterparty default risk. 3Ins urance operations must be allocated to the underwriting risk module that best reflects the technical nature of the underlyi ng ri sks. (2) The correlation coefficients for the aggregation of the risk modules referred to i n subsection (1), as well as the ca l ibration of the capital requirements for each risk module, must result in a n overall Solvency Ca pital Requirement whi ch complies with the principles set out in section 97. (3) 1Ea ch of the risk modules referred to i n subsection (1) must be calibrated using a Value-at-Risk measure, with a 99.5% confi dence l evel, over a one-year period. 2Where a ppropriate, diversification effects must be ta ken i nto account i n the des ign of each ri sk module. (4) The s ame design a nd specifications for the risk modules must be used for all insurance undertakings, both with res pect to the Basic Solvency Ca pital Requirement and to any s implified calculations as laid down in section 109 (1). (5) Wi th regard to risks arising from catastrophes, geographical s pecifications may, where appropriate, be used for the ca l culation of the life, non-life a nd health underwriting risk modules. Section 101 Non-life underwriting risk module (1) 1The non-life underwriting risk module must reflect the risk arising from non -life i nsurance obligations, in relation to the perils covered and the processes used i n carryi ng on the business. 2The risk module must take account of the uncertainty i n the results of insurance undertakings related to the existing i nsurance obligations as well as to the new bus iness expected to be written over the following 12 months. (2) The non-life insurance underwriting risk module must be calculated in a ccordance with Appendix 3 a s a combination of the ca pital requirements for a t least the risk of l oss, or of adverse change in the va lue of insurance liabilities, result ing from: 1. fl uctuations i n the timing, frequency a nd s everity of insured events, a nd i n the timing and amount of claim s ettlements (non-life premium and reserve ri sk), and 2. s i gnificant uncertainty of pricing a nd provisioning assumptions related to technical provisions for extreme or exceptional events (non-life ca tastrophe risk). Section 102 Life underwriting risk module – Page 71 of 207 – (1) The l ife underwriting risk module must reflect the risk a rising from life insurance obligations, in relation to the peril s covered and the processes used i n carryi ng on the business. (2) The l ife underwriting risk module must be calculated in a ccordance with Appendix 3 as a combination of the capital requirements for a t least the risk of l oss, or of adverse change in the va lue of i nsurance liabilities, resulting from: 1. cha nges i n the level, trend, or volatility of mortality ra tes, where an i ncrease i n the mortality ra te leads to an i ncrease i n the value of insurance l iabilities (mortality ri sk), 2. cha nges i n the level, trend, or volatility of mortality ra tes, where a decrease in the mortality ra te leads to an i ncrease i n the value of insurance l iabilities (longevity ri sk), 3. cha nges i n the level, trend or volatility of disability, sickness and morbidity ra tes (disability – morbidity ri sk), 4. cha nges i n the level, trend, or volatility of the expenses i ncurred in servi cing i nsurance contracts (life-expense ri sk), 5. fl uctuations i n the level, trend, or volatility of the revision rates applied to annuities, due to changes i n the legal envi ronment or i n the state of health of the person i nsured (revision risk), 6. cha nges i n the level or volatility of the rates of policy l apses, terminations, renewals and surrenders (lapse risk) a nd 7. s i gnificant uncertainty of pricing a nd provisioning assumptions related to extreme or irregular events (life - ca ta strophe risk). Section 103 Health underwriting risk module (1) 1The health underwriting ri sk module must reflect the ri sk arising from the underwriting of health insurance obl igations, following from both the perils covered a nd the processes used in ca rrying on the business. 2This applies i rres pective of whether the health i nsurance is pursued on a similar technical basis to that of life insurance or not. (2) The health underwriting risk module must include at least the ri sk of loss, or of adverse change in the value of i ns urance liabilities, resulting from 1. cha nges i n the level, trend, or volatility of the expenses i ncurred in servi cing i nsurance contracts, 2. fl uctuations i n the timing, frequency a nd s everity of insured events, a nd i n the timing and amount of claim s ettlements a t the time of recognising the technical provisions and 3. the s ignificant uncertainty of pricing a nd provisioning assumptions related to technical provisions for outbreaks of ma jor epidemics, as well as the unusual accumulation of risks under s uch extreme ci rcumstances. Section 104 Market risk module (1) 1The market risk module must reflect the risk a rising from the level or volatility of market prices of financial i ns truments which have an i mpact upon the va lue of the assets and l iabilities of the undertaking. 2It must properly refl ect the structural mismatch between assets and liabilities, i n particular with respect to the duration thereof. (2) 1The market risk module must be calculated in a ccordance with Appendix 3 a s a combination of the capital requirements in relation to the s ensitivity of the values of parts of assets, liabilities and financial i nstruments i n relation to the following changes a t least: 1. cha nges i n the term structure of interest rates, or in the volatility of interest ra tes (interest ra te risk), 2. cha nges i n the level or i n the volatility of market prices of equities (equity ri sk), 3. cha nges i n the level or i n the volatility of market prices of real estate (property risk), 4. cha nges i n the level or i n the volatility of credit spreads over the risk-free i nterest rate term structure (spread risk) a nd 5. cha nges i n the level or i n the volatility of currency exchange rates (currency risk). – Page 72 of 207 – 2 Addi tional ri sks stemming either from lack of diversification in the a sset portfolio or from large exposure to default risk by a s i ngle issuer of securities or a group of related issuers (market risk concentrations) must also be calculated. Section 105 Counterparty default risk module (1) The counterparty default risk module must reflect possible losses due to un expected default, or deterioration in the credi t standing, of the counterparties a nd debtors of insurance undertakings over the following 12 months. (2) 1The counterparty default risk module must cover 1. ri s k-mitigating contracts, such as reinsurance a rrangements, securitisations and derivatives, 2. recei vables from i ntermediaries, as well as 3. a ny other credit exposures which a re not covered in the spread risk i n accordance with section 104 (2) s entence 1 no. 4. 2 The counterparty default risk module take appropriate a ccount of collateral or other security held by or for the a ccount of the i nsurance undertaking a nd the risks associated therewith. (3) For ea ch counterparty, the counterparty default risk module must take account of the overall counterparty ri sk exposure of the insurance undertaking concerned to that counterparty, i rrespective of the l egal form of i ts contractual obl igations to that undertaking. Section 106 Equity risk module (1) The equity risk module must i nclude a s ymmetrical a djustment o f the factor in the s cenario for s tock i nvestments whi ch records the risk from changes i n the level of equity pri ces. (2) 1The s ymmetric adjustment made to the standard ca pital requirement for equity prices, calibrated in accordance wi th s ection 100 (3), must be based on a function of the current level of an appropriate equity i ndex a nd a weighted a vera ge l evel of that index. 2The weighted average must be calculated over an appropriate period of ti me which must be the s ame for all insurance undertakings. (3) The a djustment may not result i n a factor in the s cenario for s hare investments which is more than 10 percentage poi nts lower or higher than the standard factor for equity i nvestments. Section 107 Capital requirement for operational risk (1) 1The ca pital requirement for operational risk must reflect operational ri sks to the extent they a re not already refl ected i n the risk modules referred to i n section 100. 2It must be ca librated in a ccordance with section 97 (2). (2) Wi th respect to life insurance contracts where the investment risk is borne by the policy holders, the calculation of the ca pital requirement for operational risk must ta ke account of the amount of annual expenses i ncurred in respect of thos e insurance obligations. (3) 1Wi th respect to insurance operations other than those referred to i n subsection (2), the calculation of the capital requirement for operational risk must take a ccount of the volume of those operations, in terms of earned premiums and technical provisions which are held i n respect of those insurance obligations. 2In this case, the capital requirement for operational risks must not exceed 30% of the Basic Solvency Ca pital Requirement relating to those i nsurance operations. Section 108 Adjustment for the loss-absorbing capacity of technical provisions and deferred taxes (1) The a djustment referred to i n section 99 no. 3 for the loss-absorbing capacity of technical provisions a nd deferred ta xes must reflect potential compensation of unexpected l osses through a simultaneous decrease i n technical provisions or deferred ta xes or a combination of the two. – Page 73 of 207 – (2) 1Tha t a djustment must ta ke account of the risk mitigating effect provided by future discretionary benefits of i ns urance contracts, to the extent insurance undertakings ca n establish that a reduction in s uch benefits may be used to cover unexpected l osses when they a rise. 2The risk mitigating effect provided by future discretionary benefits must be no hi gher than the sum of technical provisions a nd deferred taxes relating to those f uture discretionary benefits. (3) For the purpose of subsection (2), the value of future discretionary benefits under adverse circumstances must be compa red to the value of such benefits under the underlying assumptions of the best-estimate calculation. Section 109 Deviations from the standard formula (1) 1Ins urance undertakings may use a simplified calculation for a s pecific sub-module or ri sk module where the nature, s ca le and complexity of the risks they face justifies i t and where it would be disproportionate to require all insurance undertakings to apply the standardised calculation. 2Simplified calculations must be calibrated in a ccordance with s ection 97 (2). (2) 1Fol lowing a pproval from the s upervisory a uthority, insurance undertakings may use compa ny-specific parameters in pl a ce of a sub-group of parameters when calculating the technical modules. 2Parameters of this type must be calibrated ba sed on the undertaking’s i nternal data or based on data that is directly relevant for this undertaking’s busi ness using s ta ndardised methods. 3The data used must be precise, complete and a dequate. Section 110 Significant deviations from the assumptions underlying the standard formula calculation 1Where it is inappropriate to calculate the Solvency Ca pital Requirement i n accordance with the standard formula, beca use the ri sk profile of the insurance undertaking concerned deviates significantly from the assumptions underlying the s tandard formula calculation, the s upervisory a uthority may require the undertaking co ncerned to replace a s ubset of the parameters used in the s tandard formula calculation by parameters specific to that undertaking when calculating the underwriting ri sk modules. 2Those specific parameters must be calculated i n such a way to ensure that the undertaking complies with section 97 (2) a nd section 109 (2) sentences 2 a nd 3. Subpart 3 Internal models Section 111 Use of internal models (1) Ins urance undertakings may use a n internal model in the form of a full or partial model for the calculation of the s ol vency ca pital requirement. (2) 1Wri tten i nternal policies must be compiled on the model and they must stipulate which changes the insurance undertaking is a llowed to make to the internal model. 2The internal policies must s et out when a change must be qua lified as being minor or major. (3) 1Us e of a model, the internal policies a nd the changes to these, changes to the model as well as termination of use of the model a nd a complete or partial return to the standard formula must be a pproved by the s upervisory a uthority. 2Sentence 1 a bove does not a pply to minor changes to the model. 3The supervisory a uthority will approve the request i f the s ystems for risk identification, risk measurement, ri sk monitoring, risk management and risk reporting are fulfilled a ppropriately, a nd i n particular if the requirements stated i n subsection (4) a re complied with. 4A complete or partial return to the s tandard formula may only be approved if there is sufficient justification for this. (4) The request for a pproval must be s ubmitted together with the internal policies under s ubsection (2) along with the documents which s how that the i nternal model meets the requirements of section 112 (2) a nd sections 115 to 121. (5) The s upervisory a uthority must decide on the request for approval within six months following receipt of the compl ete request. (6) The s upervisory a uthority may require an estimate of the solvency capital requirement i n accordance with the – Page 74 of 207 – s ta ndard formula in a ccordance with s ections 96 to 110 i n relation to insurance undertakings for which the supervisory a uthority has approved the use of an i nternal model. Section 112 Internal models in the form of partial internal models (1) 1Ins urance undertakings may use partial i nternal models for the calculation of 1. one or more risk modules, or sub-modules, of the Basic Solvency Ca pital Requirement, as s et out in s ections 101 to 106, 2. the ca pital requirement for operational risk as s et out in s ection 107 a nd 3. the a djustment referred to in s ection 108. 2 Pa rti al modelling may be applied to the whole business or only to one or more major business units. (2) 1Secti ons 115 to 121 a pply, with the necessary modifications; the limited s cope of the model must be taken i nto a ccount. 2In a ddition, 1. the s olvency ca pital requirement derived from the model must ta ke better account of the risk profile of the i ns urance undertaking than the solvency ca pital requirement calculated using the standard formula a nd 2. the model a ) mus t be consistent with the principles in s ections 96 to 98 a nd b) mus t be a ble to be fully i ntegrated into the s tandard formula for the s olvency ca pital requirement as well as be cons istent with sections 96 to 98 i n terms of i ts design. (3) To a reasonable extent, the insurance undertaking must explain w hy the limited scope of the model is justified. (4) If the partial i nternal models only covers certain s ub-modules i n a risk module or only s ome areas of activity i n a n i ns urance undertaking in relation to a s pecific risk module or parts of both aspects, the supervisory a uthority may demand that a transition plan be i mplemented to extend the scope of the model to other s ub-modules or a reas of a cti vi ty i n a risk module until the va st majority of insurance activities i n relation to this risk module are covere d. Section 113 Responsibility of the management board; involvement of third parties (1) The ma nagement board is itself responsible 1. for s ubmitting the a pplication to use the internal model i n accordance with section 111 (3) a nd any application for a uthorisation of s ubsequent major changes to the model, 2. for i ntroducing systems to ensure that the internal model functions properly a t all times, 3. for ens uring that the structure and mode of operation of the i nternal model are a dequate on an ongoing basis and 4. for ens uring that the internal model a ppropriately reflects the risk profile of the i nsurance undertaking at all times. (2) The full or partial provision of the model or of data by third parties does not absolve the i nsurance undertaking of the obl igation to satisfy the internal model requirements s pecified i n sections 115 to 121. Section 114 Non-compliance with the requirements for the internal model (1) If a n i nsurance undertaking no longer satisfies the requirements specified in sections 115 to 121 a fter the s upervisory a uthority has granted a uthorisation to use a n internal model, the i nsurance undertaking must submit a plan to the s upervisory a uthority without delay explaining how it ca n restore compliance with the requirements within a reasona ble peri od or s ubmit evidence demonstrating that the impact from non-compliance with the requirements is i mmaterial. – Page 75 of 207 – (2) If the plan in accordance with subsection (1) is not properly implemented, the s upervisory a uthority may i nstruct the i ns urance undertaking to return to the standard formula for calculating the solvency ca pital requirement. Section 115 Usage test (1) The i nternal model must be used extensively for the management of the undertaking and play a key rol e in the orga nisation of the business, i n particular 1. i n the risk management s ystem under s ection 26 a nd i n decision -making processes as well as 2. i n the assessment of economic ca pital a nd solvency ca pital, and in a llocation processes, including the assessment under section 27. (2) The frequency with which the solvency ca pital requirement is calculated using the internal model must be consistent wi th the frequency wi th which the internal model is used for the purposes specified in s ubsection (1). (3) The onus is on the insurance undertaking to demonstrate that the requirements i n subsections (1) and (2) have been s a tisfied. Section 116 Statistical quality standards for probability distribution forecasts (1) 1The i nternal model must cover all significant ri sks faced by the insurance un dertaking. 2The risks specified in section 97 (3) mus t be taken into account at all times. 3Regardless of the calculation method selected, the risk classification must be s ufficient to ensure that the internal model is used extensively a nd plays a key role within the meaning of s ection 115 (1) i n the business organisation, i n particular i n the risk management s ystem, in decision-making processes and in ca pital a l location. (2) The i nsurance undertaking must be i n a position at a ll ti mes to provide evidence to the supervisory a uthority of the pl a usibility of the assumptions on which the i nternal model is based. (3) 1The methods used to calculate the underlying probability distribution forecast i n the internal model must be based on s uitable a nd reasonable a ctuarial and statistical procedures. 2These methods must be consistent with the methods us ed for calculating the technical provisions. (4) The ca lculation of the probability distribution forecast must be based on up -to-date, reliable information and on rea listic assumptions. (5) 1The data used for the i nternal model must be accurate, complete a nd appropriate. 2The data series used for ca l culating the probability distribution forecast must be updated a t least once a year. Section 117 Other statistical quality standards (1) Dependencies within the risk categories a nd between the risk categories i n relation to diversification effects ca n be i ncorporated into the internal model i f the systems for measuring diversification effects are appropriate. (2) Effects from risk mitigation techniques ca n be included in the i nternal model if the credit ri sk and other risks a rising from the use of ri sk mitigation techniques are a dequately reflected i n the model. (3) 1Si gnificant risks arising from financial guarantees and contractual options must be measured accurately. 2Risks a ri sing from options in favour of policyholders or other insurance undertakings must also be assessed. 3The i mpact from – Page 76 of 207 – future changes i n financial a nd non-financial conditions on the exercise of these options must be factored i nto the a s sessment. (4) 1Future action that is reasonably l ikely to be taken by members of the senior management i n certain ci rcumstances ca n be taken into account in the i nternal model. 2The a mount of ti me required for the implementation of action of this na ture must also be taken into account. (5) The i nternal model must take i nto account expected payments to the i nsured, regardless of whether s uch payments a re contractually guaranteed or not. Section 118 Calibration standards (1) In derogation of s ection 97 (2), i nsurance undertakings may use a different time period or an alternative risk measure for i nternal modelling purposes if they ensure that the output from the internal model is used to calculate the solvency ca pi tal requirement in s uch a way that the i nsured are given a l evel of protection equivalent to that specified i n section 97. (2) 1Where practicable, i nsurance undertakings must derive the solvency ca pital requirement directly from the proba bility distribution forecast generated by the i nternal model. 2Insurance undertakings must use the risk measure "va l ue at risk" as s pecified i n section 97. (3) The s upervisory a uthority may permit approximations for the purposes of calculating the s olvency ca pital requirement if the solvency capital requirement ca nnot be derived directly from the probability distribution forecast generated by the internal model a nd the insurance undertaking concerned demonstrates to the supervisory a uthority tha t the policyholders are given the level of protection in accordance with section 97 (2). (4) 1At the request of the s upervisory a uthority, the internal model must be a pplied to relevant benchmark portfolios. 2In thi s regard, the insurance undertaking must, a t the request of the supervisory a uthority, use assumptions that are l a rgely based on external data i n order to review the ca libration of the internal model and determine whether i ts s pecifications a re in line with generally accepted market practice. Section 119 Profit and loss attribution 1Ins urance undertakings must investigate the causes and sources of profits and losses i n each principal area of activity a t l east once a year. 2In this process, they must examine how the risk categorisation s elected i n the internal model explains the ca uses and sources of the profits and losses. 3The risk ca tegorisation and the allocation of profits a nd l osses must refl ect the risk profile of the i nsurance undertaking concerned. Section 120 Validation standards (1) Ins urance undertakings must operate a regular cycl e of model validation, which must i nclude monitoring the performance capability of the i nternal model, reviewing the ongoing appropriateness of its specification a nd testing its res ults a gainst experience. – Page 77 of 207 – (2) The model va lidation process must include an effective s tatistical procedure for va lidating the internal model, ena bling the i nsurance undertaking concerned to demonstrate to the s upervisory a uthority that the ca pital requirements determined with the internal model are appropriate. (3) The s tatistical methods applied must test the a ppropriateness of the probability distribution forecast compared not onl y to l oss experience but a lso to all material new data and information relating thereto. (4) 1The model validation process must include an a nalysis of the stability of the i nternal model and, in particular, the tes ting of the s ensitivity of the results of the i nternal model to changes in key underlying assumptions. 2It must also i ncl ude an assessment of the accuracy, completeness and appropriateness of the data used for the i nternal model. Section 121 Documentation standards (1) 1The design of the internal model and its mode of operation must be documented. 2It must be cl ear from this documentation that the undertaking concerned is complying with the requirements in sections 115 to 120. (2) The documentation must include a detailed description of the theoretical principles, assumptions a nd mathematical a nd empirical bases underlyi ng the i nternal model and must also describe all scenarios in which the internal model does not function effectively. (3) Ins urance undertakings must document all major changes to their i nternal models (section 111 (2)). Subsegment 4 Minimum capital requirement Section 122 Determining the minimum capital requirement; authorisation to issue statutory orders (1) The mi nimum capital requirement equates to that amount of eligible basic own funds below which, i n a s ituation in whi ch the insurance undertaking continues as a going concern, the policyholders and those entitled to benefits are exposed to a n unacceptable l evel of ri sk. (2) 1The Federal Mi nistry of Finance is authorised to use a statutory order to s tipulate the amount of the minimum ca pi tal requirement specified i n subsection (1); Article 129 (1) to (3) of Directive 2009/138/EC, delegated legislative a cts of the European Commission i n accordance with Article 130 of Directive 2009/138/EC a nd i nformation published by the European Commission in accordance with Article 300 of Directive 2009/138/EC must be observed. 2This authorisation ma y be delegated by s tatutory order to BaFin. 3Statutory orders under sentences 1 a nd 2 do not require the consent of the Bundesrat. Section 123 Calculation frequency; reporting obligations (1) 1Ins urance undertakings must calculate the minimum ca pital requirement quarterly a nd report the result of the ca l culation to the supervisory a uthority. 2It is not necessary to ca lculate the solvency ca pital requirement quarterly for the purposes of determining the threshold va lues for the minimum ca pital requirement. (2) If one of the threshold va lues s pecified in Article 129 (3) of Directive 2009/138/EC determines the minimum capital requirement of a n i nsurance undertaking, the i nsurance undertaking concerned must explain the reasons for this to the s upervisory a uthority. – Page 78 of 207 – Segment 3 Investments; guarantee assets Section 124 Investment principles (1) 1Ins urance undertakings must invest their entire assets in a ccordance with the principle of corporate prudence. 2In doi ng so, insurance undertakings must comply wi th the following requirements: 1. i ns urance undertakings may i nvest s olely i n assets and i nstruments whose a ssociated risks they ca n a ) s ufficiently i dentify, assess, monitor, control, manage, i nclude i n their repo rting s ystems, b) a dequately take into account in the assessment of their solvency needs under section 27 (2) number 1; 2. a l l assets must be i nvested so as to ensure the security, quality, liquidity and profitability of the portfolio as a whole; a s sets must also be l ocated so as to ensure a ccess and availability; 3. a s sets held to cover the technical provisions must also be i nvested i n a manner a ppropriate to the nature and ma turity of the primary i nsurance and reinsurance l iabilities of the undertaking; these assets must be invested in the i nterests of all policyholders and those entitled to benefits, taking into account the investment policy, i f such an i nvestment policy has been published; 4. i n the case of a conflict of interest, action must be taken to ensure that the assets a re invested i n the best i nterest of the policyholders a nd those entitled to benefits; 5. deri vative financial i nstruments may only be used to help reduce risk or facilitate efficient portfolio management; thi s criterion is not satisfied i f derivative financial instrument transactions are used solely to build up tra ding pos itions (arbitrage) or if the insurance undertaking concerned is not actually i n possession of the relevant i nvestment portfolios involved in the transaction (short-selling); 6. i nvestments and assets that are not a dmitted to tra ding on a regulated financial market must be kept at prudent l evels; 7. a s sets must be mixed and diversified a ppropriately to a void excessive dependency on a certain asset, issuer, group of undertakings or geographical a rea a nd a n excessive concentration of risk i n the portfolio as a whole; a nd 8. i nvestments i n assets involving the same issuer or issuers who belong to the same group of undertakings must not res ult in a n undue concentration of ri sk. (2) 1Subsection (1) nos. 5 to 8 does not a pply to life insurance contracts i n which the investment risk is borne by the pol icyholder, subject to the application of sentence 2 no. 3. 2The following stipulations also apply to the assets i nvolved i n the case of s uch contracts, over and above the requirements i n subsection (1) nos. 1 to 4: 1. i f the benefits under a contract are directly linked to the value of units in undertakings for collective investment in tra ns ferable securities within the meaning of Directive 2009/65/EC or to the va lue of assets that a re contained in a n i nternal fund held by the insurance undertakings concerned a nd usually divided into units, the technical provisions in res pect of those benefits must be represented as closely as possible by the units concerned or, if no units have been crea ted, by the assets concerned; 2. i f the benefits provi ded by a contract are directly l inked to an s hare index or to a reference va lue other than as s pecified in no. 1 a bove, the technical provisions for these benefits must be reflected as closely as possible by the uni ts or shares that represent the reference value; i f no units or shares have been established, the provisions must be reflected by a ppropriately s ecure a nd recoverable assets that correspond as closely as possible those values on whi ch the relevant reference value is based; and 3. i f the benefits specified in nos. 1 a nd 2 a bove include a guarantee of i nvestment performance or some other gua ranteed benefit, subsection (1) nos. 5 to 8 mus t be a pplied to the assets held to cover the corresponding a dditional technical provisions. (3) If i nsurance contracts form part of a ny i ndependent portfolio of a n insurance undertaking i n a country outside the member states or EEA signatory s tates, subsections (1) and (2) must be applied unless otherwise specified under foreign l a w. – Page 79 of 207 – Section 125 Guarantee assets (1) 1Duri ng the financial year, the management board of a primary i nsurance undertaking must allocate to the guarantee a s sets, a nd i nvest in accordance with regulations, a mounts equivalent to the expected increase of the minimum gua rantee assets in a ccordance with s ubsection (2) below. 2If primary i nsurance undertakings invest assets in 1. cl a ims for repayment of a loan, 2. bonds and participation rights, 3. book-entry s ecurities; 4. s ha res; 5. equity i nvestments; 6. l a nd and land ri ghts; 7. s ha res within the meaning of s ection 215 (2) s entence 1 no. 6 or 8. current a ccount balances and deposits at credit institutions, thes e assets must be added to the guarantee assets in a n amount up to the a mount of the total balance sheet va lues s pecified in subsection (2). 3Overall, the assets specified in s entence 2 must at least match the level of the entire portfolio i n terms of i nvestment protection, liquidity, profitability a nd quality. (2) 1As a minimum, the total guarantee assets must correspond to the total balance sheet va lues for the following items: 1. the unearned premiums, 2. the premium reserve, 3. the provision for a ) cl a ims outstanding and surrenders, b) reba tes and c) unexpired premiums from suspended insurance contracts, 4. the portions of the provision for bonuses attributable to with-profits bonuses declared but not yet allocated, 5. the l iabilities to policyholders under direct insurance business, a nd 6. the premium income to be refunded by a n i nsurance undertaking in the event of cancellation or rescission of a n i ns urance contract or a tra nsaction defined i n section 2 (2). 2Ba lance sheet values within the meaning of sentence 1 a re the gross amounts for direct i nsurance business before deduction of the a mounts for ceded reinsurance business. (3) 1For the purpose of determining the guarantee assets, unencumbered land a nd land rights must be included at the ba lance sheet value. 2If the balance sheet value is higher than the fair va lue, then the fair value must be used. 3The s upervisory a uthority may permit a reasonable increase in this value i f i t can be demonstrated by an experts' report that the fa ir value exceeds the balance sheet va lue by a t least 100 per cent. 4In the case of encumbered land a nd land rights, the s upervisory a uthority must determine the value on a case-by-case basis. (4) 1The guarantee assets must be managed s eparately from a ny other assets and must be kept in the territory of the member states and EEA signatory states. 2The supervisory a uthority must be informed about the manner i n which they a re kept. 3The s upervisory a uthority may permit the guarantee assets to be kept a t a different l ocation. (5) A gua ra ntee asset a ccount (investment portfolio) must be created for each type of i nvestment i f l ife insurance contra cts provide for i nsurance benefits linked 1. to uni ts or shares in open-ended investment funds within the meaning of section 1 (4) of the German Investment Code (Kapitalanlagegesetzbuch – KAGB) , 2. to s hares or units issued by a n investment company, – Page 80 of 207 – 3. to a s sets within the meaning of s ection 2 (4) of the German Investment Act (Investmentgesetz – InvG) i n the version i n force until 21 July 2013, wi th the exception of money, or 4. di rectly to an equity i ndex or other reference values. (6) 1Separate accounts may be established within the guarantee assets with the a pproval of the supervisory authority. 2The rules relating to the guarantee assets and any ri ghts attached then apply, with the necessary modifications, to each of the s eparate accounts. Section 126 Register of assets (1) 1The i nsurance undertaking must ensure that the asset items i n the guarantee assets are individually entered i n a regi ster of assets. 2The rules relating to the guarantee assets a pply to all assets entered i n the register of assets. 3Any ri ghts to use conferred by i ndividual assets within the guarantee assets are deemed part of the guarantee assets, even i f not entered i n the register of assets. 4Any receivables a rising from advances or l oans granted a gainst the undertaking’s own i nsurance policies may, to the extent that they are part of the guarantee assets, be registered i n an aggregate a mount. 5In the case of receivables secured by a charge over land and repayable in instalments, the register of assets mus t be a mended as prescribed by the supervisory a uthority; the same applies to charges over land that do not serve as col lateral for a ny a mounts due from an individual. (2) 1At the end of each financial year, the i nsurance undertaking must submit a copy of the entries made during that year to the s upervisory a uthority; the management board must certify the a ccuracy of the copy. 2The s upervisory a uthority mus t retain the copy. (3) 1Wi th regard to the gross technical provisions within the meaning of s ections 341e to 341h of the German Commercial Code for direct insurance business, the portions of such provisions a ttributable to the reinsurers and the porti ons a ttributable to special purpose entities or vehicles within the meaning of Article 211 of Directive 2009/138/EC tha t have been authorised to conduct business also form part of the guarantee assets, even if not entered in the register of a s sets. 2In the case of receivables due from s pecial purpose i nsurance companies domiciled in a third country, this onl y a pplies i f the s pecial-purpose i nsurance company has been authorised to carry on business and is supervised by the na ti onal authorities in the home country i n a ccordance with the requirements i n section 168 a nd has comparable capital a dequacy. (4) 1Subsection (3) a pplies to life insurance, health insurance of the type specified in section 146, private compulsory l ong-term-care i nsurance in accordance with section 148 a nd accident i nsurance with premium refund in a ccordance wi th s ection 161 only for the unearned premiums i n accordance with section 341e (2) no. 1 of the German Commercial Code a nd the provision for cl aims outstanding in accordance with section 341g of the German Commercial Code. 2In the cl a sses of insurance referred to above, the undertaking must itself also retain and manage the proportion of guarantee a s sets for the portion ceded to reinsurers save for the unearned premiums in a ccordance with section 341e (2) no. 1 of the German Commercial Code and the provision for claims outstanding in a ccordance with s ection 341g of the German Commercial Code. Section 127 Additions to guarantee assets (1) 1If gua rantee assets do not meet the minimum level specified in s ection 125 (2), the ma nagement board must make up the deficiency wi thout delay. 2The necessary a ddition to the guarantee assets need not be ca rried out only i n cases where a special security deposit has to be furnished out of premium i ncome in favour of certain i nsurance undert akings a broad. (2) 1The s upervisory a uthority may order an insurance undertaking to make further a dditions to the guarantee assets over a nd above the minimum requirement under s ection 125 (2) i f this is deemed necessary to s afeguard the interests of the i nsured. 2Such a dditions may be necessary, i n particular, if the fair values of assets within the guarantee assets are l ower than their balance s heet carrying a mounts. – Page 81 of 207 – Section 128 Guarantee asset trustee (1) 1A trus tee and deputy trustee must be appointed to monitor the guarantee assets for l ife i nsurance, health i nsurance of the type specified in section 146, private compulsory l ong-term-care i nsurance in a ccordance with s ection 148 a nd a cci dent insurance with premium refund i n accordance with section 161. 2Public law i nsurance undertakings do not need to a ppoint a ny trustee. 3Smaller mutual s ocieties within the meaning of section 210 (1) s entence 1 only need to a ppoint a trus tee i f i nstructed to do so by the supervisory a uthority. (2) The regulations governing the trustee also apply to the deputy trustee, with the necessary modifications. (3) 1The trustee is a ppointed by the s upervisory board. 2If a smaller mutual society does not have a s upervisory board, the trus tee is appointed by the management board. (4) 1Before appointment, the s upervisory a uthority must be informed of the name of the designated trustee. 2If the s upervisory a uthority has reservations about the a ppointment i t may request that another person be proposed within a rea sonable period. 3If this requirement is not met or if the supervisory a uthority a lso has reservations about the newly proposed trustee, i t may itself a ppoint the trustee. 4Sentences 2 a nd 3 a lso apply i f the s upervisory a uthority has res ervations about an a ppointed trustee continuing in office. The trus tee must certify at the end of the balance sheet in the annual financial s tatements that the guarantee assets ha ve been i nvested and maintained i n compliance with the applicable rules, without this requirement affecting the res ponsibility of the bodies representing the undertaking. The s upervisory a uthority decides on a ny disputes between the trustee and the insurance undertaking concerning the trus tee's duties. Section 129 Protecting the guarantee assets (1) Acti on must be taken to protect the guarantee assets such that a ny decisions regarding the use of the assets a re pos sible only wi th the consent of the trustee. (2) 1The trustee must, i n particular, maintain the guarantee assets in joint custody with the i nsurance undertaki ng. 2The trus tee may only release an item of guarantee assets i f the remaining assets are sufficient to cover the minimum requirement for guarantee assets as specified in s ection 125 (2) or the i nsurance undertaking concurrently ensures that the guarantee assets a re covered i n some other way. 3If the i nsurance undertaking is under a n obligation to release a deed, the trustee must consent to the release, even if the criteria specified in sentence 2 a re not satisfied; section 127 (1) a pplies, with the necessary modifications. 4If the i nsurance undertaking needs a deed for temporary use, the trustee mus t release the deed without a ny obligation on the part of the insurance undertaking to provide alternative cover for the guarantee assets. (3) The trus tee may a pprove any decision regarding the use of assets in writing only; i f a n item is to be deleted from the regi ster of assets, it is s ufficient for the trustee to write his/her name beside or underneath the deletion annotation. (4) The trus tee is a uthorised to inspect the books and records of the insurance undertaking at any time, insofar as they rel ate to the guarantee assets. Section 130 Withdrawals from the guarantee assets (1) Other tha n the funds required for i nvestments or changes i n investments, only s uch amounts released upon occurrence or settlement of an insured event, a surrender, any other termination of an insurance contract or changes to the business plan may be withdrawn from the guarantee assets. (2) 1Executi on levied on, or attachment of, guarantee assets i s only permitted to the extent that allocations to the gua rantee assets have been prescribed a nd a ctually been made under section 125 (1) to (3), s ection 126 a nd section 127 – Page 82 of 207 – wi th respect to the claim for the settlement of which the assets are now to be used. 2Sentence 1 a pplies, with the necessary modifications, to any s et-off against claims that form part of guarantee assets. Section 131 Authorisation to issue statutory orders (1) For i nsurance undertakings that are not subject to supervision by the supervisory a uthorities i n the federal states, the Federal Mi nistry of Finance is a uthorised to issue statutory orders covering the following, such orders to be i ssued taking i nto a ccount delegated l egislative acts by the European Commission in a ccordance with Arti cle 135 of Directive 2009/138/EC: 1. the reporting by i nsurance undertakings on the investment of all their assets; 2. the i dentification, assessment, monitoring, management a nd reporting of or concerning a ) ri s ks arising from i nvestments and b) s pecific risks a rising from investments in derivative financial i nstruments; a nd 3. the determination of requirements i n connection with l oans securitised to create negotiable securities a nd other fi nancial instruments, specifically a ) requirements that the originator must satisfy s o that insurance undertakings a re permitted to invest i n securities or fi nancial instruments of this nature issued a fter 1 Ja nuary 2011, i ncluding s uch requirements to ensure that the ori ginator retains a net economic i nterest of not l ess than 5 per cent a nd b) qua litative requirements that must be satisfied by insurance undertakings i nvesting i n such securities or financial i ns truments. (2) Thi s power under s ubsection (1) may be delegated by s tatutory order to BaFin. (3) Sta tutory orders in accordance with subsections (1) and (2) do not require the consent of the Bundesrat. Segment 4 Insurance undertakings in special situations Section 132 Identification and notification of a deteriorating financial position (1) An i nsurance undertaking must have suitable s ystems in place to enable it to i dentify a deterioration in its financial pos ition. (2) An i nsurance undertaking must notify the s upervisory a uthority without delay of any deterioration in i ts financial pos ition that could jeopardise i ts ability to fulfil its obligations under insurance contracts or represent a risk to the s ol vency of the insurance undertaking. Section 133 Inadequate level of technical provisions (1) If a n i nsurance undertaking recognises i nadequate technical provisions i n breach of the obligations specified in s ections 74 to 88, the s upervisory a uthority may restrict or prohibit the free disposal of the assets of the undertaking. (2) Subsection (1) applies, with the necessary modifications, if an i nsurance undertaking does not recognise adequate technical provisions within the meaning of s ections 341e to 341h of the German Commercial Code. (3) If the s upervisory a uthority intends to restrict or prohibit the free disposal of assets in a ccordance with s ubse ction (1), i t mus t notify i n a dvance the supervisory a uthority i n the member state or EEA signatory s tate i n which the undertaking maintains a branch or provides s ervices a nd designate the assets that a re to be covered by the i ntended a cti on. – Page 83 of 207 – Section 134 Non-compliance with the solvency capital requirement (1) If the s olvency ca pital requirement is no l onger covered or i f this situation is likely to a rise within the subsequent three months, the i nsurance undertaking must i nform the supervisory a uthority a ccordingly without delay. (2) Wi thin two months of the date on which the insurance undertaking has i dentified that the solvency capital requirement is no l onger covered, the undertaking must submit a realistic recovery plan to the supervisory a uthority f or a pproval. (3) 1Wi thin six months of the date on which the i nsurance undertaking has identified that the s olvency ca pital requirement is no l onger covered, the undertaking must i mplement a ppropriate measures and increase its eligible own funds or reduce i ts risk profile until compliance with the solvency ca pital requirement is re -established. 2The supervisory a uthority may extend the deadline by three months. (4) 1If the European Insurance a nd Occupational Pensions Authority has identified the existence o f exceptional adverse ci rcumstances within the meaning of Article 138 (4) of Directive 2009/138/EC, the supervisory authority may extend the peri od specified i n subsection (3) s entence 2 for a ffected undertakings, taking into account all relevant factors, by ma xi mum of seven years. 2The possibility of the period extension comes to an end as s oon as the European Insurance a nd Occupational Pensions Authority has identified that there a re no longer a ny exceptional adverse ci rcumstances. (5) 1The European Insurance and Occupational Pensions Authority decides on the existence of exceptional a dverse ci rcumstances in response to a request from a supervisory authority. 2BaFin may s ubmit the request i f i nsurance undertakings that account for a substantial proportion of the market or of the areas of activity i nvolved will i n all proba bility not s atisfy one of the conditions s pecified in subsection (3). (6) 1If the s upervisory a uthority has extended the period under subsection (3) sentence 1 by more than three months, the i nsurance undertakings i nvolved must submit a progress report to the supervisory a uthority every three months. 2These reports must i nclude a description of the measures taken and the progress made to increase eligible own funds to the l evel required to cover the solvency capital requirement or to reduce the risk profile to re -establish compliance wi th the s olvency ca pital requirement. 3The extension of the period must be revoked if the progress report shows that there was no significant progress in achieving the establishment of compliance with the s olvency ca pital requirement between the date on which non-compliance with the solvency capital requirement was identified and the date on which the progress report was s ubmitted. (7) If there is evidence to s uggest that the financial position of the insurance undertaking concerned will deteriorate further, the supervisory a uthority ma y restrict or prohibit the free disposal of the assets of that i nsurance undertaking; s ection 133 (3) a pplies, with the necessary modifications. (8) 1If the supervisory a uthority has restricted or prohibited the free disposal of assets in a ccordance with s ubsection (7), i t mus t inform the supervisory authorities i n the member s tates or EEA signatory s tates i n which the undertaking concerned maintains a branch or provides services. 2It may request these authorities to take the same measures. 3In this ca s e, i t must designate the assets to be covered by s uch measures. Section 135 Non-compliance with the minimum capital requirement (1) If the minimum ca pital requirement is no longer covered, or there is a threat of this occurring within the next three months, the insurance undertaking must i nform the s upervisory a uthority of this fact without delay. (2) 1The i nsurance undertaking will submit a realistic financing plan in the short term to the supervisory a uthority for a pproval within one month of the undertaking’s determination that the minimum ca pital requirement i s no longer covered. 2This plan will show how the a llowable basic own funds are due to be i ncreased a t least to the level of the mi nimum ca pital requirement amount or how the risk profile is due to be lowered in such a way that the minimum ca pi tal requirement is covered once a gain. (3) The s upervisory a uthority may restrict or p rohibit free disposal over the insurance undertaking’s assets; section 133 (3) a nd section 134 (8) a pplies, with the necessary modifications. – Page 84 of 207 – Section 136 Recovery plan and finance scheme (1) The recovery plan a nd finance s cheme must i nclude the following information at a minimum: 1. Es ti mates of operating costs, in particular current general expenses and commissions, 2. Es ti mated i ncome and expenditure for the primary i nsurance business a nd for the reinsurance business assumed a nd tra nsferred, 3. A forecast for the s olvency s tatement, 4. Es ti mates of the financial resources that are due to be available to cover technical provisions, the solvency capital requirement and the minimum capital requirement, and 5. The reinsurance policy a s a whole. (2) If a restructuring plan or a financing plan must be submitted to the supervisory authority, then i t may only issue a certi fication under s ection 13 (2) no. 1 i f i t believes that the ri ghts of the policyholders are no longer at ri sk. Section 137 Progressive deterioration in solvency (1) 1In the event of a progressive deterioration in an i nsurance undertaking’s s olvency, then in a ddition to the measures s ta ted i n sections 134 a nd 135, the s upervisory a uthority may also i mplement all measures that a re appropria te, required and reasonable for the purposes of safeguarding the i nterests of the policyholders arising from the i nsurance contra cts or of fulfilling the obligations from reinsurance contracts. 2The degree and duration of the deterioration i n the i ns urance undertaking’s solvency position must be considered when selecting the relevant measure. (2) The s upervisory a uthority may i n particular 1. require the provision of a higher amount of eligible own funds than that required for compliance with the solvency ca pi tal requirement, 2. prohi bit or ri ng-fence withdrawals from the reserves as well any distribution of profits, 3. prohi bit or ri ng-fence measures aimed a t compensating for a ny net loss for the fi nancial year or a t stating an una ppropriated surplus. Chapter 3 Special regulations for individual classes of insurance Segment 1 Life insurance Section 138 Premium calculation in life insurance; equal treatment (1) 1Premiums i n life insurance must be calculated on the basis of reasonable a ctuarial assumptions a nd be sufficient to ena ble the life i nsurance undertaking to meet all i ts liabilities, and in particular, to recognise adequate premium reserves – Page 85 of 207 – for the i ndivi dual contracts. 2For this purpose, the financial position of an i nsurance undertaking may be taken into a ccount, without the inclusion of any regular and permanent funding from resources other than premiums. (2) Al l factors being equal, the same principles must be used to calculate premiums a nd benefits. Section 139 Profit participation (1) The a mounts earmarked for profit participation, provided that they have not been directly allocated to the insured, mus t be recognised under a provision for bonuses i n the balance sheet. (2) 1In the case of i nsurance stock corporations, the management board, with the consent of the s upervisory board, mus t s et the a mounts to be allocated for profit participation. 2However, allocations to the provision not based on a legal cl a im by the insured may only be earmarked for profit participation if at l east 4 per cent of share ca pital can still be di s tributed out of the remaining unappropriated surplus. 3A net profit can only be distributed if it exceeds a ny safeguard a mount (Sicherungsbedarf) provided for in a ccordance with s ubsection (4). (3) Va l uation reserves from fixed-income i nvestments a nd interest ra te hedging transactions held directly or i ndirectly by the i nsurance undertaking must only be ta ken into account for the participation of the policyholders in the valuation res erves in a ccordance with s ection 153 of the of the German Insurance Contract Act to the extent that they exceed any s a feguard amount from the i nsurance contracts with interest guarantee in accordance with subsection (4). (4) 1The safeguard amount from the insurance contracts with guaranteed i nterest a re the total sum of the safeguard a mounts of the insurance contracts whose essential a ctuarial interest ra te is above the essential euro interest ra te swap ra te a t the time that the valuation reserves (reference interest) are determined. 2The safeguard amount of an i nsurance contra ct is the a ctuarial interest-rate obligation under an insurance contract va lued with due regard to the reference i nterest, minus the premium reserve. 3Funeral expenses funds can ca lculate the safeguard a mount from the insurance contra cts with interest guarantee i n accordance with a divergent procedure with the approval of the s upervisory a uthority. Section 140 Provision for bonuses (1) 1The a mounts allocated to the provision for bonuses may only be used for the purpose of profit participation for the i ns ured, i ncluding the participation in the va luation reserves stipulated by s ection 153 of the Insurance Contract Act. 2Wi th the consent of the s upervisory a uthority, however, provided that i t is not attributable to bonuses that have a l ready been determined, the insurance undertaking is entitled to use the provision for bonuses in exceptional cases in the i nterest of the insured in order to 1. a voi d a n impending emergency situation, 2. compensate for unforeseeable l osses from the insurance contracts entitled to the bonuses which a re attributable to the general changes in conditions, or 3. i ncrease the premium reserve if the calculation assumptions have to be adjusted on a ccount of an unforeseeable cha nge in conditions that is not merely temporary. 3Mea sures i n accordance with sentence 2 nos. 2 or 3 must be charged to the groups of the insured based on cause. (2) An i rregularity jeopardising the interests of the insured is also deemed to exist i f i n the case of i ns urance which is enti tled to a bonus 1. there is no reasonable allocation to the provision for bonuses or – Page 86 of 207 – 2. there is no reasonable use of the funds in the provision for bonuses. Thi s must be assumed in particular if i n the case of s entence 1 no. 1, the allocations to the provision for bonuses of a l ife insurance undertaking, taking into a ccount direct credit and the actuarial interest ra te, do not meet the minimum allocation requirement as defined by s ta tutory order in a ccordance with s ection 145 (2) a nd i n the case of s entence 1 no. 2, the uncommitted portion of the provision for bonuses exceeds the maximum a mount s ti pulated by s tatutory order in accordance with section 145 (3). (3) The s upervisory a uthority may require 1. tha t a plan is submitted to it that will ensure adequate allocations to the provision for bonuses (allocation plan), if the a llocations to the provision do not comply with the minimum requirement in a ccordance with the statutory order under section 145 (2), or 2. tha t a plan is submitted to it that will ensure that reasonable use is made of the provision for bonuses (distribution pl a n) i f the uncommitted portion of the provision exceeds the maximum amount under the statutory order under s ection 145 (3). (4) Li fe i nsurance undertakings may establish one or more collective portions within the provision for bonuses that must be a llocated overall to the contracts entitled to the bonuses. Section 141 Appointed actuary in life insurance (1) 1Every l i fe insurance undertaking must have a n appointed a ctuary. 2This appointed a ctuary must be a fit a nd proper pers on for the position. 3To meet the fit and proper requirement, the person concerned must have sufficient knowledge of a ctuarial theory and professional experience. 4The person can generally be assumed to have sufficient professional experience i f they ca n demonstrate that they have held a position as an a ctuary for at l east three years. (2) 1The name of the designated appointed actuary must be submitted to the supervisory a uthority before appointment, together with the information necessary to assess whether the person is fit and proper in accordance with subsection (1) a bove. 2If there is evidence that the designated appointed actuary does not meet the fit a nd proper requirement, the s upervisory a uthority may require that another person be appointed. 3If, a fter the appointment, evidence emerges of ci rcumstances that would have prevented a ppointment, or i f the appointed a ctuary does not properly fulfil the duties under this Act, then the s upervisory a uthority may require that another person be appointed. 4If the designated or the newly a ppointed actuary i n the cases mentioned i n sentences 2 a nd 3 a lso fails to meet the requirements, or if no new a ppointment is made, the supervisory a uthority may i tself appoint an actuary. 5The supervisory a uthority must be i nformed immediately upon resignation or dismissal of the appointed actuary. 6If there is an i ntention to terminate the contra ct with the a ppointed a ctuary or to bring the contract to an end by mutual consent, the governing body specified i n s ubsection (3) must notify the s upervisory a uthority i n advance s tating the reasons. (3) The a ppointed actuary must be engaged or dismissed by the supervisory board or, i f there is no such board, by a corres ponding highest-level governing body. (4) 1The a ppointed actuary must attend the meeting of the supervisory board for the purposes of approval of the year- end financial statements and report on the main findings in his or her explanatory report accompanying the actuarial certi fication. 2In the supervisory board's report to the annual general meeting, the s upervisory board must comment on the explanatory report from the appointed actuary. (5) 1The a ppointed actuary must 1. ens ure that the ca lculation of premiums and the premium reserve is in line with the principles set out i n section 138 a nd section 341f of the German Commercial Code as well as the principles of the statutory order enacted based on s ection 88 (3); they must subsequently revi ew the undertaking’s financial position in order to ensure that the ability – Page 87 of 207 – to ful fil the obligations under the i nsurance contracts is guaranteed at all ti mes; 2. certi fy below the balance sheet that the premium reserve has been recognised in accordance with section 341f of the German Commercial Code and the s tatutory orders issued i n accordance with section 88 (3) (actuarial certi fication); this is without prejudice to section 341k of the German Commercial Code relating to the audit; i n the report to the undertaking’s board of management, the actuary must explain the calculation methods and additional a s sumptions underlying the certification. 3. i nform the management board i n the event that, in the performance of the assigned duties, they recognise a pos sibility that circumstances will preclude the granting of a certification i n accordance with no. 2, or a llow only a qua lified certification, and inform the supervisory a uthority without delay i f the board does not immediately remedy the s ituation; i f when performing their duties, the appointed a ctuary discovers information that could threaten the goi ng concern status of the undertaking or s eriously hinder its development, they must immediately inform the ma nagement board a nd the supervisory a uthority a nd 4. s ubmit to the management board proposals for a n appropriate share of profits for insurance contracts with profit pa rti cipation; the appointed actuary must take i nto a ccount the need to ensure that the undertaking is i n a position to ful fil its obligations under the insurance contracts at all times; the a ctuary must explain in a report to the board of ma nagement the facts and assumptions from which the reasonableness of their proposal arises. 2Theduties under sentence 1 number 2 do not a pply to the appointed actuary i f the life i nsurance undertaking is a s mall mutual association within the meaning of section 210. (6) The ma nagement board of the undertaking must 1. ma ke a vailable to the appointed actuary a ll the i nformation necessary to enable it to fulfil its duties properly under s ubsection (5), 2. s ubmit to the supervisory a uthority the explanatory report accompanying the actuarial certification i n accordance wi th s ubsection (5) no. 2 a nd the a ppropriateness report i n accordance with subsection (5) no. 4, a nd 3. s ubmit to the supervisory a uthority wi thout delay the proposals made by the a ppointed actuary i n accordance with s ubsection (5) no. 4 a nd inform the supervisory a uthority i f i t intends to a pprove a level of profit participation that di ffers from the proposals made by the appointed actuary; the reasons for the deviation must be communicated to the s upervisory a uthority i n writing or electronically. Section 142 Trustees in life insurance 1 In the case of life insurance contracts entered i nto after 28 July 1994, i n which the premiums may be changed with an effect on existing insurance contracts, any such changes may only be i mplemented after approval by an independent trus tee. 2Section 157 (1) a nd (2) a pplies to the trustee, with the necessary modifications. 3The i nvolvement of an i ndependent trustee is not required if changes under s entence 1 a re subject to the a pproval of the supervisory a uthority. Section 143 Special notification obligations in life insurance When the authorisation to operate life insurance has been gra nted, the undertaking must immediately report the pri nciples for the calculation of the premiums and the premium reserve to the supervisory a uthority, a lso submitting the rel evant documents, including the calculation assumptions, mathematical formulas, actual calculations made and s ta tistical evidence used; this also applies, with the necessary modifications, to the use of new or a mended principles. Section 144 Information for occupational retirement provision – Page 88 of 207 – (1) In ca ses where life insurance undertakings provide occupational retirement benefits, s ections 234k to 234p a pply to the i nformation provided to members a nd beneficiaries, with the necessary modifications. (2) Subsection (1) applies to i nsurance transactions in other member s tates or EEA signatory s tates i f the insurance contra cts are based on German law. Section 145 Authorisation to issue statutory orders (1) The Federal Ministry of Finance may stipulate further details by s tatutory order in relation to 1. the fi xed-income investments and i nterest-rate hedging tra nsactions to be included in the procedure i n accordance wi th s ection 139 (3); 2. s ti pulation of the essential euro i nterest ra te swap rate in accordance with section 139 (4) s entence 1; 3. the va l uation method for the interest-rate obligation of a n insurance contract i n accordance with section 139 (4) s entence 2. (2) 1For the purpose of safeguarding the i nterests of the i nsured as well as taking into account the market conditions and the s olvency needs of the life insurance undertaking, the Federal Mi nistry of Finance is a uthorised to issue by s tatutory order provisions with respect to section 140 (2) concerning allocations to the provision for bonuses, in particular the mi nimum allocations subject to the i nvestment i ncome, the risk result a nd the remaining results. 2Regulation is required here regarding whether and to what extent negative earnings a nd results ca n be offset a gainst positive earnings and res ults. 3The minimum allocation must be ascertained s eparately for i nsu rance relationships based on a pproved business pl a ns. 4If a collective portion of the provision for bonuses within the meaning of section 140 (4) is established, the mi nimum allocation for this must also be ascertained separately. (5) The Federal Ministry of Finance is authorised to stipulate, by s tatutory order, a maximum a mount of the uncommitted portion of the provision for bonuses. (4) The Federal Ministry of Finance is authorised to specify, by means of a statutory order, the wording of the a ctuarial certi fication, further details regarding the content, scope a nd s ubmission deadline for the explanatory report under s ection 141 (5) s entence 1 no. 2, a nd further details regarding the content, scope and submission deadline for the report under section 141 (5) s entence 1 no. 4. (5) 1The powers in subsections (1) to (4) may be delegated by s tatutory order to BaFin. 2Statutory orders under s ubsections (1) to (4) do not require the consent of the Bundesrat. (6) 1By wa y of s tatutory order that requires the approval of the Bundesrat, the Federal Ministry of Finance may s tipulate further details on the configuration of the collective portions of the provision for bonuses i n order to safeguard the i nterests of the insured parties, i n particular related to l imitation of the collective portions and allocations to and repa yments from the collective portions to the non-collective portions of the provision for bonuses. 2The Federal Mi nistry of Finance may, by s tatutory order, delegate this power to BaFin with the approval of the Bundesrat. 3BaFin will ena ct the statutory order without the a pproval of the Bundesrat in agreement with the supervisory a uthorities of the i ndividual federal states. Segment 2 Health insurance Section 146 Substitutive health insurance (1) If health insurance is suitable as a full or partial substitute for the health and long-term ca re insurance protection provi ded for in the s tate social insurance s ystem (substitutive health insurance), then subject to the requirements i n s ubsection (3) it may only be operated in Germany a ccording to the technical principles of life i nsurance, whereby 1. premiums must be calculated in a ccordance with a ctuarial principles on the basis of probability ta bles a nd other perti nent s tatistical data, specifically ta king i nto a ccount any relevant assumptions with respect to the risk of i nva lidity a nd illness, to mortality, to the dependence of the ri sk on a ge and gender and to the probability of – Page 89 of 207 – ca ncellation, also ta king i nto a ccount safety l oadings a nd other l oadings and a technical interest rate, 2. the provision for i ncreasing age must be recognised in a ccordance with section 341f of the German Commercial Code, 3. the ri ght of termination without cause for the i nsurance undertaking must be excluded in the i nsurance contract, in da ily benefits insurance this must be from the fourth policy year a t the latest, and a premium i ncrease must be res erved, 4. the i nsurance contract must grant the policyholder the ri ght to policy a lteration by choosing other premium scales wi th comparable coverage while maintaining the rights and provision for i ncreasing age entitlements a cquired s o far under the contract, 5. the i nsurance contract must, for situations where the policyholder switches to a nother private health i nsurance undertaking, i nclude stipulations ensuring the provision of the transfer value for that part of the insurance i n which the benefits correspond to the basic tariff within the meaning of section 152 (1); this does not apply to contracts entered i nto prior to 1 Ja nuary 2009 a nd 6. pri or to entering into the contract, the potential applicant must receive an official i nformation s heet issued by BaFin expl aining the different principles behind the s tatutory a nd private health i nsurance systems; receipt of the i nformation s heet must be confirmed by the potential a pplicant. (2) 1Secti on 138 (2) a pplies, with the necessary modifications, to substitutive health insurance. 2The premiums for new bus iness may not be lower than the premiums for the i nsured of the same age under the existing portfolio of i nsurance contra cts, not i ncluding their provision for i ncreasing age. 3Sentence 2 does not a pply to the difference i n premiums a ri sing from the fact that the premiums for new business are calculated on a gender-neutral basis. (3) Substitutive health insurance contracts with fixed terms i n accordance with section 195 (2) a nd (3) of the German Ins urance Contract Act a s well as daily benefits insurance a fter the i nsured has reached the age of 65 under s ection 196 of the German Insurance Contract Act ma y be calculated without provision for i ncreasing a ge. Section 147 Other health insurance If the non-substitutive health insurance business is pursued on a similar technical basis to that of life i nsurance (SLT hea lth), s ection 146 (1) nos. 1 to 4 a nd s ubsection (2) as well a s section 156 a pply, wi th the necessary modifications. Section 148 Long-term care insurance 1Subject to s ections 110 a nd 111 of the Eleventh Book of the German Social Security Code, section 146 (1) nos. 1 to 4 a nd subsection (2) as well as sections 155 to 157 a nd 160 a pply, with the necessary modifications, to private compulsory l ong-term care i nsurance and to subsidised long-term ca re provision. 2Insurance contracts for private compulsory l ong- term-ca re insurance must i nclude s tipulations ensuring that the transfer value i s provided i f the policyholder switches to a nother private health insurance undertaking. Section 149 Premium supplement in substitutive health insurance 1In s ubstitutive medical expenses i nsurance, a loading of 10 per cent of the annual zillmerised gross premium must be – Page 90 of 207 – cha rged to the insured a t the latest with the beginning of the calendar year following the year in which the insured rea ches the a ge of 21 a nd ending in the ca lendar year i n which the i nsured person reaches the a ge of 60. 2This must be a l located a nnually a nd directly to the provision for i ncreasing age under section 341f (3) of the German Commercial Code, a nd used for the purpose of premium reduction in old age i n a ccordance with section 150 (3). 3Sentences 1 a nd 2 a bove do not apply to i nsurance contracts with fixed terms i n accordance with section 195 (2) a nd (3) of the German Ins urance Contract Act, to premium rates that generally come to an end when the policyholder reaches the s tatutory reti rement a ge, or to the hardship tariff under section 153. Section 150 Credit for provision for increasing age; direct credit (1) 1In medical expense i nsurance and vol untary l ong-term care i nsurance (long-term care costs and long-term ca re daily benefits i nsurance) pursued on a similar technical basis to that of life insurance, the insurance undertaking must a nnually credit to the i nsured the investment i ncome a ttributable to the total of the positive provision for i ncreasing a ge for the policies concerned a t the end of the preceding financial year. 2The a mount credited must total 90 per cent of the a vera ge i nvestment i ncome generated beyond the level of the technical interest rate (excess yi eld). (2) 1The s hare of the a mount determined i n accordance with subsection (1) attributable to that portion of the provision for i ncreasing age arising from the loading must be credited in full each year directly to the i nsured persons who paid the l oa ding under section 149 until the end of the financial year i n which the persons concerned reach the age of 65. 2Of the rema ining amount, 50 per cent must be credited annually directly to the provision for increasing a ge for all insured pers ons. 3The percentage rate defined in s entence 2 a bove is in creased by two per cent annually from the financial year of the i nsurance undertaking that begins in 2001 until the rate reaches 100 per cent. (3) 1When the i nsured reaches the a ge of 65, the a mounts referred to i n subsection (2) must be used to fund, for a n unl imited period, the a dditional premiums arising from premium increases, or a portion of the a dditional premiums i f the a vailable funds a re not sufficient to fully fund the a dditional premiums. 2Unused a mounts must be utilised for premium reduction as of the point a t which the insured reaches the age of 80. 3Any s ubsequent allocations must be used for a n i mmediate premium reduction. 4In voluntary l ong-term care daily benefits insurance, the general policy conditions ma y provi de for a corresponding increase i n benefits instead of a premium reduction. (4) 1The s hare of the i nvestment i ncome determined i n accordance with subsection (1) remaining after deduction of the a mounts used i n accordance with subsection (2) must be s et a side for a rebate for the insured who have reached the age of 65 by the balance sheet date and be used within a period of three years to offset or l imit premium increases, or to reduce premiums. 2The premium reduction in a ccordance with s entence 1 a bove may be limited to prevent the premium of the insured from falling below the level paid at the initial a ge a t entry; the unused portion of the amount credi ted must be credited additionally i n accordance with subsection (2) a bove. Section 151 Profit participation for the insured (1) Secti on 139 (1) a nd (2) sentences 1 a nd 2 as well as section 140 (1) wi th the exception of section 140 (1) s entence 2 nos . 2 a nd 3 a pply, with the necessary modifications, to health i nsurance contracts that provide for a bonus for the i ns ured. (2) 1An i rregularity jeopardising the interests of the insured is also deemed to exist i n health i nsurance operated a ccording to the technical principles of life i nsurance if no a dequate allocations a re made to the provision for bonuses. 2Unl ess there is no profit participation due to the type of business operated, this must in particular be deemed to be the ca s e i f the allocations to the provision for bonuses of a health insurance undertaking do not comply with the ra te s ti pulated for allocations by statutory order i n accordance with section 160 s entence 1 no. 6. – Page 91 of 207 – (3) The s upervisory a uthority may require that a plan is s ubmitted to i t that will ensure a dequate allocations to the provi sion for bonuses (allocation plan) if the allocations to the provision do not comply with the minimum requirement i n a ccordance with the statutory order under s ection 160 s entence 1 no. 6. Section 152 Basic tariff (1) 1Ins urance undertakings domiciled in Germany that operate substitutive health i nsurance business must offer a s ta ndard industry-wide basic tariff in which the nature, s cope and amount of the benefits under the contract are i n each ca s e comparable with the benefits under the third s ection of the Fifth Book of the German Social Security Code to which there is a n entitlement. 2The basic tariff must in each case provide for a va riant covering 1. chi l dren a nd young people; i n this variant, no provisions for increasing a ge a re recognised until the a ge of 21 i s rea ched; 2. pers ons and their eligible family members who a re entitled to assistance in the event of sickness under the provi sions or principles of ci vil s ervice law; i n this variant, the benefits under the contract are l imited to supplements to the a ssistance. 3 The i nsured must be gra nted the option of agreeing a n excess of 300, 600, 900 or 1,200 euros and requesting a change i n the excess level at the end of the contractually a greed period subject to three months' notice. 4The minimum commi tment period for contracts with a n excess under the basic tariff is three years; if th e agreed excess does not lead to a rea sonable reduction i n the premium, the policyholder may at a ny ti me s ubmit a request to the insurer to switch the contract to the basic tariff without excess; the switch must then be made within three months. 5In the case of pers ons eligible for assistance, the possible levels of excess a re determined by a pplying the percentage ra te not covered by the a ssistance ra te to the va lues 300, 600, 900 or 1,200 euros . 6Persons are permitted to take out s upplementary medical expenses i nsurance. (2) 1The i nsurer is under an obligation to grant the following persons insurance a t the basic ta riff: 1. a l l parties i nsured voluntarily as part of s tatutory health insurance within s ix months of the start of the switching opti on period provided for i n the Fifth Book of the German Social Security Code as part of the i nsured's voluntary i ns urance relationship; 2. a l l persons domiciled in Germany who a re not subject to compulsory i nsurance under s tatutory health insurance, who a re not included in the group of persons specified i n number 1 or s ection 193 (3) s entence 2 nos. 3 a nd 4 of the Germa n Insurance Contract Act a nd who have not already ta ken out priva te medical expenses i nsurance that is a greed with an i nsurance undertaking authorised to conduct i nsurance business in Germany a nd that satisfies the obl igation under section 193 (3) of the German Insurance Contract Act; 3. a l l persons who are eligible for assistance or are entitled to similar s upport if such persons require s upplementary i ns urance cover to satisfy the obligation under section 193 (3) s entence 1 of the German Insurance Contract Act, a s wel l as 4. a l l persons domiciled in Germany who have a greed private medical expenses insurance with a n insurance undertaking a uthorised to conduct business in Germany a nd whose contract was entered into after 31 December 2008. 2If a pri vate medical expenses i nsurance contract was entered i nto prior to 1 Ja nuary 2009, the policyholder may, i n the event of a contract s witch or termination of the co ntract, not demand a contract under the basic tariff with the existing or a di fferent insurance undertaking, i ncluding the transfer of the provision for increasing age in a ccordance with section 204 (1) of the German Insurance Contract Act. 3The application under sentence 1 must be accepted, even if, in the case of the termination of a contract with another insurer, the termination in a ccordance with section 205 (1) s entence 1 of the German Insurance Contract Act has not yet come i nto effect. 4The a pplication may only be rejected i f the a pplicant ha s already been insured with the insurer a nd the i nsurer 1. ca ncelled the i nsurance contract because of a threat or malicious deception or 2. res cinded the insurance contract because of a wilful breach of pre-contractual notification requirements. (3) 1The premium for the basic tariff without excess and at all excess levels must not exceed the maximum contribution for s ta tutory health i nsurance. 2This maximum contribution is determined by multiplying the general co ntribution rate – Page 92 of 207 – pl us the average supplementary contribution rate under section 242a (2) of the Fifth Book of the German Social Security Code by the prevailing income limit for the assessment of contributions i n statutory health insurance. 3In the case of pers ons eligible for assistance under the principles of civil servi ce law, sentences 1 a nd 2 a pply s ubject to the proviso tha t the maximum contribution for statutory health insurance is replaced by a maximum contribution that reflects the percentage proportion represented by the benefit entitlement that s upplements the assistance. (4) If there is a need for s upport within the meaning of the Second or Twelfth Book of the Social Security Code, or i f a need for support would arise solely because of payment of the premium under s ubsection (3) sentences 1 or 3, the premium must be reduced by half for the period i n which s upport is needed; a t the request of the insured, the need for s upport must be verified and certified by the relevant s ponsoring a gency i n a ccordance with the Second or Twelfth Book of the Social Security Code. (5) The premiums for the basic tariff, excluding the costs incurred i n operating the i nsurance business, are determined uni formly using a common calculation basis for all the undertakings i nvolved. Section 153 Hardship tariff (1) 1Non-payers within the meaning of section 193 (7) of the German Insurance Contract Act form a tariff within the mea ning of s ection 155 (3) s entence 1. 2The hardship tariff provides for the reimbursement of expenses solely i n connection with benefits necessary for the treatment of s erious illness and pain a nd those associated with pregnancy a nd maternity. 3By wa y of derogation from the a bove provision, expenses for insured children a nd young persons, i n pa rti cular expenses for preventive medical examinations aimed at the early discovery of illnesses under s tatutory progra mmes and for i mmunisation recommended by the German Standing Committee on Vaccination ( Ständige Impfkommission – STIKO) a t the Robert Koch Institute under s ection 20 (2) of the German Protection against Infection Act (Infektionsschutzgesetz – IfSG) must be reimbursed. (2) 1A s ta ndard premium must be calculated for a ll i nsured persons under the hardship tariff; s ection 146 (1) nos. 1 and 2 a pplies i n all other respects. 2In the case of insured persons whose insurance contract only provides for the rei mbursement of a percentage of the expenses incurred, the hardship tariff provides benefits equivalent to 20, 30 or 50 per cent of the i nsured treatment costs. 3Section 152 (3) a pplies, with the necessary modifications. 4The calculated premiums under the hardship tariff must not exceed the a mount required to cover the claims expenditures under the ta ri ff. 5Additional expenses that arise in connection with guaranteeing the l imitations s pecified in sentence 3 must be a l located equally to a ll the i nsurer's policyholders with an i nsurance contract that satisfies an obligation under section 193 (3) s entence 1 of the German Insurance Contract Act. 6The provision for i ncreasing age must be offset a gainst the premium to be paid under the hardship tariff such that up to 25 per cent of the monthly premium is covered by a wi thdrawal from the provision for i ncreasing age. Section 154 Risk equalisation (1) 1Ins urance undertakings that offer a basic tariff must participate i n the equalisation of the insurance ri sk under the ba sic ta riff to ensure that obligations under i nsurance contracts a re satisfied at all times a nd, to this end, must create a nd maintain an equalisation system to which they belong. 2The equalisation system must ensure that the different burdens are equalised effectively and on a l ong-term basis. 3Additional expenses that arise under the basic tariff because of pre-existing conditions must be distributed evenly a mong all insured persons in the basic tariff; additional expenses tha t a rise in connection with ensuring the limitations specified in s ection 152 (3) a nd (4) must be allocated over a ll i ns urance undertakings involved such that these undertakings share the burden equally. (2) The establishment, design, modification and i mplementation of the equalisation system are subject to s upervision by Ba Fin. – Page 93 of 207 – Section 155 Premium adjustments (1) 1For SLT health insurance, premium a djustments may only be i mplemented after approval by a n independent trus tee. 2The trustee must verify whether the premiums have been calculated i n accordance with the applicable legal provi sions. 3For this purpose, all technical calculation bases required for scrutiny, including a ctual ca lculations made and s ta tistical evidence, are to be provided to the trustee. 4The technical calculation bases must s how in full the principles for the ca lculation of the premiums and provision for i ncreasing a ge, including the a ctuarial assumptions a nd ma thematical formulas used. 5Approval must be granted i f the requirements of sentence 2 a bove have been met. (2) 1The following are s ubject to the approval of the trustee: 1. the da te and the a mount of the withdrawal a nd the use of funds from the provision for return of premiums, to the extent that they are to be used in a ccordance with s ection 150 (4); 2. the us e of the funds from the provision for bonuses. 2 In the cases mentioned i n sentence 1 nos. 1 a nd 2 a bove, the trustee must ensure that the requirements set forth in the a rti cles of association and the general policy conditions are met and that the i nterests of the i nsured a re sufficiently s a feguarded. 3If the funds a re utilised to limit premium increases, the trustee must ensure, in particular, a n appropriate di s tribution a mongst the groups of the insured who paid the premium l oading under section 149 a nd those who did not, a nd sufficiently ta ke i nto a ccount the aspect of reasonableness of the premium increases, i n percentage a nd a bsolute terms , for the older i nsured. (3) 1For every i nsurance ta riff calculated according to the technical principles of life insurance, the i nsurance undertaking mus t compare, at least annually, the required benefits with the calculated benefits. 2If the comparison to be submitted to the s upervisory a uthority a nd the trustee indicates a deviation of more than 10 per cent for a certain tariff, provided the general policy conditions do not require a lower percentage, the undertaking must examine all premiums s ubject to thi s tariff and, if the deviation may be considered to be more than just temporary, a djust them with the a pproval of the trus tee. 3In this context, the fixed amount of a ny excess may a lso be a djusted and any a greed premium loading changed a ccordingly if this has been stipulated in the contract. 4There must be no adjustment if the i nsurance benefits were i na dequately calculated at the time of i nitial calculation, or recalculation, and a prudent and conscientious a ctuary ought to ha ve recognised this, in particular on the basis of the statistical calculation bases available a t that ti me. 5If the trustee fi nds that premium increases or reductions are necessary for a ta riff, wholly or i n part, and if no agreement on this can be rea ched with the undertaking, the trustee must i mmediately i nform the supervisory a uthority. (4) 1For every ta riff ca lculated a ccording to the technical principles of life i nsurance, the insurance undertaking must ea ch year compare the required mortality probability with the calculated figure using an analysis of present va lues. 2If the comparison to be s ubmitted to the supervisory a uthority a nd the trustee indicates a deviation of more than 5 per cent for a certain tariff, the undertaking must examine all premiums subject to this tariff a nd a djust them with the a pproval of the trustee. 3Subsection 3 s entences 3 to 5 a pplies, with the necessary modifications. Section 156 Appointed actuary in health insurance (1) 1Ins urance undertakings that operate substitutive health insurance business must have a n appointed actuary. 2Secti on 141 (1) s entences 2 to 4 a nd (2) a nd (3) applies, with the necessary modifications. (2) 1The a ppointed actuary must be responsible for the following: 1. ens uring that the calculation of premiums a nd the technical p rovisions is i n line with the principles set out in sections 341e to 341h of the German Commercial Code, in particular the provision for i ncreasing age, the actuarial methods under section 146 (1) nos. 1 a nd 2, a s well as the principles of the statutory order enacted based on section 160; they mus t in particular review the undertaking’s financial position i n order to ensure that the a bility to fulfil the obl igations under the i nsurance contracts is guaranteed at all times a nd 2. certi fying a t the end of the balance sheet that the provision for increasing a ge has been calculated i n a ccordance wi th no. 1 a bove (actuarial certification); this does not a pply to s maller mutual s ocieties within the meaning of – Page 94 of 207 – s ection 210. 2 Secti on 141 (5) s entence 1 no. 3 a nd (6) no. 1 a pplies, with the necessary modifications. Section 157 Trustees in health insurance (1) 1Onl y persons who a re fit and proper, i ndependent of the i nsurance undertaking and, in particular, have not entered i nto a n employment contract or other s ervice contract with the insurance undertaking or a ny a ffiliated undertaking and ha ve no outstanding claims against the undertaking under s uch a contract may be appointed as trustee. 2To meet the fit a nd proper requirement, the trustee must have sufficient knowledge i n the field of premium calculation i n health i ns urance. 3The a ppointment of a person already a ctive as trustee or a ppointed actuary for ten insurance undertakings or pension funds is generally excluded. 4The supervisory a uthority may permit a person to hold a higher number of such pos itions. (2) 1The name of the designated trustee must be s ubmitted to the supervisory a uthority before appointment, together wi th the i nformation necessary to assess whether the person meets the requirements specified i n subsection (1) a bove. 2 If there is evidence that the designated trustee does not meet the requirements specified in s ubsection (1), the s upervisory a uthority may require that another person be appointed. 3If, a fter the appointment, evidence emerges of ci rcumstances that would have prevented a ppointment i n accordance with subsection (1), or i f the trustee does not properly fulfil the duties under this Act, i n particular if they approve any premium a djustment that does not comply with the l egal provisions, the supervisory a uthority ma y require that another trustee be appointed. 4If the designated or the newly a ppointed trustee i n the cases mentioned i n sentences 2 a nd 3 also fails to meet the requirements, or i f no new a ppointment is made, the supervisory a uthority may i tself appoint a trustee. 5The s upervisory a uthority must be i nformed immediately upon resignation or dismissal of the trustee. (3) 1For the a ppointment of a trustee i n the event of a contract adjustment under s ection 203 (3) of the German Ins urance Contract Act, s ubsection (1) s entences 1, 3 a nd 4, a nd s ubsection (2) apply, wi th the necessary modifications. 2 To meet the fit and proper requirement, the trustee must have sufficient l egal knowledge, relating in particular to the fi eld of health i nsurance. Section 158 Special notification obligations in health insurance; benefits in the basic and hardship tariff (1) Hea lth insurance undertakings must notify the supervisory a uthority i mmediately regarding: 1. wi th respect to health i nsurance within the meaning of section 146 (1), the intended use of new or a mended general pol icy conditions, s ubmitting the relevant documents; 2. wi th respect to health i nsurance within the meaning of section 146 (1), the intended use of new or a mended pri nciples within the meaning of section 9 (4) no. 5, s ubmitting all documents referred to therein. (2) 1It i s left to the German Association of Pri vate Health Insurers to specify the nature, scope and the a mount of the benefits i n the basic tariff i n accordance with the provisions in section 152 (1) a nd i n the hardship tariff in accordance wi th the provisions i n section 153 (1). 2The Federal Mi nistry of Finance is responsible for the relevant supervision in this rega rd. Section 159 Statistical data (1) 1Ba Fin must publish general probability tables not related to s pecific premium scales, as well as other relevant s ta tistical data for health i nsurance within the meaning of section 146 (1). 2Section 318 (3) a pplies, with the necessary modi fications. – Page 95 of 207 – (2) 1Pri ma ry i nsurance undertakings domiciled in Germany that conduct health insurance business are required to communicate annually to BaFin the data required for the publication under subsection (1) on the basis of data from their i ns urance portfolios. 2The insurance portfolios and data to be taken into account must be set forth in the statutory order referred to in section 160. (3) Ba Fin must communicate the information relating to health i nsurance published in a ccordance with s ubsection (1) to the s upervisory a uthorities of the home country. Section 160 Authorisation to issue statutory orders 1 As regards SLT health insurance, the Federal Ministry of Finance is authorised to carry out the following by s tatutory order: 1. s pecify the a ctuarial methods for calculating the premiums, including premium adjustments and the technical provi sions within the meaning of s ections 341e to 341h of the German Commercial Code, specifically the provision for i ncreasing age, i n particular to ta ke into account any relevant assumptions with respect to the ri sk of invalidity a nd illness, l ong-term care requirements, mortality, dependence of the risk on a ge a nd gender, and probability of ca ncellation, as well as the amount of the safety l oading and discount ra te and the principles for measuring and l i miting the other l oadings; 2. i s sue more detailed provisions with regard to the equivalence of the insurance coverage and eligibility of acquired ri ghts a nd the provision for increasing age i n the event of a change of tariff under section 146 (1) no. 4; 3. i s sue more detailed provisions for calculating the transfer va lue as s pecified in section 146 (1) no. 5 a nd s ection 148 s entence 2; 4. i s sue more detailed provisions covering a switch to the basic ta riff as specified in s ection 152 (2) a nd a subsequent s wi tch out of the basic tariff; 5. s pecify how the excess yi eld as defined i n section 150 (1) i s to be calculated, how the a mounts a re to be distributed a mong the eligible i nsured persons in accordance with section 150 (2) a nd (4), a nd how the initial premium a t the a ge of entry is to be determined; 6. ena ct regulations regarding the minimum a llocation to the provision for bonuses under s ection 151 (2) i n order to s a feguard the interests of the insured, in particular regarding the a mount and calculation of the allocation ra te; a percentage of the sum of the a nnual surplus a nd expenses for performance-related bonuses is to be set separately for health i nsurance within the meaning of section 146 (1) sentence 1, private compulsory l ong -term care i nsurance wi thin the meaning of s ection 148 a nd for subsidised long-term care provision within the meaning of s ection 148; for thi s purpose, any direct crediting and the average s olvency needs of the health i nsurance undertakings must be ta ken i nto account; 7. s pecify the procedure for comparing the required insurance benefits a nd the last published mortality probability wi th the calculated i nsurance benefits under section 155 (3) a nd the deadline for submitting this comparison to the s upervisory a uthority and the trustee. 2Thi s a uthorisation may be delegated by statutory order to BaFin. 3Statutory orders under s entences 1 a nd 2 do not require the consent of the Bundesrat; with the exception of s entence 1 no. 6 they must be enacted i n consultation with the Federal Ministry of Justice and for Consumer Protection. Segment 3 Other non-life insurance – Page 96 of 207 – Section 161 Accident insurance with premium refunds (1) Secti ons 138, 139, 140 (1), s ections 141, 142 a nd 145 (4) a nd section 336 a pply, with the necessary modifications, if a cci dent insurance undertakings take over insurance with premium refunds. (2) Immediately a fter commencement of operations i n accident insurance with premium refunds the insurance undertaking must disclose to the supervisory a uthority the principles for the calculation of the premiums a nd the premium reserve, with the relevant i nformation s ubmitted, including the calculation assumptions made, mathematical formulas used, derivations underlying the calculations and s tatistical evidence used; this also a pplies, with the necessary modi fications, for the use of new or a mended principles. Section 162 Premium reserve for annuity obligations in third-party liability and accident insurance For the ca lculation of the premium reserve for a nnuity obligations under general third party l iability i nsurance, motor thi rd party l iability insurance, motor vehicle accident i nsurance and general accident i nsurance without premium refund, s ection 141 (1) to (3), (5) and (6) and section 145 (4) a pply, wi th th e necessary modifications. Section 163 Claims representatives in motor vehicle liability insurance (1) 1For a uthorisation to provide coverage for the risks named i n no. 10 (a ) of the Annex, the i nsurance undertaking must a ppoint a claims representative i n all other member states or EEA s ignatory s tates. 2This person must work on behalf of the i nsurance undertaking to process a nd settle damages claims for personal injury a nd property damage resulting from a n a ccident, which took place in a nother member s tate or EEA signatory s tate than the member state of residence of the cl a imant, involving the use of a motor vehicle insured in a member state or EEA signatory s tate and normally based there. (2) Appointment of any cl aims representative must be notified to th e supervisory a uthority i mmediately wi th the documents stated i n section 9 (4) no. 6 a lso submitted. (3) 1The cl aims representative must be domiciled or be established i n the country for which the appointment i s made. 2The cl aims representative may a ct for the a ccount of one or more insurance undertakings. 3The representative must ha ve s ufficient authority to represent the i nsurance undertaking vis-à-vis claimants and to satisfy their compensation cl a ims i n full. 4They must be able to process the case in the official language or languages of the country of appointment. (4) 1The cl aims representative must compile a ny a nd all of the i nformation required to s ettle claims that arise in connection with a vehicle insured by the undertaking in question. 2If the a ccident has occurred in a third country, this onl y a pplies i f 1. the cl aimant is domiciled i n a member s tate or EEA signatory s tate; 2. the vehicle that ca used the accident is normally l ocated in one of these countries; a nd 3. the na tional i nsurer’s bureau within the meaning of Article 1 no. 3 of Directive 2009/103/EC of the European Pa rl iament and of the Council of 16 September 2009 relating to insurance a gainst civil liability i n respect of the use of motor vehicles, and the enforcement of the obligation to i nsure against s uch liability (OJ L 263 of 7 October 2009, pa ge 11) of the country in which the accident occurred is a member of the Green Ca rd s cheme. 3In s uch cases, s ection 3a (1) nos. 1 a nd 2 of the German Compulsory Insurance Act (Pflichtversicherungsgesetz – Pfl VG) a pplies, with the necessary modifications. (5) The a ppointment of a cl aims representative in Germany by a foreign i nsurance undertaking does not in itself cons titute the establishment of a branch; the claims representative i s not deemed to be a branch. – Page 97 of 207 – Section 164 Loss adjustment in legal expenses insurance (1) 1An i nsurance undertaking that conducts l egal expenses insurance business together with other cl asses of insurance mus t tra nsfer the claims a dministration under legal expenses insurance to a nother undertaking with a legal form as s pecified under s ection 8 (2) or wi th another incorporated company l egal form (loss adjustment firm). 2The tra nsfer is deemed to be outsourcing. (2) The l oss adjustment firm may not operate in a ny classes o f insurance other than l egal expenses insurance and may not be i nvolved in the processing of benefit claims i n other classes of insurance. (3) 1Secti on 24 (1) a pplies, with the necessary modifications, to the managers of the l oss a djustment firm. 2They ma y not a t the same time conduct a ctivi ties for a n i nsurance undertaking that operates in other cl asses of i nsurance in a ddition to l egal expenses insurance. 3Employees entrusted with the processing of benefit claims may not conduct a ny similar a cti vi ty for s uch a n insurance undertaking. (4) 1The members of the management board and the employees of an insurance undertaking s pecified in subsection (1) a bove may not issue any i nstructions to the loss adjustment firm with respect to the administration of indivi dual cl aims. 2The members of the senior management and employees of the l oss a djustment firm may not provide any such i ns urance undertaking with information that could result i n conflicts of i nterest to the disadvantage of the i nsured. (5) Subsections (1) to (4) above do not a pply to l egal expenses insurance if it relates to disputes or claims arising from or l i nked to the operation of ships at sea. Segment 4 Reinsurance Section 165 Run-off in reinsurance undertakings (1) Wi th the exception of section 215, the following s ubsections a nd the regulations applicable to small insurance undertakings apply to all reinsurance undertakings that had ceased writing new reinsurance business up to 10 December 2007 a nd that manage their portfolios solely with the objective of discontinuing their activities. (2) 1The portfolios of assets which a re for the purposes of ensuring the ongoing ability to fulfil the obligations under the rei nsurance contracts include assets equivalent to the amount of the technical provisions within the meaning of sections 341e to 341h of the German Commercial Code and of the liabilities a nd deferred i ncome a rising under reinsurance contra cts (qualified assets). 2These portfolios must be invested i n a way that ensures maximum s ecurity and profitability ta ki ng into consideration the type of insurance business conducted, while maintaining the reinsurance undertaking's l i quidity at all ti mes and ensuring an a dequate diversification and spread. 3This applies subject to the proviso that the undertaking must ensure that there is an a dequate level of currency matching a nd must assess whether the mix a nd di versification in the portfolios is appropriate taking i nto a ccount the special features of the reinsurance undertaking concerned. 4The undertaking's capital a dequacy a s well as i ts overall financial situation a nd group s tructure must also be ta ken i nto account with this. 5Investments i n derivative financial i nstruments are permissible provided that such i nvestments make a contribution to reducing i nvestment risk or to facilitating portfolio management. (3) 1When determining the a mount of the liabilities to be covered, liabilities that are covered by cash deposits with the cedi ng insurer must not be i ncluded. 2The portions of liabilities a ttributable to retrocessionaires and to special purpose enti ties authorised to conduct business within the meaning of Arti cle 13 No. 26 of Directive 2009/138/EC are not cons idered. 3Portions of liabilities a ttributable to s pecial purpose entities domiciled i n a third country a re only di s regarded i f the s pecial-purpose i nsurance company has been authorised to conduct business a nd is s upervised by the na ti onal authorities in the home country i n a ccordance with the requirements of the delegated legislative a cts enacted i n a ccordance with Article 211 (2) of Directive 2009/138/EC a nd has comparable ca pital adequacy. (4) If rei nsurance contracts form part of a n independent portfolio held by a reinsurance undertaking i n a third country, s ubsection (2) and section 125 (1) a pply, wi th the necessary modifications, to the portfolios of assets a rising from these rei nsurance contracts unless otherwise prescribed by foreign law. Section 166 Portfolio transfers; transformations – Page 98 of 207 – (1) 1Any contra ct by which the insurance portfolio of a German reinsurance undertaking is to be tra nsferred wholly or pa rtl y to another i nsurance undertaking domiciled in a nother member or EEA s ignatory state is subject to a pproval by Ba Fin. 2The portfolio transfer agreement must be i n writing; section 311b (3) of the G erman Ci vil Code does not apply. 3The a pproval will be granted i f evidence is provided through a certificate from the competent a uthority of the member s ta te or EEA signatory s tate that the tra nsferee has eligible own funds enabling compliance with the sol vency capital requirement with due regard to the tra nsfer. 4For the purpose of the portfolio tra nsfer, the rights and obligations of the tra ns feror under the reinsurance contracts, also i n relation to the ceding i nsurers, are tra nsferred to the tra nsferee; s ection 415 of the German Civil Code does not a pply. 5Approval of the portfolio transfer must be published i n the Federal Gazette. 6Once the portfolio transfer has taken effect, the tra nsferee must notify the ceding i nsurers of the portfolio tra nsfer i n writing without delay. (2) 1The complete or partial transfer of a n insurance portfolio by a German reinsurance undertaking to a branch of an i ns urance undertaking in a third country requires approval by Ba Fin. 2The approval may only be granted i f the tra nsferee bra nch provides evidence that i t has eligible own funds to comply with the s olvency ca pital requirement following the tra ns fer. 3If the ca pital adequacy of the branch in the third country is monitored by the s upervisory a gency of another member state or EEA signatory s tate, the evidence must be provi ded by way of a certificate by the competent authority of the other member state or EEA signatory s tate. 4Subsection 1 s entences 2, 4 a nd 6 a pplies, with the necessary modi fications. (3) 1Any tra ns formation of a reinsurance undertaking in a ccordance with sections 1 a nd 122a of the German Tra nsformation Act which involves reinsurance contracts as part of the assets covered by the transformation is subject to a pproval by the s upervisory a gency. 2Subsection 1 s entences 3 a nd 4 a pplies, with the necessary modifications. 3Approval may a lso be refused if the rules governing transformation have not been observed. 4The s upervisory a uthority mus t be notified immediately of any intention to transform a reinsurance undertaking in accordance with sections 1 a nd 122a of the German Transformation Act unless the authorisation requirement under s entence 1 a pplies. Section 167 Financial reinsurance (1) 1Fi nancial reinsurance is reinsurance vi a which the overall economic risk exposure arising from the assumption both of a s ignificant underwriting ri sk as well as the ri sk related to the execution ti me exceeds the total amount of the premium over the entire term of the insurance contract by a limited but considerable amount (suff icient ri sk transfer) if a t the same time at least 1. i nterest payment factors (time value of money) a re expressly accounted for to a considerable extent or 2. there a re contractual provisions that the economic results between the contractual parties will be balanced out over the entire term of the contract i n order to permit a targeted risk tra nsfer. 2The regulations under this Act that a lso a pply to existing reinsurance only a pply to contracts with s ufficient risk tra nsfer; contra cts without sufficient risk transfer must be part of business operations subject to the regulations on non-insurance bus iness. (2) Ins urance undertakings that enter i nto financial reinsurance treaties or conduct financial reinsurance business must ens ure that they a re a ble a dequately to i dentify, a ssess, monitor, control a nd verify the risks a rising from these contracts or tra nsactions a nd ca n report on these. Section 168 Special purpose insurance companies (1) 1A s pecial purpose insurance company is a corporation or partnership that is not an existing i nsurance undertaking a nd that assumes risks from i nsurance undertakings, hedging in full a gainst ri sks of l oss from the issue of debt securities or a nother fi nancing mechanism for which the l ender’s repayment cl aims or the financin g mechanism a re subordinate to the company’s reinsurance obligations. 2The term of the debt securities or of the other financing mechanism must corres pond with that of the reinsurance contract at least. 3Special purpose i nsurance companies with their registered offi ce or headquarters in Germany require authorisation from the supervisory a gency prior to starting business operations. (2) Secti ons 4, 8 (3), s ection 9 (1), s ection 10 (1), s ections 11, 16, 24, 25, 47 no. 1, 2, 5, s ection 294 (2) s entences 1, 3 a nd 4 a nd (3), (6) and (7), s ections 305, 306, 307 a nd 310 to 315 wi th the exception of s ection 312 (1) a pply, with the – Page 99 of 207 – necessary modifications, to special purpose insurance companies. (3) 1If the funds of a special purpose insurance company a re not adequate within the meaning of the i mplementing mea sure of the European Commission enacted in a ccordance with Arti cle 211 (2) of Directive 2009/138/EC, the s pecial purpose insurance company must, i f required by the supervisory a gency, s ubmit a plan for the restoration of a s ound fi nancial position to the latter for approval. 2The s upervisory a uthority may revoke the authorisation to conduct business operations if the special purpose insurance company i s unable to demonstrate a dequate funds once again within a rea sonable period set by the supervisory a uthority. Section 169 Reinsurance undertakings domiciled in another member state or EEA signatory state (1) 1Rei nsurance undertakings domiciled in a nother member s tate or EEA signatory s tate which have official a uthorisation in a ccordance with the l egal regulations which have been enacted i n the home country for the purpose of i mplementing Arti cle 14 of Directive 2009/138/EC, may operate reinsurance business in Germany vi a a branch or through cross-border provision of services. 2BaFin is responsible for supervision with the exception of financial s upervision a nd must cooperate with the competent supervisory agency i n the home country on this. (2) 1If Ba Fin determines that a reinsurance undertaking within the meaning of subsection (1) does not comply with the l egal regulations to be a dhered to for the purposes of exercising these a ctivi ties, it must require the undertaking cease thes e irregularities. 2It will a lso notify the supervisory a uthority i n the home country a t th e same ti me. 3BaFin will also noti fy the supervisory a gency i n the home country i f it has reason to assume that the activities of the reinsurance undertaking may l ead to an i mpairment of i ts financial stability. 4Upon request by the supervisory a uthority of the home country of the reinsurance undertaking, BaFin will implement the measures i n the cases governed in s ections 133, 134 a nd 135. 5The s upervisory a uthority of the home country must designate the assets which ought to be subject to these mea sures. (3) 1If the reinsurance undertaking continues to breach the regulations which must be observed despite the measures i ntroduced under s ubsection (2), then BaFin may i tself take all measures required to remedy earlier breaches and to prevent future ones a fter i nforming the competent authority in the home country once again. 2If attempts to enforce orders vi a coercive measures or coercive penalties are futile or unsuccessful, BaFin may prohibit the undertaking from conti nuing to do business i n Germany wholly or partly, i f other measures are also i neffective or unsuitable. 3BaFin may a l so a ddress the matter to the European Insurance and Occupational Pensions Authority under Arti cle 19 of Regulation (EU) No. 1094/2010 a nd ask that a uthority for s upport. (4) 1In a ddition to subsections 2 a nd 3, s ections 4, 68 (2) s entence 4, s ections 298, 299 No. 1, s ections 303, 305 (1) no. 2, (3) a nd (5), section 306 (1) s entence 1 nos. 1 to 3, (2) s entence 1 no. 2, (5) to (8), section 310 a nd section 17 of the Germa n Act Es tablishing the Federal Financial Supervisory Authority a lso apply, wi th the necessary modifications, to Ba Fin supervision under subsection (1). 2Section 305 (1) no. 1 a pplies, with the necessary modifications, s ubject to the provi so that the ceding i nsurers take the place of the policyholders. Section 170 Authorisation to issue statutory orders 1The Federal Mi nistry of Finance is authorised to enact regulations on the following by s tatutory order: 1. the form of the duties under s ection 167 (2), unless the area is governed by delegated l egislative acts of the Commi ssion in a ccordance with Arti cle 210 (2) of Directive 2009/138/EC, a nd 2. fi nancial reinsurance within the meaning of s ection 167 (1) for financial reinsurance treaties and contracts without a dequate risk tra nsfer regarding, a ) the conditions under which a ri sk transfer must be considered to be sufficient; b) the mi nimum regulations that must be i ncluded i n every fi nancial reinsurance contract; a nd c) the ma nner i n which undertakings a re required to ascertain the ri sk transfer under a contract using appropriate i nternal procedures. 2Thi s a uthorisation may be delegated by statutory order to BaFin. 3Statutory orders under s entences 1 a nd 2 do not require the consent of the Bundesrat. – Page 100 of 207 – Chapter 4 Mutual societies Section 171 Legal personality A s ociety that intends to insure i ts members according to the mutual principles a cquires legal capacity with permission by the s upervisory a uthority to conduct business as a “mutual society”. Section 172 Application of the German Commercial Code 1 Unl ess otherwise stipulated by this Act, the requirements of the first and fourth books of the German Commercial Code wi th respect to merchants, with the exception of s ections 1 to 7, a lso apply, wi th the necessary modifications, to mutual s oci eties. 2With respect to a ccounting, the provisions of the second subpart of the fourth part a pply, with the necessary modi fications, in conjunction with the provisions of the first and second parts of the third book of the German Commercial Code. Section 173 Articles of association (1) The governing framework of a mutual s ociety is laid down in its articles of association, unless otherwise s tipulated i n thi s Act. (2) The a rticles of association require notarial certification a ccording to German s tandards. Section 174 Company name (1) The a rticles of association must define the name and registered office of the society. (2) 1The name should make apparent the l ocation of the s ociety’s registered office. 2The name or an a ddition thereto mus t also convey the fact that the s ociety operates mutual i nsurance. Section 175 Liabilities 1The creditors of a mutual s ociety are only be entitled to satisfaction from the assets of the s ociety. 2The members are not l iable for claims of the creditors. Section 176 Membership 1 The a rticles of association s hould i nclude provisions a bout the membership inception. 2A requirement for membership i s a n insurance relationship with the mutual society. 3Membership ends upon termination of the i nsurance relationship unl ess otherwise s tipulated i n the articles of association. Section 177 Equal treatment (1) Al l factors being equal, member contributions a nd benefits must be calculated based on the same principles. (2) The mutual society may not offer i nsurance coverage for a s et charge without the policyholder becoming a member, unl ess this is expressly permitted by the articles of association. – Page 101 of 207 – Section 178 Initial fund (1) 1The a rticles of association must provide for the establishment of an initial fund to cover the co sts of establishing the mutual s ociety and serve as guarantee and operational funds. 2The articles of association should contain the conditions of a ccess by the society to the initial fund a nd, i n particular, stipulate rules for repayment of the initial fund, as well as if a nd to what extent the persons who provided the fund are entitled to participate in the administration of the mutual s oci ety. (2) 1Onl y l egal tender, cheques certified by the Bundesbank, tra nsfers to a domestic account with the Bundesbank or a credi t institution of the society or i ts management board, available at i ts free disposal, may be used to contribute to the i ni tial fund. 2Any cl aims of the management board a gainst these paid-in funds are deemed claims of the society. 3The a rti cles of association may permit promissory notes instead of the a bove payments. (3) 1The persons who provi ded the initial fund may not be gra nted an early repayment right. 2In addition to i nterest pa yments from the annual income, the a rticles of association may grant them a ri ght to participation in the surplus as s hown in the a nnual balance sheet; the s upervisory a uthority will decide on the maximum percentage of the interest a nd total emoluments received on the paid-in cash a mount. 3The i nitial fund may be divided i nto shares for which share certi ficates may be issued. (4) The i nitial fund may be repaid only out of the annual i ncome and only to the extent that the loss reserve under s ection 193 has increased; repayment must begin as s oon as the ca pitalised s tart-up costs have been fully amortised. (5) 1The a rticles of association may permit another i nitial fund to be established after the formation of the s ociety with the purpose of safeguarding the society’s long-term risk-bearing ca pacity. 2Pa yments i nto the additional initial fund and i ts repayment require the approval of the s upervisory a uthority. 3Subsection (4) does not a pply. Section 179 Contributions (1) The a rticles of association must stipulate whether the expenses are to be covered by single or recurri ng contributions to be paid in a dvance, or by contributions allocating a ctual costs a mong the members. (2) If the contributions are to be paid i n advance, the articles of association must also s pecify whether a right to call for s upplementary contributions is reserved or excluded; i f it is to be excluded, the articles of association must also s tipulate whether benefits may be reduced. (3) 1The a rticles of association may provide maximum amounts for supplementary contributions and cost allocations. 2 Any res tri ctions to the effect that payments of s upplementary contributions or cost allocations may only be called for to cover i nsurance claims of the members are i mpermissible. Section 180 Liability to pay contributions of former or subsequent members (1) 1Members who left or joined the mutual society during the financial year are a lso l iable to pay supplementary contri butions or cost allocations. 2The l iability to pay contributions depends on the l ength of ti me that they were members within the financial year. (2) If the s upplementary contribution or the cost allocation amount of a member is determined on the basis of the contri bution paid in a dvance or the sum insured, and if the contribution or s um i nsured was increased or reduced during the fi nancial year, the higher a mount must be used as a basis for the calculation. (3) Subsections (1) a nd (2) above apply only to the extent that the a rticles of association do not s tipulate otherwise. Section 181 Prohibition of setting-off A member is not entitled to set off the obligation to pay contributions against any claim the member may have a gainst the mutual society. – Page 102 of 207 – Section 182 Call for cost allocations or supplementary contributions (1) The a rticles of association must specify the conditions under which s upplementary contributions or cost allocations ma y be ca lled for, in particular to what extent other funds such as the i nitial fund or reserves must be used first. (2) The a rticles of association must also specify how the s upplementary contributions or cost allocati ons a re to be called for a nd collected. Section 183 Publication of notices (1) The a rticles of association must stipulate how notices of the mutual society a re to be published. (2) Noti ces of the mutual society a re to be published i n the Federal Gazette. Section 184 Governing bodies The a rticles of association must specify how a management board, a s upervisory board and senior representative body (s enior governing body; assembly of members or of representatives of the members) must be established. Section 185 Commercial register application (1) 1An a pplication for registration of the mutual society i n the commercial register by all members of the management a nd supervisory board must be filed with the court of the district where the society has i ts registered office. 2The a pplication must state the powers of the board members to represent the s ociety. (2) The s upervisory a uthority must inform the Registration Court of any a uthorisation granted to carry on business wi thin the meaning of s ection 171. Section 186 Registration documents (1) The registration on the commercial register must be a ccompanied by: 1. the certi ficate authorising the s ociety to operate; 2. the a rticles of association; 3. the documents relating to the a ppointment of the management board a nd the supervisory board; 4. a l ist of the members of the supervisory board signed by the a pplicants a nd s pecifying the name, surname, profession and domicile of each member; 5. the documents relating to the establishment of the initial fund, together with a declaration by the management boa rd and the s upervisory board as to how a nd to what extent the initial fund has been paid i n and that the ma nagement board has the paid-in amount a t its free disposal; 6. a n overview of whether the expenses are to be covered by contributions paid in advance or a llocated among the members later and, if contributions a re to be paid in advance, whether a ri ght to call for supplementary contri butions is reserved or excluded, whether the liability to pay contributions is limited and whether benefits may be reduced. (2) Secti on 12 (2) of the German Commercial Code applies, with the necessary modifications, to the submission of – Page 103 of 207 – documents under this Act. Section 187 Entry in the commercial register (1) 1The following must be stated for the entry i n the commercial register: 1. the s ociety’s name and registered office; 2. the cl ass of i nsurance due to be covered by the society; 3. the a mount of the initial fund; 4. the da te upon which the business operations were a uthorised; a nd 5. the board members. 2The powers of the board members to represent the society must also be entered. (2) If the a rticles of association include any provision with regard to the duration of the society this must also be entered. Section 188 Management board (1) 1The management board must consist of at least two members. 2Section 76 (1), (3) and (4), sections 77 to 91 a nd 93 (1), (2) a nd (4) to (6) as well as section 94 of the German Stock Corporation Act a pply to the management board, with the necessary modifications, subject to the proviso that the resolutions of the highest l evel representative body must repl ace the resolutions of the a nnual general meeting. 3Section 93 (3) of the German Stock Corporation Act is replaced by the regulation in s ubsection (2). (2) The board members are in particular liable for damages i f, contrary to this Act: 1. the i nitial fund is repaid or i nterest is paid thereon; 2. the a ssets of the mutual society a re distributed; 3. pa yments are made after the society has become i nsolvent or over-indebted; this does not apply for payments whi ch, even after this point, a re consistent with the care of a prudent and conscientious manager; or 4. l oa ns are granted. Section 189 Supervisory board (1) 1The s upervisory board consists of three members. 2The a rticles of association may s pecify a higher number which mus t be divisible by three. 3The maximum number of s upervisory board members is 21. (2) 1The s upervisory board of mutual societies s ubject to the rules of one-third co-determination under section 1 (1) no. 4 of the German One-Third Participation Act (Drittelbeteiligungsgesetz – DtrittelbG) must be composed of members el ected by the senior representative body a nd by employee representatives. 2For other societies the s upervisory board is composed only of members elected by the senior representative body. (3) 1Section 30 (2) a nd (3) sentence 1 a nd first half of sentence 2, s ection 96 (4), s ections 97 to 100, 101 (1) a nd (3), s ections 102 a nd 103 (1) a nd (3) to (5) as well as sections 104 to 116 of the German Stock Corporation Act a pply, with the necessary modifications, to the s upervisory board. 2The duties assigned therein to the annual general meeting must i n this context be performed by the senior representative body. 3Every member of the senior representative body has – Page 104 of 207 – the ri ght of petition in a ccordance with s ection 98 (2) no. 3 a nd s ection 104 (1) s entence 1 of the German Stock Corpora tion Act. 4Section 113 (3) of the German Stock Corporation Act i s replaced by the regulations i n subsections 4 a nd 5 which a pply i n addition to section 116 of the German Stock Corporation Act. (4) 1If the members of the supervisory board are entitled to participation in the profit, this is calculated on the basis of the a nnual surplus l ess accumulated losses brought forward, and transfers to retained earnings; the share of the s urplus whi ch has been appropriated to the persons who provided the initial fund under section 178 (3) must be deducted. 2Any provi sions to the contrary a re null and void. (5) The members of the supervisory board a re in particular liable for damages if any of the a cts under section 188 (2) a re performed with their knowledge a nd without their i ntervention. Section 190 Liability for damages Secti on 117 of the German Stock Corporation Act a pplies, with the necessary modifications. Section 191 Senior representative body 1Secti ons 118, 119 (1) nos. 1 to 3, 5, 7 a nd 8 as well as subsection (2), s ection 120 (1) to (3) a nd section 121 (1) to (4), (5) s entence 1 a nd (6), s ections 122 a nd 123 (1), s ections 124 to 127, 129 (1) a nd (4), s ection 130 (1) s entences 1 a nd 2 a s wel l as (2) to (5), sections 131 to 133 a nd 134 (4) a s well as sections 136, 142 to 149, 241 to 253 a nd 257 to 261 of the Germa n Stock Corporation Act a pplicable to the annual general meeting also apply, wi th the necessary modifications, to the s enior representative body. 2Section 256 of the German Stock Corporation Act applies, with the necessary modi fications. 3If the senior representative body is the Members Meeting, section 134 (3) of the German Stock Corpora tion Act a lso applies, with the necessary modifications. 4Participation ri ghts within the meaning of section 214 (2) ma y only be granted based on a resolution of the senior representative body. 5A majority of three quarters of votes ca s t is required to pass the resolution. 6The a rticles of association may s tipulate a different majority a nd additional requirements. Section 192 Minority rights To the extent that the provisions of the German Stock Corporation Act that apply, wi th the necessary modifications, under sections 188, 190 a nd 191, gra nt ri ghts to a minority of shareholders (section 93 (4) s entence 3, s ection 117 (4), s ection 120 (1), s ections 122, 142 (2) a nd (4), sections 147, 258 (2) s entence 3 as well as section 260 (1) s entence 1 a nd (3) s entence 4 of the German Stock Corporation Act), the a rticles of association must specify the required minority of the members of the senior representative body. Section 193 Loss reserve The a rticles of association must stipulate that a reserve to cover extraordinary operational l osses (loss reserve, reserve fund) must be established, the a nnual amounts to be transferred to the reserve a nd the minimum a mount of the res erve. Section 194 Use of surplus – Page 105 of 207 – (1) 1Any s urplus shown i n the balance sheet must be distributed among the members s pecified in the a rticles of a s sociation, unless such a surplus is to be a llocated to the l oss reserve or other reserves or used for the payment of remunerations or carried forward to the next financial year i n accordance with the articles of association. 2This is wi thout prejudice to section 214 (2). (2) The a rticles of association must stipulate the rules for a ny s uch distribution and whether the surplus is to be di s tributed only a mong the existing members a t the end of the financial year or also among the former members of the mutual s ociety. Section 195 Amendments to the articles of association (1) Onl y the senior representative body i s entitled to a mend the a rticles of association. (2) The s enior representative body ma y delegate the power to make a mendments that only a ffect the form to the s upervisory board. (3) The s enior representative body ma y authorise the s upervisory board to make any changes required by the s upervisory a uthority before the approval of a n amendment resolution. (4) 1A res olution by the s enior representative body to discontinue operating a class of insurance or to i ntroduce a new one requires a majority of three quarters of votes cast; the articles of association may stipulate additional requirements. 2 Such a majority is only required for other resolutions under subsections (1) to (3) if not otherwise specified in the a rti cles of association. Section 196 Registration of amendments to the articles of association (1) 1An a pplication for registration i n the commercial register must be filed for a ny a mendment to the articles of a s sociation. 2The a pplication must be a ccompanied by the certificate of approval. 3The complete text of the a rticles of a s sociation must also be submitted; this must be a ccompanied by notarial certification that the amended provisions of the a rticles of association comply with the a mendment resolution a nd that the non-amended provisions comply with the l a st version of the a rticles of association submitted for registration in the commercial register. (2) The documents submitted to the court relating to the a mendment may be referred to for registration, unless the a mendment pertains to the i nformation under section 187. (3) The a mendment does not become effective until i t has been entered in the commercial register with the competent court of the district where the mutual s ociety has i ts registered office. Section 197 Amendments to the general policy conditions (1) Subject to subsection (2), section 195 (1) a nd (2) also apply, wi th the necessary modifications, to amendments to the general policy conditions. (2) 1The a rticles of association may a uthorise the management board to introduce or a mend general policy conditions wi th the a pproval of the supervisory board. 2If neither the management board nor the s upervisory board are a uthorised by the a rti cles of association to amend the general policy conditions, the senior representative body may a uthorise the s upervisory board to make preliminary amendments to the general policy conditions i n cases of urgent need; the a mendments must be submitted to the senior representative body a t its next meeting a nd repealed if so required by this body. (3) 1Any a mendment to the articles of association or the general policy conditions must only a ffect an existing i nsurance contra ct i f the i nsured explicitly a pproves the a mendment. 2This does not apply to provisions for which the articles of a s sociation expressly s tipulate that amendments may a lso have a n effect on existing contracts. – Page 106 of 207 – Section 198 Dissolution of the society The mutual society must be dissolved: 1. a fter expiry of the period of time s pecified i n the articles of association; 2. through a resolution by the senior representative body; 3. upon opening of i nsolvency proceedings a gainst the mutual s ociety; or 4. from the date on which the opening of insolvency proceedings due to a lack of assets attains legal force. Section 199 Dissolution resolution (1) 1The resolution under section 198 no. 2 requires a majority of three quarters of votes cast, unless otherwise s ti pulated i n the articles of association. 2Members of the senior representative body who voted against the dissolution ma y ha ve their objection to the dissolution recorded. (2) 1The resolution i s subject to approval by the supervisory a uthority. 2The supervisory a uthority must i nform the Registration Court of its approval. (3) 1If the mutual s ociety has been dissolved by a resolution of the s enior representative body, the insurance rel ationships entered i nto between the members and the s ociety must cease to exist on the date s pecified in the res olution, at the earliest, however, a fter a period of four weeks. 2Any cl aims arising by that date may be asserted; i n all other respects as regards to any contributions paid in a dvance for future periods of insurance, these may be reclaimed onl y a fter deduction of the expenses incurred. 3These provisions do not a pply to life insurance contracts; these are not a ffected unless otherwise set forth i n the articles of association. Section 200 Portfolio transfer 1Contra cts for the purpose of transferring the insurance portfolio of a mutual s ociety wholly or partly to a nother undertaking a re subject to a pproval by the s enior representative body before coming into effect. 2The resolution requires a majority of three quarters of votes cast, unless otherwise stipulated i n the articles of association. 3The amount of compensation under section 201 must also be decided with the approval. 4The cri teria a ccording to which the compensation must be distributed a mong the members must be s tipulated i n the resolution. Section 201 Loss of membership (1) 1If a policyholder l oses their rights as a member of the s ociety in whole or in part as a result of a portfolio transfer a nd does not become a member of a transferee mutual insurance association, then they must be entitled to reasonable ca s h compensation for this loss. 2This must take i nto a ccount the s ociety’s circumstances at the ti me of the resolution i n a ccordance with s ection 200. (2) The s ociety may decide to restrict this claim to members who belonged to the society a t least three months before the res olution. (3) 1Every entitled member must receive the same a mount of compensation. 2A different distribution ca n only be s ti pulated i n accordance with one or more of the following cri teria: 1. the a mount of the sum i nsured; 2. the a mount of the contributions; 3. the a mount of the life insurance premium reserve; 4. the cri teria determined in the articles of association of the society for distribution of the surplus; – Page 107 of 207 – 5. the cri teria determined in the articles of association of the society for distribution of the assets; and 6. the l ength of membership. Section 202 Registration of dissolution 1The ma nagement board must apply for re gistration of the dissolution of the mutual s ociety in the commercial register. 2 Thi s does not apply to the cases under section 198 nos. 3 a nd 4. 3In these cases the court must officially register the di ssolution of the society a nd the grounds for this; th e office of the insolvency court must send to the Registration Court a certi fied copy of the order to open i nsolvency proceedings or a certified copy of the order to dismiss a n i nsolvency peti tion, certifying that the order has legal force. Section 203 Run-off (1) Run-off follows dissolution of the mutual s ociety, unless insolvency proceedings have been opened in relation to the a s sets of the mutual society. (2) 1Duri ng run-off, the same provisions apply as beforehand, unless otherwise stipulated in the following provisions or i mplied from the purpose of the run-off. 2In particular, s upplementary contributions or cost allocations within the mea ning of s ection 179 ma y be called for a nd collected. 3New i nsurance may no l onger be written; the existing policies ma y not be increased or renewed. Section 204 Run-off procedure (1) 1Run-off is performed by the board members as liquidators, unless other persons have been designated by the a rti cles of association or a resolution of the senior representative body. 2The liquidator may a lso be a legal entity. (2) 1If ca use exists, the court must a ppoint a nd dismiss liquidators a t the request of the supervisory board or a minority of members to be specified in the a rticles of association. 2Section 402 of the La w on Procedures in Family Ma tters a pplies, with the necessary modifications. 3Any l iquidators who have not been appointed by the court may be dismissed by the s enior representative body a t any ti me. 4For claims under the employment contract, the generally applicable rules a pply. (3) 1In a ll other respects section 265 (4), sections 266 to 269, 270 (1) a nd 2 s entence 1 a nd sections 272, 273 of the Germa n Stock Corporation Act a pply, with the necessary modifications, to the run -off. 2Without prejudice to a pplication of s ection 270 (2) s entence 3 a nd subsection (3) of the German Stock Corporation Act, wi th the necessary modifications, the provisions applicable to the preparation and a uditing of the annual financial statements and management report of a mutual society a nd sections 175, 176 of the German Stock Corporation Act and sections 325, 328 of the Commercial Code a pply, wi th the necessary modifications, to the opening balance sheet, the management report, the annual fi nancial statements and management report. Section 205 Repayment of the initial fund; distribution of assets (1) 1The i nitial fund may not be repaid unless the claims of a ll the other creditors, in particular the claims of the members under i nsurance contracts have been met or collateral has been furnished. 2Supplementary contributions or cos t a llocations may not be imposed for repayment purposes. (2) 1The a ssets of the mutual s ociety remaining a fter the liabilities have been met are to be distributed a mong the exi sting members a t the time of dissolution of the society. 2The ratio used is the same as for surplus distribution. (3) The a rticles of association may provide for alternative asset distribution; they ma y authorise the s enior representative body to designate other eligible recipients. – Page 108 of 207 – Section 206 Continuation of the society (1) 1If a mutual society has been dissolved due to lapse of ti me or a resolution of the senior representative body, the s enior representative body may resolve to continue operation of the society until distribution of the assets a mong those el igible has commenced. 2The resolution requires a majority of three quarters of votes cast, unless otherwise stipulated i n the articles of association. 3It is subject to a pproval by the supervisory a uthority, which must inform the Registration Court of s uch a pproval. (2) The s ame a pplies i f the mutual society has been dissolved following the opening of insolvency proceedings, but the proceedings have been discontinued upon petition by the mutual s ociety, or set aside a fter a n insolvency plan inte nded for the continued operation of the mutual society has been confirmed. (3) The l iquidators must file an a pplication for registration of the continuation of the society's operations in the commercial register; on filing the application, they must prove that distribution of the assets of the society a mong those el igible has not yet been started. (4) The resolution to continue operations does not become effective until i t has been entered in the commercial register of the place where the mutual s ociety has its registered office. Section 207 Liability to pay contributions during insolvency proceedings (1) If exi sting or former members are required to pay contributions by vi rtue of law or under the articles of association, they a re liable for the society's debts if insolvency proceedings are opened. (2) Members who left the society i n the year before the petition for insolvency proceedings was filed or after the filing of s uch petition are liable for the society's debts as i f they were s till members. Section 208 Ranking of creditor claims in insolvency (1) 1Any cl a ims for repayment of the initial fund ra nk after a ll the other creditor cl aims. 2Among the i nsolvency cl aims, a ny cl aims under insurance relationships of members who were members a t the time the i ns olvency proceedings were opened or who left the s ociety in the year prior to filing of the petition for i nsolvency proceedings or a fter s uch petition wa s filed rank after the claims of a ny other creditors. (2) No s upplementary contributions or cost allocations may be i mposed for the purpose of repayment of the initial funds. Section 209 Supplementary contributions and cost allocations in insolvency proceedings (1) 1Any s upplementary contributions or cost allocations required for the i nsolvency proceedings must be fixed and requested by the i nsolvency a dministrator. 2Immediately after the statement of affairs has been filed with the court a ccording to section 153 of the German Insolvency Code, the insolvency administrator must calculate the amounts to be a dva nced by the members to cover the deficit represented in the s tatement of a ffairs i n accordance with their liability to pa y contributions. 3For the calculation of a ny s uch a dvance payments a nd a dditional payments, section 106 (1), s entence 2, s ubsection (2) a nd (3), as well as sections 107 to 113 of the German Act Concerning Industrial and Tra ding Cooperative Soci eties (Genossenschaftsgesetz – GenG) apply, with the necessary modifications. (2) 1Soon after final distribution has commenced under s ection 196 o f the Insolvency Code, the insolvency a dministrator mus t calculate the final contributions to be paid by the members. 2Section 114 (2) a nd s ections 115, 115a , 115c a nd 115d (1) a s well as sections 115e to 118 of the German Act Concerning Industrial a nd Tra ding Cooperative Societies a pply, with the necessary modifications. Section 210 Small mutual associations (1) 1For mutual societies whose operations are limited to a certain range of business, territory or group of persons (small – Page 109 of 207 – mutual associations) only s ections 171 a nd 172 s entence 2, s ection 173 (1), section 174 (1), sections 175, 176 a nd 177 (1), s ections 178 to 182 a nd 183 (1), section 188 (1) s entence 1, s ections 193, 194 a nd 195 (1) to (3), s ections 197, 198 a nd 199 (1), (2) s entence 1 a nd (3) as well as sections 200, 205 a nd 207 to 209 a pply from the regulations under this Cha pter. 2Insurance policies with a fixed charge may not be written unless the policyholders become members. (2) 1Unl ess otherwise s et forth in s ubsection (1), small mutual associations are only s ubject to sections 24 to 53 of the Germa n Ci vil Code. 2In the cases of sections 29 a nd 37 (2) of the Ci vil Code, however, the Local Court is replaced by the s upervisory a uthority. 3If the articles of association provide for a s upervisory board, section 34 (1) a nd (2) sentence 1 and (6), s ection 36 (2) a nd (3) and sections 37 to 40 of the German Act Concerning Industrial and Tra ding Cooperative Soci eties apply, with the necessary modifications. (3) 1The s upervisory a uthority may permit deviations from s ections 39 (1) a s well as from sections 125, 138, 141, 146, 147, 149, 152 a nd 156 for the authorisation to carry on business a nd for the management of small mutual associations. 2If the deviations relate to management, they ma y be permitted on the particular condition that business operations and the fi nancial position a re audited by a n expert a t the expense of the a ssociation at i ntervals of several years, and that the a udit report is submitted to the supervisory a uthority. (4) The s upervisory a uthority must decide whether a s ociety i s to be considered a small mutual association. Chapter 5 Small insurance undertakings and funeral expenses funds Segment 1 Small insurance undertakings Section 211 Small insurance undertakings (1) 1Sma ll insurance undertakings within the meaning of this Act a re primary i nsurance undertakings: 1. whos e annual booked gross contribution revenues do not exceed the amount s tated i n Article 4 (1) l etter a of Di rective 2009/138/EC; 2. whos e total technical provisions as defined in section 75 without deduction of the recoverable amounts from rei nsurance contracts and of special purpose entities do not exceed the amount s tated i n Article 4(1)(b) of Directive 2009/138/EC; 3. whos e business activities do not i nclude reinsurance activities which exceed a ) the a mounts s tated i n Arti cle 4(1)(e) of Directive 2009/138/EC i n relation to their booked gross contribution revenues or their technical provisions as defined in section 75 wi thout deduction of the recoverable a mounts from rei nsurance contracts and of special purpose entities; or b) 10 per cent of their booked gross contribution revenues; or c) 10 per cent of their technical provisions as defined in s ection 75 wi thout deduction of the recoverable a mounts from rei nsurance contracts and of special purpose entities; 4. whos e business activities do not i nclude insurance activities to cover third-party l iability, loan or suretyship i ns urance, unless these relate to a dditional ri sks within the meaning of section 10 (4) s entence 1; 5. whi ch do not exercise cross-border business activities under sections 57 to 59. 6. tha t a re not Pensionskassen or funeral expenses funds. – Page 110 of 207 – 2 If the primary i nsurance undertaking is part of a group, then the total gross technical provisions of the group may not exceed the amount stated in Arti cle 4 (1) l etter c of Directive 2009/138/EC. 3If authorisation is requested to operate a bus iness as a primary i nsurance undertaking, sentence 1 nos. 1 to 3 must not be a pplied if there i s an expectation that one of the amounts stated there will be exceeded within the next five years. (2) If a pri mary i nsurance undertaking meets the conditions under subsection (1) a nd the total limits s tipulated i n s ubsection (1) have not been exceeded in the last three successive years, the supervisory a uthority will officially determine that i t must be considered to be a s mall i nsurance undertaking, unless one of these total l imits is expected to be exceeded i n the next fi ve years. (3) 1If one of the total limits stated i n subsection (1) is exceeded i n three successive years then the supervisory a uthority wi l l revoke this decision. 2The primary i nsurance undertaking will no longer be considered to be a small insurance undertaking as of the fourth year. (4) Fol lowing a request, a primary i nsurance undertaking that would have been considered to be a small insurance undertaking under subsections 1 a nd 2 must no longer be treated as s uch. Section 212 Applicable provisions (1) The provisions in this Act a pplicable to primary i nsurance undertakings that a re not funeral expenses funds or Pensionskassen a pply to s mall i nsurance undertakings unless otherwise provided for i n this chapter. (2) The following provisions do not a pply to s mall i nsurance undertakings: 1. of the provisions concerning business organisation, s ection 23 (1a ) to (1c), section 26 (3), (4) and (6) to (8), s ections 27, 28 (1), 29 (2) to (4) a nd sections 30 a nd 31; 2. of the provisions concerning the audit of financial statements, section 35 (2) a nd section 37 (2); 3. of the provisions concerning the report on solvency a nd financial position, sections 40 to 42; 3a . of the provisions governing i nsurance distribution, section 48 (2a ), 4. of the provisions concerning insurance business vi a cross-border provision of s ervices or branches, s ections 57 to 59; 5. of the provisions concerning financial adequacy, sections 74 to 124, 125 (1) s entence 2 a nd (3), a nd sections 131 a nd 133; 6. (Repealed) 7. of the provisions concerning responsibilities and general requirements, section 301; a nd 8. of the tra nsitional a nd concluding provisions, sections 340 to 352. (3) The following provisions apply subject to the general proviso that "own funds" replaces "eligible basic own funds" a nd subject to the s pecific provisos stated i n each case: 1. s ection 9 (2) no. 4 s ubject to the proviso that details of the components of own funds that represent the a bsolute mi nimum ca pital requirement must be submitted as part of the business plan; 2. (Repealed) 3. s ection 9 (4) no. 1 (a) subject to the proviso that details on the nature a nd s cope of the business organisation only need to be provided in respect of the members of the s enior management, the members of the s upervisory board a nd, i f a ppointed, the a ppointed a ctuary; 4. s ection 12 (1) a nd (3) subject to the proviso that the requirement applies to any extension of business operations to a terri tory outside Germany; 5. s ection 15 (1) s entence 3 s ubject to the proviso that an i njection of capital i n return for the granting of pa rti cipation rights or resulting in the recognition of s ubordinated liabilities that, as a minimum, satisfy the requirements of tier 2 i n accordance with section 92 (2) i s not deemed to be ta king on debt; – Page 111 of 207 – 6. s ection 23 (3) s ubject to the proviso that the guiding principles must n ot include any requirements relating to i nternal audit; 7. s ection 24 (1) no. 1 s ubject to the proviso that the requirement relates only to members of the senior ma nagement a nd members of the supervisory board; 8. s ection 26 (1) s ubject to the proviso that the ri sks to which the undertaking is or could be exposed must be a ppropriately documented on a regular basis; 9. s ection 29 (1) s ubject to the proviso that no compliance function needs to be maintained; 10. s ection 47 nos. 1 a nd 2 s ubject to the proviso that only the proposed a ppointment of a member of the s enior ma nagement, the appointment of a member of the supervisory board, the retirement or departure from the undertaking of such persons, or the withdrawal of the authority for one of these persons to represent the i ns urance undertaking needs to be notified; 11. s ection 141 (5) s ubject to the proviso that the basic principles in the statutory order i ssued on the basis of section 217 s entence 1 nos. 12. s ection 303 (1) a nd (2) no. 1 s ubject to the proviso that a warning, dismissal or prohibition is only possible in res pect of a member of the senior management or a member of the s upervisory board; and 13. s ection 304 (1) no. 2 s ubject to the proviso that the s upervisory a uthority can revoke the authorisation if the undertaking does not s ucceed in meeting the approved financing plan within three months of identifying that the mi nimum ca pital requirement is not covered, a nd the proviso that the supervisory a uthority must revoke the a uthorisation if the undertaking does not succeed i n meeting the a pproved financing plan within nine months of i dentifyi ng that the minimum capital requirement is not covered. Section 213 Solvency and minimum capital requirement 1Sma ll insurance undertakings must i n all cases have own funds a t the level of the s olvency ca pital requirement. 2The s ol vency ca pital requirement must be calculated in a ccordance with the statutory order relating to section 217 s entence 1 number 1. 3One-third of the solvency ca pital requirement is deemed to be the minimum capital requirement. Section 214 Own funds (1) The following a re included in the calculation of own funds: 1. for public limited companies, the paid-in s hare capital l ess the amount of treasury s hares; for mutual societies, the pa i d-in a mount of the i nitial fund; for insurance undertakings under public l aw, the items corresponding to the paid- i n s hare ca pital of public l imited companies; 2. ca pi tal reserves a nd revenue reserves; 3. profi t carried forward after divi dend distribution; 4. ca pi tal paid in exchange for participation rights in a ccordance with s ubsections (2) and (5) below; 5. ca pi tal paid in connection with subordinated liabilities taken on by the undertaking in accordance with subsections (3) a nd (5) below; 6. ca pi tal raised i n the form of s ecurities with no s pecified maturity date in a ccordance with s ubsections (4) and (5) bel ow, 7. i n the case of life insurance undertakings a nd health insurance undertakings operating health insurance a ccording to the technical principles of life insurance, the provision for bonuses to the extent that s uch provision may be used to cover l osses a nd to the extent that i t is not accounted for by declared with-profit bonuses; a nd 8. on a pplication to and with the a pproval of the supervisory a uthority, a nd observing the maximum amount under s ubsection (6): a ) ha l f of the unpaid portion of the share capital, the i nitial fund or, in the ca se of insurance undertakings under – Page 112 of 207 – public law, the items equivalent to the s hare capital of public limited companies i f the paid-in portion amounts to 25 per cent of the share ca pital, the initial fund or, i n the case of public law insurance undertakings, the items equivalent to the share capital of public limited companies; b) i n the case of i nsurance undertakings that aa) a re mutual societies or i nsurance undertakings under public law operating in accordance with mutual pri nciples and bb) do not conduct either health or l ife i nsurance, ha l f of the difference between the supplementary contributions permissible under th e articles of association in a fi nancial year a nd the a ctual supplementary contributions required; c) a ny net hidden reserves resulting from the valuation of assets, provided that these reserves are not of a n exceptional nature; d) for l i fe insurance undertakings in accordance with the provisions issued under section 217 s entence 1, the va lue of a cquisition costs i ncluded i n the premium, to the extent that these have not been ta ken into account i n the premium reserve. The own funds a re calculated as the total of the a mounts under sentence 1 numbers 1 to 8, l ess 1. the l oss carryforward increased by the dividend to be distributed, 2. the i ntangible assets reported on the balance sheet, in particular any recognised goodwill in accordance with section 246 (1) s entence 4 of the Commercial Code, a nd 3. the holdings a nd receivables s tated i n subsection (7). (2) 1Ca pital within the meaning of subsection 1 s entence 1 no. 4 may only be included in own funds if 1. i t mus t bear a share of losses up to the full amount of the capital and the i nsurance undertaking is obliged i n case of l oss to defer interest payments; 2. i t ha s been agreed that, in the event that insolvency proceedings are opened or i n the event of liquidation of the i ns urance undertaking, the capital will not be repaid until all non-subordinated creditors have been satisfied; 3. i t i s made available to the insurance undertaking for a period of a t least five years and, under the a greements entered i nto, a ) mus t be repaid early a t most in the event of liquidation a nd under no circumstances i f requested by the creditor, a nd b) ma y only be repaid early wi th the consent of the supervisory a uthority a nd 4. a ny cha nge in the a greements made is s ubject to the condition that the s upervisory a uthority has declared that i t ha s no objections to the change. 2In the case of agreements with a fixed term, insurance undertakings must submit to the supervisory a uthority for a pproval no later than one year before the end of the term a plan that shows how the adequacy of own funds will be ma i ntained or increased to the required level by the end of the term. 3If the i nsurance undertaking intends to repay ca pi tal early i n the case of an a greement with or without a fixed term, i t must ask the supervisory a uthority for a pproval a t l east six months before the chosen repayment date. 4An i nsurance undertaking may not a cquire securities representing its own profit-sharing rights. (3) 1Ca pital within the meaning of subsection 1 s entence 1 no. 5 may only be included in own funds if 1. i t ha s been agreed that, in the event that insolvency proceedings are opened or i n the event of liquidation of the i ns urance undertaking, the capital will not be repaid until all non-subordinated creditors have been satisfied; 2. i t i s made available to the insurance undertaking for a period of a t least five years and, under the a greements entered i nto, a ) mus t be repaid early a t most in the course of liquidation a nd under no circumstances if requested by the credi tor, a nd – Page 113 of 207 – b) ma y only be repaid early wi th the consent of the supervisory a uthority a nd 3. the ri ght to repayment cannot be set off a gainst receivables due to the i nsurance undertaking and no contractual s ecurity is provi ded by the insurance undertaking or any third parties for the liabilities; and 4. a ny cha nge in the a greements made is s ubject to the condition that the s upervisory a uthority has declared that i t ha s no objections to the change. 2 In the case of agreements with a fixed term, insurance undertakings must submit to the supervisory a uthority for a pproval no later than one year before the end of the term a plan that shows how the adequacy of own funds will be ma i ntained or increased to the required level by the end of the term. 3If the i nsurance undertaking intends to repay ca pi tal early i n the case of an a greement with or without a fixed term, i t must ask the supervisory a uthority for a pproval a t l east six months before the chosen repayment date. 4An insurance undertaking may not acquire s ecurities representing its own s ubordinated liabilities. 5By wa y of derogation from s entence 1 no. 3, a n i nsurance undertaking ma y provi de subordinated collateral for s ubordinated liabilities i ncurred by a s ubsidiary of the insurance undertaking set up excl usively for the purpose of ra ising capital. (4) 1Ca pital within the meaning of subsection 1 s entence 1 no. 6 may only be included in own funds if 1. the cl aims of all non-subordinated creditors rank prior to the claims of holders of the securities, 2. under no circumstances may i t be required if requested by the creditor, 3. i t ma y only be repaid with the consent of the supervisory a uthority, 4. the contract of issue allows the insurance undertaking to defer i nterest payments at a ny ti me a nd 5. under the terms a nd conditions of issuance, unpaid interest participates in a ny l oss i n addition to the paid-in ca pital, wi thout restricting the a bility of the insurance undertaking to continue its business activities. 2If the i nsurance undertaking i ntends to repay the capital, i t must ask the supervisory a uthority f or a pproval a t least six months before the chosen repayment date. (5) 1Ca pi tal that is paid in 1. a ga inst the granting of participation ri ghts under s ubsection (2), 2. due to the issuance of s ubordinated liabilities under subsection (3) or 3. i n the form of securities under s ubsection (4) ca n only be attributed to own funds subject to the l imits s et out in s entence 2. 2Attri bution is possible if 1. the total a mount of this capital does not exceed 50 per cent of own funds and 50 per cent of the solvency ca pital requirement after it has been raised, and 2. the portion of the capital for which fixed maturities have been a greed a nd that is attributed to own funds does not exceed 25 per cent of own funds and 25 per cent of the s olvency ca pital requirement after it has been raised. (6) Funds in a ccordance with s ubsection (1) sentence 1 no. 8 (a ) and (b) may only be attributed to own funds up to a l i mit of 50 per cent of the amount representing the minimum own funds a nd the solvency ca pital requirement. (7) 1The following a re included in the deductions under subsection (1) s entence 2 number 3: 1. hol dings of the insurance undertaking as defined i n section 7 number 4 i n a ) credi t institutions as defined in s ection 1 (1) s entence 2 numbers 1 to 5 a nd 7 to 10 of the Banking Act, b) fi nancial services institutions as defined i n section 1 (1a ) sentence 2 numbers 1 to 4 of the Banking Act, c) fi nancial enterprises as defined i n section 1 (3) of the Banking Act, d) i ns urance undertakings whose registered office is in a member s tate or a n EEA signatory s tate, e) thi rd country i nsurance undertakings, – Page 114 of 207 – f) i ns urance holding companies a nd g) pension funds, and 2. recei vables from participation rights within the meaning of subsection (1) s entence 1 no. 4 a nd receivables from s ubordinated liabilities within the meaning of subsection (1) sentence 1 no. 5 from the undertakings s et forth in number 1 (a ) to (g) in which the insurance undertaking has a holding or together with which it forms a horizontal group. 2At the request of the insurance undertaking, the supervisory a uthority may gra nt exemptions with regard to the items to be deducted in a ccordance with sentence 1 i f the i nsurance undertaking temporarily has a holding in the undertakings s et forth i n sentence 1 number 1 (a ) to (g) in order to provide financial support to save the undertaking i n question and a i d recovery. (8) 1Subs ections (2) a nd (3) in the version i n force until 12 Ja nuary 2019 ca n continue to be a pplied to capital within the mea ning of s ubsection (1) sentence 1 numbers 4 a nd 5 tha t was paid in before 13 Ja nuary 2019. 2Sentence 1 a pplies for the l ast time to the financial year beginning after 31 December 2027. Section 215 Investment principles for guarantee assets (1) Wi th due regard to the nature of the insurance business operated by the undertaking and the undertaking's s tructure, guarantee assets in a ccordance with section 125 must be i nvested in a way that ensures the greatest possible s ecurity and profitability, while maintaining the insurance undertaking's l iquidity at a ll ti mes and providing an a dequate mi x a nd diversification in the portfolio. (2) 1Gua rantee assets may be i nvested only i n 1. cl a ims for repayment of a loan, bonds a nd participation rights; 2. book-entry s ecurities; 3. s ha res; 4. equity i nvestments; 5. l a nd and land ri ghts; 6. s ha res or units in undertakings for collective i nvestment i n tra nsferable securities within the meaning of Directive 2009/65/EC or i n undertakings for other investments made in a ccordance with the principle of risk divers ification provi ded that the undertakings a re subject to effective public supervision for the protection of the shareholders or uni tholders; 7. current a ccount balances and deposits at credit institutions; and 8. other types of investment, provided that they a re authorised in the regulation issued i n a ccordance with section 217 s entence 1 no. 6. 2Gua rantee assets may only be invested otherwise i f temporarily a uthorised by the supervisory a uthority on a case -by- ca s e basis in exceptional circumstances in response to an a pplication submitted to the s upervisory a uthority. Section 216 Notification requirements (1) A ca l culation of the solvency ca pital requirement and evidence of own funds must be s ubmitted to the s upervisory a uthority each year together with the annual financial s tatements and management report prescribed in a ccordance wi th s ection 341a (1) of the German Commercial Code. (2) 1Ins urance undertakings must report on their entire i nvested assets, broken down into new i nvestments and existing portfolios. 2The obligations under s ection 126 (2) remain unaffected. – Page 115 of 207 – Section 217 Authorisation to issue statutory orders 1 The Federal Mi nistry of Finance is authorised to issue s tatutory orders to specify regulations for small insurance undertakings governing the following: 1. the ca lculation and the amount of the solvency capital requirement; 2. the mi nimum ca pital requirement relevant for the individual classes of insurance a nd the calculation of such mi nimum ca pital requirement; 3. the method for ca lculating the own funds not reported on the balance sheet of life insurance undertakings and the extent to which these own funds a re eligible for i nclusion in the solvency ca pital requirement and the minimum ca pi tal requirement; 4. the content, form and number of copies of the solvency statement to be prepared i n a ccordance with section 216, the content, form and number of copies of the report on i nvested assets a nd the timeframe for the submission of thes e documents to the supervisory a uthority; 5. the methods to be used for data tra nsmission, the data formats to be used a nd the required data quality; 6. qua ntitative and qualitative requirements for the i nvestment of guarantee assets i n accordance with section 215 (1) a nd (2) sentence 1; the regulation may permit other types of i nvestment if these alternatives offer a l evel of a s set protection a nd liquidity that is comparable with the assets specified i n section 215 (2) s entence 1 nos. 1 to 7; 7. one or more maximum values for the technical interest ra te in the case of insurance contracts with a guaranteed ra te of return; 8. further requirements for determining the discount rate i n accordance with section 341f (2) of the German Commercial Code; 9. the ma ximum amounts for zillmerising; a nd 10. the a ctuarial assumptions a nd the methods to be used for determining the premium reserve. 2The Federal Mi nistry of Finance may transfer its powers under sentence 1 nos. 1 to 5 to Ba Fin by s tatutory order. 3 Sta tutory orders under s entences 1 a nd 2 do not require the consent of the Bundesrat. 4Statutory orders i n accordance wi th s entence 1 nos. 6 to 10 a bove must be issued in agreement with the Federal Ministry of Justice and Consumer Protecti on. Segment 2 Funeral expenses funds Section 218 Funeral expenses funds (1) Funeral expenses funds a re life i nsurance undertakings that, i n accordance with their business plan, only i nsure death ri s k in Germany, whereby the a mount of the benefits paid out in each case does not exceed the average value of the funeral expenses for a single death or the benefits are paid in kind. (2) Funeral expenses funds must not tra nsact business as specified i n section 1 (2). Section 219 Applicable provisions (1) Rega rdless of the l evel of premium income a nd technical provisions i n funeral expenses f unds, the provisions of this – Page 116 of 207 – Act a pplicable to small insurance undertakings as specified in sections 212 to 217, to the extent that these provisions concern life i nsurance undertakings, also apply to funeral expenses funds unless otherwise specified in thi s segment. (2) 1Of the pa rticular provisions relating to life i nsurance, section 140 (2) to (4) does not apply to funeral expenses funds. 2 The a ppointed actuary i s not required to prepare the reports specified in section 141 (5) s entence 1 nos. 2 a nd 4; s ection 141 (6) nos. 2 a nd 3 does not a pply. (3) The following provisions apply to funeral expenses funds, i n each case with the s tated proviso: 1. s ection 9 (2) number 2, s ubject to the condition that the following must also be s ubmitted: a ) the general insurance policy conditions and b) the documents related to the insurance business, s pecifically the premium ra tes a nd principles for calculating the premiums and the technical provisions i n a ccordance with the German Commercial Code, i ncluding the a ctua rial assumptions, mathematical formulas, actual calculations made, and statistical evidence used, 2. s ection 141 (5) s entence 1 no. 1 s ubject to the condition that the appointed actuary only has to assess the financial pos ition of the undertaking to establish whether or not the undertaking is in a position to fulfil its obligations under the i nsurance contracts a t all ti mes and whether i t has adequate resources i n the amount of the solvency ca pital requirement; and 3. s ection 141 (5) s entence 1 no. 2 s ubject to the condition that the certification s pecified in that provision is replaced wi th a certification that the premium reserve has been recognised i n compliance with the approved business plan (a ctuarial certification). Section 220 Authorisation to issue statutory orders 1The Federal Mi nistry of Finance is authorised to issue, by means of statutory order, regulations covering the calculation a nd a mount of the solvency ca pital requirement for funeral expenses funds. 2This authorisation may be delegated by s ta tutory order to BaFin. 3Statutory orders under sentences 1 a nd 2 do not require the consent of the Bundesrat. Part 3 Guarantee schemes Section 221 Compulsory membership (1) Undertakings that are a uthorised to carry on business i n insurance classes 19 to 23 defined i n Annex 1 i n a ccordance wi th s ection 8 (1) or s ection 67 (1) or a re a uthorised to provide s ubstitutive health i nsurance in a ccordance with s ection 146, wi th the exception of Pensionskassen and funeral expenses funds, must belong to a guarantee scheme, the purpose of whi ch is to safeguard the rights of their policyholders, insured persons, beneficiaries and other individuals with ri ghts under the insurance contract. (2) 1Pensionskassen ma y vol untarily join a guarantee scheme. 2In order to ensure a comparable financial situation a mongst all members, the guarantee scheme may make a dmission contingent upon the fulfilment of certain conditions. Section 222 Maintenance of insurance contracts (1) If the s upervisory a uthority establishes that an i nsurance undertaking which is a member of a guarantee s cheme ful fils the conditions set forth i n section 314 (1) s entence 1, or a notification under s ection 311 (1) s entence 1 or 2 ha s been s ubmitted by s uch an i nsurance undertaking, the supervisory a uthority must i nform the guarantee s cheme of the s i tuation a nd notify the insurance undertaking in question a ccordingly. (2) If other measures designed to safeguard the i nterests of the insured a re deemed i nsufficient, the s upervisory a uthority must order that the entire portfolio of i nsurance contracts held by the undertaking in question, together with a l l of the assets required to cover the liabilities under these contracts, be transferred to the relevant guarantee scheme; – Page 117 of 207 – s ection 13 does not a pply. (3) Wi th the portfolio tra nsfer, the rights and obligations of the transferor under the insurance contracts, including s uch ri ghts a nd obligations in relation to the policyholders, are tra nsferred to the guarantee s cheme; s ection 415 of the Germa n Ci vil Code does not apply. (4) 1The guarantee scheme must manage the transferred contracts separately from its other assets a nd must also a ccount for these contracts separately. 2Without delay, the guarantee scheme must determine the amount necessary to cover the obligations under the insurance contracts in full a nd make a vailable suitable eligible assets. 3In this regard, s ection 15 (1), s ections 39, 124, 139, 141, 142, 146 to 158 a nd section 336 a pply, with the necessary modifications; s ection 140 (2) a nd (3) a pplies to the insurance contracts managed by the guarantee scheme as soon as the s upervisory a uthority has established that the recovery of the tra nsferred i nsurance portfolio has been completed and the ca pital ma de a vailable to the guarantee scheme for this purpose has been returned to the i nsurance undertakings that provided s uch ca pital. (5) 1If the assessment under subsection (4) reveals that the funds available to the guarantee scheme in a ccordance with s ection 226 (4) to (6) a re insufficient to guarantee the continuation of the contracts, the supervisory a uthority must, in the ca se of life i nsurance undertakings, reduce the obligations under the contracts by a maximum of 5 per cent of the contra ctually guaranteed benefits. 2The supervisory authority may a lso issue orders to prevent an undue increase in the number of premature contract terminations. (6) 1The guarantee scheme may tra nsfer the portfolio of contracts, either i n full or i n part, to undertakings authorised to conduct insurance business i n Germany; s ection 13 a pplies to s uch tra nsfers, with the necessary modifications. 2Upon tra ns fer of the portfolio, the guarantee s cheme may a mend the general policy conditions and the premium ra te terms a pplicable to the transferred contracts in order to align them with the portfolio of the tra nsferee, provided that this i s a ppropriate to allow the continuation of the contracts at the tra nsferee and that s uch a change does not place an unreasonable burden on the persons i nsured. 3The amendment becomes effective i f due consideration is given to the i nterests of the insured, the objective of the contract i n question is safeguarded and an i ndependent trustee confirms tha t these conditions have been met. 4Sections 142 a nd 157 (3) a pply to the trustee, with the necessary modifications. (7) The i nsurer's authorisation to conduct business lapses as s oon as the s upervisory a uthority has ordered that the portfolio of contracts be tra nsferred to the guarantee s cheme. (8) Objections and a ction to have the orders issued by the supervisory a uthority declared null and void have no s us pensory effect. Section 223 Guarantee schemes (1) 1A gua ra ntee scheme for life insurance undertakings a nd a guarantee s cheme for health insurance undertakings are s et up as Federal Government funds without l egal personality by the KfW Banking Group (Kreditanstalt für Wi ederaufbau). 2The guarantee s chemes may act with legal effect, sue or be sued. (2) 1The purpose of the guarantee s chemes is to protect the ri ghts of the policyholders, insured persons, beneficiaries a nd other i ndividuals with rights under the insurance contracts i n question. 2To this end, the guarantee s chemes ensure tha t the contracts of the insurance undertaking i n question continue i n force. (3) 1The KfW Ba nking Group (Kreditanstalt für Wiederaufbau ) a dministers the guarantee s chemes. 2The KfW Banking Group (Kreditanstalt für Wiederaufbau) receives a fee paid out of the common fund to cover the costs of a dministration. (4) Ba Fin i s responsible for deciding on a ny objections to administrative acts by a guarantee scheme. Section 224 Assignment of duties and powers to persons under private law (1) 1The Federal Mi nistry of Finance is authorised to assign, by means of a s tatutory order in consultation with the Federal Mi nistry of Justice a nd Consumer Protection but without the need for the consent of the Bundesrat, the duties – Page 118 of 207 – a nd powers of one or both guarantee schemes to a legal person under private law, provided that the latter is prepared to a s sume the duties of the guarantee s cheme concerned and can offer s ufficient warranty that the rights of those covered by the guarantee scheme will be fulfilled. 2A l egal person is deemed to provide sufficient warranty i f 1. the i ndividuals responsible for managing a nd representing the l egal person by vi rtue of law or the undertaking’s a rti cles of association are fit a nd proper; 2. the l egal person has the necessary fa cilities a nd organisation to allow it to fulfil i ts duties, in particular with regard to the col lection of premiums, processing of benefit claims and the management of funds, a nd has financial resources equivalent to at l east one million euros for this purpose; and 3. the l egal person can document that it is a ble to organise, i n particular, the collection of premiums, processing of benefit claims and the management of funds upon tra nsfer of the contract portfolio i n accordance with section 222 (2). 3 The duties a nd powers i n question may also be assigned to a n undertaking that is authorised i n accordance with section 8. 4The Federal Mi nistry of Finance may, by means of the statutory order under sentence 1, reserve the ri ght to approve the a rticles of association of the legal person and a ny a mendments thereto. (2) 1In the event of assignment i n accordance with subsection (1), the legal person under private law s ucceeds to the ri ghts a nd obligations of the guarantee s cheme i n question. 2Section 223 (4) a pplies, with the necessary modifications. 3There is no tra nsfer of assets. Section 225 Supervision 1Ba Fin must counteract any i rregularities that could a dversely impact the ability of the guarantee schemes to perform thei r functions properly. 2BaFin may i ssue a ny orders that are a ppropriate a nd necessary to remedy or prevent such i rregularities. 3BaFin also has the ri ght to request i nformation from and to a udit the guarantee schemes i n accordance wi th s ections 305 a nd 306. 4Otherwise, only the provisions i n this chapter and in section 332 a pply to the guarantee s chemes. Section 226 Financing (1) 1Ins urance undertakings that belong to a guarantee scheme must pay contributions to the guarantee s cheme. 2These contri butions are i ntended to cover a ny s hortfalls from the transferred i nsurance contracts, the resulting administrative cos ts and other costs that a rise as a result of the a ctivities of the guarantee s cheme concerned. (2) 1The l iability of the guarantee scheme for fulfilment of the obligations under transferred i nsurance contracts is l i mited to the assets available as a result of the paid contributions net of costs in a ccordance with s ubsection (1) s entence 2 plus the assets tra nsferred i n accordance with section 222 (2) sentence 1. 2These assets cannot be used to cover the other liabilities of the guarantee scheme. 3A guarantee scheme within the meaning of section 224 must s egregate these assets from i ts other assets and manage them separately. (3) The funds accumulated for a cquiring i nsurance contracts (guarantee assets) must be invested in a ccordance with the pri nciples in section 124 (1). (4) The va lue of these assets should not fall below one thousandth of the total net technical provisions within the mea ning of s ections 341e to 341h of the German Commercial Code of all i nsurance undertakings that belong to the gua rantee s cheme. (5) 1The member i nsurance undertakings must pay a nnual contributions to the guarantee s cheme. 2The total annual contri butions for a ll i nsurance undertakings belonging to the guarantee s cheme for life insurance undertakings must a mount to 0.2 thousandths of the total of their net technical provisions within the meaning of sections 341e to 341h of the German Commercial Code. 3The guarantee scheme must calculate the annual contribution to be paid by each i ndividual insurance undertaking on an a nnual basis i n accordance with the procedure set forth in the regulation i ssued under subsection (7). 4Any i ncome generated by the guarantee scheme must be distributed to the member i nsurance undertakings on a pro rata basis in relation to their contributions. 5The guarantee s cheme must levy s pecial contri butions up to a maximum of one thousandth of the total net technical provisions within the meaning of sections 341e to 341h of the German Commercial Code of the i nsurance undertakings that belong to the guarantee s cheme i f this – Page 119 of 207 – i s necessary to enable the scheme to carry out its functions. 6The share of the scheme assets accounted for by an i ns urance undertaking must be appropriate to cover its technical provisions within the meaning of sections 341e to 341h of the German Commercial Code. (6) 1Subsections (2) to (5) do not a pply to the guarantee scheme for health insurance undertakings. 2After a cquiring i ns urance contracts, the guarantee s cheme must l evy s pecial contributions of up to two thousandths of the total net technical provisions within the meaning of s ections 341e to 341h of the German Co mmercial Code of the member health i ns urance undertakings in order to enable it to perform its duties. (7) 1In consultation with the Federal Mi nistry of Justice and Consumer Protection, the Federal Mi nistry of Finance is res ponsible for detailing, by means of a statutory order not requiring the consent of the Bundesrat, the minimum a mount of the guarantee assets, the a nnual and special contributions and the upper limit for payments per calendar yea r. 2The annual contributions must ta ke i nto account the type and scope of the business covered, along with the number, size and business structure of the insurance undertakings that belong to the guarantee s cheme. 3The amount of the contributions must also reflect the financial and risk situation of the contributors. 4The statutory order may also conta in provisions relating to the i nvestment of the funds held by the guarantee scheme. (8) 1The contribution notice issued by the guarantee s cheme is enforced i n accordance with the provisions contained in the German Act on Administrative Enforcement (Verwaltungsvollstreckungsgesetz – VwVG). 2The guarantee s cheme i s sues the copy of the notice that includes the enforcement clause. Section 227 Guarantee scheme accounting (1) 1The guarantee schemes must prepare a n annual report for each completed ca lendar year a nd engage an i ndependent auditor or an independent auditing firm to carry out an audit, verifying that the annual report is complete a nd that the disclosures contained therein a re accurate. 2The guarantee schemes must immediately inform BaFin of thei r choice of a uditor. 3Within one month of receiving notification of the appointment, BaFin may demand the a ppointment of a different auditor if this is deemed necessary to a chieve the purpose of the audit; objections a nd a ction to ha ve the demand issued by Ba Fin declared null a nd void have no s uspensory effect. 4The annual report must contain i nformation on the a ctivi ties and the fi nancial situation of the guarantee s cheme, i n particular the amount of funds and how these a re invested, the use of these funds for compensation a rrangements, the amount of contributions and the gua rantee s cheme’s administrative costs. (2) 1The guarantee scheme must submit the formally a dopted a nnual report to BaFin by 31 Ma y ea ch year. 2The auditor mus t s ubmit the report on the audit of the a nnual report to BaFin without delay following completion of the audit. 3Upon request, BaFin must also be provided with more detailed i nformation on the disclosures made i n accordance with s ubsection (1) sentence 4 a bove. Section 228 Duty to cooperate (1) Upon request, the insurance undertakings must provide the guarantee s cheme of which they a re a member with all i nformation a nd all documents that the guarantee s cheme requires in order to perform i ts duties in a ccordance with this Act. (2) 1The parties obliged to furnish i nformation may refuse to do so in respect of a ny questions, the answers to which woul d place themselves or one of their relatives as designated in s ection 383 (1) nos. 1 to 3 of the German Code of Civil Procedure at ri sk of criminal prosecution or proceedings under the German Act on Breaches of Administrative Regulations (Ordnungswidrigkeitengesetz – OWi G). 2Such parties must be informed of their ri ght to refuse to furnish the i nformation. (3) 1As s oon as the supervisory a uthority has established the existence of a situation as specified in section 222 (1), the employees of the guarantee schemes, as well as any persons commissioned by them, may a ccess the business premises of the i nsurance undertaking concerned during normal business hours. 2Such persons must be provided with all of the documents required for preparation of the portfolio tra nsfer. 3If the i nsurance undertaking in question has outsourced functi ons to another undertaking, sentences 1 a nd 2 a bove apply to s uch undertaking, with the necessary modifications. (4) 1If the undertaking whose portfolio is being transferred has entered i nto outsourcing a greements concerning the a dministration of the portfolio, the guarantee scheme may become a party to the agreements in question i n place of the – Page 120 of 207 – undertaking. 2Section 415 of the German Ci vil Code does not apply. 3The earliest date for ordinary termination of s uch a n a greement by the service provider is the last day of the twelfth month a fter the date on which the guarantee scheme becomes a party to the agreement concerned. 4If the other party calls on the guarantee scheme to exercise its option, the guarantee s cheme must i mmediately declare whether or not i t intends to become a party to the agreement. 5If the gua rantee s cheme fails to make this declaration, it ca nnot i nsist on performance. Section 229 Exclusion (1) 1If a n insurance undertaking fails to fulfil its obligation to pay contributions or cooperate in a ccordance with section 226 or 228, or fa ils to do so correctly, in full or in a timely manner, the guarantee scheme must inform BaFin. 2If BaFin i s not the competent supervisory a uthority, i t must immediately inform the competent authority. 3If the insurance undertaking also fails to fulfil its obligations within one month of being asked to do s o by BaFin, the guarantee s cheme ma y i ssue the i nsurance undertaking with a notice of exclusion from the guarantee s cheme, s ubject to a notice period of twel ve months. 4After this notice period has expired, the guarantee s cheme is entitled to exclude the i nsurance undertaking s ubject to the approval of BaFin if the i nsurance undertaking’s obligations remain unfulfilled. 5Following s uch exclusion, the guarantee scheme i s only responsible for covering those liabilities of the i nsurance undertaking that a ros e before this notice period expired. (2) The guarantee scheme is not responsible for covering any liabilities of the insurance undertaking that arose a fter the i ns urance undertaking's a uthorisation to conduct business lapsed or was withdrawn. Section 230 Duty of confidentiality 1 Pers ons who a re employed at, or perform activities on behalf of, a guarantee s cheme may not disclose or utilise secrets rel ating to third parties, in particular business or trade secrets, without authorisation to do so. 2BaFin must require these pers ons to fulfil their obligations conscientiously i n a ccordance with the German Act on the Formal Obligation of Persons wi th Non-Civil Servant Status (Gesetz über die förmliche Verpflichtung nichtbeamteter Personen – VerpflG) of 2 Ma rch 1974 (Federal La w Gazette I, pages 469, 547). 3The forwarding of information to BaFin is not be deemed to be una uthorised disclosure or use. Section 231 Enforcement (1) The guarantee scheme is entitled to enforce its orders in accordance with the provisions s et forth in the German Act on Admi nistrative Enforcement. (2) For measures as set forth i n section 226 (1), (5) s entence 1 a nd section 228 (1), the coercive penalty ma y be up to fi fty thousand euros. Segment 1 Differentiation versus other life insurance undertakings Part 4 Institutions for occupational retirement provision Chapter 1 Pensionskassen Section 232 Pensionskassen (1) A Pensionskasse i s a l egally i ndependent life insurance undertaking, the purpose of which is to provide cover for a l oss of income due to old age, invalidity or death a nd that – Page 121 of 207 – 1. provi des a funded insurance scheme; 2. does not, as a general rule, provi de benefits until the actual loss of income takes place, a lthough the general policy conditions may provide for pro ra ta benefits i n the event of a partial loss of i ncome; 3. i n the event of death, may only provide benefits to surviving dependants, though a death grant, which may not exceed standard funeral costs, may be i ncluded for third parties; 4. a ffords the insured a separate entitlement to benefits from the Pensionskasse or provides benefits i n the form of pension liability i nsurance. (2) 1Pensionskassen ma y only conduct primary i nsurance business. 2They can only be granted a uthorisation in the classes of i nsurance s et out in Annex 1 numbers 19, 21 a nd 24. Section 233 Regulated Pensionskassen (1) 1Pensionskassen ca n be regulated with BaFin’s a pproval (regulated Pensionskassen). 2The application to be regulated ca n be filed by 1. Pensionskassen wi th the legal form of a mutual society i f a ) the a rticles of association provide that pension claims can be reduced, b) under the articles of association, a t least 50 per cent of the members of the senior representative body s hould be i nsured persons or their representatives or, if the Pensionskasse only operates pension liability insurance, the a rti cles of association grants such a ri ght to the policyholders, c) onl y i ndividuals covered by s ection 17 of the Occupational Pensions Act (Betriebsrentengesetz – BetrAVG), the members of the senior management or owners of the sponsoring undertakings are i nsured, as well as persons a s signed to the Pensionskasse by vi rtue of law or who continue the insurance relationship with the Pensionskasse a fter the end of their employment relationship, and d) they do not charge any actuarial acquisition cost l oadings for the intermediation of i nsurance contracts a nd do not pa y a ny fees for the intermediation or conclusion of i nsurance contracts, and 2 Pensionskassen for which BaFin has determined that they satisfy the criteria of section 156a (3) sentence 1 of the Germa n Insurance Supervision Act, a s amended on 15 December 2004. 3Ba Fin must a pprove the application if the requirements of sentence 2 numbers 1 or 2 a re met. (2) Separate ring-fenced funds in a ccordance with section 2 (1), Pensionskassen s ubject to supervision by the individual federal s tates and Pensionskassen that a re collective a greements within the meaning of s ection 4 (2) of the German Col l ective Bargaining Act (Tarifvertragsgesetz – TVG) established under a generally bi nding collective bargaining a greement are always considered to be regulated Pensionskassen. (3) 1Secti on 140 (2) sentence 2 a nd (4), section 145 (2) a nd (3) and section 234 (2) s entences 2 a nd 3 a nd (6) do not apply to regulated Pensionskassen. 2Section 210 (3) s entence 1, s ection 219 (2) s entence 2 a nd (3) number 1 (b) and number 2 a pply, with the necessary modifications. 3Where i nsurance relationships are entered into before Pensionskassen are regulated that are not based on a ny business plan approved by the supervisory a uthority, the documents related to the i ns urance business within the meaning of section 219 (3) number 1 (b) do not form part of the business plan, by way of derogation from sentence 2. 4Contrary to s entence 1, the general i nsurance policy conditions under s ection 234 (2) s entences 2 a nd 3 continue to apply in this case. (4) 1Secti on 139 (3) a nd (4) does not apply to regulated Pensionskassen that have issued general insurance policy conditions that differ from the requirements of section 153 of the Insurance Contract Act wi th the approval of the s upervisory a uthority in accordance with section 211 (2) number 2 of the Insurance Contract Act. 2Regulated Pensionskassen tha t have not issued general policy conditions that deviate from the requirements specified i n section 153 of the German Insurance Contract Act a s permitted by s ection 211 (2) no. 2 of the German Insurance Contract Act ma y, for the purposes of calculating the safeguard a mount in connection with i nsurance contracts with guaranteed i nterest as specified i n section 139 (4), use a different calculation method, subject to the approval of the s upervisory a uthority. – Page 122 of 207 – (5) 1If a regulated Pensionskasse no l onger satisfies the cri teria i n subsection (1) or (2), BaFin must i ssue a notice to the effect that the Pensionskasse concerned is no longer deemed a regulated Pensionskasse. 2Section 234 (6) a pplies, with the necessary modifications, to insurance relationships that came i nto force before the date specified in the notice. Section 234 Special requirements relating to business activities that do not relate to governance (1) 1Secti on 341k of the German Commercial Code applies to Pensionskassen; section 36 (2) does not apply. 2Section 1 (2) s entence 4, s ection 35 (2), s ection 37 (2), s ections 40 to 42 a nd 48 (2a ), sections 52 to 56, 141 (5) s entence 2 a nd s ection 144 do not apply. (2) 1The general insurance policy conditions form part of the business plan as a component under s ection 9 (2) number 2. 2The approval requirement und section 12 (1) s entence 1 does not apply to them. 3Amendments to and the i ntroduction of new general insurance policy conditions only come into force three months after their submission to t he s upervisory a uthority, unless the supervisory a uthority determines before that period that i t has no objections. (3) 1Pensionskassen ma y depart from the requirements of section 138 wi th the approval of the supervisory a uthority. 2In s ection 141 (5) s entence 1 numbers 1 a nd 2, the principles of the statutory order enacted on the basis of section 235 (1) numbers 4 to 7 replace the principles of the statutory order enacted on the basis of section 88 (3). 3The trustee under s ection 142 must have s ufficient knowledge i n the field of occupational pensions. 4If the Pensionskasse is a s mall mutual a s sociation, the appointed actuary must certify that the requirements of the statutory order enacted under s ection 235 (1) s entence 1 numbers 8 or 9 a re met. (4) If the a mount of benefits paid is contingent upon the performance of a fund established i n accordance with the bus iness plan, separate accounts must kept for this fund in a ccordance with s ections 67, 101, 120, 135, 148 a nd 158 of the German Investment Code or in a ccordance with s ection 44 of the German Investment Act a s amended up to 21 July 2013; s ection 101 (2) of the German Investment Code a nd section 44 (2) of the German Investment Act as a mended up to 21 Jul y 2013 do not apply. (5) 1By wa y of derogation from section 210 (1) s entence 1, s ection 184 a lso applies if the Pensionskasse is a s mall mutual a s sociation. 2The articles of association must s tipulate that the management board is to be a ppointed by the supervisory boa rd or the s enior governing body. (6) 1Secti on 336 a pplies, with the necessary modifications, to insurance relationships that ca me i nto force before 1 Ja nuary 2006, provided they a re based on a business plan approved by the supervisory authority. 2Section 142 does not a pply i n such cases. Segment 2 Special requirements relating to governance Section 234a Supplementary general requirements (1) 1In a ddition to meeting the requirements of section 23 (1), the system of governance of a Pensionskasse must be a ppropriate to the size of i ts a ctivities. 2The s ystem of governance must reflect whether a nd how ecological, s ocial a nd governance factors a re taken into account for assets in i nvestment decisions. (2) Secti on 23 (1a ) to (1c) does not apply to Pensionskassen. (3) 1The i nternal policies under section 23 (3) must also include requirements governing any existing a ctuarial function. 2By wa y of derogation from section 23 (3) s entence 3, i t is s ufficient for Pensionskassen to review the policies at least once every three years. (4) Special requirements relating to the a ppointment of representatives of the employers a nd employees of the s ponsoring undertakings to the s upervisory board must be taken into account. (5) The remuneration s ystems within the meaning of section 25 must be proportionate to the size and internal orga nisation of the Pensionskasse, as well as to the size, nature, s cale a nd complexity of i ts a ctivities. – Page 123 of 207 – 6 Secti on 28 (1) does not apply. (7) Secti on 29 (1) s entence 2 a nd (2) to (4) do not a pply to the internal control system. Section 234b Special requirements relating to key functions (1) Pensionskassen mus t enable the persons responsible for key functions to undertake their duties effectively in an objective, fair and independent manner. (2) The person responsible for the internal a udit function may not perform any other key function within the Pensionskasse. (3) 1The person responsible for a key function may only perform a similar function i n the sponsoring undertaking i f 1. i t i s proportionate to the size, nature, scale a nd complexity of the a ctivities of the Pensionskasse a nd 2. the Pensionskasse demonstrates to the supervisory a uthority how conflicts of interest with the sponsoring undertaking a re avoided or managed. 2The Pensionskasse must s end the supervisory a uthority a statement u nder sentence 1 number 2 wi thout undue delay i f the person responsible for a key function performs or is i ntended to perform a similar function i n the sponsoring undertaking. (4) 1The person responsible for a key function must inform the board of managemen t about all material findings a nd recommendations from that person’s area of responsibility. 2The board of management determines what actions a re to be ta ken. 3The person responsible for the key function must i nform the supervisory a uthority that the board of ma nagement has not taken appropriate a nd ti mely a ction if the Pensionskasse 1. i s exposed to a substantial risk of non-compliance with materially significant statutory requirements, a ) thi s was reported to the board of management and b) i t coul d significantly i mpact the i nterests of members a nd beneficiaries, or 2. there is a significant material breach of laws, regulations or administrative provisions i n an area falling within the res ponsibility of the key function a nd this was reported to the board of management. 4No report need be made i f i n doing so the person responsible for the key function would place that person or one of tha t person’s relatives designated i n section 383 (1) numbers 1 to 3 of the Code of Ci vil Procedure a t risk of cri minal pros ecution or proceedings under the Act on Breaches of Administrative Regulations ( Gesetz über Ordnungswidrigkeiten). 5The person responsible for the key function may not be held responsible under either labour l a w or the provisions of cri minal law because of a report under s entence 3. 6That person may not be held liable for da mages unless the report made was intentionally or negligently untrue. 7The ri ght of that person to make reports under sentence 3 ma y not be restricted by contractual arrangements. 8Any a greements to the contrary a re ineffective. (5) 1The a ctuarial function must also supervise the calculation of the technical provisions. 2By wa y of derogation from s ection 31 (1) s entence 2 numbers 2 a nd 4, i t must 1. a s sess the appropriateness of the methodologies and underlying models used i n the calculation of technical provi sions a nd the assumptions made for this purpose, 2. compa re the assumptions underlying the calculation of the technical provisions with the experience. 3 In a ddition, the actuarial function contributes to the own-risk assessment under s ection 234d. 4Section 31 (1) s entence 2 number 6 a nd subsection (2) sentences 3 a nd 4 does not a pply. (6) There is no need for a Pensionskasse to have a n actuarial function i f 1. i t does not itself provide cover against biometric risks a nd 2. nei ther the investment performance nor a certain level of benefits a re guaranteed. – Page 124 of 207 – (7) Pers ons or entities to which a key function has been outsourced must comply with the requirements of section 24 (1), wi th the necessary modifications. Section 234c Risk management (1) 1In a ddition to meeting the requirements of section 26 (5), the risk management s ystem of a Pensionskasse must also cover ecological, s ocial and governance risks, to the extent that these risks relate to the investment portfolio and its ma nagement. 2The risks ca ptured by the ri sk management system must be treated in such a way that is proportionate to the s ize and internal organisation of the Pensionskasse, as well as to the size, nature, scale and complexity of its a cti vi ties. (2) The ri sk-management s ystem must also consider the risks to which members and beneficiaries are exposed under the conditions of a pension scheme from the perspective of members and beneficiaries. (3) 1Pensionskassen mus t submit the reports to the management board under section 26 (1) s entences 1 a nd 2 to s upervisory a uthority within one month of their provision to the board of management. 2This requirement does not a pply to reports that are provided to the board of management i n the period of six months before a nd after the compl etion of a n own risk assessment in a ccordance with s ection 234d for which the entire ri sk profile is assessed. 3The s upervisory board may exempt Pensionskassen in part or i n full from the requirement under sentence 1 i f this is cons istent with the supervisory objectives. (4) Secti on 26 (3), (4), (6), (7) a nd (8) s entences 2 a nd 3 do not a pply. (5) 1The Pensionskasse’s risk management s ystem includes the own-risk assessment under s ection 234d. 2Section 27 does not a pply. Section 234d Own-risk assessment (1) 1A Pensionskasse’s risk management sys tem includes a n own-risk assessment, which must be documented. 2The own-risk assessment must be performed a t least every three years for the entire risk profile, o r more frequently i f required by the supervisory a uthority. 3The Pensionskasse must perform an own-risk assessment without undue delay i f there has been a significant change 1. i n i ts risk profile or 2. i n the risk profile of pension s chemes it operates. 4If onl y a single pension scheme is involved i n the case of s entence 3 number 2, the own-risk assessment can be limited to tha t pension scheme. 5Pensionskassen must inform the supervisory authority of the findings of each own-risk a s sessment performed within 14 da ys of i ts completion. (2) 1As pa rt of the own-risk assessment, the Pensionskasse must 1. des cribe how the own-risk assessment is integrated i nto the management and decision-making processes of the Pensionskasse; 2. a s sess the effectiveness of the risk management system; 3. des cribe how it prevents or manages conflicts of interest with the sponsoring undertaking, i f the person responsible for a key function also performs a similar function i n the sponsoring undertaking; 4. a s sess the overall funding needs and describes any measures to cover the funding needs, where applicable; 5. a s sess the risks to members and beneficiaries relating to the paying out of their retirement benefits and the effectiveness of any remedial action ta king i nto a ccount, where applicable, any a ) i ndexation mechanisms, b) mechanisms for reducing pension rights and pension benefits, i ncluding the conditions under which a nd the extent to which pension ri ghts a nd pension benefits ca n be reduced, and by whom; – Page 125 of 207 – 6. ca rry out a qualitative assessment of the mechanisms protecting pension ri ghts a nd pension benefits including, as a pplicable, a ny of the following in favour of the Pensionskasse or the members a nd beneficiaries: a ) gua rantees, covenants or any other type of financial s uppo rt by the sponsoring undertaking, b) i ns urance or reinsurance by a n undertaking covered by Directive 2009/138/EC, or c) covera ge by a pension protection scheme; 7. undertake a qualitative assessment of the operational ri sks; 8. a s sess new a nd probable emerging risks because the Pensionskasse considers environmental, s ocial and governance fa ctors i n its investment decisions. 2 The a ssessment under sentence 1 number 8 must include, among other things, risks related to climate change, use of res ources and the environment, social ri sks and risks related to the depreciation of assets due to regulatory change. (3) 1For the performance of the ri sk assessment under subsection (2), the Pensionskasse must have i n place methods to i dentify a nd assess risks that 1. they could be exposed to i n the short or long term and 2. tha t ma y have an impact on the Pensionskasse’s a bility to meet i ts obligations. 2 The methods must be proportionate to the size, nature, s cale and complexity of the Pensionskasse’s activities and must a l so cover the risks referred to i n subsection (2) sentence 2. 3They must be described i n the own-risk assessment. (4) The own-risk assessment must be ta ken i nto a ccount i n the Pensionskasse’s strategic decisions. Section 234e Supplementary requirements relating to outsourcing (1) If a cti vities are outsourced, Pensionskassen must s elect a suitable s ervice provider a nd monitor the service provider on a n ongoing basis to ensure that it performs the outsourced activities properly. (2) Pensionskassen mus t enter i nto a written, legally enforceable outsourcing agreement with the service provider that defines the ri ghts and obligations of the parties to the agreement. (3) Secti on 32 (3) a nd section 47 numbers 8 a nd 9 a pply to the outsourcing of other a ctivities that a re subject to the requirements of this Act. Segment 3 Special requirements relating to financial adequacy Section 234f General (1) Secti ons 74 to 88 a nd 133, 134 (4) a nd (5), s ections 301 a nd 304 (1) number 2 a nd sections 341 to 352 do not apply to Pensionskassen. (2) 1Secti on 234g (1) to (3) replaces sections 89 to 123. 2To the extent that reference is made in the requirements a pplicable to Pensionskassen to basic own funds or eligible own funds, they a re replaced by the own funds under s ection 234g (3). (3) 1By wa y of derogation from section 134 (3) s entence 2, the supervisory authority may a lso extend the deadline under s ection 134 (3) s entence 1 by a n appropriate period. 2On application by the Pensionskasse, it ca n extend the deadline under section 134 (2) by one month. 3The supervisory a uthority ca n extend the deadline under section 135 (2) s entence 1 by a maximum of two months and the deadline under section 135 (2) sentence 2 to a maximum of twelve months. (4) 1The s upervisory a uthority ca n withdraw the authorisation i f the Pensionskasse fails to comply with the approved – Page 126 of 207 – fi nance s cheme within three months following determination of non-compliance with the minimum ca pital requirement. 2 The s upervisory a uthority must withdraw the a uthorisation if it believes that the finance scheme submitted is ma nifestly i nadequate or the Pensionskasse fails to comply wi th the approved finance scheme within twelve months fol lowing determination of non-compliance with the minimum capital requirement. Section 234g Solvency capital requirement, minimum capital requirement and own funds (1) Pensionskassen mus t in all cases have eligible own funds at l east at the l evel of the solvency ca pital requirement. (2) 1The s olvency ca pital requirement is determined by the statutory order relating to section 235 (1) number 1. 2One- thi rd of the solvency capital requirement is deemed to be the minimum ca pital requirement. (3) 1Secti on 214, with the exception of subsection (1) s entence 1 number 8 (b), a pplies to the determination of own funds. 2In section 214 (1) s entence 1 number 8 (d), the requirements a dopted under section 235 (1) replace the requirements adopted under section 217 s entence 1. (4) Pensionskassen mus t submit a calculation of the s olvency ca pital requirement and evidence of own funds to the s upervisory a uthority each year. Section 234h Supplementary general investment rules (1) 1Pensionskassen a re required to i nvest the assets in the best long-term i nterests of the members and beneficiaries as a whole. 2In the case of a potential conflict of interest, the Pensionskasse, or the entity that manages i ts portfolio, must ens ure that the i nvestment is made in the sole i nterest of members and beneficiaries. (2) In the case of i nvestments i n derivative financial instruments, an excessive ri sk exposure to a s ingle counterparty a nd to other derivative operations must be avoided. (3) Wi thin the prudent person rule, Pensionskassen can take i nto account the potential l ong-term i mpact of investment deci sions on envi ronmental, social and governance factors. (4) Secti on 124 (1) s entence 2 number 1 (b) a nd number 4, a s well as subsection (2) sentence 1, does not apply. Section 234i Investment policy 1Pensionskassen mus t submit to the s upervisory a uthority a statement of their i nvestment policy principles 1. a t the l atest four months after the end of a financial year a nd 2. wi thout undue delay after any significant change i n the investment policy. 2The s tatement must address, as a minimum, the investment risk measurement and risk management processes, the s tra tegy a nd the question of how the investment policy takes environment, social a nd governance factors i nto a ccount. 3 Pensionskassen mus t make the statement publicly a vailable. 4The s tatement must be reviewed at l east every three yea rs . Section 234j Special requirements relating to guarantee assets (1) 1Gua rantee assets may only be invested i n 1. the ca tegories of assets referred to in section 215 (2) s entence 1 numbers 1 to 7 a nd 2. other a ssets permitted under the s tatutory order relatin g to section 235 (1) number 10. 2 Gua rantee assets may only be invested otherwise i f temporarily a uthorised by the supervisory a uthority on a case -by- ca s e basis in exceptional circumstances in response to an a pplication submitted to the s upervisory a uthority. – Page 127 of 207 – (2) Secti on 125 (1) s entences 2 a nd 3, a nd s ection 131 do not apply. (3) 1Pensionskassen must report on their entire i nvested assets, broken down into new investments and existing portfolios. 2The obligations under s ection 126 (2) remain unaffected. Segment 4 Information required to be given to members and beneficiaries Section 234k Requirements relating to the information to be given (1) The i nformation prescribed for a pension scheme under this s egment must 1. be prepared i n German; 2. be wri tten i n a cl ear, s uccinct and comprehensible manner, a voiding the use of jargon a nd a voiding technical terms where everyday words can be used instead; 3. be coherent, a nd terms a nd designations must be used consistently throughout the i nformation; 4. be presented in a way that is easy to read; 5. be regularly updated. (2) The i nformation may not be misleading. (3) The prescribed information must be made available free of charge. (4) The requirements of this segment do not apply to pension schemes that are operated by the Pensionskasse on a cros s -border basis within the meaning of section 241. Section 234l General information on a pension scheme (1) For every pension scheme that is operated, the Pensionskasse must provide the members and beneficiaries with general i nformation a bout that pension scheme. (2) The Pensionskasse must inform the members and beneficiaries within a reasonable ti me of a ny relevant i nformation rega rding changes to the pension scheme rules. (3) In the event of significant changes to the methods and assumptions used to calculate the technical provisions, the Pensionskasse mus t provide an explanation of the associated impact on the members a nd beneficiaries within a rea sonable ti me. Section 234m Information to be provided to members at the beginning of the pension arrangement (1) The Pensionskasse must provide members with the following i nformation a t the beginning of the pension a rra ngement: 1. the na me, address, l egal form and registered office of the Pensionskasse, 2. the terms and conditions of the pension a rrangement, including premium ra te terms as well as the law a pplicable to the contract, 3. deta ils on the term of the pension a rrangement, 4. general i nformation on the ta x treatment applicable to this type of pension arrangement, 5. the fi nancial, technical and other risks related to the pension scheme, as well as the nature and distribution of these ri s ks, and – Page 128 of 207 – 6. general i nformation a bout the extent to which the pension benefits payable are subject to compulsory contributions to s ta tutory health and long-term ca re insurance. (2) Members who are enrolled a utomatically i n the pension scheme must additionally receive the following information: 1. a ny rel evant options available to them, including investment options, 2. the releva nt features of the pension scheme including the kind of benefits, 3. i nformation on whether a nd how envi ronmental, climate, s ocial a nd corporate governance factors a re considered in the i nvestment a pproach, 4. where further i nformation is available. Section 234n Information to be provided before enrolment in the pension scheme The Pensionskasse must ensure that members who are not a utomatically enrolled i n the pension scheme are provided wi th the i nformation s pecified in section 234m (2) before they join that pension s cheme. Section 234o Information to be provided to members during the pre-retirement phase (1) 1Pensionskassen mus t provide the members with all relevant i nformation a bout the status of their pension a rra ngement at l east every twelve months. 2The information must be summarised i n a concise form under the heading “Pens ion Benefit Statement”. (2) The Pension Benefit Statement must consider the s pecific nature of the statutory pension systems a nd the labour, s ocial and tax l aw. (3) 1The Pensionskasse must i nclude in the Pension Benefit Statement a projection of the retirement benefits until the expected retirement a ge. 2It must i nclude a cl ear disclaimer that 1. the i nformation i n the projection is not guaranteed a nd that the final va lue of the retirement benefits received may di ffer from the projection, and 2. the member cannot base a ny claims a gainst the Pensionskasse on the projection. (4) Any ma terial change to the information contained in the Pension Benefit Statement compared with the i nformation i n the previous Pension Benefit Statement must be clearly i ndicated. (5) 1The Pensionskasse must i nform the members in good ti me before the date from which retirement benefits are expected to be paid of the form i n which retirement benefits ca n be paid. 2It must also provide the member with this i nformation on request. Section 234p Information to be given to beneficiaries (1) The Pensionskasse must notify the beneficiary regularly a bout the benefits due a nd any payout options for the benefits. (2) The Pensionskasse must inform the beneficiary a bout a ny reduction in the l evel of benefits due 1. wi thout undue delay after a fi nal decision has been taking resulting in the reduction, and 2. three months before the date on which the reduction will take effect. (3) When a significant level of investment risk is borne by beneficiaries in the payout phase, they must receive a ppropriate i nformation regularly from the Pensionskasse. – Page 129 of 207 – Part 5 Authorisations to issue statutory orders Section 235 Authorisation to issue statutory orders regarding financial supervision (1) The Federal Ministry of Finance is authorised to enact requirements for Pensionskassen by way of a statutory order coveri ng the following: 1. the ca lculation and the amount of the solvency capital requirement; 2. the releva nt amount for the minimum capital requirement a nd the calculation of this amount; 3. the method for ca lculating own funds not reported on the balance sheet and the extent to which these own funds a re eligible for inclusion i n the solvency ca pital requirement a nd the minimum capital requirement; 4. one or more maximum values for the technical interest ra te in the case of insurance contracts with a guaranteed ra te of return; 5. further requirements for determining the discount rate i n accordance with section 341f (2) of the German Commercial Code; 6. the ma ximum amounts for zillmerising; 7. the a ctuarial assumptions a nd the methods to be used for determining the premium reserve; 8. i n the case of Pensionskassen i n which both the employee a nd the employer are subject to a contractual obligation to pa y premiums for l ife i nsurance contracts that are not based on any approved business plan, provisions s pecifying how the employee’s share of surplus of revenues over and above the technical i nterest ra te i s to be determined and specifyi ng a n appropriate level for the employee’s share i n this i ncome within the meaning of s ection 140 (2); 9. the a ctuarial methods for calculating the premiums including premium changes and the technical provisions within the meaning of sections 341e to 341h of the German Commercial Code, in particular the premium reserve; i n the ca s e of Pensionskassen with collective funding for life insurance contracts not based on a ny a pproved business pl a n, in particular how the relevant assumptions relating to mortality, the dependence of the risk on a ge a nd gender and the probability of ca ncellation, assumptions regarding the composition of existing and new business, the i nterest ra te, including the safety l oading, and the principles for a ssessing other l oadings are to be ta ken i nto a ccount; 10. qua litative a nd quantitative investment principles for the guarantee assets in a ddition to section 124 (1) sentences 1 a nd 2 number 1 (a ), numbers 2, 3, 5 to 8 a nd section 234h (1) to (3) in order to ensure matching a nd to ensure tha t the relevant business plan can be fulfilled at all times, whereby the types of i nvestment s pecified i n section 215 (2) s entence 1 nos. 1 to 7 a nd other types of investment authorised by this regulation, together with the s pecifications i n the business plan regarding i nvestment risk a nd the bearer of such risk, must be ta ken i nto a ccount; provisions governing limitations on i nvestments i n the sponsoring undertaking; 11. the content of the audit reports under section 35 (1) i f required to enable the s upervisory a uthority to fulfil i ts duti es, in particular to enable the supervisory authority to obtain standardised documents so that it ca n assess the i ns urance business conducted by the Pensionskassen; 12. the content, form and number of copies of the solvency statement to be prepared i n a ccordance with section 234g (4), the content, form a nd number of copies of the report on i nvested assets and the timeframe for the submission of these documents to the supervisory authority; a nd 13. the methods to be used for data tra nsmission, the data formats to be used a nd the required data quality. (2) 1Thi s power may be delegated by statutory order to BaFin. 2Statutory orders i n accordance with subsection (1) s entence 1 a nd i n accordance with sentence 1 a bove do not require the consent of the Bundesrat. 3Statutory orders in a ccordance with s ubsection 1 s entence 1 nos. 9 a nd 11 a nd in a ccordance with sentence 1 where they i nclude the power under subsection 1 s entence 1 nos. 9 a nd 11 must be issued i n consultation with the Federal Mi nistry of Justice and Cons umer Protection. – Page 130 of 207 – Section 235a Power to issue statutory orders on the information requirements 1 For Pensionskassen tha t are not subject to supervision by the supervisory a uthorities of the federal s tates, the Federal Mi nistry of Finance is authorised to enact requirements by way of a s tatutory order, with the consent of the Federal Mi nistry of La bour and Social Affairs, covering the following: 1. the content, s tructure a nd design of the information to be provided under section 234l (1), 2. the content, s tructure a nd format of the Pension Benefit Statement under s ection 234o (1) to (3), 3. the content a nd frequency of the information to be given under section 234p (1) a nd (3), 4. the i nformation to be provided in a ddition to the information specified in s ection 234m (1) or (2) at the beginning of the pension arrangement, 5. the a dditional i nformation to be provi ded to the member i n the case of s ection 234n before enrolment i n the pension s cheme, 6. the a dditional i nformation the Pensionskasse has to provide to the member or beneficiary on request, 7. how i nformation is to be provided to the member of beneficiary, and 8. the determination of the assumptions on which the projections under section 234o (3) a re to be based. 2 Sta tutory orders under s entence 1 do not require the consent of the Bundesrat. Chapter 2 Pensionsfonds Section 236 Pensionsfonds (1) 1A Pensionsfonds wi thin the meaning of this Act i s a scheme with legal personality that 1. offers funded occupational retirement provision for one or more employers for the benefit of employees; 2. i s not permitted to guarantee, in the way that an insurance contract guarantees, the level of benefits or the l evel of future contributions required to provide a given level of benefits in respect of all benefit cases provided for; 3. a ffords employees a n independent entitlement to payment of benefits from the Pensionsfonds; and 4. i s obliged to provide the retirement benefits as a l ife a nnuity or one-off lump sum. 2An a nnuity within the meaning of sentence 1 no. 4 ca n be combined with a partial or full lump-sum option. 3Pensionsfonds ma y a lso make funeral expenses payments to survi ving dependants, where the funeral expenses a re l i mited to the level of normal burial costs. (2) 1Pensionsfonds ma y provide retirement benefits other than those specified in s ubsection (1) sentence 1 no. 4 a bove, provi ded contribution payments by the employer are to be continued during the payout phase. 2No fixed date may be s et for the end of contribution payments. 3Sentence 1 does not a pply for commitments within the meaning of section 1 (2) no. 2 of the German Occupational Pensions Act. (3) 1In the case of commitments as defined in section 1 (2) number 2 of the Occupational Pensions Act, Pensionsfonds ma y ma ke lifetime payments as retirement benefits by way of derogation from subsection (1) s entence 1 number 4 i f 1. the res ponsible collective bargaining partners agree, 2. the pension plan provides for a lifetime payment a nd a minimum level of that lifetime payment (minimum level) for pa yment of the pension ca pital to be provided under section 1 (2) number 2 of the Occupational Pensions Act, 3. the s cheduled utilisation of the pension capital and the a ttributable interest and income for ongoing benefit pa yments is defined, a nd 4. the Pensionsfonds provides evidence of the commitment of the employer to guarantee the provision of the – Page 131 of 207 – mi nimum l evel, and the a pproval of the collective bargaining partners under number 1 has been submitted to the s upervisory a uthority. 2 Subs ection (2) sentence 2 a pplies, with the necessary modifications. (4) For the purposes of this provision, “employees” also refers to former employees as well as persons falling within the s cope of section 17 (1) s entence 2 of the Occupational Pensions Act. (5) The operation of Pensionsfonds must be authorised by the supervisory a uthority. (6) 1In the case of subsection (3), the Federal Ministry of Finance may, by way of a s tatutory order, adopt more detailed requirements on 1. pa yout limits on the Pensionsfonds if the employer i s required to provide the minimum l evel, 2. provi sions for calculating a nd a djusting the lifetime payment a nd for calculating the minimum level, 3. the form a nd content of the commitment by the employer to guarantee the provision of the minimum l evel, and the evi dence of this commitment to be provi ded. 2 Thi s a uthorisation may be delegated by statutory order to BaFin. 3BaFin will enact the provisions i n consultation with the i nsurance supervisory authorities of the federal states. 4Statutory orders under sentences 1 to 3 do not require the cons ent of the Bundesrat. Section 237 Applicable provisions (1) 1The requirements for life insurance undertakings that a re not Pensionskassen a pply to Pensionsfonds, with the necessary modifications, unless specified otherwise in this part. 2In this case, 1. the pension plans replace the general i nsurance policy conditions, 2. the i nterests of the members and beneficiaries replace the interests of the i nsureds, 3. the pension arrangements replace insurance relationships. 3Pens ion plans a re the terms and conditions a pplicable to the scheduled payment of pension benefits under the business pl a n. (2) Secti on 8 (2), s ection 10 (4), section 13 (2), section 125 (5) a nd (6), section 139 (3) a nd (4), sections 210, 232 a nd 233, 234 (3) s entences 1, 2 a nd 4 a nd subsections (5) and (6), sections 234i a nd 234k (1), sections 235 a nd 312 (4) s entences 1, 3 a nd 4 a nd subsection (5) sentence 2, a nd section 313 do not a pply. (3) 1The a uthorisation to conduct business may only be issued to s tock corporations, including European companies a nd mutual Pensionsfonds. 2The requirements for mutual s ocieties apply to mutual Pensionsfonds, with the necessary modi fications, unless stipulated otherwise. (4) 1In s ection 140 (2), the statutory order enacted on the basis of s ection 240 s entence 1 number 7 replaces the s ta tutory order enacted on the basis of section 145 (2). 2In section 141 (5) s entence 1 numbers 1 a nd 2, the principles of the s tatutory order enacted on the basis of s ection 240 s entence 1 numbers 10 to 12 replace the principles of the s ta tutory order enacted on the basis of section 88 (3). Section 238 Financial adequacy (1) 1Subs ections (2) to (5) apply to Pensionsfonds i nstead of section 234g. 2In section 234f (2) s entence 2, s ubsection (4) repl aces s ection 234g (3). (2) Pensionsfonds mus t at all times have own funds equivalent to at l east the solvency capital requirement, which is determined on the basis of the entire volume of business. (3) 1The s olvency ca pital requirement is determined by the statutory order relating to section 240 s entence 1 number 9. – Page 132 of 207 – 2 One-third of the solvency ca pital requirement is deemed to be the minimum capital requirement. (4) The s tatutory order enacted on the basis of section 240 sentence 1 number 9 governs the calculation of own funds. (5) Pensionsfonds mus t submit a calculation of the s olvency ca pital requirement and evidence of own funds to the s upervisory a uthority each year. Section 239 Investments (1) 1Pensionsfonds must establish guarantee assets, taking i nto a ccount each of the pension plans. 2Pensionsfonds must ens ure that the guarantee assets are i nvested in manner that reflects the nature and duration of the retirement provi sion to be provided ta king i nto a ccount the terms of each pension plan. (2) 1Pensionsfonds mus t submit to the s upervisory a uthority a s tatement of their i nvestment policy principles 1. a t the l atest four months after the end of a financial year a nd 2. wi thout undue delay after any significant change i n the investment policy. 2The s tatement must include a description of the risk assessment and risk management procedures and of the strategy i n relation to each pension plan, i n particular the allocation of assets according to the type a nd duration of retirement benefits. 3It must also address the question of how the investment policy ta kes environment, social a nd governance fa ctors i nto a ccount. 4Pensionsfonds must make the statement publicly a vailable. 5The s tatement must be reviewed a t l east every three years. (3) 1The s atisfaction of the obligations under a pension plan at all ti mes may s till be deemed to be guaranteed even if the pl a n is temporarily underfunded, provided that the deficit does not exceed 5 per cent of the am ount of the technical provi sions within the meaning of s ections 341e to 341h of the German Commercial Code and provided that the interests of the beneficiaries are protected. 2In s uch cases, the employer a nd the Pensionsfonds must a gree a plan to re -establish the cover provided by the guarantee assets and this plan requires the approval of the s upervisory a uthority. 3The plan mus t satisfy the following conditions: 1. the plan must explain how the level of the assets required to cover the technical provisions within the meaning of s ections 341e to 341h of the German Commercial Code in full is to be a chieved within a reasonable period; this peri od must not exceed three years; and 2. the preparation of the plan must take into account the special situation of the Pensionsfonds, in particular the s tructure of its assets and liabilities, i ts ri sk profile, i ts liquidity plan, the a ge profile of the beneficiaries or, i f a ppropriate, the fact that it is a newly created s ystem. 4The s upervisory authority must gra nt approval if the employer furnishes a guarantee or indemnity from a suitable credit i ns titution or provides an arrangement i n some other a ppropriate form, ensuring that the additional funding required to cover the technical provisions within the meaning of sections 341e to 341h of the German Commercial Code will be met i n full. 5The Pensionsfonds must immediately notify the Pensions Insurance Association (Pensionssicherungsverein) of the a greement. (4) 1In the case of pension plans i n accordance with section 236 (2), s ubsection (3) above applies subject to the proviso tha t the deficit does not exceed 10 per cent of the a mount of the technical provisions within the meaning of s ections 341e to 341h of the German Commercial Code. 2The period for the restoration of full coverage of the provisions may be extended by the supervisory authority; this period must not exceed ten years i n total. Section 240 Authorisation to issue statutory orders 1For Pensionsfonds tha t are not subject to supervision by the supervisory a u thorities of the federal s tates, the Federal Mi nistry of Finance is authorised to issue provisions by s tatutory order covering the following: 1. the wording of the actuarial certification, the content, s cope and submission deadline for the disclosure repo rt under section 141 (5) s entence 1 no. 2 a nd the content, scope and submission deadline for the report under s ection 141 (5) s entence 1 no. 4, i n each case in conjunction with section 237 (1); – Page 133 of 207 – 2. bookkeeping, the content, form a nd number of copies of the internal report to be submitted to the supervisory a uthority, comprising the balance s heet broken down for s upervisory purposes, income statement a nd s pecial notes to the balance sheet a nd i ncome statement to the extent required for s upervisory purposes in accordance wi th this Act; 3. the content, form and number of copies of the internal i nterim report to be submitted to the supervisory a uthority qua rterly, comprising a compilation of the latest accounting a nd portfolio data a nd disclosures regarding the number of claims to the extent required for s upervisory purposes in a ccordance with this Act; 4. the content of the audit reports under section 341k of the German Commercial Code to the extent required for s upervisory purposes in a ccordance with this Act, i n particular to enable the competent authority to obtain s ta ndardised documents so that i t can assess the business conducted by the Pensionsfonds; 5. the content of the audit reports under section 35 (1) s entence 1 i f required to enable the supervisory a uthority to ful fil its duties, in particular to enable the supervisory a uthority to obtain standardised documents s o that i t can a s sess the business conducted by the Pensionsfonds; 6. the methods to be used for data tra nsmission, the data formats to be used a nd the required data quality; 7. the a ddition to the provision for bonuses under section 145 (2) i n conjunction with section 237 (1); 8. qua litative a nd quantitative investment principles for the guarantee assets in a ddition to section 124 (1) sentences 1 a nd 2 number 1 (a ), numbers 2, 3, 5 to 8 a nd section 234h (1) to (3) in order to ensure matching a nd to ensure tha t the relevant pension plan can be fulfilled at all times, whereby the types of i nvestment s pecified i n section 215 (2) s entence 1 nos. 1 to 7 a nd other types of investment authorised by this regulation, together with the s pecifications i n the pension plan regarding i nvestment risk and the bearer of such risk, must be ta ken i nto a ccount; provisions governing limitations on i nvestments i n the sponsoring undertaking; Arti cle 18 of Directive 2003/41/EU mus t be observed; 9. the ca lculation and the amount of the solvency capital requirement, the amount of the minimum ca pital requirement relevant for Pensionsfonds and associated authorisation powers, including the procedure; the items deemed to form part of own funds within the meaning of s ection 238 (2); provisions specifying that reports on the s ol vency ca pital requirement and own funds must be submitted to the supervisory a uthority a nd s pecifying th e form, content and deadline for the submission of such reports to the s upervisory a uthority; 10. ma xi mum va lues for the technical i nterest ra te in the case of contracts with a guaranteed ra te of return; 11. further requirements for determining the discount rate i n accordance with section 341f (2) of the German Commercial Code; a nd 12. the a ctuarial assumptions a nd the methods to be used for determining the premium reserve. 2Thi s a uthorisation may be delegated by statutory order to BaFin. 3Statutory orders under s entences 1 a nd 2 do not require the consent of the Bundesrat. 4Statutory orders i n accordance with sentence 1 nos. 4 a nd 10 to 12 a nd in a ccordance with s entence 2 where they i nclude the powers under s entence 1 nos. 4 a nd 10 to 12 mus t be issued i n cons ultation with the Federal Ministry of Justice and Consumer Protection. Chapter 3 Cross-border business activities of institutions for occupational retirement provision and cross -border transfer of portfolios Section 241 Cross-border business activities (1) 1Cros s -border business activities of an i nstitution for occupational retirement provision mean that it operates a pension s cheme where the host country is not the same member s tate or EEA s ignatory s tate as the institution’s home s ta te. (2) The host country means the member state or EEA signatory s tate whose s ocial and labour law relevant to the fi eld of occupational pension schemes is applicable to the relationship between the sponsoring undertaking and its members or beneficiaries; (2) 1Secti ons 57 to 60 do not apply to Pensionskassen a nd Pensionsfonds. 2Sections 61 to 66 do not apply to institutions for occupational retirement provision whose home country i s another member state or EEA signatory s tate. – Page 134 of 207 – Section 242 Cross-border business activities of Pensionskassen and Pensionsfonds (1) 1Pensionskassen a nd Pensionsfonds must notify their i ntention to ca rry out occupational pension s chemes for a s ponsoring undertaking through cross-border business a ctivi ties to the supervisory a uthority. 2They must provide the fol lowing information: 1. the na me of the host country, 2. the na me a nd the location of the main administration of the s ponsoring undertaking a nd 3. the ma in characteristics of the pension scheme to be operated for the sponsoring undertaking. 3 The s upervisory a uthority must examine whether the proposed business activities are lawful and whether the a dministrative structure, the financial situation and the good repute and professional qualifications of the managers of the proposed cross-border business activities are appropriate. 4It ca n require the establishment of s egregated guarantee a s sets for the pension scheme to be operated. 5Section 232 (1) nos. 2 a nd 3 do not a pply to the cross-border business a cti vi ties of a Pensionskasse. 6Section 236 (1) s entence 1 nos. 2 to 4 a nd sentence 2 a nd s ubsection (2) and section 239 (3) a nd (4) do not a pply to i n the case of a Pensionsfonds. (2) 1As s oon as all the i nformation under subsection (1) s entences 1 a nd 2 has been received, the supervisory a uthority mus t decide within three months if the conditions under subsection (1) s entence 3 have been fulfilled. 2If the conditions ha ve been fulfilled, i t must communicate the i nformation under subsection (1) s entence 2 to the competent authorities of the host country a nd must i nform the Pensionskasse or Pensionsfonds that those a uthorities have been i nformed. 3If not, i t must prohibit the Pensionskasse or Pensionsfonds from commencing the cross-border business activities. (3) 1In the case of subsection (2) sentence 2, the supervisory a uthority communicates to the Pensionskasse or Pensionsfonds the i nformation received from the competent authorities of the host country relating to 1. the requirements of social and labour l aw releva nt to the field of occupational pension schemes under that a pply to the pension scheme operated for the sponsoring undertaking, a nd 2. the requirements of the host country that have been enacted under Title IV of Directive (EU) 2016/2341. 2 Pensionskassen a nd Pensionsfonds are entitled to start carryi ng out the cross-border business a ctivities in a ccordance wi th the requirements referred to i n sentence 1 numbers 1 a nd 2 a s soon as they have received the communication from the s upervisory a uthority under s entence 1, but at the latest six months a fter they have received the communication under subsection (2) s entence 2. (4) If the s upervisory a uthority is informed by the competent a uthorities i n the host country of a ny significant changes in the requirements referred to in subsection (3) sentence 1 numbers 1 a nd 2, the supervisory a uthority must communicate this i nformation to the Pensionskasse or Pensionsfonds. (5) 1In coordination with the competent a uthorities in the host country, the supervisory a uthority must ta ke the necessary measures to ensure that the Pensionskasse or Pensionsfonds puts a stop to the breaches of the requirements s et out in s ubsection (3) sentence 1 numbers 1 a nd 2 detected by the competent authorities in the host country. 2The s upervisory a uthority may prohibit or restrict the cross-border business activities if the Pensionskasse or Pensionsfonds does not comply with the requirements under s ubsection (3) sentence 1 number 1. (6) 1In the case of Pensionskassen and Pensionsfonds that are subject to supervision a t federal state l evel, the competent s ta te s upervisory a uthority must inform BaFin of a notification under subsection (1) s entences 1 a nd 2. 2Upon request, Ba Fin must provide the state supervisory a uthority with assistance in i mplementing the procedure under subsections (2) a nd (3) and in implementing measures under s ubsection (5). (7) 1The s upervisory a uthority must inform the European Insurance and Occupational Pensions Authority of the member s ta tes or EEA signatory s tates in which the Pensionskasse or Pensionsfonds is operating. 2It must notify EIOPA on an ongoing basis of any changes i n this information. Section 243 Cross-border business activities of institutions whose home country is another member state or EEA – Page 135 of 207 – signatory state (1) Subsections (2) to (6) also apply to pension schemes 1. tha t a re operated by a n i nstitution whose home country is a nother member s tate or EEA s ignatory s tate and is a uthorised within the meaning of Article 9(1) of Directive (EU) 2016/2341, as part of cross -border business a ctivi ties for the s ponsoring undertaking, and 2. for whi ch Germany is the host country. (2) 1If Ba Fin has received from the competent authorities of the i nstitution’s home country the information referred to in Arti cl e 11(3) s entence 2 of Directive (EU) 2016/2341, i t must inform those authorities within six weeks of 1. the requirements of social and labour l aw releva nt to the field of occupational pension schemes that must be complied with if pension schemes a re operated in Germany for a s ponsoring undertaking, a nd 2. the requirements that have been enacted under Title IV of Directive (EU) 2016/2341. 2 The i nstitution i s entitled to start carryi ng out the cross-border business a ctivities in accordance with the requirements referred to in sentence 1 numbers 1 a nd 2 a s soon as it has received from the competent authorities of the home country the information provi ded by BaFin, but at the latest a fter the end of the period stipulated in sentence 1. (3) Ba Fin must determine the vehicle, within the meaning of section 1b (2) to (4) of the German Occupational Pensions Act, under which the i nstitution is to be classified a nd must i nform both the institution and the Pensions Insurance As s ociation. (4) Ba Fin must inform the competent a uthorities of the home country of any s ignificant changes in the requirements referred to in subsection (2) sentence 1 numbers 1 a nd 2. (5) 1Ba Fin must monitor on an ongoing basis whether the institution complies with requirements referred to in s ubsection (2) sentence 1 numbers 1 a nd 2. 2In the event of a ny breaches of those requirements, i t must notify the competent authorities of the home country without undue delay. 3If the i nstitution persists i n breaching the requirements, BaFin may, after informing the competent a uthorities of the home country, i tself take a ppropriate mea sures to prevent or penalise further breaches. 4If no other solution can be considered, i t may prohibit the institution from ca rryi ng out further a ctivities in Germany for the sponsoring undertaking. (6) For the purposes of subsection (5) sentence 1, s ection 305 (1) number 1, (2) numbers 1 a nd 2 a nd (5) apply, with the necessary modifications. (7) At the request of the supervisory authority of the home country, BaFin may prohibit the free disposal of assets held by a cus todian or depositary l ocated i n Germany. Section 243a Transfer of portfolios to a Pensionskasse or Pensionsfonds (1) 1Any contra ct by which all or part of the portfolio of pension arrangements of a pension scheme operated by an i ns titution for occupational retirement provision whose home country is not Germany will be transferred to a Pensionskasse or Pensionsfonds requires the a pproval of the supervisory authority. 2The a pplication for approval must be s ubmitted by the Pensionskasse or Pensionsfonds. 3The supervisory authority must notify the application to the competent authority i n the institution’s home country without undue delay. (2) The contract under s ubsection (1) sentence 1 must ensure that the costs of the transfer are not i ncurred by the i ncumbent members and beneficiaries of the Pensionskasse or Pensionsfonds or by the remaining members and beneficiaries of the institution. (3) The tra nsfer must be approved by 1. a ma jority of members and a majority of the beneficiaries concerned or by a majority of their representatives, where the releva nt majority is defined by a pplicable national law, and 2. the i nstitution’s sponsoring undertaking, if its approval is required. – Page 136 of 207 – (4) The a pplication under s ubsection (1) sentence 2 must contain 1. the wri tten a greement between the institution a nd the Pensionskasse or Pensionsfonds setting out the conditions of the tra nsfer; 2. a description of the main characteristics of the pension s cheme of the portfolio to be tra nsferred; 3. a description of the liabilities or technical provisions to be tra nsferred, and other rights and obligations, as well as a s sociated assets or cash equivalent to those assets; 4. for the i nstitution a nd the Pensionskasse or Pensionsfonds i n each case information on the a ) na me, b) l oca tion of the main administration, c) home country; 5. the na me a nd the main administration of the i nstitution’s s ponsoring undertaking concerned; 6. evi dence of the approval under s ubsection (3); 7. the na mes of the member states and EEA s ignatory s tates whose social a nd labour law relevant to the field of occupational pension provision is a pplicable to the pension scheme of the portfolio to be transferred. (5) 1Once the supervisory a uthority has received the application under subsection (1) sentence 2, i t must assess whether 1. the i nformation required by s ubsection (4) has been provided, 2. the following a re appropriate to the transfer a pplied for: a ) the a dministrative s tructure a nd the financial situation of the Pensionskasse or Pensionsfonds, b) the good repute a nd professional qualifications of the managers of the Pensionskasse or Pensionsfonds, 3. the l ong-term interests of the members and beneficiaries a ) of the Pensionskasse or Pensionsfonds, b) the portfolio to be transferred a re a dequately protected during and a fter the tra nsfer, 4. where the tra nsfer results in a cross-border business a ctivity of the Pensionskasse or Pensionsfonds, the technical provi sions of the Pensionskasse or Pensionsfonds a re fully funded a t the date of the tra nsfer, a nd 5. the a ssets to be tra nsferred a re sufficient a nd appropriate to cover the liabilities, technical provisions and other obl igations and rights to be transferred, in accordance with the rules applicable to Pensionskassen and Pensionsfonds. 2The a ssessment under sentence 1 is designed to establish whether the i nterests of the members and beneficiaries are protected. (6) 1Ba s ed on the assessment under subsection (5), the supervisory a uthority must decide on an a pplication under s ubsection (1) sentence 2 wi thin three months. 2It must notify the competent authority of the i nstitution’s home country a bout the decision within two weeks. 3No authorisation ca n be issued if that authority has not a pproved the transfer. (7) If the a pplication under subsection (1) s entence 2 i s approved, section 13 (5) a nd (7) s entences 1 a nd 2 a pply. (8) 1If the tra nsfer results i n a cross-border business a ctivity of the Pensionskasse or Pensionsfonds, section 242 (1) to 3 does not a pply. 2The supervisory a uthority must communicate to the Pensionskasse or Pensionsfonds within one week the i nformation a bout the requirements referred to in section 242 (3) s entence 1 numbers 1 a nd 2 that i t received from the competent authority of the home country on the occasion of the transfer. (9) Pensionskasse or Pensionsfonds ca n operate the tra nsferred pension s cheme, – Page 137 of 207 – 1. a s s oon as i t has received the approval under s ubsection (1) sentence 1, unless the transfer results in a cross-border bus iness a ctivity, 2. a s s oon as i t has received the approval under s ubsection (1) sentence 1 a nd the information referred to i n s ubsection 8 s entence 2 from the supervisory a uthority, but at the latest s even weeks a fter receipt of the i nformation. Section 243b Transfer of portfolios to an institution whose home country is another member state or EEA signatory state (1) 1Any contra ct by which all or part of the portfolio of pension arrangements of a pension scheme operated by a Pensionskasse or Pensionsfonds i s to be transferred to an institution whose home country i s another member state or EEA s i gnatory s tate requires the approval of the competent a uthority of the home country. 2The a pplication for approval mus t be s ubmitted by the i nstitution. (2) The Pensionskasse or Pensionsfonds must ensure that the costs of the tra nsfer a re not incurred by the remaining members and beneficiaries of the Pensionskasse or Pensionsfonds. (3) 1The tra nsfer must be approved by 1. a ma jority of a ) three-quarters of each of the members and beneficiaries concerned of the pension scheme or b) three-quarters of the members of the representative body of the members a nd beneficiaries i f a representative body i s provi ded for by the articles of association of the Pensionskasse or Pensionsfonds, a nd 2. the s ponsoring undertaking of the Pensionskasse or Pensionsfonds if its interests are a ffected. 2 The Pensionskasse or Pensionsfonds must notify the members and beneficiaries concerned or the members of the representative body referred to i n sentence 1 number 1 (b) of the conditions a pplying to the tra nsfer i n good ti me before the institution s ubmits the application under s ubsection (1) sentence 2. (4) 1Once the supervisory body has received from the competent authority of the home country the application under s ubsection (1) sentence 2, i t must assess whether 1. the l ong-term interests of the remaining members and beneficiaries of the Pensionskasse or Pensionsfonds are a dequately protected; 2. the i ndividual entitlements of the members and beneficiaries of the portfolio to be tra nsferred a nd the remaining portfolio of the Pensionskasse or Pensionsfonds a re at least the same after the transfer as before i t; 3. the a ssets to be tra nsferred a re sufficient a nd appropriate to cover the liabilities, technical provisions and other obl igations and rights to be transferred in accordance with the provisions i n Germany. 2The a ssessment under sentence 1 is designed to establish whether the i nterests of the members and beneficiaries are protected. 3The s upervisory body must notify the competent authority of the home country within e ight weeks whether i t a pproves the transfer or not based on the assessment under s entence 1. (5) 1If the tra nsfer results i n a cross-border business a ctivity of the i nstitution, the supervisory body must inform the competent authority of the institution’s home country of the requirements referred to i n section 243 (2) sentence 1 numbers 1 a nd 2. 2It must communicate the information within four weeks of being notified by the competent authority of the a pproval under s ubsection (1) sentence 1. 3Section 243 (2) does not apply. Section 244 (Repealed) Part 4a Pure defined contribution schemes in occupational retirement provision – Page 138 of 207 – Section 244a Scope (1) In ca ses where pure defined contribution schemes under s ection 1 (2) number 2a of the Occupational Pensions Act a re i mplemented, Pensionsfonds, Pensionskassen and other life insurance undertakings must comply with the requirements of this part. (2) The provisions of this Act a pplicable to Pensionsfonds, Pensionskassen a nd other l ife i nsurance undertakings only a pply to the extent that this part does not contain a ny provisions to the contrary. Section 244b Obligations (1) Pensionsfonds, Pensionskassen a nd other life insurance undertakings may only i mplement pure defined contribution s chemes if 1. they do not incur any obligations containing guaranteed benefits, 2. the general insurance policy conditions or pension plans provide for a l ifetime payment as the retirement benefit a nd 3. i t i s stipulated that the s cheduled attributable pension ca pital and the attributable interest and income will be used for s cheduled ongoing benefits. (2) Pensionskassen a nd other l ife i nsurance undertakings require a uthorisation for the cl ass referred to in number 21 of Annex 1. Section 244c Guarantee assets Ta ki ng i nto a ccount the relevant collective a greements, 1. s egregated guarantee assets must be established i n the case of a Pensionsfonds and 2. a s egregated investment portfolio within the meaning of section 125 (5) must be established in the case of a Pensionskasse or a nother life i nsurance undertaking. Section 244d Authorisation to issue statutory orders 1 The Federal Ministry of Finance is authorised, with the consent of the Federal Ministry of Labour a nd Social Affairs, to ena ct more detailed requirements relating to the following by wa y of a statutory order: 1. the ca lculation and adjustment of the lifetime payment, – Page 139 of 207 – 2. the ri sk management requirements, in particular with the goal of limiting the volatility of the l evel of the lifetime pa yments, 3. the i nformation required to be provi ded to the members a nd pensioners, and 4. reporting to the supervisory a uthority. 2 In consultation with the Federal Mi nistry of Labour and Social Affairs, this authorisation may be delegated to BaFin by a s ta tutory order. 3Statutory orders under sentences 1 a nd 2 do not require the consent of the Bundesrat. Part 5 Groups Chapter 1 Supervision of insurance undertakings in a group Section 245 Application of group-wide supervision (1) 1In a ddition to solo s upervision, insurance undertakings i n a group a re subject to s upervision a t group level in a ccordance with the provisions in this part of the Act. 2Unless otherwise specified in this part of the Act, the provisions for the s olo s upervision of insurance undertakings continue to a pply to i nsurance undertakings i n group. (2) The following a re subject to group-wide s upervision: 1. i ns urance undertakings that are a participating undertaking in a t least one i nsurance undertaking or in at least one thi rd country i nsurance undertaking; 2. i ns urance undertakings whose parent undertaking is a ) a n i nsurance holding company; or b) a mi xed financial holding company; or 1. a n i nsurance undertaking domiciled in member state or EEA signatory s tate or 3. i ns urance undertakings whose parent undertaking is a ) a n i nsurance holding company; or b) a mi xed financial holding company; or c) a n i nsurance undertaking c) a n i nsurance undertaking domiciled in a third country; a nd 4. i ns urance undertakings whose parent undertaking is a mixed-activity i nsurance holding company. (3) If the participating insurance undertaking or the i nsurance holding company or the mixed financial holding company domi ciled i n a member s tate or EEA signatory s tate is an a ffiliated undertaking of a supervised undertaking or a mixed fi nancial holding company that is subject to s upplementary s upervision in a ccordance with Arti cle 5 (2) of Directive 2002/87/EC of the European Pa rliament a nd of the Council of 16 December 2002 on the supplementary s upervision of credi t institutions, insurance undertakings a nd i nvestment firms in a financial conglomerate and amending Council Di rectives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC a nd Directives 98/78/EC and 2000/12/EC of the European Pa rliament a nd of the Council (OJ L 35 of 11 February 2003, pa ge 1) or i s itself such an undertaking or s uch a company, the group supervisory a uthority may, i n the cases specified i n subsection (2) nos. 1 a nd 2 a nd after consulting the other s upervisory a uthorities involved, d ecide not to monitor the risk concentration in a ccordance with s ection 273 or the i ntra-group transactions in accordance with section 274 or either of these two items – Page 140 of 207 – a t the l evel of the participating insurance undertaking, the i nsurance holding company or the mixed financial holding compa ny. (4) 1If a mi xed financial holding company, in particular in relation to risk-based supervision, i s subject to equivalent provi sions i n accordance with Directive 2009/138/EC a nd Directive 2002/87/EC, the group s upervisory a uthority may, a fter consulting the other supervisory authorities i nvolved, apply only the appropriate provisions in Directive 2002/87/EC a t the l evel of this mixed financial holding company. 2If the mixed financial holding company is s ubject to equivalent provisions in accordance with Directive 2009/138/EC a nd Directive 2006/48/EC, the group supervisory authority, i n consultation with the consolidating supervisory authority for the banking and investment services sectors, ma y only a pply the provisions of the Directive applicable to the most i mportant financial sector in the company i n a ccordance with Arti cle 3 (2) of Directive 2002/87/EC. 5. The provisions of this part do not apply i f a group of undertakings subject to insurance supervision a rises solely beca use of the inclusion of small insurance undertakings, funeral expenses funds, Pensionskassen or Pensionsfonds. Section 246 Scope of group-wide supervision (1) 1Group-wide supervision in accordance with section 245 does not include s olo supervision of a third country i ns urance undertaking, insurance holding company, mixed financial holding company or mixed -activity insurance holding compa ny. 2This is without prejudice to section 293. (2) 1The group supervisory a uthority ca n determine that an undertaking will not be included in the group-wide s upervision i n accordance with section 245 i f: 1. the undertaking is l ocated in a third country i n which there are legal i mpediments to the tra nsfer of the necessary i nformation; this is without prejudice to s ectio n 260; 2. the undertaking to be included is only of negligible interest i n relation to the objectives of group-wide s upervision; or 3. the i nclusion of the undertaking would be inappropriate or misleading i n relation to the objectives of group-wide s upervision. 2If anumber of undertakings in the same group could, i f they were each evaluated s eparately, be excluded from group - wi de s upervision i n accordance with sentence 1 no. 2, they should still nevertheless be included in the group-wide s upervision i f they a re no longer of negligible i nterest when vi ewed collectively. 3If the group supervisory authority bel ieves that an insurance undertaking s hould not be i ncluded i n group-wide supervision in accordance with sentence 1 no. 2 or 3, i t must consult the other s upervisory a uthorities involved before reaching a ny decision. (3) Al l the undertakings subject to group-wide s upervision i n the group are responsible for complying with the requirements in a ccordance with part 5 of this Act. (4) At the request of the supervisory authority that is the competent a uthority i n the relevant member state or EEA s i gnatory s tate for the supervision of a n insurance undertaking not included in group -wide supervision i n accordance wi th s ubsection (2) sentence 1 no. 2 or 3, the undertaking at the head of the group must provi de all the i nformation required by s uch competent a uthority to enable it to ca rry out its supervisory a ctivities. Section 247 Ultimate parent undertaking at the level of the member state or EEA signatory state (1) If the participating insurance undertaking specified i n section 245 (2) no. 1 or the insurance holding company or mi xed financial holding company s pecified i n section 245 (2) no. 2 i s itself a subsidiary of a nother insurance undertaking or of a nother i nsurance holding company or mixed financial holding company domiciled in a member s tate or EEA s i gnatory s tate, s ections 250 to 287 a nd 293 (1), s ection 298 (1) a nd (2), s ection 305 (1) no. 1 a nd section 306 (1) no. 1 onl y a pply a t the level of the ultimate parent undertaking that is a n insurance undertaking or an i nsurance holding compa ny or a mixed financial holding company domiciled in a member state or EEA signatory s tate. (2) If s uch ultimate parent undertaking that is a n insurance undertaking or a n i nsurance holding company or a mixed fi nancial holding company domiciled i n a member s tate or EEA signatory s tate, as referred to i n subsection (1), is a s ubsidiary of a n undertaking that i s subject to supplementary s upervision under Article 5 (2) of Directive 2002/87/EC, the group s upervisory a uthority may, a fter consulting the other s upervisory a uthorities i nvolved, decide not to monitor – Page 141 of 207 – the ri sk concentration i n accordance with section 273 or the intra-group tra nsactions i n accordance with section 274 or ei ther of these two i tems at the level of this ultimate parent undertaking. Section 248 Ultimate parent undertaking at national level (1) 1If the participating insurance undertaking s pecified i n section 245 (2) no. 1 or the insurance holding company or mi xed financial holding company s pecified i n section 245 (2) no. 2 i s domiciled in Germany a nd if the ultimate parent undertaking s pecified i n section 247 i s domiciled in another member state or EEA s ignatory state, the supervisory a uthority may, a fter consulting the group supervisory a uthority a nd this ultimate parent undertaking, order that the ul ti mate parent insurance undertaking a t national level or the ultimate parent undertaking a t national level that is an i ns urance holding company or a mixed financial holding company be subject to group-wide supervision. 2The supervisory a uthority must give the reasons for its decision i n this case to both the group s upervisory a uthority and the ultimate pa rent undertaking a t the l evel of the member state or EEA signatory s tate. 3The group supervisory a uthority must i nform the college of supervisors (section 283) i n a ccordance with Arti cle 248 (1a ) of Directive 2009/138/EC. 4Subject to s ubsections (2) to (6) below, sections 250 to 287, s ection 293 (1), s ection 298 (1) a nd (2), section 305 (1) no. 1 a nd s ection 306 (1) no. 1 a pply, with the necessary modifications. (2) The s upervisory a uthority may s pecify that the group -wide s upervision for the ultimate parent undertaking a t na ti onal level be limited to individual provisions in sections 250 to 275. (3) If the s upervisory a uthority applies sections 250 to 272 to the ultimate parent undertaking a t national level, the s upervisory a uthority will recognise as binding a nd apply the method that has been s elected by the group supervisory a uthority i n a ccordance with s ection 252 for the ultimate parent undertaking a t the level of the member state or EEA s i gnatory s tate referred to i n section 247. (4) 1If the supervisory a uthority a pplies sections 250 to 272 to the ultimate parent undertaking a t national level a nd the ul ti mate parent undertaking at the level of the member s tate or EEA s ignatory s tate specified i n section 247 has been a uthorised under s ection 262 or s ection 265 (5) to ca lculate the s olvency ca pital requirement for the group and the s ol vency ca pital requirement for the i nsurance undertakings in the group using a n internal model, the s upervisory a uthority will recognise this decision as binding and will implement such decision. 2If, i n such cases, the s upervisory a uthority believes that the i nternal model authorised a t the level of the member s tate or EEA signatory s tate is s i gnificantly different from the ri sk profile of the ultimate parent undertaking at national level, the supervisory authority ma y, i f the undertaking does not a dequately allay its concerns, demand in respect of the ultimate parent undertaking a t na ti onal level an a dd-on to the group s olvency ca pital requirement calculated using such model. 3If, i n exceptional ci rcumstances, such a capital add-on is not appropriate, the supervisory a uthority may request that the undertaking ca l culate its group s olvency ca pital requirement using the standard formula. 4The s upervisory a uthority must provide the rea sons for s uch decisions to both the undertaking a nd the group s upervisory a uthority. 5The group s upervisory a uthority must inform the college of supervisors in a ccordance with Arti cle 248 (1a ) of Directive 2009/138/EC. (5) If the s upervisory a uthority applies the provisions in sections 250 to 272 to the ultimate parent undertaking at na ti onal level, this undertaking ca nnot be authorised in accordance with the provisions of section 267 or s ection 272 to a pply s ections 269 a nd 270 to one of i ts s ubsidiaries. (6) An order i n accordance with subsection (1) above cannot be issued or upheld i f the ultimate parent undertaking a t na ti onal level is a s ubsidiary of the ultimate parent undertaking a t the level of the member state or EEA signatory s tate s pecified in section 247 a nd the latter has been authorised in a ccordance with the provisions of section 268 or s ection 270 to a pply sections 269 a nd 270 to the subsidiary. Section 249 Parent undertakings covering several member states or EEA signatory states (1) 1In conjunction with the supervisory a uthorities i n other member states or EEA s ignatory s tates that are the l ocation of a n a ffiliated undertaking that is also an ultimate parent undertaking at national l evel, the s upervisory a uthority may a gree to conduct group-wide supervision at the level of a s ubgroup spanning a number o f member s tates or EEA s i gnatory s tates. 2If the supervisory a uthorities concerned have entered i nto such an agreement, there is no group-wide s upervision a t the l evel of a n ultimate parent undertaking within the meaning of section 248 l ocated in a member state or EEA s i gnatory s tate other than that of the subgroup. – Page 142 of 207 – (2) Secti on 248 (2) to (6) a pplies, with the necessary modifications. Chapter 2 Financial position Segment 1 Group solvency Section 250 Supervision of group solvency (1) 1The s olvency of the group is s upervised i n accordance with subsections (2) and (3) below, sections 275 to 287, s ection 293 (1), s ection 298 (1) a nd (2), section 305 (1) no. 1 a nd section 306 (1) no. 1. 2As sets a nd liabilities are mea sured i n accordance with section 74. (2) In the case specified in section 245 (2) no. 1, the participating insurance undertakings must, at group l evel and at all ti mes, have eligible own funds i n an a mount equivalent to at least the s olvency ca pital requirement calculated in a ccordance with s ections 252 to 265. (3) In the case specified in section 245 (2) no. 2, the insurance undertakings i n a group must, a t group level a nd at a ll ti mes, have eligible own funds i n an a mount equivalent to at least the s olvency ca pital requirement calculated in a ccordance with s ection 266. (4) Secti ons 132 a nd 134 (1) to (6) a pply, with the necessary modifications. Section 251 Frequency of calculation (1) 1The s olvency ca pital requirement a t group level must be calculated at least once a year by the participati ng i ns urance undertakings, the i nsurance holding company or the mixed financial holding company. 2If the ultimate pa rti cipating undertaking is an insurance undertaking, this undertaking must report the data and results relevant to this ca l culation to the group s upervisory a uthority. 3If the ultimate participating undertaking is an insurance holding compa ny or a mixed financial holding company, this company must report the i nformation s pecified i n sentence 2 unless the group s upervisory a uthority has, a fter consulting the other s upervisory a uthorities i nvolved and the group, s pecified a n i nsurance undertaking as the undertaking with responsibility for s ubmitting the reports. (2) 1The i nsurance undertakings, the insurance holding company and the mixed financial holding company wi thin the mea ning of s ubsection (1) must continuously monitor the s olvency ca pital requirement for the group. 2If the group's risk profi le is significantly different from the assumptions on which the most recent reported solvency ca pital requirement for the group was based, the solvency capital requirement must be recalculated without delay a nd reported to the group s upervisory a uthority. 3If there is evidence to suggest that the risk profile of the group has changed significantly s i nce the most recently reported solvency ca pital requirement, the group s upervisory a uthority may demand that the s ol vency ca pital requirement be recalculated. Section 252 Determining the method (1) The s olvency of the group headed by a participating insurance undertaking must be calculated on the basis of cons olidated financial s tatements i n accordance with sections 261 to 264 (a ccounting consolidation method). – Page 143 of 207 – (2) The group supervisory a uthority ma y, after consulting the other s upervisory a uthorities invo lved a nd the group, s pecify the use of the method described in s ection 265 (deduction and aggregation method) or, i f the use of the a ccounting consolidation method a lone would be i nadequate, the use of a combination of the two methods. Section 253 Inclusion of the proportional share (1) The ca lculation of group solvency must take i nto a ccount the proportional share held by the participating undertakings in its affiliated undertakings. (2) The proportional s hare within the meaning of subsection (1) refers to the following: 1. when using the accounting consolidation method, the percentages used i n the preparation of the consolidated fi nancial statements; or 2. when using the deduction a nd a ggregation method, the share of subscribed ca pital directly or i ndirectly held by the pa rti cipating undertaking. (3) 1If the a ffiliated undertaking is a s ubsidiary whose own funds a re inadequate to comply wi th its solvency ca pital requirement, this solvency s hortfall must be included in the ca lculation i n full, regardl ess of the method used. 2In derogation of sentence 1, the group supervisory a uthority may permit the solvency s hortfall to be i ncluded on a pro ra ta ba sis if, in the opinion of the supervisory a uthorities involved, the liability of the parent undertaking i s limited exclusively to the s hare of capital held. (4) After consulting the other supervisory a uthorities i nvolved and the group, the group supervisory a uthority must s pecify the proportional share to be included if: 1. there a re no capital relationships between some of the undertakings in a group; 2. a s upervisory authority has decided that the direct or indirect holding of voting rights or ca pital i n an undertaking is a l so deemed to be a qualifying holding because, in the opinion of the supervisory a uthority, a significant influence is exercised over this undertaking i n practice; or 3. a s upervisory authority has decided that a n undertaking is the parent undertaking of a nother undertaking because, i n the opinion of the supervisory a uthority, the former e xercises a dominant influence over the latter i n practice. Section 254 Elimination of double use of eligible own funds (1) 1The double use of own funds eligible for the solvency ca pital requirement among the different i nsurance undertakings taken into account in the ca lculation of group of solvency is not permitted. 2The following a mounts a re di s regarded i n the calculation of group solvency unless otherwise provided for i n the methods described i n sections 261 to 265: 1. the va l ue of a ny asset of the participating undertaking that represents the financing of own funds eligible for the s ol vency ca pital requirement of one of i ts a ffiliated insurance undertakings; 2. the va l ue of a ny asset of a n insurance undertaking affiliated with the participating insurance undertaking that represents the financing of own funds eligible for the solvency ca pital requirement of this participating insurance undertaking; a nd 3. the va l ue of a ny asset of a n insurance undertaking affiliated with the participating insurance undertaking that represents the financing of own funds eligible for the solvency ca pital requirement of a ny other i nsurance undertaking a ffiliated with this participating insurance undertaking. – Page 144 of 207 – (2) The following may be i ncluded i n the calculation only in so far as they a re eligible for covering the solvency capital requirement of the a ffiliated undertaking concerned: 1. s urplus funds in a ccordance with Arti cle 91 (2) of Directive 2009/138/EC a rising in a n affiliated life i nsurance undertaking of the participating i nsurance undertaking for which the group solvency is calculated; a nd 2. a ny s ubscribed but unpaid ca pital of an i nsurance undertaking affiliated with the participating insurance undertaking for whi ch the group s olvency i s calculated. (3) In derogation of s ubsection (2) no. 2, the following are excluded from the ca lculation: 1. s ubscribed but unpaid ca pital that represents a potential liability for the participating insurance undertaking; 2. s ubscribed but unpaid ca pital of the participating insurance undertaking that represents a potential l iability for an a ffiliated insurance undertaking; and 3. s ubscribed but unpaid ca pital of an a ffiliated insurance undertaking that represents a potential liability for a nother i ns urance undertaking affiliated with the same participating insurance undertaking. (4) Where the s upervisory a uthorities involved consider that certain own funds eligible for the s olvency ca pital requirement of a n affiliated insurance undertaking other than those referred to in s ubsections (2) a nd (3) ca nnot effectively be made available to cover the solvency ca pital requirement of the participating i nsurance undertaking for whi ch the group solvency is calculated, those own funds may be included in the ca lculation only i n s o far as they a re el igible for covering the solvency ca pital requirement of the affiliated undertaking. (5) The s um of the own funds in a ccordance with s ubsections (2) to (4) must not exceed the solvency ca pital requirement of the a ffiliated insurance undertaking. (6) If group solvency is calculated, the additional eligible own funds of an affiliated i nsurance undertaking of the pa rti cipating insurance undertaking may only be included in the ca lculation i f the s upervisory a uthority responsible for s upervising this affiliated i nsurance undertaking has a uthorised these own funds. Section 255 Elimination of intra-group creation of capital (1) When calculating group s olvency, no account must be taken of a ny own funds eligible for the s olvency ca pital requirement arising out of reciprocal financing between the participating i nsurance undertaking and any of the fol lowing: 1. a n a ffiliated undertaking; 2. a pa rticipating undertaking; or 3. a nother a ffiliated undertaking of any of i ts participating undertakings. (2) In a ddition, when ca lculating group solvency, no a ccount must be ta ken of any own funds eligible for the solvency ca pi tal requirement of a n affiliated i nsurance undertaking of the participating i nsurance undertaking where the own funds concerned arise out of reciprocal financing with any other affiliated undertaking of that participating i nsurance undertaking. (3) Reci procal financing is deemed to exist, i n particular, where an i nsurance undertaking, or any of i ts a ffiliated undertakings, holds shares in, or makes l oans to, a nother undertaking that, directly or indirectly, holds own funds el igible for the solvency ca pital requirement of the first insurance undertaking or a ny of its affiliated undertakings. – Page 145 of 207 – Section 256 Affiliated insurance undertakings (1) If the i nsurance undertaking has more than one affiliated i nsurance undertaking, the calculation of group s olvency mus t i nclude all the affiliated i nsurance undertakings. (2) In the case of a n affiliated insurance undertaking that is domiciled in a member s tate or EEA signatory s tate other tha n that of the i nsurance undertaking for which the group solvency is to be calculated, the ca lculation of group s olvency mus t ta ke into account the solvency capital requirement of this other member s tate or EEA signatory s tate and the own funds eligible to satisfy the requirement in that other s tate. Section 257 Intermediate insurance holding companies (1) 1If a n insurance undertaking has a holding in an affiliated insurance undertaking or i n a third country i nsurance undertaking through an i nsurance holding company or a mixed financial holding company, the insurance holding compa ny or mixed financial holding company i s included in the group s olvency ca lculation. 2For the sole purpose of this ca l culation, the intermediate insurance holding company or intermediate mixed financial holding company i s treated as i f i t were an i nsurance undertaking subject to the rules in s ections 96 to 121 i n respect of the s olvency ca pital requirement and the rules in sections 89 to 95 i n respect of eligible own funds. (2) 1If a n intermediate insurance holding company or a n i ntermediate mixed financial holding company holds s ubordinated liabilities or other eligible own funds subject to l imitation in a ccordance with s ection 94, s uch debt or funds are recognised as own funds only i n an amount up to the limits applicable at group level. 2Eligible ancillary own funds of an i ntermediate insurance holding company or an intermediate mixed fi nancial holding company may only be i ncl uded i n the group solvency calculation i f they have been duly a uthorised beforehand by the group supervisory a uthority. Section 258 Affiliated third country insurance undertakings (1) 1If a n insurance undertaking is participating undertaking i n a third co untry i nsurance undertaking and if group s ol vency i s calculated using the deduction and aggregation method, the third country i nsurance undertaking must be trea ted as an a ffiliated insurance undertaking for the purposes of this calculation. 2If the third country i nsurance undertaking is s ubject, in its home country, to authorisation and s olvency rules that are at l east equivalent to those s pecified in Title I Chapter VI of Directive 2009/138/EC, the solvency ca pital requirement and the eligible own funds mus t be calculated i n accordance with the regulations i n the third country concerned. (2) 1Any pa rticipating undertaking may a pply for a n equivalence verification i n accordance with subsection (1) sentence 2. 2The group supervisory a uthority is responsible for deciding on equivalence after consulting the other supervisory a uthorities involved and the European Insurance and Occupational Pensions Authority. 3The decision must be taken on the basis of the cri teria specified by the Commission i n delegated legislative acts under Arti cle 227 (3) of Directive 2009/138/EC. 4The group supervisory a uthority i s bound by any previous decision taken i n respect of a third country. 5Thi s does not apply if a new review is required because the s upervisory s ystem described i n Ti tle I Chapter VI of Di rective 2009/138/EC or the supervisory s ystem i n the third country has changed s ignificantly. 6If the other s upervisory a uthorities involved do not a gree with the decision taken by the group supervisory a uthority, they ma y, within three months of the notification of the decision by the group s upervisory a uthority, refer the matter for consultation to the European Insurance a nd Occupational Pensions Authority i n a ccordance with Arti cle 19 of Regulation (EU) – Page 146 of 207 – no. 1094/2010. (3) 1A del egated l egislative act by the European Commission under Article 227 (4) of Directive 2009/138/EC specifying whether the solvency rules of a third country a re equivalent or not is binding on the group s upervisory a uthority and precl udes any review under subsection (2) a bove. 2The same a pplies if and for a s long as there is a delegated l egislative a ct from the European Commission i n force under Arti cle 227 (5) of Directive 2009/138/EC covering provisional equivalence. Section 259 Affiliated credit institutions, investment firms and financial institutions (1) 1When calculating the group solvency of an i nsurance undertaking that is a participating undertaking in a credit i ns titution, investment firm or fi nancial institution, the participating insurance undertakings may a pply method 1 or 2 a s s pecified in Annex I of Directive 2002/87/EC, with the necessary modifications. 2The accounting consolidation method ma y only be applied i f, i n the opinion of the group s upervisory a uthority, the integrated management and the internal control in relation to the undertakings included i n the scope of consolidation are appropriate. 3The s elected method mus t be consistently a pplied over the l ong term. (2) 1The s upervisory a uthority may, i f it has assumed the role of group supervisory a uthority, order that a holding referred to in subsection (1) be deducted from the own funds eligible for inclusion i n the group solvency of the pa rti cipating undertaking. 2The participating undertaking may request such deduction. Section 260 Non-availability of the necessary information 1 If the i nformation concerning a n affiliated undertaking domiciled in a member s tate or EEA s ignatory s tate or third country necessary for calculating the group solvency of a n insurance undertaking is not available, the carryi ng amount for thi s undertaking recognised by the participating i nsurance undertaking is deducted from the own funds eligible for group s olvency. 2Any unrealised gains associated with this holding may not be i ncluded i n own funds eligi ble to cover group s olvency. Section 261 Accounting consolidation method (1) 1Under the accounting consolidation method, the group solvency of the participating insurance undertaking is ca l culated on the basis of the consolidated financial s tatements. 2The group solvency of the participating i nsurance undertaking is the difference between the own funds eligible to cover the solvency ca pital requirement calculated on the basis of the consolidated financial statements a nd the solvency ca pital requirement a t group level calculated on the ba sis of the consolidated financial s tatements. 3Pa rt 2 chapter 2 s egment 2 a pplies, with the necessary modifications, to the ca lculation of the own funds eligible for the solvency ca pital requirement a nd the calculation of the s olvency ca pital requirement at group l evel using the accounting consolidation method. (2) The consolidated group solvency ca pital requirement must be calculated using either the s tandard formula or an a pproved internal model. (3) 1The mi nimum amount of the consolidated group s olvency ca pital requirement is the sum of the minimum ca pital – Page 147 of 207 – requirement for the participating i nsurance undertaking and the proportional share of the minimum capital requirement for ea ch of the affiliated insurance undertakin gs, such share in each case corresponding to the percentage holding. 2This mi nimum must be covered by eligible basic own funds as determined i n section 95. 3Section 250 (1) s entence 2, s ections 253 to 260 a nd s ection 135 (1) a nd (2) a pply, with the necessary modifications. Section 262 Group internal model (1) 1An i nsurance undertaking a nd i ts a ffiliated undertakings or, jointly, the a ffiliated undertakings of a n insurance hol ding company or mixed financial holding company may a pply for a uthorisation to use a n internal model to calculate the consolidated solvency capital requirement a t group level a nd the solvency capital requirement for the insurance undertakings in the group. 2The application must be submitted to the group supervisory a uthority. (2) 1The group supervisory a uthority must inform the other members of the college of supervisors (section 283) without del ay that it has received such an a pplication. 2As soon as the application documents have been received i n full, the group s upervisory a uthority must forward them without delay to the other supervisory a uthorities i nvolved. 3The s upervisory a uthorities involved must cooperate to decide whether or not to grant the authorisation and to determine a ny conditions that they may wish to impose in co nnection with granting the authorisation. 4The decision s hould be rea ched by mutual consent. 5The supervisory a uthorities must do everything within their power to reach a joint decision on the a pplication within six months of receiving the complete a pplication. (3) If the s upervisory a uthorities come to a decision within the meaning of subsection (2) by mutual consent, the group s upervisory a uthority sends notice of the decision to the applicant. (4) 1If no decision is reached by mutual consent within six months of receiving the complete application from the group, the group s upervisory a uthority must decide on the application. 2The group s upervisory a uthority must ta ke due account of a ny vi ews and reservations expressed by the other supervisory a uthorities i nvolved within the six month period. 3The group s upervisory a uthority must send notice of i ts decision to the a pplicant and inform the other supervisory a uthorities involved accordingly. 4The decision of the group supervisory a uthority must be accepted by the s upervisory a uthorities involved as binding and implemented accordingly. (5) 1If, before the six-month period referred to in s ubsection (2) expires, one of the supervisory authorities i nvolved refers the matter to the European Insurance and Occupational Pensions Authority in accordance with Article 19 of Regulation (EU) no. 1094/2010, the procedure a t the group supervisory a uthority is s uspended until the European Ins urance and Occupational Pensions Authority decides in a ccordance with Arti cle 19 (3) o f the Regulation. 2The decision of the group supervisory a uthority must be consistent with the decision of the European Insurance a nd Occupational Pens ions Authority. 3The decision of the group supervisory authority must be a ccepted by the supervisory a uthorities i nvolved as binding and i mplemented accordingly. (6) The ma tter is not referred to the European Insurance a nd Occupational Pensions Authority i f a joint decision has been reached or the six-month period has expired. (7) 1If the European Insurance and Occupational Pensions Authority rejects the decision proposed by the panel in a ccordance with Arti cle 41 (3) a nd Article 44 (1) of Regulation (EU) no. 1094/2010, the decision must be made by the group s upervisory a uthority. 2The decision of the group supervisory a uthority must be accepted by the supervisory a uthorities involved as binding and implemented accordingly. 3The six-month period i n subsection (2) is deemed to be a peri od for settling differences of opinion within the meaning of Arti cle 19 (2) o f Regulation (EU) no. 1094/2010. – Page 148 of 207 – Section 263 Capital add-on for a group undertaking (1) 1If a n insurance undertaking calculates its solvency ca pital requirement on the basis of an i nternal model approved at group l evel and, in the opinion of the supervisory a uthority, the risk profile of this undertaking deviates significantly from the a ssumptions underlying this internal model, the s upervisory a uthority may, i n accordance with section 301, i mpose a ca pi tal add-on to the solvency capital requirement determined using the internal model. 2The capital add-on requirement must be withdrawn as soon as the insurance undertaking concerned has allayed the concerns of the s upervisory a uthority. (2) 1If, i n exceptional ci rcumstances, a ca pital add-on in accordance with subsection (1) is not a ppropriate, the s upervisory a uthority may require the undertaking concerned to calculate i ts s olvency ca pital requirement using the s ta ndard formula. 2Subject to the requirements specified in section 301 (1) no. 1 or 3, the supervisory a uthority may also i mpose a capital a dd-on to the solvency ca pital requirement determined using the standard formula. 3The supervisory a uthority must explain the reasons for any decision made i n accordance with subsection (1) a nd sentences ( 1) or (2) a bove to both the insurance undertaking a nd the other members of the college of s upervisors. Section 264 Capital add-on for the group (1) 1The group supervisory a uthority may i mpose a capital add -on to the consolidated solvency ca pital requirement for the group i f the consolidated solvency capital requirement does not a dequately reflect the risk profile of the group. 2This i s the case, in particular, if 1. a s pecific risk at group l evel cannot be adequately covered because the risk is difficult to quantify with the standard formula or the internal model used by the group; or 2. ca pi tal add-ons must be imposed in respect of a ffiliated i nsurance undertakings i n accordance with sections 301 a nd 263. (2) Secti on 301 a nd the delegated legislative a cts under Article 37 of Directive 2009/138/EC apply, with the necessary modi fications. Section 265 Deduction and aggregation method (1) Under the deduction a nd a ggregation method, the group solvency of the participating i nsurance undertaking is the di fference between 1. the a ggregated eligible own funds for the group i n accordance with subsection (2); and 2. the va l ue of the affiliated insurance undertakings recognised by the participating i nsurance undertaking plus the a ggregated s olvency ca pital requirement for the group in a ccordance with s ubsection (3). (2) The a ggregated eligible own funds for the group comprise the following: 1. the own funds eligible for the s olvency ca pital requirement of the participating insurance undertaking; 2. the proportional share of the participating insurance undertaking in the own funds eligible for the s olvency ca pital requirement of the a ffiliated insurance undertakings. (3) The a ggregated solvency capital requirement for the group comprises the following: 1. the s olvency ca pital requirement of the participating insurance undertaking; a nd 2. the proportional share of the s olvency ca pital requirement of the a ffiliated insurance undertakings. – Page 149 of 207 – (4) 1In the case of a holding that is partially or wholly i ndirect, the value of the indirect holding is determined on the ba sis of the i ndirect proportional share. 2The proportional shares referred to i n subsection (2) no. 2 a nd s ubsection (3) no. 2 a re ca lculated accordingly. (5) Secti ons 262 a nd 263 a pply, with the necessary modifications, to an a pplication for a uthorisation to calculate the s ol vency ca pital requirement for the i nsurance undertakings in a group using an internal model. (6) 1The a ggregated solvency ca pital requirement for the group must appropriately reflect the risk profile of the group. 2In pa rticular, s pecific risks at group level that a re difficult to quantify must be adequately ta ken into account. 3If the risk profi le of the group deviates significantly from the assumptions underlying the aggregated solven cy capital requirement for the group, the group supervisory a uthority may i mpose a ca pital add-on to the aggregated solvency ca pital requirement for the group. 4Section 301 a nd the delegated legislative acts under Article 37 of Directive 2009/138/EC a pply, with the necessary modifications. Section 266 Group solvency of an insurance holding company or a mixed financial holding company 1 If i nsurance undertakings are subsidiaries of an insurance holding company or a mixed financial holding company, the s ol vency of the group in accordance with section 250 (1) s entence 2 a nd sections 252 to 265 mus t be calculated a t the l evel of the insurance holding company or mixed financial holding company. 2For the purposes of this calculation, the i ns urance holding company or mi xed financial holding company is treated as i f it were an insurance undertaking. 3Its s ol vency ca pital requirement must be determined i n accordance with part 2 cha pter 2 s egment 2 s ubsegments 2 a nd 3 a nd with the assumption that, i n relation to e ligible own funds, it is s ubject to the provisions specified i n part 2 chapter 2 s egment 2 s ubsegment 1. Section 267 Conditions applicable to subsidiaries of an insurance undertaking The provisions in sections 269 a nd 270 a pply to any i nsurance undertaking that is a s ubsidiary of a nother i nsurance undertaking where: 1. the s ubsidiary i s included in the group-wide supervision at the level of the parent undertaking; 2. the ri sk management system a nd i nternal control mechanisms of the parent undertaking include the subsidiary a nd the pa rent undertaking has satisfied the supervisory a uthorities concerned that the subsidiary i s managed prudently; 3. the pa rent undertaking has received consent i n accordance with section 275 (4); 4. the pa rent undertaking has received consent i n accordance with section 277 (2); a nd 5. the pa rent undertaking has a pplied for the use of the provisions in sections 269 a nd 270 a nd this a pplication has been a pproved in accordance with section 268. Section 268 Supervision in the case of centralised risk management (1) 1Al l the supervisory a uthorities concerned must work together within the college of supervisors (section 283) to rea ch a decision on whether or not to approve a n application for the solvency of a group with centralised risk ma nagement to be supervised in a ccordance with the provisions of sections 269 a nd 270 a nd to decide on any – Page 150 of 207 – conditions to be i mposed i n connection with the issue of such approval. 2The a pplication must be s ubmitted to the s upervisory a uthority responsible for the subsidiary concerned. 3This supervisory authority must i nform the other s upervisory a uthorities in the college of supervisors without delay a nd forward the complete application to these other s upervisory a uthorities. (2) The s upervisory a uthorities concerned should come to a decision on the a pplication by mutual consent within three months of the date on which the complete a pplication is received by a ll the s upervisory a uthorities involved. (3) If the s upervisory a uthorities manage to come to a decision by mutual consent within the meaning of subsection (2), the s upervisory a uthority responsible for the subsidiary sends notice of the decision to the applicant. (4) 1If no decision is reached by mutual consent within three months of receiving the complete application from the group, the group s upervisory a uthority must decide on the application. 2The group supervisory a uthority must ta ke due a ccount of any vi ews and reservations expressed by the other supervisory a uthorities represented i n the college of s upervisors within the three-month period. 3The group s upervisory a uthority must send notice of i ts decision to the a pplicant and i nform the other s upervisory a uthorities i nvolved accordingly. 4The decision of the group supervisory a uthority must be a ccepted by the s upervisory a uthorities involved as binding and implemented a ccordingly. (5) 1If, before the three-month period referred to i n subsection (2) expires, one of the s upervisory a uthorities involved refers the matter to the European Insurance and Occupational Pensions Authority in accordance with Article 19 of Regulation (EU) no. 1094/2010, the group supervisory a uthority must a wait the decision of the European Insurance a nd Occupa tional Pensions Authority. 2The group s upervisory a uthority is, as regards the details of its decision, bound by the deci sion of the European Insurance a nd Occupational Pensions Authority. 3The decision of the group supervisory a uthority must be a ccepted by the s upervisory a uthorities involved as binding and implemented a ccordingly. (6) The ma tter is not referred to the European Insurance a nd Occupational Pensions Authority i f a joint decision has been reached or the three-month period has expired. (7) 1If the European Insurance and Occupational Pensions Authority rejects the decision proposed by the panel in a ccordance with Arti cle 41 (3) a nd Article 44 (1) of Regulation (EU) no. 1094/2010, the decision must be made by the group s upervisory a uthority. 2The decision of the group supervisory a uthority must be accep ted by the supervisory a uthorities involved as binding and implemented accordingly. Section 269 Determination of the solvency capital requirement for a subsidiary (1) 1The s olvency ca pital requirement of a subsidiary must be calculated i n accordance with subsections (2), (4) and (5) bel ow. 2This is without prejudice to section 262. (2) 1If the solvency ca pital requirement of the subsidiary is ca lculated using an i nternal model approved at group level i n a ccordance with s ection 262, the s upervisory a uthority may i mpose a capital a dd-on to the solvency ca pital requirement for thi s undertaking i f i t believes that the risk profile deviates significantly from the i nternal model and the criteria in s ection 301 a re satisfied. 2If a ca pital add-on would not be appropriate in a n indivi dual case, the supervisory a uthority tha t a uthorised the s ubsidiary ma y require the undertaking to calculate i ts solvency ca pital requirement using the s ta ndard formula. 3Before reaching a decision, the s upervisory a uthority must consult both the subsidiary concerned and the other s upervisory a uthorities represented in the college of supervisors i n accordance with section 283. (3) 1If the solvency ca pital requirement for the s ubsidiary i s calculated with the s tandard formula and the supervisory a uthority believes that the risk profile of the undertaking deviates significantly from the assumptions underlying the s ta ndard formula, and if the concerns of the supervisory a uthority a re not satisfactorily addressed, the s upervisory a uthority may i n individual cases require that the undertaking replace a subgroup of the s tandard formula calculation pa ra meters with undertaking-specific parameters in the calculation of the underwriting risk modules or may i mpose a ca pi tal add-on in the cases specified in s ection 301. 2Before reaching a decision, the s upervisory a uthority must consult both the subsidiary concerned and the other s upervisory a uthorities represented in the college of supervisors i n a ccordance with s ection 283. – Page 151 of 207 – (4) 1The college of supervisors must do everything within i ts power to reach a n agreement on the proposal from the s upervisory a uthority that authorised the subsidiary or on other possible measures. 2The decision must be accepted by the s upervisory a uthorities involved as binding and implemented a ccordingly. (5) 1If the supervisory a uthority that a uthorised the subsidiary a nd the group supervisory a uthority disagree, either a uthority may, wi thin one month of receiving the proposal from the s upervisory a uthority, refer the matter to the European Insurance a nd Occupational Pensions Authority for consultation in accordance with Article 19 of Regulation (EU) no. 1094/2010. 2The matter i s not referred to the European Insurance a nd Occupational Pensions Authority i f a deci sion has been reached within the college of supervisors by mutual consent or the one-month period has expired. (6) 1The s upervisory a uthority that authorised the s ubsidiary must await the decision of the European Insurance and Occupa tional Pensions Authority. 2The decision of the supervisory a uthority that a uthorised the subsidiary must be cons istent with the decision of the European Insurance a nd Occupational Pensions Authority. 3The supervisory a uthority mus t s end notice of i ts decision to the subsidiary a nd inform the college of s upervisors accordingly. 4The decision of the s upervisory a uthority must be accepted by the supervisory authorities i nvolved as binding a nd i mplemented accordingly. Section 270 Non-compliance with the capital requirement for a subsidiary (1) 1Wi thin six months of the date on which non-compliance with the solvency ca pital requirement is i dentified, the s ubsidiary must increase its eligible own funds or reduce i ts risks such that compliance with the solvency ca pital requirement is restored. 2The s upervisory a uthority that authorised the subsidiary must s end to all of the s upervisory a uthorities in the college of s upervisors without delay the recovery plan s ubmitted by the subsidiary. 3The s upervisory a uthorities in the college of s upervisors must come to a decision regarding approval of the recovery plan by mutual cons ent within four months of the date on which non-compliance with the solvency ca pital requirement was identified. 4 If the s upervisory a uthorities are unable to reach an a greement within this period, the supervisory a uthority that a uthorised the subsidiary must decide on the approval of the recovery plan taking into account the vi ews of the other s upervisory a uthorities. (2) 1If the supervisory a uthority i dentifies a deterioration i n the financial position of the s ubsidiary i n a ccordance with s ection 132 (2), i t must notify the supervisory a uthorities in the college of supervisors without delay of the measures it bel ieves ought to be ta ken. 2Unless the situation is cri tical, the proposed measures will be discussed by the college of s upervisors. 3The college of supervisory a uthorities must do everything within its power to reach a n agreement on the proposed measures to be taken. 4If the supervisory a uthorities a re unable to reach a n agreement within one month of recei ving the notification referred to i n sentence 1, the supervisory a uthority that authorised the subsidiary must make the decision taking due account of the vi ews of the other supervisory a uthorities i n the college of s upervisors regarding the measures concerned. (3) 1In the event of non-compliance with the minimum capital requirement, the supervisory a uthority that a uthorised the s ubsidiary must, without delay, forward to the college of supervisors the s hort-term finance plan s ubmitted by the s ubsidiary s o that, within three months of the date on which non-compliance with the minimum capital requirement wa s identified, the eligible own funds a re increased or the risk profile is reduced such that compliance with the minimum ca pi tal requirement is restored. 2The supervisory a uthority must also inform the college of supervisors of the measures it ha s initiated to enforce compliance with the minimum ca pital requirement. (4) If the s upervisory a uthority that authorised the subsidiary a nd the group s upervisory a uthority cannot agree rega rding 1. a pproval of the recovery plan, including a ny extension of the period for the restoration of compliance, within the four-month period s pecified in subsection (1); or 2. a pproval of the proposed measures within the one-month period specified i n subsection (2), they ma y refer the matter to the European Insurance and Occupational Pensions Authority for consultation i n a ccordance with Arti cle 19 of Regulation (EU) no. 1094/2010. (5) The ma tter is not referred to the European Insurance a nd Occupational Pensions Authority i f: – Page 152 of 207 – 1. a greement has been reached within the college of s upervisors on the approval of the recovery plan in a ccordance wi th s ubsection (1) or the proposed measures in a ccordance with s ubsection (2); 2. the periods referred to in s ubsection (4) have expired; or 3. a cri ti cal situation as specified i n subsection (2) s entence 2 has arisen. (6) 1The s upervisory a uthority that authorised the s ubsidiary must await the decision of the European Insurance and Occupa tional Pensions Authority. 2The decision of the supervisory a uthority that a uthorised the subsidiary must be cons istent with the decision of the European Insurance a nd Occupational Pensions Authority. 3The supervisory a uthority mus t s end notice of i ts decision to the subsidiary a nd inform the college of s upervisors accordingly. 4The decision of the s upervisory a uthority must be accepted by the supervisory authorities i nvolved as binding a nd i mplemented accordingly. Section 271 End of derogations for a subsidiary (1) 1The rules provided for i n sections 269 a nd 270 do not apply if: 1. the condition specified i n section 267 no. 1 i s no l onger satisfied; 2. the conditions specified in section 267 no. 2 a re no l onger satisfied and the group does not ensure that it satisfies the conditions a gain within a reasonable period; or 3. the conditions specified in section 267 nos. 3 a nd 4 a re no l onger satisfied. 2 If, i n the case specified in sentence 1 no. 1 a nd a fter consulting the college of supervisors, the group s upervisory a uthority decides that the s ubsidiary will no l onger be included in the group-wide s upervision, it must notify the s upervisory a uthority responsible for the subsidiary a nd the parent undertaking without delay. (2) 1The parent undertaking is responsible for ensuring that the conditions specified i n section 267 nos. 2, 3 a nd 4 a re s a tisfied a t all ti mes. 2If a condition is not satisfied, the parent undertaking must notify without delay the group s upervisory a uthority and the supervisory authority responsible for the s upervision of the s ubsidiary concerned. 3The pa rent undertaking must s ubmit a plan to ensure it satisfies the conditions once again within a reasonable period. 4The group s upervisory a uthority must ca rry out a review at l east once a year to verify that the conditions continue to be s a tisfied. 5It must also carry out such a review a t the request of the supervisory a uthority concerned if the latter has s i gnificant doubts whether these conditions continue to b e satisfied. 6If this review reveals weaknesses or deficiencies, the group s upervisory a uthority must request the parent undertaking to present a plan for the elimination of these wea knesses or deficiencies within a reasonable period of ti me. 7If, a fter consulting the college of supervisors, the group s upervisory a uthority establishes that the plan referred to in sentences 3 a nd 6 i s inadequate or is not being i mplemented within the agreed timeframe, the conditions s pecified in section 267 nos. 2 to 4 wi ll be deemed to be no l onger satisfied. 8The group s upervisory a uthority must inform the supervisory a uthority concerned a ccordingly without del ay. (3) If the parent undertaking s ubmits a new application and this is approved, the regime provided for i n sections 269 a nd 270 a pplies once again. Section 272 Subsidiaries of an insurance holding company or a mixed financial holding company Secti ons 267 to 271 a pply, with the necessary modifications, to insurance undertakings that are subsidiaries of an i ns urance holding company or a mixed financial holding company. – Page 153 of 207 – Segment 2 Risk concentration and intra-group transactions Section 273 Supervision of risk concentration (1) Al l significant risk concentrations at group l evel must be reported to the group supervisory a uthority a t least once a yea r. (2) 1If the ultimate participating undertaking i s an i nsurance undertaking, this undertaking must report the i nformation to the group s upervisory a uthority. 2If the ultimate participating undertaking is a n insurance holding company or a mi xed financial holding company, this company must report the information unless the supervisory a uthority has, after cons ulting the other supervisory authorities i nvolved and the group, specified a n insurance undertaking as the undertaking with responsibility for s ubmitting the reports. (3) 1After consulting the other s upervisory a uthorities i nvolved and the group, the group s upervisory a uthority determines: 1. the types of risk to be reported i n all circumstances by i nsurance undertakings in a particular group; a nd 2. a ppropriate threshold va lues for the reporting obligations related to significant risk concentrations. 2 The s pecific s tructure of the group concerned and the structure of the group's risk management s ystem must be taken i nto a ccount when determining the risks. 3The threshold va lues must be based on the solvency capital requirement, the technical provisions or both. (4) When supervising risk concentrations, the group supervisory a uthority must monitor the level a nd probability of l osses occurring in respect of the ri sks, in particular the possible contamination risk within the group a nd the risk of a confl ict of i nterests. Section 274 Supervision of intra-group transactions (1) 1Al l significant intra-group tra nsactions by i nsurance undertakings within a group, including transactions with natural pers ons with cl ose l inks to an undertaking i n the group, must be reported to the group s upervisory a uthority at l east a nnually. 2The group s upervisory a uthority may s pecify a more frequent reporting cycl e in order to facilitate the moni toring of i ntra-group transactions. (2) 1If the ultimate participating undertaking is a n insurance undertaking, this undertaking must report the significant i ntra -group transactions to the group supervisory authority. 2If the ultimate participating undertaking is an i nsurance hol ding company or a mixed financial holding company, this company must report the i nformation unless the group s upervisory a uthority has, a fter consulting the other s upervisory a uthorities i nvolved and the group, s pecified a n i ns urance undertaking as the undertaking with responsibility for submitting the reports. (3) In the case of particularly s ignificant transactions in a ccordance with s ubsection (1), the undertaking responsible for s ubmitting the reports must submit a report without delay. (4) 1After consulting the group and the other s upervisory a uthorities involved, the group s upervisory a uthority must determine the types of intra-group tra nsaction to be reported by the insurance undertakings i n the group in a ll ci rcumstances. 2In the case of groups with cross-border activities, the group supervisory a uthority must determine the reportable types of intra-group tra nsaction a fter consulting the other supervisory a uthorities i nvolved. 3Section 273 (3) s entences 2 a nd 3, a nd (4) a pplies, with the necessary modifications. – Page 154 of 207 – Segment 3 Governance, reporting requirements Section 275 Supervision of the system of governance (1) 1Pa rt 2 cha pter 1 s egment 3 a nd section 47 numbers 1, 2, 8 a nd 9 a pply a t group level, with the necessary modi fications. 2Without prejudice to the provisions referred to i n sentence 1, the risk management s ystem, i nternal control system a nd the reporting system of all the undertakings included in the gro up-wide s upervision in accordance wi th s ection 245 (2) nos. 1 a nd 2 must be i mplemented such that these systems ca n be managed a nd controlled a t group l evel. (2) Wi thout prejudice to subsection (1), the internal control mechanisms must i nclude a t least the following: 1. a dequate mechanisms as regards group solvency to facilitate identification and measurement of all material risks a nd ensure these risks are covered by eligible own funds; a nd 2. proper reporting and accounting procedures to monitor a nd manage the i ntra-group transactions and risk concentrations. (3) 1The participating insurance undertaking or the i nsurance holding company or the mixed financial holding company mus t ca rry out an own risk a nd s olvency a ssessment at group l evel in a ccordance with s ection 27. 2Where the calculation of group solvency is ca rried out using the accounting consolidation method, the participating insurance undertaking or the i nsurance holding company or the mixed financial holding company must transparently present to the group s upervisory a uthority the difference between the sum of the s olvency ca pital requirement for all the a ffiliated insurance undertakings in the group and the consolidated solvency ca pital requirement for the group. (4) 1Subject to the consent of the group supervisory a uthority, the participating insurance undertaking or the i nsurance hol ding company or the mixed financial holding company may ca rry out the own risk and solvency a ssessments at group l evel and a t the level of the s ubsidiaries at the same ti me and, for the purposes of reporting to the s upervisory a uthorities, present the results in one report. 2In this case, the participating i nsurance undertaking or the insurance hol ding company or the mixed financial holding company must send the report to all the supervisory a uthorities i nvolved at the same ti me. 3This is without prejudice to the obligation of the subsidiaries to comply wi th the requirements specified i n section 27. 4Before giving consent in a ccordance with s entence 1, the s upervisory a uthority concerned must consult the members of the college of supervisors and ta ke due account of their vi ews. Section 276 Exchange of information (1) The natural a nd legal persons i ncluded within the scope of group -wide supervision, i ncluding the affiliated a nd pa rti cipating undertakings, are authorised to exchange all information necessary under the application of the provisions i n this part of the Act. (2) The ultimate participating undertaking may require a ny other undertaking i n the group to provide any cl arification or documentation that may be needed to enable i t to fulfil its obligations under this chapter. (3) Thi s is without prejudice to the provisions of the German Federal Data Protection Act. Section 277 Report on group solvency and financial position – Page 155 of 207 – (1) 1The ultimate parent undertaking at the level of the member state or EEA signatory state within the meaning of s ection 247 must publish a report on the solvency a nd financial position a t the l evel of the group on a n annual basis. 2 Secti on 29 (3) a nd sections 40 to 42 a pply, with the necessary modifications. (2) 1Subject to the consent of the group supervisory a uthority, this undertaking has the right to publish just a s ingle s ol vency a nd financial position report for the whole of the group that includes the information at group level to be di s closed i n accordance with subsection (1) and the i nformation to be disclosed for each s ubsidiary i n the group i n a ccordance with s ections 40 to 42, ea ch s ubsidiary to be i ndividually i dentifiable. 2In s uch cases, the obligations under the a forementioned provisions for the indivi dual s ubsidiaries no longer a pply. (3) Before giving consent i n accordance with sentence 2, the group supervisory a uthority concerned must consult the s upervisory a uthorities in the college of supervisors a nd ta ke due account of their vi ews. (4) If a s upervisory a uthority i s responsible for a subsidiary i n a group and the s olvency a nd financial position report prepared in a ccordance with s ubsection (2) fails to provide material i nformation relating to this s ubsidiary, the s upervisory a uthority concerned may impose an obligation on the subsidiary to disclose the necessary a dditional i nformation. Section 278 Group structure Ins urance undertakings, insurance holding companies and mixed financial holding companies must publish on an a nnual ba sis their l egal structure and their governance a nd organisational structure at group level, i ncluding a description of the s ubsidiaries, important affiliated undertakings a nd significant branch offices that form part of the group. Chapter 3 Measures to facilitate group-wide supervision Section 279 Responsibility for group-wide supervision (1) 1The group supervisory a uthority i s responsible for coordinating a nd ca rrying out group-wide supervision. 2The group s upervisory a uthority is the supervisory a uthority i n the member state or EEA signatory s tate concerned that satisfies the cri teria i n subsection 2 unless otherwise provi ded for in s ection 280. (2) 1Where the same supervisory authority is the competent authority for all the insurance undertakings in a group, this s upervisory a uthority takes on the role of group supervisory authority. 2In all other cases, the role of group supervisory a uthority i s assumed as follows: 1. i f the group is headed by a n i nsurance undertaking, by the supervisory a uthority responsible for this undertaking; 2. i f the group is not headed by a n i nsurance undertaking, a ) i f the parent undertaking of an i nsurance undertaking is an insurance holding company or a mixed financial hol ding company, by the supervisory a uthority responsible for this i nsurance undertaking, b) i f a t l east two insurance undertakings domiciled in a member state or EEA signatory s tate have, as their parent undertaking, one a nd the same insurance holding company or mi xed financial holding company and one of these undertakings has been a uthorised in the member s tate or EEA signatory s tate in which the insurance holding compa ny or mixed financial holding company i s domiciled, by the superviso ry a uthority responsible for the i ns urance undertaking authorised in this member s tate or EEA s ignatory s tate, c) i f the group is headed by a t least two insurance holding companies or mixed financial holding companies domi ciled i n different member states or EEA s ignatory s tates and there is a n insurance undertaking domiciled in – Page 156 of 207 – ea ch of these member states or EEA signatory s tates, by the s upervisory a uthority responsible for the insurance undertaking with the highest l evel of total assets, d) i f a t l east two insurance undertakings domiciled in a member state or EEA signatory s tate have, as their parent undertaking, one a nd the same insurance holding company or mi xed financial holding company and none of thes e undertakings has been authorised i n the member state or EEA signatory state in which the insurance hol ding company or mixed financial holding company is domiciled, by the s upervisory a uthority responsible for the i nsurance undertaking with the highest level of total assets, e) i f the group does not have a parent undertaking, or i f the s tructure is other than one of the structures described under a to d, by the supervisory a uthority that has authorised the i nsurance undertaking with the highest level of tota l assets. Section 280 Determining the group supervisory authority (1) 1If the a pplication of the criteria specified i n section 279 (2) would be inappropriate because of the s tructure of the group or the relative s ignificance of the insurance undertaking's transactions i n the different member states or EEA s i gnatory s tates, the supervisory a uthorities involved may, i n exceptional ci rcumstances, jointly designate a nother s upervisory a uthority as the group supervisory a uthority. 2The group s upervisory a uthority should not be determined more frequently than once a year. (2) 1The determination of the group s upervisory a uthority in accordance with subsection (1) must be carried out on a pplication by one of the s upervisory a uthorities involved within three months of the a pplication date following cons ultation with the group concerned and all the other s upervisory a uthorities involved. 2The supervisory a uthorities i nvolved must do everything within their power to come to a joint decision on the choice of group supervisory a uthority wi thin three months of the a pplication date. 3Before coming to a decision, the s upervisory a uthorities involved must give the group a n opportunity to s tate its opinion. 4The designated group supervisory a uthority i s responsible for sending noti ce of the final joint decision to the group. (3) 1If, before the three-month period referred to i n subsection (2) expires, one of the s upervisory a uthorities involved refers the matter to the European Insurance and Occupational Pensions Authority in accordance with Article 19 of Regulation (EU) no. 1094/2010, the procedure is s uspended until the European Insurance and Occupational Pensions Authority comes to a decision in a ccordance with Arti cle 19 (3) of the Regulation. 2The joint decision of the supervisory a uthorities concerned must be consistent with the decision of the European Insurance a nd Occupational Pensions Authority. 3The joint decision must be a ccepted by the supervisory a uthorities involved as binding and implemented a ccordingly. 4The designated group s upervisory a uthority is responsible for sending notice of the joint decision to the group a nd i nforming the college of s upervisors accordingly. (4) If the three-month period expires or a joint decision is reached, the matter is not referred to the European Insurance a nd Occupational Pensions Authority. (5) If no joint decision is reached in a ccordance with s ubsection (2) or (3), the duties of group supervisory a uthority a re ta ken on by the supervisory a uthority determined as specified i n section 279 (2). Section 281 Duties and powers of the group supervisory authority (1) The duties a nd powers of the group supervisory a uthority i nclude: 1. revi ewing and assessing the financial position of the group; 2. a s sessing compliance with the provisions on group solvency, risk concentration and intra-group transactions; – Page 157 of 207 – 3. revi ewing from a supervisory perspective the risk management, internal control and reporting s ystems specified in s ection 275; 4. a s sessing the system of governance and eligibility of the members of the senior management in participating undertakings under s ections 275, 24 a nd 293; 5. revi ewing from a supervisory perspective the own risk and solvency assessment a t group level i n accordance with s ection 27; 6. coordi nating the exchange of information between the supervisory a uthorities involved as part of ongoing s upervision a nd in critical situations i n relation to pertinent, necessary i nformation a nd other key details required to ena ble the s upervisory a uthorities to fulfil their duties; 7. pl a nning and coordinating a ctivi ties as part of ongoing supervision a nd i n cri tical situations in cooperation with the other s upervisory a uthorities i nvolved, such work to be ca rried out in meetings to be held a t least a nnually or i n s ome other a ppropriate form; 8. l eading the validation of internal models or partial internal models a t group level; 9. l eading the decision-making process for a pplications to use the provisions relating to centralised risk management; a nd 10. cha i ring the college of supervisors. (2) 1Secti ons 43, 44 a nd 305 a pply, with the necessary modifications, to i nformation required by the group supervisory a uthority to enable it to ca rry out i ts duties. 2If the group supervisory a uthority needs the information specified in s ection 305 (1) no. 1 a nd this i nformation has already been provi ded to another supervisory a uthority, the group s upervisory a uthority must, as far as possible, contact the other supervisory a uthority for the i nformation to a void a s i tuation i n which the undertaking has to send the i nformation more than o nce. (3) If the group s upervisory a uthority does not assume responsibility for the tasks as s pecified in subsection (1) or the members of the college of supervisors do not cooperate to the extent required i n accordance with subsection (1), the s upervisory a uthority may refer the matter to the European Insurance and Occupational Pensions Authority for cons ultation in accordance with Article 19 of Regulation (EU) no. 1094/2010. Section 282 Exemption from the reporting requirement at group level (1) If the i ntervals for regular s upervisory reporting are shorter than one year, the group supervisory a uthority may l imit the frequency of reporting at group l evel, provided that all the insurance undertakings in the group benefit from this l i mitation in a ccordance with section 45 (1) a nd whereby the nature, scope and complexity of the ri sks associated with the business activities of the group must be taken into account. (2) The group supervisory a uthority ma y allow a n exemption from the reporting of i ndividual i tems a t group level, provi ded that all the i nsurance undertakings in the group benefit from this exemption in a ccordance with section 45 (2) a nd whereby the nature, scope and complexity of the ri sks associated with the business activities of the group and the objective of financial s tability must be taken into account Section 283 College of supervisors (1) 1In respect of groups that do not operate exclusively in Germany, the s upervisory a uthority is a member of a college of s upervisors chaired by the group s upervisory a uthority. 2The members of the college of supervisors a re the group s upervisory a uthority, the supervisory a uthorities of all member s tates i n which subsidiaries a re domiciled and, in a ccordance with Arti cle 21 of Regulation (EU) no. 1094/2010, the European Insurance and Occupational Pensions Authority. 3The s upervisory a uthorities responsible for significant branch offices and a ffiliated undertakings may – Page 158 of 207 – pa rti cipate i n the work of the college of supervisors. 4However, their involvement is limited to ensuring an efficient excha nge of i nformation. (2) The ta sk of the college of supervisors is to ensure that the processes for cooperation, exchange of information and cons ultation between the supervisory a uthorities belonging to the college of supervisors are effectively applied with the a i m of promoting convergence between their a ctivi ties and decisions. (3) The college of s upervisors may specify that certain of its activities be ca rried out by a smaller number of members wi thin the college of supervisors as a whole to ensure that i t functions effectively. (4) The establishment and working a rrangements of the college of s upervisors must be governed by coordination a rra ngements between the group supervisory a uthority a nd the other s upervisory a uthorities i nvolved. (5) 1Should differences of opinion a rise regarding coordination arrangements, the final decision rests with the group s upervisory a uthority. 2Any member of the college of supervisors may refer the matter to the European Insurance a nd Occupa tional Pensions Authority for consultation in accordance with Article 19 of Regulation (EU) no. 1094/2010. 3The deci sion of the group s upervisory a uthority must be consistent with the decision of the European Insurance and Occupa tional Pensions Authority. 4The group s upervisory a uthority must send its decision to the other competent s upervisory a uthorities. (6) The coordination a rrangements specified i n subsection (4) must include procedures for the following: 1. the decision-making process among the supervisory a uthorities concerned in accordance with sections 262 to 264, 279 a nd 280; a nd 2. cons ultation in accordance with subsection (5) a nd section 284 (4). (7) The coordination a rrangements may a lso specify procedures for consulting the s upervisory a uthorities concerned, in pa rti cular i n a ccordance with sections 245 to 249, 251 to 253, 258, 273 to 275, 277, 285, 288 a nd 290 a nd for cooperating with other s upervisory a uthorities. (8) The coordination a rrangements may tra nsfer additional tasks to the group supervisory a uthority, the other s upervisory a uthorities involved or to the European Insurance a nd Occupational Pensions Authority i f this would l ead to more efficient s upervision of a group a nd would not impair the s upervisory a ctivities of the members of the college of s upervisors in respect of the individual responsibilities. Section 284 Cooperation in group-wide supervision (1) 1The s upervisory a uthorities responsible for the supervision of the i nsurance undertakings in a group and the group s upervisory a uthority must work in close cooperation, particularly i n cases where a n insurance undertaking encounters fi nancial difficulties. 2If an i nsurance undertaking is directly or i ndirectly a ffiliated with a credit i nstitution or an i nvestment fi rm or i f these undertakings s hare a common participating undertaking, the supervisory a uthorities within the meaning of sentence 1 must work cl osely together with the competent a uthorities i nvolved in the s upervision of thes e other undertakings. (2) 1The s upervisory a uthorities must provide each other without delay wi th all the information that enables them to ful fil their s upervisory duties under Directive 2009/138/EC. 2The group supervisory a uthority must send the s upervisory a uthorities concerned a nd the European Insurance and Occupational Pensions Authority all information in accordance wi th s ections 11 (2), 40, 47 no. 6 a nd s ection 282 (2) i n relation to the group, i n particular i nformation relating to the l egal, governance and organisational structure of the group. (3) If a s upervisory a uthority has not provided relevant i nformation, has refused a request for cooperation or not res ponded within two weeks, the supervisory a uthorities concerned may refer the matter to the European Insurance a nd Occupational Pensions Authority. (4) If a pa rticipating undertaking has informed the group supervisory a uthority i n a ccordance with section 250 (4) that the group is no longer complyi ng with the s olvency ca pital requirement for the group or there is a risk that this situa tion – Page 159 of 207 – coul d occur within the subsequent three months, the group supervisory a uthority must inform the other supervisory a uthorities in the college of s upervisors. (5) If exceptional circumstances a rise or have already a risen, a supervisory a uthority i n the role of s upervisory a uthority res ponsible for the s upervision of an i ndividual insurance undertaking i n a group or in the role of group supervisory a uthority must, without delay, convene a meeting of all supervisory authorities as s pecified in subsection ( 1) sentence 1, es pecially if: 1. i t ha s become a ware of a material breach of the s olvency ca pital requirement or a breach of the minimum capital requirement for a n i nsurance undertaking; or 2. i t ha s become a ware of a material breach of the s olvency ca pital requirement for the group. Section 285 Consultation between supervisory authorities (1) 1Before any decision that is of significance for the supervisory a ctivi ties of other s upervisory a uthorities, the s upervisory a uthority concerned must consult the other s upervisory a uthorities involved within the fra mework of the col l ege of supervisors regarding the following: 1. a pproval of changes to the shareholder, organisational or management structure of a n insurance undertaking i n the group; 2. a ny decision on an extension of the period allowed for a recovery i n accordance with section 134 (3) to (6); 3. ma jor sanctions or exceptional supervisory measures regarding an i nsurance undertaking in the group. 2 Mea sures that are deemed to be exceptional measures within the meaning of sentence 1 no. 3 i nclude but a re not l i mited to the imposition of a ca pital a dd-on to the solvency ca pital requirement a nd a restriction on the use of the i nternal model. (2) 1For the purposes of subsection 1 sentence 1 nos. 2 a nd 3, the group s upervisory a uthority must always be consulted. 2If a decision is based on information provided by other s upervisory a uthorities, the supervisory a uthorities i nvolved mus t also consult each other before this decision is made. (3) 1The s upervisory a uthority may decide not to consult other s upervisory a uthorities in cases of urgency or if such cons ultation could i mpair the effectiveness of the decision. 2If such cases a rise, the supervisory a uthority i nvolved must noti fy the other s upervisory a uthorities concerned of its decision without delay. Section 286 Cooperation in the case of affiliated undertakings (1) 1If a n insurance undertaking domiciled in Germany is directly or i ndirectly affiliated with an i nsurance undertaking, credi t institution within the meaning of Directive 2006/48/EC or a n investment firm within the meaning of Directive 2004/39/EC i n a nother member state or EEA signatory s tate, or i f i t shares a common participating undertaking with s uch a n undertaking, the supervisory a uthority must, without delay, s end the supervisory a uthority i n the other member s ta te or EEA signatory s tate the i nformation that the latter needs to enable or help it to fulfil i ts supervisory duties unde r Di rective 2009/138/EC. 2The information under sentence 1 i ncludes, in particular, information on measures ta ken by the group a nd by the s upervisory a uthorities, together with information provided by the group. 3Upon request by the s upervisory a uthority in the other member s tate or EEA s ignatory s tate, the supervisory a uthority must also s end any i nformation that is appropriate for enabling or facilitating supervision in accordance with Directives 2009/138/EC a nd 2002/87/EC. 4In a ddition, the supervisory authority must provide information that is required in delegated l egislative a cts of the European Commission under Article 249(3) of Directive 2009/138/EC. – Page 160 of 207 – (2) If the parent undertaking of a group is domiciled i n Germany and the supervisory a uthority is not the group s upervisory a uthority, the supervisory a uthority is a uthorised a t the request of the group supervisory authority first to require that the parent undertaking provide i nformation a bout all the business affairs of the group a nd submit or send a l l business documentation concerning the group that is relevant to enable the group supervisory a uthority to ca rry out i ts duties and exercise its powers as specified in s ection 281 a nd secondly to forward such information and business documentation to the group supervisory a uthority. (3) The s upervisory a uthority must accept decisions i n accordance with Article 231 (3) or (6) a nd i n accordance with Arti cl e 237 (3) of Directive 2009/138/EC by a supervisory a uthority i n a nother member s tate or EEA s ignatory s tate a cti ng i n the role of group supervisory a uthority a nd must apply s uch decisions. Section 287 Effective enforcement of regulatory measures (1) 1If a n insurance undertaking in a group does not comply with the requirements in sections 250 to 272 rega rding the s ol vency of the group or i f the requirements a re met but the solvency of the group is nevertheless jeopardised, or i f i ntra -group transactions or risk concentrations represent a risk to the financial position of the insurance undertaking, the s upervisory a uthority must require the insurance undertaking to i nitiate corrective measures to rectify the situation wi thout delay. 2At the same time, the group supervisory a uthority must require corresponding corrective measures from the i nsurance holding company or mixed financial holding company. (2) If the s upervisory a uthority is the group supervisory a uthority a nd the i nsurance holding company, mixed financial hol ding company or i nsurance undertaking is domiciled in a nother member s tate or EEA s ignatory s tate, the supervisory a uthority must notify the s upervisory a uthority of the other member s tate or EEA s ignatory s tate of the i nformation of whi ch it is a ware so that the latter authority ca n instigate the necessary measures. (3) 1The s upervisory a uthority must coordinate i ts enforcement measures with the o ther s upervisory a uthorities i nvolved and the group supervisory a uthority, i n particular i n those cases i n which the central a dministration or head offi ce of an i nsurance holding company or mi xed financial holding company is not l ocated in the same place a s the regi stered office. 2This also applies if the supervisory a uthority is the group s upervisory a uthority. Chapter 4 Third countries Section 288 Parent undertakings domiciled in a third country (1) 1In the case of a n insurance undertaking i n a group whose parent undertaking is an i nsurance holding company, a mi xed financial holding company or a n i nsurance undertaking domiciled in a third country, a verification process must be ca rri ed out to establish whether the supervisory a uthority i n the third co untry concerned supervises the insurance undertaking i n question in a manner that is equivalent to group-wide supervision in the member states or EEA s ignatory s ta tes. 2The verification of equivalence must be ca rried out officially or upon application by o ne of the undertakings i nvolved. 3If the European Commission has issued a delegated legislative act in accordance with Article 260(3) of Di rective 2009/138/EC i n relation to a third country, this must be accepted as binding. (2) 1If the European Commission has not issued a ny delegated l egislative act covering the equivalence of the supervisory s ys tem of the third country concerned, the supervisory a uthority that would be responsible for the group -wide s upervision under the a pplication of the cri teria specified in s ection 279 (2) ca rries out the verification process within the mea ning of s ubsection 1. 2Before coming to a decision, the supervisory a uthority i nvolved must consult the other s upervisory a uthorities concerned and the European Insurance a nd Occupational Pensions Authority. (3) 1The verification finding must be made on the basis of the criteria specified by the European Commission i n a ccordance with Arti cle 260 (2) of Directive 2009/138/EC. 2The group supervisory a uthority i s bound by any previous veri fication finding made i n respect of a third country. 3This does not a pply i f a new review is required because the – Page 161 of 207 – s upervisory s ystem described i n Title I Chapter VI of Directive 2009/138/EC or the s upervisory s ystem i n the third country ha s changed significantly. (4) If the s upervisory a uthority is an affected s upervisory a uthority and it does not a gree with the verification finding, i t ma y, wi thin three months of the notification of the decision by the a uthority a cting as group supervisory a uthority, ref er the ma tter for consultation to the European Insurance and Occupational Pensions Authority i n accordance with Article 19 of Regulation (EU) no. 1094/2010. (5) 1If the European Commission has declared in a delegated legislative a ct in a ccordance with Arti cle 260 (5) of Directive 2009/138/EC tha t the supervisory regime in a third country i s provisionally deemed to be equivalent, section 289 a pplies duri ng the period s pecified in the delegated l egislative act. 2This does not apply if an insurance undertaking domiciled i n Germa ny reports total assets higher than the total assets of the parent undertaking domiciled in a third country. 3In this ca s e, the authority a cting as group s upervisory a uthority takes on the tasks of the group supervisory a uthority. Section 289 Equivalence (1) If the verification procedure i n accordance with section 288 fi nds the supervisory regime to be equivalent, the s upervisory a uthority must recognise the group-wide supervision carried out in the third country as binding. (2) Secti ons 279 to 287, 293 (1), 298 (1), 305 (1) no. 1, 306 (1) no. 1 a nd 309 a pply, with the necessary modifications, to cooperation with the supervisory authorities i n the third country. Section 290 Absence of equivalence (1) 1Secti ons 250 to 265, 271 to 285 a nd 309 a pply, with the necessary modifications, in the absence of equivalent s upervision within the meaning of section 288; this is without prejudice to s ubsection (4). 2The general principles a nd ca l culation methods specified i n sections 250 to 265 a nd 271 to 285 mus t be applied a t the l evel of the insurance holding compa ny, mixed financial holding company or third country i nsurance undertaking. (2) 1If the parent undertaking is a n insurance holding company or mixed financial holding company, this undertaking mus t be treated, solely for the purposes of calculating the s olvency of the group, as if it were an i nsurance undertaking. 2The s olvency capital requirement must be calculated in accordance with section 257; the own funds eligible for the s ol vency ca pital requirement must be determined i n accordance with part 2 cha pter 2 s egment 2 s ubsegment 1. (3) 1If the parent undertaking is a third country i nsurance undertaking, this undertaking must be treated, solely for the purposes of calculating the solvency of the group, as if it were a n insurance undertaking. 2The solvency ca pital requirement must be calculated in a ccordance with s ection 258; the own funds eligible for the solvency ca pital requirement must be determined i n accordance with part 2 chapter 2 s egment 2 s ubsegment 1. (4) 1The s upervisory a uthority may, a fter consulting the other supervisory a uthorities concerned a nd subject to the cons ent of the group supervisory a uthority, use other methods than those governed by s ections 250 to 265 a nd sections 271 to 285 i f these methods ensure a ppropriate s upervision of the i nsurance undertakings in the group. 2In particular, the s upervisory a uthority ma y require the establishment of a n i nsurance holding company or mixed financial holding compa ny domiciled i n the European Community a nd apply the regulations concerning the supervision of groups to the i ns urance undertakings in the group headed by this insurance holding company or mixed financial holding company. 3The s upervisory authority may only select methods that help the objectives of group-wide supervision to be a chieved. 4The s upervisory authority must i nform the other s upervisory a uthorities i nvolved and the European Commission of the s elected methods. (5) Secti on 289 (2) a pplies to the cooperation with th e supervisory a uthorities in the third country. – Page 162 of 207 – Section 291 Level of supervision (1) If a pa rent undertaking domiciled in a third country i s itself a subsidiary of a n insurance holding company or mixed fi nancial holding company domiciled outside th e European Economic Area or of a third country i nsurance undertaking, the veri fication of equivalence referred to in section 288 i s carried out only at the level of the ultimate parent undertaking that is a third country i nsurance holding company, a third country mi xed financial holding company or a thi rd country i nsurance undertaking. (2) 1In the absence of equivalent s upervision, the supervisory a uthority may ca rry out a new verification of equivalence a t a l ower l evel in a parent undertaking of i nsurance undertakings regardless of whether the parent undertaking is a thi rd country i nsurance holding company, a third country mi xed financial holding company or a third country i nsurance undertaking. 2In this case, the supervisory a uthority s pecified i n section 288 (2) must explain the decision to the group. 3 Secti on 290 a pplies, with the necessary modifications. Chapter 5 Insurance holding companies and mixed financial holding companies Section 292 Intra-group transactions 1If one or more insurance undertakings have a mixed-activity i nsurance holding company a s the parent undertaking, the i ntra -group transactions between these insurance undertakings and the mixed -activity i nsurance holding company a re s ubject to general supervision. 2Sections 274, 284 to 287, 298 (1), 305 (1) no. 1 a nd s ection 328 a pply, with the necessary modi fications. Section 293 Supervision (1) 1Secti ons 4, 16 to 26, 29, 30, 32, 47 nos . 1, 2 a nd 5 to 7, s ections 303, 305, 306, 310 a nd section 333 a pply, with the necessary modifications, in a ddition to s ubsection (3) to insurance holding companies and mixed financial holding compa nies; this is without prejudice to section 299. 2In addition to the provisions in s ubsection (2), only those provisions rel ating to the supervision of primary i nsurance or reinsurance undertakings a pply to s uch companies that also conduct pri mary i nsurance or reinsurance business. (2) In the cases specified i n section 287, the supervisory a uthority may a lso order the required measures in respect of the releva nt insurance holding company or mixed financial holding company. (3) 1The s upervisory a uthority may fully or partially transfer the powers held by the governing bodies of an insurance hol ding company or mixed financial holding company by vi rtue of law, articles of association or rules of procedure to a s pecial commissioner i f 1. there is evidence to suggest that one or more members of the senior management or one or more members of the s upervisory board do not fulfil the requirements of section 24; or 2. the i nsurance holding company or mixed financial holding company has persistently breached the provisions of this Act, the German Insurance Contract Act, the German Money Laundering German Stock Corporation Acton (EU) no. 648/2012, the i mplementing statutory orders for this Act, the legislative acts implementing Regulation (EU) no. 648/2012 or Di rective 2009/138/EC or orders issued by the supervisory a uthority. 2Secti on 307 (1) s entences 2 a nd 3, a nd (2) to (4) applies, with the necessary modifications. (4) Subsections (1) to (3) apply, with the necessary modifications, to undertakings domiciled in Germany whose primary a cti vi ty i s the acquisition and maintenance of direct or indirect holdings in primary insurance undertakings, reinsurance – Page 163 of 207 – undertakings or pension funds and that a re not already s ubject to supervision under this Act. Part 6 Supervision: duties and general powers, organisation Chapter 1 Duties and general provisions Section 294 Duties (1) The pri mary objective of supervision is to protect policyholders and the beneficiaries of i nsurance services. (2) 1The s upervisory a uthority must monitor all business operations of i nsurance undertakings within the fra mework of l egal supervision i n general and financial s upervision in particular. 2It must monitor compliance with the laws a pplicable to the pursuit of insurance business and, in the case of primary i nsurance undertakings, a lso ensure that the interests of the i nsured are s ufficiently safeguarded. 3It must appropriately take into account the potential impact of i ts decisions on the s tability of the financial system i n the relevant countries concerned in the European Economic Area. 4In ti mes of exceptional movement i n financial markets, it must ta ke i nto account the potential pro -cyclical effects of its actions. (3) 1The objective of l egal supervision is the proper operation of insurance business, i ncluding compliance with s upervisory provisions, regulations governing i nsurance contracts, a ny other provisions concerning the i nsured and the l egal principles in the business plan. 2Legal supervision a lso extends to compliance with the labour and social law requirements to be observed by Pensionskassen i n the field of occupational retirement provision. (4) In the context of financial supervision, the supervisory authority must ensure, i n respect of the overall business a cti vi ties, that i nsurance undertakings are able to meet their obligations under insurance contracts a t all ti mes and in pa rti cular that they a re solvent and maintain their l ong-term risk-bearing capacity, that they have recognised a dequate technical provisions, i nvest in appropriate assets, comply with the principles of good business practice, including those in res pect of a proper s ystem of governance, and that they also comply with th e other financial principles established for thei r business operations. (5) 1The s upervisory a uthority must regularly review and assess the strategies, processes and reporting s ystems es tablished by a n insurance undertaking i n order to comply with the legal a nd a dministrative rules enacted in a ccordance with Directive 2009/138/EC or Directive (EU) 2016/2341 (s upervisory review process). 2The supervisory revi ew process comprises the assessment 1. of the qualitative requirements relating to the s ystem of governance, 2. of the ri sks to which the undertaking is or could be exposed a nd 3. a nd of ability of the undertaking to assess and bear these risks, ta king i nto a ccount the environment i n which the undertaking is operating. 3The s upervisory authority must s pecify the minimum frequency and the scope of these reviews, evaluations a nd a s sessments having regard to the nature, scope and complexity of the a ctivities conducted by the insurance undertaking concerned. 4In the case of Pensionskassen, it must also take into account the size of the activities. (6) 1Supervision is not limited to business a ctivities in Germany, but a lso covers business conducted i n other member s ta tes or EEA signatory s tates via branches or cross-border provision of servi ces. 2While financial supervision is the sole res ponsibility of the supervisory a uthority, a ny s upervisory function other than financial s upervision is performed in cooperation with the supervisory authority of the other member state or EEA signatory s tate. (7) Supervision must also extend to the liquidation of an undertaking a nd the run-off of existing insurance contracts if bus iness operations are prohibited or voluntarily discontinued or i f the a uthorisation to carry on business is revoked. – Page 164 of 207 – (8) The s upervisory a uthority must carry out its duties a nd exercise i ts powers only i n the public i nterest. Section 295 Competent authority in relation to EU Regulations (1) 1For the undertakings s ubject to supervision under this Act, the competent s upervisory a uthority under this Act i s a l so the 1. s ectoral competent authority within the meaning of Regulation (EC) No. 1060/2009, as amended, for the undertakings included within the scope of Regulation (EC) No. 1060/2009, 2. competent authority within the meaning of Regulation (EC) No. 1286/2014, a s amended, for the undertakings i ncl uded within the s cope of Regulation (EC) No. 1286/2014, 3. competent authority within the meaning of Regulation (EC) No. 2016/1011, a s amended, for the undertakings i ncl uded within the s cope of Regulation (EC) No. 2016/1011, 4. competent authority within the meaning of Arti cle 29(4) a nd (5) of Regulation (EU) 2017/2402 for the undertakings i ncl uded within the s cope of Regulation (EU) 2017/2402. 2(2) The s upervisory a uthority i s the competent a uthority under Article 5(1) of Directive 2014/17/EU of the European Pa rl iament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential i mmovable property a nd a mending Directives 2008/48/EC a nd 2013/36/EU and Regulation (EU) No 1093/2010 (OJ L 60 of 28 February 2014, pa ge 34; L 47 of 20 February 2015, pa ge 34; L 246 of 23 September 2015, page 11) for the undertakings it s upervises. Section 296 Principle of proportionality (1) 1The s upervisory a uthority must apply the requirements of this Act to insurance undertakings that are not Pensionskassen i n a manner that is proportionate to the nature, scale and complexity of the ri sks inherent in the bus iness of the insurance undertaking concerned. 2The supervisory authority must a pply the requirements of this Act to Pensionskassen i n a manner that is proportionate to the nature, scale and complexity of the a ctivi ties of the Pensionskasse concerned. (2) Subsection (1) applies, with the necessary modifications, to the issuer of statutory orders where this Act confers powers to enact statutory orders. Section 297 Discretion (1) The s upervisory a uthority must decide on the measures it imposes at its own discretion, exercising due care a nd di ligence. (2) 1If a number of options a re possible to provide protection against a risk, it is s ufficient if one option is chosen. 2At the request of the party concerned, a uthorisation to apply a n equally effective a lternative option must be given, provided tha t this does not result i n a greater a dverse impact on the interests of the insured. Section 298 General supervisory powers (1) 1The s upervisory a uthority may ta ke a ny a ction in respect of a primary i nsurance undertaking, the members of such a n undertaking's management board or other members of the senior management or i n respect of persons controlling the pri mary i nsurance undertaking that is appropriate and necessary to prevent or remedy irregularities. 2An irregularity i s a ny conduct by a n insurance undertaking that conflicts with the supervisory objectives under s ection 294 (2) a bove. 3 Irregularities a re also weaknesses or deficiencies that the supervisory a uthority has identified during the s upervisory – Page 165 of 207 – revi ew process. (2) The s upervisory a uthority may ta ke a ny a ction in respect of a reinsurance undertaking, the members of such a n undertaking's management board or other members of the senior management or i n respect of persons controlling the rei nsurance undertaking that is appropriate and necessary to ensure that 1. the rei nsurance undertaking complies with the laws applicable to the operation of reinsurance business a nd with orders issued by s upervisory authorities, 2. i n pa rticular, the reinsurance undertaking is in a position a t all times to satisfy i ts obligations under i ts reinsurance contra cts, and 3. the rei nsurance undertaking eliminates weaknesses or deficiencies that the s upervisory a uthority has i dentified duri ng the supervisory review process. (3) The s upervisory a uthority may reject a reinsurance or retrocession agreement that an insurance undertaking has entered i nto with a reinsurance undertaking or a primary i nsurance undertaking authorised in a ccordance with Arti cle 14 of Di rective 2009/138/EC only for reasons that do not directly relate to the financial soundness of the other undertakin g. (4) (Repealed) Section 299 Extension of supervisory powers The s upervisory a uthority may a lso take measures under s ection 298 (1) or (2) directly a gainst 1. other undertakings to which an i nsurance undertaking has outsourced activities, and 2. i ns urance holding companies as defined in section 7 no. 31, mi xed insurance undertakings as defined in s ection 7 no. 11, mi xed financial holding companies as defined in section 7 no. 10, a nd the persons who effectively direct the bus iness of such holding companies. Section 300 Amendment of the business plan 1The s upervisory authority may require amendment of the business plan before the conclusion of new insurance contra cts. 2The s upervisory a uthority may a mend or rescind a n business plan with effect on existing insurance contracts or termi nated contracts with outstanding claims, if this is deemed necessary to s afeguard the interests of the insured. 3Sentences 1 a nd 2 do not apply to reinsurance undertakings. Section 301 Capital add-on (1) The s upervisory a uthority may only stipulate a ca pital add-on to the solvency capital requirement for an insurance undertaking i f 1. the i nsurance undertaking’s ri sk profile deviates considerably from the assumptions underlying the solvency ca pital requirement which has been calculated using the s tandard formula, and if the requirement to use a n internal model – Page 166 of 207 – under section 96 (2) i s unreasonable or was unsuccessful or a full or partial i nternal model required under section 96 (2) i s s till in development, 2. the i nsurance undertaking’s ri sk profile deviates considerably from the assumptions underlying the solvency ca pital requirement which has been calculated i n accordance with a n internal model used as a full or partial i nternal model, beca use certain quantifiable risks were recorded inadequately a nd the adjustment to the model for the purposes of a n i mproved depiction of the a ctual ri sk profile failed within a reasonable ti me frame, 3. a n i nsurance undertaking’s system of governance deviates considerably fro m the standards set out in Part 2 Cha pter 1 Segment 3 a nd if a ) thes e deviations prevent the undertaking from adequately i dentifyi ng, measuring, monitoring, controlling or reporting on the risks to which it is or could be exposed; a nd b) the a pplication of other measures i s not expected to rectify the defects within a reasonable ti me frame; or or 4. the i nsurance undertaking applies the matching adjustment under s ection 80, the volatility a djustment under section 82 or the tra nsitional measures under s ection 351 or s ection 352, a nd the supervisory a uthority reaches the concl usion that this undertaking’s risk profile deviates considerably from the assumptions underlyi ng this adjustment or tra ns itional measure. (2) 1In the cases s tated i n subsection (1) nos. 1 a nd 2 the ca pital a dd-on must be calculated in such a way that fulfilment of the requirements under s ection 97 (2) i s guaranteed by the undertaking. 2In the cases stated i n subsection (1) no. 3 the ca pital add-on must be proportional to the essential risks that are associated with the defects and have led to the deci sion by the supervisory a uthority to s tipulate the capital add -on. 3In the cases stated in subsection (1) no. 4 the ca pi tal add-on must be proportional to the essential ri sks that a rise from the deviations designated there. (3) Sti pulation of a capital add-on does not release the i nsurance undertaking from rectifying the defects determined i n the ca ses stated in s ubsection (1) nos. 2 a nd 3; the supervisory a uthority will implement a dditional measures to rectify the i rregularity as necessary. (4) The ca pital add-on will be reviewed by the s upervisory a uthority at l east once per year; it will be cancelled once the undertaking has rectified the defects underlying it. (5) 1The s olvency ca pital requirement i ncluding the prescribed ca pital add-on will replace the inadequate solvency ca pi tal requirement. 2Any ca pital a dd-on s tipulated under subsection (1) no. 3 will not be considered in the calculation of the ri sk margin under section 78. Section 302 Prohibition of participating interests (1) 1If a primary i nsurance undertaking holds a participating interest in a nother undertaking that is not s ubject to s upervision, and if the nature or size of the participating i nterest has the potential to imperi l the insurance undertaking, the s upervisory a uthority ma y prohibit the insurance undertaking from maintaining its participating interest or permit it to be to ma intained only on condition that the undertaking consents to a n audit at its own expense or a t the expense of the i nsurance undertaking in a ccordance with s ection 341k of the Commercial Code a nd sections 35 a nd 36 of this Act. 2 If the undertaking refuses to be audited or i f the a udit gives rise to any objections against the participating i nterest, t he s upervisory a uthority must prohibit the insurance undertaking from maintaining its participating interest. (2) A pa rti cipating i nterest within the meaning of subsection (1) is also deemed to exist if a member of the management boa rd or supervisory board of the insurance undertaking exercises, or is in a position to exercise, a significant i nfluence on the management of another undertaking. Section 303 Dismissal of persons with key tasks, warnings – Page 167 of 207 – (1) 1The s upervisory a uthority may gi ve a warning to a person who effectively l eads a n insurance undertaking or is res ponsible for key ta sks in a n insurance undertaking if the i nsurance undertaking breaches provisions of this Act, the Ins urance Contract Act, the Money La undering Act, Regulation EU) No. 648/2012, Arti cle 4(1) to (5) or Article 15 of Regulation (EU) 2015/2365, Arti cle 16(1) to (4), Arti cle 23(3) s entence 1, paragraphs (5), (6) or (10), Arti cle 28(2) or Arti cl e 29 of Regulation (EU) 2016/1011, Arti cles 6, 7, 9, 18 to 26 or 27(1) or (4) of Regulation (EU) 2017/2402, s tatutory orders enacted to implement this Act, the legislative acts enacted to i mplement Regulation (EU) No. 648/2012, Arti cle 4(1) to (5) or Regulations (EU) 2015/2365, (EU) 2016/1011, (EU) 2017/2402 or Directive 2009/138/EG, or orders i ssued by the s upervisory a uthority. 2The subject matter of the warning will be a determination of the ci rcumstances related to the decision and the breach established as a result of this. (2) The s upervisory a uthority may require the dismissal of a ny person who actually l eads an insurance undertaking or is res ponsible for other key tasks in an i nsurance undertaking and prohibit this person from exercising their activity i f 1. there is evidence i ndicating that the person does not meet the requirements under section 24; 2. the person has, as a manager, wilfully or recklessly breached the provisions of this Act, wi th the exception of the requirements of part 2 chapter 1 s egment 6, the Insurance Contract Act, Regulation (EU) No. 648/2012, Arti cle 4(1) to (5) or Arti cl e 15 of Regulation (EU) 2015/2365, Arti cle 16(1) to (4), Article 23(3) sentence 1, paragraphs (5), (6) or (10), Arti cl e 28(2) or Arti cle 29 of Regulation (EU) 2016/1011, Arti cles 6, 7, 9, 18 to 26 or 27(1) or (4) of Regulation (EU) 2017/2402, the s tatutory orders enacted to i mplement this Act, the l egislative acts enacted to implement Regulation (EU) No. 648/2012, Article 4(1) to (5) of Regulations (EU) 2015/2365, (EU) 2016/1011, (EU) 2017/2402 or Di rective 2009/138/EC, or orders issued by the s upervisory a uthority, and continues this behaviour despite a wa rning by the s upervisory a uthority, 3. ma terial breaches by the undertaking of the principles of proper business management remain concealed from the pers on i n their capacity as a member of the supervisory board i n breach of the duty of ca re in relation to their moni toring and control functions, or they have not done everything required to rectify determined breaches and they continue with this behaviour despite a warning from the s upervisory a uthority, or 4. the person wilfully or recklessly breaches the requirements of part 2 chapter 1 s egment 6 of this Act, the Money La undering Act or regulations or enforceable orders enacted to implement those requirements, to the extent that the breaches are serious, repeated or systematic. (3) If the court is required to dismiss a member of the s upervisory board following a request from the s upervisory board, thi s request may a lso be made by the supervisory a uthority i f the requirements under subsection (2) nos. 1 or 2 a re met a nd the supervisory board has not fulfilled the dismissal demanded by the supervisory a uthority. Section 303a Disqualification of natural persons In the cases of section 304 (3) number 3 or s ection 308 c (1), the supervisory a uthority may a lso temporarily prohibit a na tural person who i s responsible for the breach a nd is not a manager a t the ti me of the breach from any future a ctivity a s a manager of insurance undertakings and Pensionsfonds for a period of up to two years Section 304 Revocation of authorisation (1) 1The a uthorisation to operate a business must be withdrawn if 1. the i nsurance undertaking expressly refrains from accepting the authorisation; 2. the i nsurance undertaking does not meet the minimum ca pital requirem ent and the s upervisory a uthority believes tha t the financing plan submitted is obviously i nadequate or the undertaking will not be able to fulfil the approved – Page 168 of 207 – fi nancing plan within three months following determination of the non-compliance with the minimum ca pital requirement; 3. the i nsurance undertaking is excluded from the guarantee scheme in a ccordance with section 229; or 4. i ns olvency proceedings are opened. 2 Revocation of the authorisation must not bear upon actions of the insurance undertaking l ega lly required as part of the i ns olvency proceedings. (2) The a uthorisation s hould be withdrawn i f the insurance undertaking has not made use of the authorisation within twel ve months of this being granted or has suspended business operations for more than s ix months. (3) The s upervisory a uthority may revoke the a uthorisation in whole or in part i f 1. the undertaking no l onger satisfies the requirements for authorisation or 2. the undertaking seriously breaches its obligations under this Act, with the exception of the requirements of part 2 cha pter 1 s egment 6, or the business plan. 3. the undertaking persistently breaches Article 4 or Arti cle 15 of Regulation (EU) 2015/2365 or orders issued by the s upervisory a uthority in relation to those requirements, or 4. the undertaking seriously, repeatedly or s ystematically breaches the requirements of part 2 chapter 1 s egment 6 of thi s Act or the Money La undering Act or regulations or enforceable orders of the supervisory a uthority enacted to i mplement those requirements. (4) 1The s upervisory a uthority will notify the s upervisory a uthorities in all other member s tates or EEA signatory s tates i n whi ch the undertaking exercises i ts business a ctivi ty a nd the European Insurance and Occupational Pensions Authority of the revocation of the authorisation. 2It will implement a ll measures alone or together with these a uthorities that a re a ppropriate i n terms of safeguarding the i nterests of the i nsured parties of a primary i nsurance undertaking or the i nterests of the ceding insurer of a reinsurance undertaking. 3It may, in particular, restrict or prohibit free disposal of the a s sets of the undertaking and appoint qualified persons to manage the assets. (5) After revocation of the authorisation, the undertaking is prohibited from writing new insurance business a nd from i ncreasing or renewing existing policies. (6) 1For mutual societies, a revocation of a uthorisation for the whole of business operations has the same effect as a di ssolution resolution. 2The revocation of authorisation is to be entered in the commercial register upon notification by the s upervisory a uthority. (7) Secti on 48 (4) s entence 1 a nd section 49 (2) s entence 2 of the German Administrative Procedure Act (Verwaltungsverfahrensgesetz - VwVfG) regarding the period of one year a re not applicable. Section 305 Survey, duty of disclosure (1) The Supervisory Authority i s authorised 1. to require the insurance undertakings, the members of their governing bodies, employees a nd persons controlling the undertakings to provide i nformation a bout a ll business matters and submit or forward all business documents, in pa rti cular i n i ndividual cases the general policy conditions, premium ra te terms, forms and other printed documents, whi ch an i nsurance undertaking uses in its dealings with policyholders or the ceding insurance undertaking (ceding i ns urer), as well as enterprise agreements and outsourcing contracts a nd 2. to require that insurance undertakings that are subject to group -wide supervision under Part 5 a nd the persons s ta ted i n no. 1 provide information and s ubmit documents regarding business matters that are useful to group -wide s upervision; i f a n insurance undertaking does not tra nsmit this i nformation within a reasonable period despite a demand, then the supervisory a uthority may a lso demand the information and transmission or submission of the – Page 169 of 207 – documents from all other undertakings that belong to the group. (2) The s upervisory a uthority a lso has the rights under subsection (1) no. 1 i n respect of 1. pers ons and undertakings who mediate or have mediated insurance contracts for an i nsurance undertaking as an i ns urance agent or insurance broker, provided that this is important for the assessment of the business operations a nd financial position of the insurance undertaking, or for fulfilment of the duties under sections 53 to 56 of the regulations under the German Money La undering Act by a n insurance undertaking within the meaning of s ection 52; 2. pers ons and undertakings to which an insurance undertaking has outsourced functions or activities as well as its offi cial a uditors and independent trustees within the meaning of this Act or of the Insurance Contract Act; the duty of di sclosure by the official a uditor is restricted to facts of which they have become aware within the s cope of the a nnual audit; 3. pers ons and undertakings who have communicated the intention to acquire participating i nterests under s ection 17 (1) no. 1 or who a re s pecified in an a pplication for a uthorisation under section 9 as holders of quali fied participating i nterests; 4. the holders of qualified participating interests in a n i nsurance undertaking and in undertakings controlled by the i ns urance undertaking; 5. pers ons and undertakings in relation to whom there is evidence to suggest that these are persons or undertakings wi thin the meaning of no. 4 a bove; a nd 6. pers ons and undertakings who a re affiliated with a person or an undertaking within the meaning of numbers 3 to 5 under section 15 of the German Stock Corporation Act. (3) 1If i t i s determined or there a re facts which justify a n assumption that an undertaking is operating unauthorised i ns urance transactions (section 308 (1) s entence 1), or is or has been involved i n initiating, underwriting or handling una uthorised insurance tra nsactions, the members of the governing bodies and the partners a nd employees of such an undertaking must provide information on all business matters to the s upervisory a uthority upon request a nd s ubmit the rel evant documentation. 2Members of a governing body, partners or employees must also provide information and s ubmit documentation upon request after they have left the governing body or the undertaking. (4) Subsection (3) applies, with the necessary modifications, provided that 1. i t i s determined or there a re facts which justify a n assumption that undertakings or i ndividuals are i nvolved in i ni tiating, underwriting or handling i nsurance transactions which a re being provided in a nother member s tate or EEA s ta te or a third country contrary to a corresponding prohibition i n this country; a nd 2. the competent authority i n the other country ma kes a corresponding request to the supervisory authority. (5) Any pers ons required to provide information in accordance with subsections (1) to (3) may refuse to answer any questions which would subject them or any of their relatives in accordance with section 383 (1) nos. 1 to 3 of the Code of Ci vi l Procedure to the risk of cri minal prosecution or of proceedings under the German Act on Breaches of Admi nistrative Regulations. (6) 1The s upervisory a uthority may a ccess i ndividual pieces of i nformation from the file i n accordance with section 24c (1) s entence 1 of the German Banking Act, provided that this is required for the purposes of fulfilling its supervisory tasks under this Act, particularly in relation to unauthorised insurance transactions and there is a particular need for urgency i n the individual case. 2Section 24c (4) of the German Banking Act a pplies, with the necessary modifications. Section 305a Powers and measures against supervised contributors and users of indices within the meaning of Regulation (EU) 2016/1011 (1) 1The s upervisory a uthority ca n s ummon a nd question persons who are involved i n or contribute to the provision of a benchmark within the meaning of Regulation (EU) 2016/1011, where this is necessary due to i ndications relating to moni toring compliance with any prohibition or requirement of Regulation (EU) 2016/1011. 2Sta tutory ri ghts to provide – Page 170 of 207 – or refus e to provide information as well as statutory obligations of confidentiality remain unaffected. (2) 1The s upervisory a uthority ca n require s upervised entities as defined i n Article 3(1) number 17 of Regulation (EU) 2016/1011 to s urrender the following records existing records that they hold: 1. recordings of telephone conversations, 2. el ectronic communications or 3. other data traffic records within the meaning of s ection 3 (30) of the Telecommunication Act, to the extent that this is necessary due to indications relating to monitoring compliance with a ny prohibition or requirement under Arti cle 16(1) to (4), Arti cle 23(3) sentence 1, paragraph (5), (6) a nd (10), Arti cle 28(2) a nd Article 29 of Regulation (EU) 2016/1011. 2The privacy of correspondence, posts a nd telecommunications under Article 10 of the Basic La w i s restricted in this respect. (3) In the event of an i nfringement of requirements of Regulation (EU) 2016/1011 a nd Commission delegated and i mplementing a cts a dopted on the basis of that Regulation, the supervisory a uthority ca n require the ces sation of the a cts or behaviour underlying the infringement for a period of up to two years i n order to prevent further i nfringements. (4) 1The s upervisory a uthority ca n a pply for the seizure of assets to the extent necessary for enforcing prohibitions and requirements of Regulation (EU) No. 2016/1011. 2Measures under s entence 1 must be ordered by the judge. 3The Local Court i n Fra nkfurt a m Main is the competent court. 4The judicial order ca n be appealed; s ections 306 to 310 a nd 311a of the Code of Cri minal Procedure apply, with the necessary modifications. (5) 1The s upervisory a uthority ca n issue orders that are appropriate and necessary for implementing the prohibitions a nd requirements of Regulation (EU) No. 2016/1011 a nd the Commission delegated and impl ementing acts adopted on the basis of that Regulation. 2In particular, it can 1. require contributors who are active on spot markets a nd contribute data to produce a commodity benchmark to provi de information and report tra nsactions, to the extent that th is is necessary to monitor compliance with the requirements and prohibitions of Regulation (EU) 2016/1011 with regard to those commodity benchmarks, 2. i n the event of a n infringement of Articles 16, 23(3) s entence 1, paragraphs (5), (6) a nd (10), Arti cle 28(2) and Article 29 of Regulation (EU) 2016/1011 or of a n enforceable order of the s upervisory a uthority i n conjunction with a n i nvestigation of compliance with obligations under that Regulation that has been issued and is enforceable under s ubsections (1) or (2), a ) require a supervised entity as defined in Article 3(1) number 17 of that Regulation to permanently cease the acts or behaviour underlying the infringement a nd to prevent their recurrence, b) publish a warning with regard to a supervised entity a s defined i n Article 3(1) number 17 of that Regulation, na ming the natural or l egal person or association of persons that is responsible for the i nfringement, as well as the na ture of the i nfringement; section 319a (3) and 5 a pplies, with the necessary modifications; c) ba n a person from exercising management functions i n an a dministrator or supervised contributor for a period of up to two years if that person intentionally caused the i nfringement and continues the behaviour despite bei ng cautioned by the supervisory a uthority. Section 306 Entry and examination of premises; asset seizure (1) 1The Supervisory Authority is a uthorised 1. to ca rry out a udits of business operations at the i nsurance undertaking’s business premises, including with no special ca us e; within the framework of group-wide supervision under Pa rt 5 i t may also examine the information under s ection 305 (1) no. 2 a nd section 284 a t undertakings s ubject to group-wide supervision, affiliated undertakings of thi s insurance undertaking, a t parent undertakings of this insurance undertaking and a t affiliated undertakings of a – Page 171 of 207 – pa rent undertaking of this i nsurance undertaking; 2. to conduct audits, including by wa y of taking part in a n audit of the insurance undertaking i n accordance with se ction 341k of the Commercial Code and itself make the determinations it deems necessary; this does not apply to i ns urance undertakings recognised as small mutual associations; 3. to ha ve persons take part i n the audits performed by i tself i n accordance with nos. 1 a nd 2 a bove, who may be a ppointed as official auditors under section 341k i n conjunction with section 319 of the Commercial Code, or to commi ssion s uch persons to perform a udits in a ccordance with nos. 2 a nd 3; the provisions of section 323 of the Commercial Code regarding a uditors apply a nalogously to these persons; 4. to di s patch to meetings of the supervisory board and annual general meetings or meetings of the senior representative body representatives who must be granted the ri ght to speak on request; a nd 5. to require that the meetings under no. 4 a bove a re convened and certain subjects are i ncluded i n the agenda for res olution. 2 In the event of a harmonisation of the established supervisory practices the members of the European Supervisory Authority have the right for i nsurance business and occupational pension schemes, i n accordance with Article 21 (1) of Regulation (EU) No. 1094/2010 of the European Parliament and of the Council of 24 November 2010 es tablishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC a nd repealing Commission Decision 2009/79/EC (OJ L 331 of 15/12/2010, pa ge 48), to ta ke part in a udits of the col leges of supervisors referred to i n Directive 2009/138/EC at the business premises of the insurance undertaking whi ch are ca rried out jointly by the Supervisory Authority a nd by a t least one competent a uthority from another member state or EEA signatory s tate. (2) 1The s upervisory a uthority also has the ri ghts under subsection (1) s entence 1 nos. 1 a nd 3 i n respect of 1. pers ons and undertakings who mediate or have mediated insurance contracts for an i nsurance undertaking in a ca pa city a s insurance a gent or i nsurance broker; or 2. pers ons and undertakings to which an insurance undertaking has outsourced functions or activities; 3. pers ons and undertakings who have communicated the intention to acquire participating i nterests under s ection 17 (1) no. 1 or who a re s pecified in an a pplication for a uthorisation under section 9 as holders of qualified participating i nterests; 4. the holders of qualified participating interests in a n i nsurance undertaking and in undertakings controlled by the i ns urance undertaking; 5. pers ons and undertakings in relation to whom there is evidence to suggest that these are persons or undertakings wi thin the meaning of no. 4 a bove; a nd 6. pers ons and undertakings who a re affiliated with a person or an undertaking within the meaning of numbers 3 to 5 under section 15 of the German Stock Corporation Act. 2As regards the cases under sentence 1 no. 1, this applies only i nsofar as it is i mportant for the assessment of the bus iness operations and financial position of the i nsurance undertaking, or compliance with the duties under sections 53 to 56 or the regulations under the German Money La undering Act by a n i nsurance undertaking within the meaning of s ection 52. 3The supervisory a uthority may ta ke measures in a ccordance with subsection (1) sentence 1 nos. 4 a nd 5 i n rel ation to the persons a nd undertakings specified i n sentence 1 nos. 3 to 6 i f there a re indications of grounds for a prohi bition under section 18 (1) nos. 1 to 6 a nd (2). (3) 1If wi thin the framework of financial supervision the supervisory a uthority i ntends to perform a udits at the premises of a bra nch under section 58, a branch of a reinsurance undertaking or the business premises of a service provider to whi ch an i nsurance undertaking has outsourced activities, using i ts own personnel or other parties i t has engaged, it mus t i nform the s upervisory a uthority of the other member s tate or EEA s ignatory s tate accordingly. 2If the s upervisory a uthority i s prohibited from exercising its ri ght to ca rry out these audits on site or i f this is not in fact possible for i t to ta ke part in the a udit, it may also a ddress the matter to the European Insurance and Occupational Pensions Authority under Article 19 of Regulation (EU) No. 1094/2010 and ask this body for support. 3The supervisory a uthority may del egate the auditing of a service provider to the supervisory a uthority of the member s tate or EEA s ignatory s tate in whi ch the service provider i s located. (4) The s upervisory a uthority may ca rry out audits a t the undertaking’s business premises a nd a t the premises of the – Page 172 of 207 – i ndividuals required to provide i nformation a nd submit documentation under s ection 305 (3) a nd (4) i f this is required in order to determine the type and scope of the transactions or activities. (5) 1The s taff of the s upervisory a uthority and any persons in a ccordance with s ubsection (1) sentence 1 no. 3 must be permitted to access a nd inspect the business premises of the audited undertaking within normal operating a nd business hours to perform the audits under s ubsection (1) sentence 1 nos. 1 a nd 2, a nd also to search these in the cases mentioned in subsection (4). 2In order to prevent urgent ri sks to public safety or order they may also enter and inspect thes e premises outside of normal operating and business hours; under this condition they may a lso enter a nd i nspect other premises which a re also residential. (6) 1Sea rches 1. of business premises, except for cases of imminent danger; and 2. premises which are also residential at the same time; mus t be ordered by a judge based on a warrant. 2This will be issued by the Local Court i n whose district the premises a re l oca ted. 3An a ppeal may be made against the judge’s decision; s ections 306 to 310 a nd 311a of the Code of Criminal Procedure apply, with the necessary modifications. 4A report must be compiled on the search. 5This must i nclude the offi ce responsible, reason, time and place of the s earch and i ts result, along with the facts which justified an assumption of i mminent danger if no judicial warrant was issued. (7) The officials from the supervisory a uthority may s eize items that may be significant as evidence in investigating the fa cts of the case. (8) 1Thos e concerned must tolerate measures taken in a ccordance with s ubsection (1) sentence 1 nos. 1 to 3, s entence 2 a s well as well as s ubsections (2), (4), (5) a nd (7). 2The fundamental ri ght of i nviolability of the home (Article 13 (1) of the Germa n Basic La w) is restricted to this extent. Section 307 Special commissioner (1) 1The s upervisory a uthority may a ssign authorisations of a governing body to a special commis sioner i n whole or i n pa rt. 2It will determine the extent to which the special commissioner may act i n place of the governing bodies of the s upervised undertaking. 3The special commissioner must be a n independent, fit a nd proper person for the position. (2) 1Wi thin the framework of their responsibilities the special commissioner is entitled to demand information and the s ubmission of documents from the members of the governing bodies a nd the employees of the undertaking, to take part i n the meetings and assemblies of the governing bodies and other committees of the undertaking in a n advisory rol e, to enter the business premises of the undertaking, to inspect i ts business documentation and accounts and to pursue further enquiries. 2The governing bodies and me mbers of the governing bodies must support the special commissioner a s the latter ca rries out their tasks. 3The s pecial commissioner is obliged to provide i nformation to the supervisory a uthority regarding all findings within the scope of their activities. (3) 1The i nsurance undertaking is responsible for a ny costs arising from the appointment of the special commissioner, i ncl uding any reasonable expenses to be granted a nd the relevant remuneration. 2The amount of this remuneration is s et by the supervisory a uthority. 3The supervisory authority must a dvance the expenses a nd the remuneration following a request from the s pecial commissioner. (4) 1In the event of negligent actions the duty to pay compensation by the special commissioner is limited to 1 mi llion euros for an activity at a n insurance undertaking. 2If this relates to a public limited company whose shares a re listed for tra de on the regulated market then the duty to pay compensation within the meaning of sentence 1 is restricted to 4 mi l lion euros. 3The limitations under s entences 1 a nd 2 a lso apply if the powers of multiple governing bodies are tra ns ferred to the s pecial commissioner or i f they have committed multiple actions liable for compensation. – Page 173 of 207 – Section 308 Unauthorised insurance transactions (1) 1If i nsurance business is operated without the a uthorisation required in section 8 (1), business activities a re started contra ry to s ection 61 (1) or s ection 67 (1) or continued contrary to section 62 (3) sentence 2 or 3 or s ection 169 (3) s entence 2 (unauthorised i nsurance transactions), the s upervisory a uthority may order the undertaking to discontinue thes e business operations with immediate effect and order a n immediate run-off of these business tra nsactions. 2It may i s sue i nstructions for the run-off and appoint a suitable person as run-off a dministrator. (2) The s upervisory a uthority may publish i ts measures in accordance with sentence 1 i f these a re irrevocable or enforceable with immediate effect; personal data may only be published if this is required i n order to avert risk. (2a ) 1If BaFin orders the business operations to be discontinued or the run-off of the unauthorised transactions, it is enti tled to exercise the rights referred to i n section 38 (1) a nd (2) of the Banking Act i n respect of l egal persons a nd commercial partnerships. 2Subsection (2) a pplies, with the necessary modifications. (3) Subsections (1) a nd (2) apply, wi th the necessary modifications, to measures in relation to the members of the undertaking’s governing bodies a nd partners. (4) The regulatory powers in accordance with subsections (1) to (3) also apply i n relation to the undertaking a nd the i ndividuals stated in s ubsection (3), if it is determined or if facts justify a n assumption that they a re i nvolved in i nitiat ing, underwriting or handling these tra nsactions; this applies in particular i n relation to 1. undertakings which enter i nto or mediate contracts for a n undertaking within the meaning of subsection (1), a nd 2. undertakings which ca rry out functions or a ctivi ties for a n undertaking of this type. (5) The l iquidator i s entitled to open i nsolvency proceedings in relation to the undertaking's assets. (6) 1The l iquidator a ppointed by Ba Fin must receive appropriate remuneration from the latter a long with reimbursement of expenses. 2The undertaking must reimburse BaFin separately for the amounts paid a nd, i f s o requested, must be paid to Ba Fin i n a dvance. 3BaFin may i nstruct the relevant undertaking to pay the a mount stipulated by BaFin directly to the l i quidator on behalf of BaFin provided that there a re no concerns related to i nfluencing the liquidator’s i ndependence as a res ult of this. (7) 1Provi ded that there a re facts which justify a n assumption that an undertaking is i nvolved in unauthorised insurance tra nsactions, the Supervisory Authority ma y inform the public of i ts s uspicion with a name or company name. 2Sentence 1 a pplies, with the necessary modifications, i f a n undertaking is not a ctually i nvolved in unauthorised insurance tra nsactions but a ppears to be i n public. 3The undertaking must be consulted prior to the decision on publishing the i nformation. 4If the i nformation published by the Supervisory Authority transpires to be incorrect or the underlying ci rcumstances as having being reproduced incorrectly, then the Supervisory Authority must i nform the public of this i n the s ame manner in which it had previously a nnounced the releva nt information. Section 308a Measures relating to PRIIP manufacturers and sellers 1Inres pect of a ny i nsurance undertaking that advises on or sells a PRIIP as defined i n Article 4 number 3 of Regulation (EU) No. 1286/2014 or the manufacturer of PRIIPs as defined in Arti cle 4 number 4 of Regulation (EU) No. 1286/2014, the s upervisory a uthority ca n ta ke all measures that are a ppropriate a nd necessary to monitoring compliance with the requirements of Regulation (EU) No. 1286/2014 and of Commission delegated acts and regulatory technical standards a dopted on the basis of that Regulation. 2In particular, it ca n 1. temporarily or permanently prohibit the marketing, distribution or sale of the PRIIP i n the event of an i nfringement of Arti cl e 5(1), Articles 6, 7 a nd 8(1) to (3), Arti cles 9, 10(1), Arti cle 13(1), (3) and (4) or Arti cles 14 or 19 of Regulation (EU) No. 1286/2014, 2. prohi bit the provision of a key information document that does not satisfy the requirements of Articles 6 to 8 or 10 – Page 174 of 207 – of Regulation (EU) No. 1286/2014, a nd 3. require the PRIIP manufacturer to publish a new version of the key i nformation document where the published vers i on does not satisfy the requirements of Arti cles 6 to 8 or 10 of Regulation (EU) No. 1286/2014, a nd 4. i n the event of a n infringement of one of the requirements specified in number 1, publish on its website a warning na ming the responsible i nsurance undertaking and the nature of the infringement. Section 308b Measures relating to mortgage lending; power to issue statutory orders 1 After hearing the leading associations of the undertakings, the supervisory a uthority may define limits on the extension of l oans to build or acquire residential property situated i n Germany by way of a general a dministrative act, if and to the extent that this is necessary counter any disruption of the proper functioning of the German financial system or a ny ri sk to fi nancial stability i n Germany. 2Section 48u (1) sentences 2 to 5 a nd (2) a nd (4) of the Banking Act a pply, with the necessary modifications. 3In the case of undertakings that are not subject to supervision by the supervisory a uthorities of the federal states, the Federal Ministry of Finance is authorised, after hearing the leading associations of the undertakings, by way of a s tatutory order that does not require the consent of the Bundesrat, to adopt more detailed requirements in a ccordance with section 48u (5) numbers 1 to 5 of the Banking Act, which is applicable with the necessary modifications. Section 308c Measures in the case of infringements of Regulation (EU) 2017/2402 (1) If a n undertaking s upervised under this Act i nfringes, as an originator or original lender, the requirements of Articles 6, 7, 9, 18 to 26 or 27(1) or (4) of Regulation (EU) 2017/2402, the s upervisory a uthority can order the acts or behaviour underlyi ng the i nfringement to cease permanently and require their recurrence to b e prevented. (2) If a s ecuritisation i s designated as a n STS s ecuritisation within the meaning of Article (EU) 2017/2402 a nd if an ori ginator, sponsor or securitisation special purpose entity has infringed one of the requirements of Articles 19 to 26 of Regulation (EU) 2017/2402 or i f an originator makes a misleading notification under Arti cle 27(1) of that Regulation, the s upervisory a uthority may temporarily prohibit a s upervised undertaking, as an originator under Arti cle 27(1) of that Regulation from notifying that its securitisations meet the requirements of Articles 19 to 22 or Arti cles 23 to 26 of that Regulation. Section 309 Duty of confidentiality (1) 1Pers ons employed or commissioned by the insurance supervisors a nd the members of the Insuran ce Advisory Counci l may not pass on any confidential information obtained i n connection with their activities to a ny other person or a uthority. 2This also applies to a ny other persons who gain access to the i nformation mentioned in sentence 1 by wa y of offi cial reporting. 3Sentences 1 a nd 2 do not apply to the communication of information in summary or a ggregate form, by whi ch it is i mpossible to identify the individual insurance undertakings. (2) 1The duty of confidentiality i n accordance with subsection (1) sentence 1 does not prohibit the exchange of i nformation with the competent authorities of other member states a nd EEA countries. 2The duty of confidentiality under subsection (1) sentence 1 a pplies to the information obtained. (3) 1An excha nge of information with competent authorities in third is only permissible if protection of the information to be communicated is guaranteed by professional s ecrecy to the same extent as is required under this regulation. 2This – Page 175 of 207 – excha nge of i nformation must be for the purposes of fulfilling the tasks of these authorities under s upervisory l aw. 3If the i nformation that a Member State has to communicate to a third country originates from a nother Member State, it ma y only be communicated with the express consent of the s upervisory a uthority of this Member State, and then only for the purposes for which consent has been provi ded by this authority. (4) The s upervisory a uthorities may only use i nformation obtained by reason of subsections (1) and (2) 1. for the examination of a n application by a n insurance undertaking for the granting of a uthorisation; 2. for the monitoring of the activities of an i nsurance undertaking, a group or a financial conglomerate; 3. for orders by the supervisory a uthority a nd for prosecution and punishment by the s upervisory a uthority of a dministrative offences; 4. wi thin the framework of an a dministrative procedure concerning remedies against a decision by the supervisory a uthority; a nd 5. wi thin the framework of proceedings i n administrative courts, insolvency courts, cri minal prosecuting a uthorities or courts having competent jurisdiction for administrative fines and criminal matters. (5) The duty of confidentiality in accordance with subsection (1) sentence 1 does not prohibit, in particular, the communication of information to 1. cri mi nal prosecuting a uthorities or courts having competent jurisdiction for administrative fines a nd cri minal ma tters or; 2. bodies and persons commissioned by s uch bodies entrusted by law or by order of public authoriti es with the s upervision of insurance undertakings, insurance i ntermediaries, credit i nstitutions, German management compa nies, i nvestment companies managed externally, EU management companies or foreign AIF management compa nies, financial enterprises, the fi nancial markets or payment tra nsactions or bodies established for the prevention of money l aundering; 3. a gencies handling the liquidation or i nsolvency of a n insurance undertaking, credit institution, a financial servi ces i ns titution, an i nvestment company or other financial i nstitution; 4. pers ons responsible for the statutory a uditing of the a ccounts of insurance undertakings, credit institutions, Germa n management companies, investment companies managed externally, EU ma nagement companies or forei gn AIF management companies or financial enterprises, as well as bodies which supervise the aforementioned pers ons; 5. Centra l Banks; 6. the European Central Bank, the Central Banks of the European System of Central Banks and other bodies with a s i milar function i n their ca pacities as monetary i nstitutions, the European Insurance a nd Occupational Pensions Authority, the European Banking Authority, the European Securities and Markets Authority, the Joint Committee of European Supervisory Authorities, the European Systemic Risk Board or the European Commission; 7. a uthorities that are responsible for s upervision of payment and s ettlement systems; 8. i ns titutions for the management of guarantee s chemes; 9. pa rl iamentary review committees under section 1 of the German Review Committees Act (Untersuchungsausschussgesetz – PUAG) based on a decision regarding a request under section 18 (2) of the Germa n Review Committees Act; 10. the Federal Constitutional Court; 11. the Federal Court of Audit, provided that a n audit re quest relates to the decisions and other a ctivities of BaFin in a ccordance with this Act or delegated legislative acts based on Directive 2009/138/EC; 12. Admi nistrative Courts in administrative law disputes in which BaFin is the defendant, with the exception of a ctions under the German Freedom of Information Act (Informationsfreiheitsgesetz - IFG); provi ded these bodies require the information for the performance of their functions. (6) In the event of a crisis, in particular a crisis as described i n Article 18 of Regulations (EU) No. 1094/2010, i nformation – Page 176 of 207 – ma y be forwarded to the European Central Bank, to the central banks of the European Sys tem of Central banks, and to the European Systemic Risk Board, provided that these bodies require the i nformation i n order to fulfil their res ponsibilities. (7) The duty of confidentiality in accordance with subsection (1) sentence 1 does not prohibit the exchange of i nformation with a ll undertakings that belong to a group as defined i n section 7 no. 13, i ncluding when this i nvolves i nformation from other undertakings belonging to the group. 1The duty of confidentiality as specified in s ubsection (1) sentence 1 a pplies, with the necessary modifications, to the pers ons employed by the bodies stated in s ubsection (5) nos. 1 to 8 a nd 10 to 12, the persons appointed by these bodies a nd the members of the committees stated in subsection (5) no. 9. 2If the body s tated in subsection (5) nos. 1 to 8 a nd 12 i s situated i n another country, the information may only be communicated if the persons employed or a ppointed by thi s body a re subject to a duty of confidentiality in accordance with subsection (5) sentence 1. 3Bodies situated i n a third country must be i nformed that the information forwarded may be used solely for the purpose f or which i t was communicated. 4Information obtained from other countries may only be passed on with the express permission of the competent agencies that have forwarded the i nformation, and only for purposes approved by these a gencies. (9) 1Secti ons 93, 97 a nd 105 (1), 111 (5) i n conjunction with section 105 (1) a nd section 116 (1) of the German Fiscal Code do not a pply to the persons referred to in s ubsection (1), to the extent that they a re acting in a capacity to implement thi s Act. 2This does not apply i f the fiscal authorities require the information for cri minal proceedings or any a ssociated ta x a ssessment proceedings. (10) 1Confi dential i nformation received by the s upervisory a uthority from the bodies mentioned in s ubsection (2) s entence 1, a nd s ubsection (5) nos. 2 to 7 ma y not be communicated by way of official reporting under subsection (1) s entence 2 without a pproval of the competent a uthority that has given the information. 2The same applies to i nformation obtained during a n on-site inspection of a branch in a nother Member State or EEA signatory s tate; i n this ca s e, a pproval by the competent authority of the Member State or EEA signatory s tate where the on-site inspection was ca rri ed out is required. (11) Thi s is without prejudice to the provisions of the German Federal Data Protection Act. Section 310 Ancillary provisions; exclusion of suspensory effect (1) Admi nistrative acts under this Act or a s tatutory i nstrument enacted based on this Act ma y include ancillary provi sions. (2) Objections to and a ctions to annul measures and decisions by the supervisory a uthority i ncluding the threat a nd the i mposition of enforcement measures in a ccordance with s ection 18 (1) a nd (2), sections 20, 36, 134 (7), s ection 135 (3) a s well as sections 264 a nd 298 i n conjunction with sections 15, 294 (6) a nd section 295 as well as sections 301, 305 (3) a nd (6), section 306 (4), (5) a nd (7), and sections 308, 312 a nd 314 do not have any suspensory effect. Chapter 2 Security measures Section 311 Notification of insolvency (1) 1As s oon as the i nsurance undertaking becomes insolvent its management board must notify the supervisory a uthority of this fact. 2This a pplies, with the necessary modifications, if the assets of the insurance undertaking are no l onger sufficient to cover i ts liabilities. 3This notification requirement replaces the duty of the management board in – Page 177 of 207 – a ccordance with other s tatutory requirements to file a petition to open insolvency proceedings in the case of i nsolvency or over-i ndebtedness. (2) 1If i n the case of mutual s ocieties and insurance undertakings under public law operating on the principle of mutuality which impose supplementary contributions or cost allocations, any called-for payments of s upplementary contri butions or cost allocations have been outstanding for five months after their due date, the management board mus t determine whether the undertaking would be over-indebted if the supplementary contributions or cost allocations not pa id in cash are disregarded; if this is the case, the board must inform the supervisory a uthority within one month a fter expiry of the specified period. 2Liquidators a re subject to the same duties. Section 312 Opening of insolvency proceedings (1) 1A petition to open insolvency proceedings against the insurance undertaking may only be filed by the supervisory a uthority. 2The s upervisory a uthority has the sole ri ghts of petition under section 3a (1), section 3d (2) and section 269d (2) of the Insolvency Code (Insolvenzordnung). 3The i ntroduction of a coordination procedure (sections 269d to 269i of the Insolvency Code) only affects insurance undertakings belonging to the group i f the s upervisory a uthority applied for i t or cons ented to it. (2) 1Onl y the authorities of the home country ma y open i nsolvency p roceedings a gainst a n insurance undertaking from the European Economic Area. 2If i nsolvency proceedings are opened against a n insurance undertaking i n a member s tate or EEA s i gnatory s tate, the proceedings must be recognised notwithstanding the requirements under section 343 (1) of the Insolvency Code. (3) 1Secondary insolvency proceedings or other territorial proceedings relating to the i nsurance undertaking with a regi stered office in another member state or EEA signatory state are not permissible. 2This does not a pply to cases under s ection 65 or i n relation to branches of insurance undertakings from third countries under s ection 68. (4) 1The i nsolvency court must i mmediately forward the order to open insolvency proceedings to the s upervisory a uthority, which must in turn immediately inform the supervisory a uthorities of the other member states a nd EEA countri es. 2If the supervisory a uthority receives a communication of this nature from the s upervisory a uthorities of a nother member s tate or EEA signatory s tate, it is entitled to promulgate this decision. 3Without prejudice to the publication provided for i n section 30 of the Insolvency Code, the i nsolvency court must publish excerpts from the order to open insolvency proceedings i n the Official Journal of the European Union. 4The publication under section 30 of the Ins olvency Code a nd the publication in the Official Journal of the European Union must include information of the court ha vi ng competent jurisdiction, the governing law and the appointed insolvency a dministrator. (5) 1The s upervisory a uthority may demand information on the status of proceedings from the i nsolvency court and the i ns olvency a dministrator at a ny ti me. 2The supervisory authority is obliged to inform the supervisory authority of a nother member s tate or EEA signatory s tate upon request concerning the status of the i nsolvency proceedings. (6) 1If the supervisory a uthority petitions for the opening of i nsolvency proceedings against a branch of a n insurance undertaking i n a third country, i t must immediately i nform the supervisory a uthorities of the other member states or EEA s i gnatory s tates i n which the i nsurance undertaking also has a branch. 2The individuals a nd a uthorities i nvolved mus t endeavour to coordinate with each other. Section 313 Provision of information to creditors (1) 1When the court has entered the order opening i nsolvency proceedings, the creditors must be s ent a form bearing the ti tle “Invitation to lodge a claim and submit observations relating to a claim. 2Time limits to be observed!” with the corres ponding translations i nto all official languages of the Member States a nd EEA countries. 3This form must be published i n the Federal Gazette by the Federal Ministry of Justice and for Consumer Protection and must contai n, i n pa rti cular, the following information: – Page 178 of 207 – 1. the ti me limits to be observed and the penalties l aid down with regard to those time limits; 2. who i s empowered to a ccept the notification of claims or observations relating to claims; 3. a ny other s teps to be ta ken; 4. wha t relevance the notification of claims has for creditors whose cl aims a re preferential or those whose claims are s ecured by a property l ien and the extent to which these creditors must lodge their claims; 5. the general effects of the insolvency proceedings on the insurance contracts; 6. the da te on which the insurance contracts or operations are no longer l egally va lid; a nd 7. the ri ghts and duties of the insured with regard to the contract or corresponding business tra nsaction. (2) If known creditors who have their habitual residence, domicile or registered office in another member s tate or EEA s i gnatory s tate are the owner of a cl aim as a policyholder, insured, beneficiary or i njured third party wi th a direct ri ght of a cti on against the insurer, they must be informed in the official language of the member state or EEA signatory s tate where they have their habitual residence, domicile or registered office. (3) 1Credi tors who have their habitual residence, domicile or registered office i n an other member state or EEA signatory s ta te ca n assert their claims i n an official language of the country i n question. 2In s uch cases, the claim must bear the Germa n title “Anmeldung und Erläuterung einer Forderung” (Noti fication and explanation of a claim). (4) The i nsolvency administrator must inform the creditors concerning the progress of the insolvency proceedings on a regular basis and in an a ppropriate form. Section 314 Prohibition of payments; reduction of benefits (1) 1If a n audit of the management and financial position of a n undertaking finds that the undertaking will no l onger be a bl e to permanently meet its liabilities, but that i t seems to be in the best interest of the i nsured to avoid insolvency proceedings, the supervisory authority may i ssue the necessary orders and require the representatives of the undertaking to change the bases for the operating principles within certain periods, or to otherwise remedy the deficiencies. 2All kinds of payments, i n particular the payment of i nsurance benefits, profit distributions and, for life i ns urance, redemptions or policy l oans or advances may be temporarily prohibited. 3The provisions of the Insolvency Code relating to the protection of sys tems for payment settlement, delivery a nd settlement of securities, collateral s ecurity held by central banks a nd financial collateral a rrangements a pply, with the necessary modifications. (2) 1Subject to s ubsection (1) sentence 1, the supervisory a uthority may i f necessary reduce the liabilities of a l ife i ns urance undertaking under i ts i nsurance contracts in a ccordance with i ts financial situation. 2The reductions required by the s upervisory a uthority may be differentiated if this is justified by the circumstances, i n particular i f i n the case of s everal i nsurance lines the individual lines have contributed differently to the emergency s ituation of the undertaking. 3For the purpose of the reductions, i n cases where the premium reserve is established for the i ndividual insurance contra cts, these must be i nitially reduced, after which the s ums insured will be re -determined; i f this is not possible then the s ums insured must be reduced directly. 4The obligation of the policyholders to continue payment of the agreed premiums is not affected by the reduction. (3) The measures i n accordance with subsections (1) and (2) may be restricted to a s eparate a ccount within the gua rantee assets (section 125 (6)). Section 315 Treatment of insurance-related claims (1) 1In the case of satisfaction out of the guarantee assets in accordance with section 126 (1) a nd (3), 1. the cl aims of the i nsured, beneficiaries or i njured third parties with a direct right of action a gainst the i nsurance undertaking; a nd – Page 179 of 207 – 2. premium refund claims, provided the insurance contract was cancelled or rescinded before the opening of i ns olvency proceedings mus t ra nk prior to the cl aims of the remaining i nsolvency creditors i n the amount of the share of guarantee a ssets under s ection 125 (2). 2The guarantee assets must be drawn on only to the extent that allocations to the guarantee a ssets are pres cribed i n accordance with section 125 (1) a nd (2), section 126 (3) a nd section 127. (2) Al l claims privileged i n accordance with subsection (1) rank pari passu. Section 316 Lapse of certain insurance contracts 1The following cease to exist upon opening of insolvency proceedings 1. l i fe insurance; 2. hea lth insurance of the type stated in section 146; 3. pri va te compulsory l ong-term care i nsurance in a ccordance with s ection 148; 4. a cci dent insurance of the type stated in section 161; a nd 5. pensions from the insurance s tated in section 162. 2 The i nsurance creditors can claim the proportion of the minimum guarantee assets in a ccordance with s ection 125 (2) to whi ch they a re entitled as at the date on which insolvency proceedings are opened. 3Section 315 (1) s entence 2 a nd (2) a pplies, with the necessary modifications. Section 317 Guardian in insolvency (1) 1The i nsolvency court must a ppoint a guardian for the i nsured to protect their ri ghts in accordance with sections 315 a nd 316. 2For the purpose of guardianship, the insolvency court ta kes the place of the guardianship court. (2) The guardian must determine the a mount of the existing guarantee assets and determine and register the cl aims on behalf of the insured. (3) 1Wherever possible, the guardian must consult the insured before, a nd notify them a fter, notification of the claim a nd otherwise i nform them of a ny facts relevant to their claims upon request. 2The right of individual i nsured persons to regi ster claims on their own behalf is not affected. 3If there is a difference between the notification filed by the i nsured a nd the notification filed by the guardian, the filing which is more favourable to the insured prevails until the difference ha s been eliminated. (4) The i nsolvency administrator must permit the guardian to inspect all books and records of the debtor, a nd on request document all the assets i ncluded i n the guarantee assets. (5) 1The guardian may demand reasonable remuneration for the discharge of these duties. 2The recoverable expenses a nd remuneration of the guardian a re charged to the guarantee assets. (6) The s upervisory a uthority must be consulted prior to the a ppointment of the guardian and the setting of their remuneration. Chapter 3 Published information – Page 180 of 207 – Section 318 Published information (1) Ba Fin publishes information annually regarding the s tatus of the i nsurance undertakings subject to i ts supervision a nd i ts observations with respect to the i nsurance sector. (2) 1It wi ll also publish 1. the texts of the legal a nd administrative regulations related to i nsurance supervision; 2. i ts l egal and administrative principles, in particular the criteria and methods related to i ts s upervisory review process i n a ccordance with section 294 (5) a nd projections in accordance with section 44; 3. the type of and manner of exercising the options provided in Directive 2009/138/EC a s well as 4. the objectives of the supervision and its main functions a nd activities. 2 The i nformation must be sufficient in order to enable a comparison of the supervisory a pproaches by the supervisory a uthorities in the different Member States or EEA signatory s tates. (3) The published information under s ubsections (1) a nd (2) must be accessible vi a a single electronic a ddress. Section 319 Publication of measures (1) 1Ba Fin s hould publish every definitive measure i mposed a gainst an undertaking s ubject to its supervision or against a n executive director of a n undertaking as a result of a breach of this Act or the statutory i nstruments enacted based upon it, a nd every i rrevocable decision to impose a fine under subsections (2) and (3) without delay upon i ts website, a nd thereby a lso provide notification of the type and nature of the breach, provided that this is required considering the rel evant interests in order to rectify or prevent irregularities. 2This is without prejudice to BaFin’s ri ghts under s ection 308 (2). (2) 1Ba Fin must publish a definitive measure or a n irrevocable decision to i mpose a fine on an a nonymous ba sis i f publication under s ubsection (1) 1. i nfringes the personal ri ghts of natural persons or publication of personal data would be disproportionate on other grounds; 2. woul d put the stability of the financial markets of the Federal Republic of Germany or of one or more of the Member Sta tes of the European Economic Area or the continuation of a cri minal investigation a t significant risk; or 3. woul d cause a disproportionately large amount of damage to the undertakings or natural persons concerned. 2By wa y of derogation from s entence 1 BaFin may refrain from publication under subsection (1) i n the cases under s entence 1 nos. 2 a nd 3 until the grounds for publication on an a nonymous basis no l onger exist. 3A publication may not be ma de i f the measures under sentence 1 a re not sufficient to rule out a threat to financial stability or to ensure the proportionality of the publication. (3) 1A publication should be published on BaFin’s website for five years. 2By wa y of derogation from sentence 1, personal da ta must be deleted as soon as i ts publication is no l onger necessary. Section 319a Publication of measures and penalties due to infringements of Regulation (EU) No. 2015/2365, Regulation (EU) 2016/1011 and Regulation (EU) 2017/2402 – Page 181 of 207 – (1) The s upervisory a uthority must publish decisions on measures and penalties i mposed due to infringements of Regulation (EU) 2015/2365 or Regulation (EU) 2016/1011 or delegated acts issued on the basis of those Regulations on i ts website without undue delay a fter notifying the natural or l egal person on whom the measure or penalty was i mposed. (2) In the publication, the s upervisory a uthority must s tate the provision that was i nfringed a nd the natural or l egal pers on or a ssociation of persons that is responsible for the infringement. (3) Where the publication of the identity of the legal person a ffected by the decision or the personal data of a natural pers on is disproportionate, or if publication would jeopardise an ongoing investigation or the s tability of the financial ma rkets, 1. the s upervisory a uthority must defer publication of the decision until the reasons for deferral cease to exist, 2. the s upervisory a uthority must publish the decision without s tating the identity or personal data if this ensures effective protection of the identity or the relevant personal data, or 3. the s upervisory a uthority does not publish the decision if publication under numbers 1 a nd 2 would not be s ufficient to ens ure that a ) the s tability of financial markets would not be put in jeopardy or b) the proportionality of the publication is ensured. (4) 1In the case of decisions that a re not definitive under a dministrative law or unappealable, the s upervisory a uthority mus t a dd a corresponding note. 2If a n appeal is l odged against a decision to be published, the s upervisory a uthority must s upplement the publication without undue delay with a reference to the appeal and any s ubsequent information about the outcome of the a ppeal. (5) 1Any publication under subsection (1) must be deleted five years a fter being published. 2By way of derogation from s entence 1, personal data must be deleted as soon as its publication is no longer necessary. (6) In the case of final a nd absolute measures and unappealable decisions to impose an a dministrative fine that were i s sued due to a n infringement of Articles 6, 7, 9 or 27(1) of Regulation (EU) 2017/2402, s ubsections (1) to (3) and (5) a pply, with the necessary modifications, subject to the condition that the publication a lso covers the i mposed measures a nd a dministrative fine decisions and that the review of proportionality under subsection (3) examines whether the publication would cause disproportionate damage to the persons involved. Chapter 4 Remit Segment 1 Federal Supervision Section 320 Federal Financial Supervisory Authority (BaFin) (1) Ba Fin s upervises 1. pri va te insurance undertakings a nd pension funds that have their registered office or a branch or otherwise ca rry on i ns urance or pension funds business in Germany; 2. i ns urance holding companies as defined in section 7 no. 31, s pecial purpose insurance companies within the mea ning of s ection 168 a nd guarantee schemes within the meaning of section 223 as well as 3. public law insurance undertakings subject to competition (öffentlich-rechtliche Wettbewerbs- Versicherungsunternehmen) which operate on a national basis. – Page 182 of 207 – (2) 1If a primary i nsurance undertaking that is s upervised a t federal s tate l evel belongs to a financial conglomerate within the meaning of section 1 (2) of the German Supervision of Financial Conglomerates Act, then supervision of this undertaking must be tra nsferred to BaFin as soon as the group to which the primary i nsurance undertaking in question bel ongs has been finally cl assified as a financial conglomerate in accordance with section 11 (1) s entence 1 of the Germa n Supervision of Financial Conglomerates Act; the competent a uthority i n the relevant federal state must be i nformed of the classification i n a ti mely manner. 2Upon revocation of the classification by BaFin, or i f the primary i ns urance undertaking in question no longer belongs to the financial conglomerate, BaFin may transfer supervision of the pri mary i nsurance undertaking back to the competent authority in the relevant federal state with its approval. (3) Ba Fin i s responsible for the technical supervision of the type of institutions named in section 140 (1) of Book Seven of the Social Security Code if these institutions operate on a national basis. Section 321 Transfer of supervision to a state supervisory authority (1) At the request of BaFin, the Federal Ministry of Finance can tra nsfer s upervision of private insurance undertakings of mi nor economic i mportance, pension funds a nd public law insurance undertakings subject to competition to the competent state supervisory a uthority with its approval. (2) Even a fter responsibility for s upervision has been tra nsferred, the Federal Mi nistry of Finance may tra nsfer s upervision of undertakings within the meaning of s ubsection (1) back to BaFin, particularly i f the undertakings have ga i ned greater economic importance. Section 322 Transfer of supervision to BaFin (1) The competent state s upervisory a uthority may request that technical supervision of the activities of public law i ns urance undertakings subject to competition, with operations l imited to a single federal state be tra nsferred to BaFin. (2) In the case of other insurance undertakings under public law that a re not insurance undertakings s ubject to competition, BaFin may assume responsibility for s upervision a t the request of the governments of the relevant federal s ta tes. Section 323 Procedure (1) Any a pplication filed under section 322 (1) ma y be withdrawn by the state authority previously responsible for s upervision on 1 Ja nuary a t a ny ti me effective as of 1 Ja nuary of the following year. (2) If Ba Fin has assumed responsibility for s upervision i n accordance with section 322 (2), the application ca n only be wi thdrawn jointly by all of the federal s tate governments involved with effect from 1 Ja nuary of the following year. (3) In the event of a transfer of supervisory powers i n accordance with sections 321 a nd 322, BaFin must announce the da te of the assumption or tra nsferral of responsibility for s upervision in the Federal Gazette at least two weeks in a dva nce. Section 324 Cooperation between supervisory authorities 1Ba Fin a nd the supervisory a uthorities of the individual federal s tates are required to exchange information about their l egal and a dministrative principles. 2This also applies to principles established by the authorities of the i ndividual federal s ta tes for the s upervision of insurance undertakings under public law as well as the drafts of statutory i nstruments, general a dministrative a cts a nd directives if the i nterests of the other supervisory a uthorities could be a ffected. (2) The s upervisory a uthorities of the federal states must cooperate with BaFin whenever this is necessary for them to di s charge their duties under Directive 2014/17/EU, including for the purposes of cooperation with the European Banking Authority i n a ccordance with that Directive. – Page 183 of 207 – Section 325 Insurance Advisory Council (1) An Ins urance Advisory Council within BaFin composed of insurance experts assists in the exercise of supervision. (2) 1The Insurance Advisory Council comprises eight members equally representing the different i nsurance classes of the i ns urance industry, of which two represent i nsurance sales, as well as eight policyholder representatives a nd eight representatives from actuarial s ciences and actuarial associations. 2The policyholder representatives include four representatives of consumer protection organisations, as well as one representative each for insurance brokers, i ndustry, mid-range societies a nd labour unions. (3) 1The members of the Insurance Advisory Council are a ppointed for a period of five years. 2They ma y be reappointed once. (4) The members s erve in an honorary ca pacity wi thout remuneration; for attendance of the meetings, they will receive da ily a llowances and reimbursement of their travel expenses. Segment 2 Supervision in the European Economic Area Section 326 General principles for cooperation between the supervisory authorities (1) The s upervisory a uthority cooperates cl osely with the European Commission a nd the supervisory a uthorities i n the Member States a nd EEA countries in order to facilitate supervision at Community l evel. (2) If the s upervisory a uthority of another Member State or EEA signatory s tate s eeks cooperation for the purpose of s upervision, BaFin must i mpose the a ppropriate measures under sections 298, 305, 306 a nd 309 a nd inform the a uthority s eeking such cooperation accordingly. (3) If the s upervisory a uthority in the home country enacts statutory restrictions a gainst a n undertaking i n accordance wi th Arti cle 137 or 138 (5), Arti cl e 139 (3) or Arti cle 144 (2) s ubsection (2) of Directive 2009/138/EC, BaFin must at the request of this authority i mpose the same measures with respect to the assets of the undertaking located i n Germany, a nd referred to in the request, to the same extent as referred to in the request. (4) 1Ba Fin must cooperate with the supervisory a uthorities of the home member state whenever this is necessary to perform its functions under Directive 2014/17/EU. 2For this purpose, BaFin can tra nsfer functions and responsibilities to the s upervisory a uthority of the home member s tate a nd ta ke over functions and responsibilities from the supervisory a uthority of the home member s tate relating to services within the meaning of that Directive i n Germany. 3In the case of di sagreements between the s upervisory a uthorities relating to cooperation, Article 19 of Regulation (EU) No. 1093/2010 of the European Parliament a nd of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), a mending Decision No 716/2009/EC a nd repealing Commission Decision 2009/78/EC (OJ L 331 of 15 December 2010, page 12), as most recently amended by Di rective 2014/17/EU (OJ L 60 of 28 February 2014, pa ge 34) a pplies, with the necessary modifications. Section 327 Cooperation in local audits (1) 1Provi ded that this is required in order to exercise financial s upervision under s ection 62 (1) or s ection 169 (1) or for the purposes of auditing a servi ce provider l ocated in Germany, the s upervisory a gency of the home country i s a uthorised to carry out a udits of the business operations on the business premises of the branch by i ts own staff or by a ppointed representatives; section 305 (5) a nd section 306 (5) a pply, wi th the necessary modifications. 2BaFin must – Page 184 of 207 – provi de administrative assistance upon request. 3The employees of the s upervisory a uthority and indivi duals appointed for the a udit under section 306 (1) no. 3 ma y enter the business premises of the i nsurance undertaking. 4The fundamental ri ght of inviolability of the home (Article 13 (1) of the German Basic Law) is restricted to this extent. (2) The s upervisory a uthority may a sk the supervisory a uthority i n a nother Member State of the European Union to revi ew information regarding a group company subject to supervision or a n undertaking not s ubject to supervision from the other Member State. (3) 1If wi thin the framework of cooperation in group-wide supervision (section 284) the competent authority ma kes an a udit request to another Member State or EEA signatory s tate (requesting a uthority) within the meaning of subsection (2) rel ated to a corresponding undertaking with registered office in Germany then the supervisory a uthority must provi de administrative assistance. 2If the supervisory a uthority ca rries out the a udit itself then the requesting a uthority ma y ta ke part in or be present a t the a udit. 3Section 305 (5) a nd section 306 (5) a pply, with the necessary modifications. 4The s upervisory authority will notify the group supervisory a uthority regarding the measures ta ken. Section 328 Notifications 1 If the s upervisory a uthority of a nother Member State or EEA signatory s tate i ntends to send an undertaking that carries on business i n that state and is domiciled i n Germany, a document for the purpose of proceedings in a ccordance with the i nsurance supervisory provisions applicable in s uch other member s tate or EEA s ignatory s tate, it is permitted to s end the document directly by post in compliance with the rules applicable to postal communication with the other member state or EEA signatory s tate. 2Sending the document by registered mail, delivered “to a ddressee only” (eigenhändig) a nd with “confirmation of receipt” (Rückschein), is sufficient to prove that the document has been del ivered. 3If the document ca nnot be directly delivered by post or if is not a ppropriate due to the nature and content of the document, BaFin will arrange delivery of the document. Section 329 Cooperation with the European Insurance and Occupational Pensions Authority (1) 1Under regulation (EU) No. 1094/2010, the supervisory a uthority must work in cooperation with the European Ins urance and Occupational Pensions Authority for the purposes of Directives 2009/138/EC and 2003/41/EC. 2It will take i ts policies a nd recommendations into account as far as possible a nd provi de justification for any deviations. (2) The s upervisory a uthority must provide the following s tatements to the European Insurance and Occupational Pens ions Authority a nnually: 1. the a verage capital add-on for each undertaking a nd the distribution of the capital add-ons determined by the s upervisory a uthority during the previous year, measured as a percentage of the solvency ca pital requirement a nd s ta ted s eparately as follows: a ) for a l l insurance undertakings; b) for l i fe insurance undertakings; c) for non-life insurance undertakings; d) for i nsurance undertakings a ctive both in life i nsurance and well as non -life i nsurance; and e) for rei nsurance undertakings; 2. for every communication within the meaning of no. 1 the proportion of capital add-ons that have been determined a s relevant in accordance with section 301 (1) nos. 1, 2 a nd 3; 3. the number of insurance undertakings that a re exempt i n part from regular supervisory reporting, a nd the number of i nsurance undertakings that are exempt i n whole or i n part from individual item reporting, together with the value of their ca pital requirement, premiums, technical provisions and assets, measured i n each case as a percentage of the total va lue of the i nsurance undertakings’ capital requirement, premiums, technical provisions and assets, and – Page 185 of 207 – 4. the number of groups that are exempt in part from regular reporting, a nd the number of groups that are exempt in whol e or in part from i ndividual item reporting, together with the va lue of their capital requirement, premiums, technical provisions a nd assets, measured i n each case as a percentage of the total value of the capital requirement, premiums, technical provisions and assets of all groups. (3) 1The s upervisory a uthority must i nform the European Insurance a nd Occupational Pensions Authority of national s upervisory provisions that a re relevant to occupational pension schemes unless s uch provisions a re under national s ocial or labour law. 2Any changes to the i nformation s ubmitted in a ccordance with s entence 1 must be notified by the s upervisory a uthority to the European Insurance and Occupational Pensions Authority on a regular basis, a nd at l east every two yea rs. (4) In a ccordance with Arti cle 35 of Regulation (EU) No. 1094/2010, the supervisory a uthority must make available to the European Insurance a nd Occupational Pensions Authority, on request a nd without delay, a ll the information i t needs to ca rry out i ts responsibilities on the basis of Directive 2003/41/EC a nd Regulation (EU) No. 1094/2010. (5) The s upervisory a uthority must notify the European Insurance a nd Occupational Pensions Authority of all a dministrative sanctions and other measures imposed i n accordance with Article 32(3) and Article 36 of Directive (EU) 2016/97. Section 330 Notifications to the European Commission (1) The s upervisory a uthority must notify the European Commission of the following: 1. the i ssue of an a uthorisation under section 8 (1) to an undertaking that is the s ubsidiary of a parent undertaking domi ciled i n a third country; the s tructure of the group must be included in the notification; 2. the a cquisition of a holding in an i nsurance undertaking as a consequence of which the i nsurance undertaking becomes a subsidiary of a parent undertaking domiciled i n a third country; 3. the number and nature of the cases in which the establishment of a branch or operation of primary i nsurance bus iness vi a cross-border provision of services in a nother member s tate or EEA signatory s tate could not be i mplemented because the supervisory a uthority did not forward the documents under section 58 (1) s entence 2 or s ection 59 (1) s entences 2 a nd 3 to the supervisory a uthority of the other member state or EEA signatory state; 4. the number and nature of the cases in which measures i n accordance with section 62 (3) s entences 2 a nd 3 have been i mposed; 5. general difficulties that insurance undertakings encounter when establishing branches, setting up subsidiaries or rel ated in a ny other way wi th the operation of i nsurance business in a third country; 6. a t the request of the Commission, the application for authorisation from a n undertaking that is a subsidiary of a pa rent undertaking domiciled i n a third country; 7. a t the request of the Commission, any intention disclosed i n accordance with section 17 to a cquire a holding in a n i ns urance undertaking by which the i nsurance undertaking would become a subsidiary of a n undertaking domi ciled i n a third country; 8. the s elected procedure in the cases set forth i n section 288; 9. the persons and agencies specified in section 309 (5) nos. 3 a nd 4; 10. the provisions issued under s ection 170 (1); 11. the provisions applicable to special purpose insurance companies within the meaning of s ection 168; 12. a l ist of all reinsurance undertakings that had ceased writing new reinsurance business up to 10 December 2007 a nd that manage their portfolios s olely with the objective of discontinuing their a ctivities. (2) 1The notification obligations under subsection (1) nos. 6 a nd 7 a bove only apply if the European Commission fi nds tha t i nsurance undertakings domiciled i n a member state or EEA signatory s tate a re not permitted effective access to the – Page 186 of 207 – ma rket of the third country tha t i s comparable to the a ccess the European Union grants to undertakings of this third country, or i f the Commission finds that the i nsurance undertakings domiciled i n a member s tate or EEA signatory s tate a re not granted national treatment in this third country. 2The notification obligations under s ubsection (1) nos. 6 a nd 7 i n conjunction with sentence 1 no l onger apply i f an a greement has been entered i nto with the country concerned rega rding effective market a ccess and national treatment for insurance undertakings domiciled in a member state or EEA s i gnatory s tate. (3) The notification obligations under s ubsection (1) nos. 1, 2 a nd 10 a lso a pply to notifications to be submitted to the competent authorities i n the other member states or EEA s ignatory s tates. (4) The notification obligations under s ubsection (1) nos. 1, 2, 3 a n d 5 a lso apply in respect of notifications to be s ubmitted to the European Insurance a nd Occupational Pensions Authority. Part 7 Regulations regarding criminal penalties and administrative fines Section 331 Criminal penalties (1) Pers ons committing the following offences will be liable to imprisonment for a term of up to five years or a fine: 1. the operation of primary i nsurance business, reinsurance business or a pension fund without a uthorisation under s ection 8 (1), s ection 65 (1) s entence 1, s ection 67 (1) s entence 1, s ection 168 (1) s entence 3 or s ection 236 (4) or commencement of any business a ctivity referred to in those provisions without authorisation; or 2. the commencement, extension or modification of a business activity s pecified i n, and in breach of the provisions in, s ection 61 (2) s entence 2 or s entence 5, (3) or (4) or the operation of health insurance or compulsory i nsurance i n brea ch of these provisions. (2) Pers ons committing the following offences will be liable to imprisonment for a term of up to three years or a fine: 1. a cts i n contravention of a n enforceable order under section 62 (3) sentence 2; 2. does not correctly i ssue a confirmation as set out i n a ) s ection 128 (5); or b) s ection 141 (5) s entence 1 no. 2 fi rst half-sentence, also in conjunction with s ection 161 (1) or s ection 162, or 3. fa i ls to s ubmit a notification or fails to submit a notification correctly or i n a timely ma nner i n breach of the provi sions i n section 311 (1) s entence 1, also i n conjunction with sentence 2, or i n subsection (2) sentence 1 s econd- ha l f-sentence, also in conjunction with sentence 2. (2a ) Persons will be liable to i mprisonment for a term of up to one year or a fine if, as a member of the s upervisory boa rd within the meaning of section 189 or a s a member of an a udit committee of a mutual s ociety appointed under s ection 189 (3) s entence 1 i n conjunction with section 107 (3) s entence 2 of the Stock Corporation Act that is an i ns urance undertaking as defined i n Arti cle 2(1) of Council Directive 91/674/EEC of 19 December 1991 on the a nnual a ccounts and consolidated accounts of insurance undertakings (OJ L 374 of 31 December 1991, pa ge 7), a s most recently a mended by Directive 2006/46/EC (OJ L 224 of 16 August 2006, page 1), 1. they commit a n act referred to in s ection 332 (4a ) a nd receive or obtain the promise of a pecuniary a dvantage in return or 2. they persistently repeat a n act referred to in s ection 332 (4a ). (3) If the offender has a cted negligently, he or s he will be liable in the cases under s ubsection (1) to imprisonment for a term of up to three years or a fine and in the cases under s ubsection (2) to imprisonment for a term of up to one year or a fi ne. – Page 187 of 207 – Section 332 Administrative fines (1) An a dministrative offence i s deemed to be committed by a ny person who 1. wi thout authorisation under section 12 (1) s entence 1, a lso i n conjunction with sentence 2, a nd in each case also in conjunction with section 212 (3) no. 4, s ection 237 (1) sentence 1, brings into force a change, extension or enterprise agreement as referred to in those provisions or expands the business operations of a reinsurance undertaking, 2. contra venes a n enforceable order under a ) s ection 43a (1), section 44 sentence 1, s ection 293 (2) or s ection 306 (1) s entence 1 no. 4 or no. 5, or b) s ection 303 (2) no. 2 or no. 3, 2a . gra nts or promises a s pecial allowance in contravention of s ection 48b (1) sentences 1 or 2, 2b. does not ensure the disbursement of a n inducement in contravention of section 48c (1) s entence 1, or does not do s o correctly or promptly, 3. does not a dd an asset to the guarantee assets or does not do s o correctly or promptly i n breach of the provisions i n s ection 125 (1) s entence 2; 4. does not ensure that the guarantee assets are individually entered in a register of assets i n breach of the provi sions i n section 126 (1) s entence 1; 5. wi thdraws an a mount from the guarantee assets in breach of the provisions in section 130 (1) ; 6. fa i ls to provide the required information or does not provide the required information correctly, in full or i n a ti mely manner i n breach of the provisions i n section 134 (1) ; 7. works for an i nsurance undertaking at the same ti me i n breach of the provisions in section 164 (3) s entence 2; 8. ca rri es out comparable activities for an i nsurance undertaking in breach of the provisions in s ection 164 (3) s entence 3; 9. i nvests guarantee assets in breach of the provisions in a ) s ection 215 (2) s entence 1, i ncluding in conjunction with a statutory order under section 217 (1) number 6, or b) s ection 234j (1) s entence 1 i n conjunction with a s tatutory order under section 235 (1) number 10, 10. does not ensure that the guarantee assets are invested in the s pecified manner i n breach of the provisions i n s ection 239 (1) s entence 2, or 11. contra venes a statutory order under s ection 240 s entence 1 number 8 fi rst half-sentence or an enforceable order ba sed on such a statutory order where the statutory order refers to this fines provision for specific circumstances. (2) An a dministrative offence i s deemed to be committed by a ny person who wilfully or recklessly 1. fa i ls to s ubmit a specified document or fails to submit such document i n a ti mely manner in breach of the provisions i n s ection 37 (1) or s ection 227 (2) sentence 1; 2. contra venes a statutory order under s ection 39 (1) s entence 1, a lso in conjunction with s ection 68 (1) s entence 4, or a n enforceable order based on s uch a s tatutory order, where the statutory order refers to this fines provision for s pecific circumstances; 3. fa i ls to disclose i nformation or fails to disclose the required i nformation correctly, i n full or i n a ti mely manner i n brea ch of the provisions in section 40 (1) s entence 1, or 4. contra venes a statutory order under s ection 43a (2) s entences 1 or 2 a n enforceable order based on such a statutory order where the statutory order refers to this fines provision for s pecific circumstances. – Page 188 of 207 – (3) An a dministrative offence i s deemed to be committed by a ny person who wilfully or negligently 1. fa i ls to s ubmit a notification or fails to submit a notification correctly, i n full, i n the prescribed way or in a timely ma nner in breach of the provisions in section 17 (1) or (2), s ection 36 (1) s entence 1 or s ection 59 (1), a lso in conjunction with (4); 2. contra venes a n enforceable order in a ccordance with a ) s ection 18 (1), (2) first half-sentence or (3) s entence 4, s ection 19 (1), s ection 133 (1), s ection 134 (7) fi rst half- s entence, section 135 (3) fi rst half-sentence or section 305 (3), also i n conjunction with (4) ; or b) s ection 305 (1), also i n conjunction with (2), section 308 (4) no. 1, a lso in conjunction with section 62 (1) no. 6 or s ection 314 (1) s entence 1 or s entence 2; 3. works together wi th an i nsurance intermediary i n breach of the provisions in section 48 (1) or (2) s entence 2; 3a . communicates information to policyholders or potential policyholders in breach of section 1a (3) of the Insurance Contra ct Act, 3b. i n the case of the mediation of an i nsurance-based i nvestment products as defined i n Article 2 (1) number 17 of Di rective (EU) 2016/97 of the European Pa rliament and of the Council of 20 Ja nuary 2016 on i nsurance distribution (reca st) (OJ L 26 of 2 February 2016, page 19; L 222 of 17 Augus t 2016, page 114) a ) does not provide appropriate information in good ti me before conclusion of the contract i n breach of s ection 7b (1) sentence 1 of the Insurance Contract Act, b) does not i nquire about i nformation i n breach of s ection 7c (1) s entence 1 of the Insurance Contract Act, or does not do s o correctly, completely or promptly, c) recommends a n insurance-based investment product in breach of section 7c (1) s entence 2 of the Insurance Contra ct Act, or d) does not provide a declaration before conclusion of the contract in breach of section 7c (5) s entence 3 of the Ins urance Contract Act, 3c. does not make a record i n breach of s ection 7c (4) s entence 1 of the Insurance Contract Act, 4. fa i ls to provide the required information or does not provide the required information correctly, in full or i n a ti mely manner i n breach of the provisions i n section 135 (1) ; 5. contra venes a statutory order under s ection 160 s entence 1 or a n enforceable order based on such a s tatutory order where the statutory order refers to this fines provision for s pecific circumstances; or 6. does not a ccept a measure in breach of the provisions in s ection 306 (8) s entence 1, or 7. contra venes a n enforceable order under section 308b (1). (4) An a dministrative offence i s deemed to be committed by a ny person who, a cting on behalf of a n undertaking subject to s upervision under this Act, i nfringes the provisions of Regulation (EC) No. 1060/2009 of the European Pa rliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302 of 17 November 2009, pa ge 1), most recently a mended by Directive 2014/51/EU (OJ L 153 of 22 Ma y 2014, pa ge 1), in which the person concerned wilfully or reckl essly 1. us es a credit rating a breach of the provisions i n Article 4 (1) s ubparagraph 1; 2. fa i ls to ensure that an undertaking s ubject to supervision in a ccordance with this Act ca rries out i ts own credit risk a s sessments i n breach of the provisions i n Article 5a (1); 3. pl a ces a n order i ncorrectly i n breach of the provisions i n Article 8c (1) ; 4. fa i ls to ensure, in breach of the provisions in Article 8c (2), th at an a ppointed credit ra ting a gency fulfils a requirement specified in that Article; or 5. i n breach of the provisions i n Article 8d (1) sentence 2, fa ils to deal correctly with the documentation referred to in tha t Arti cle. – Page 189 of 207 – (4a ) An a dministrative offence is deemed to be committed by a ny person who, as a member of the supervisory board wi thin the meaning of s ection 189 or a s a member of a n audit committee of a mutual society a ppointed under s ection 189 (3) s entence 1 i n conjunction with section 107 (3) s entence 2 of the Stock Corporation Act that is an i ns urance undertaking as defined i n Arti cle 2(1) of Council Directive 91/674/EEC of 19 December 1991 on the a nnual a ccounts and consolidated accounts of insurance undertakings (OJ L 374 of 31 December 1991, p a ge 7), a s most recently a mended by Directive 2006/46/EC (OJ L 224 of 16 August 2006, page 1), 1. does not monitor the independence of the auditor or audit firm in accordance with Article 4(3) subparagraph 2, Arti cl e 5(4) s ubparagraph 1 s entence 1 or Arti cle 6(2) der Regulation (EU) No. 537/2014 of the European Pa rliament a nd of the Council of 16 April 2014 on s pecific requirements regarding s tatutory a udit of public-interest entities and repealing Commission Decision 2005/909/EC (OJ L 158 of 27 Ma y 2014, pa ge 77, L 170 of 11 June 2014, page 66), or 2. s ubmits a recommendation for the appointment of a n auditor or an audit firm that is not based on a requirement by the s upervisory a uthority under section 36 (1) s entence 2, a nd a ) tha t does not comply with the requirements of Arti cle 16(2) s ubparagraphs 2 or 3 of Regulation (EU) No. 537/2014 or b) i s not preceded by a s election procedure under Article 16(3) subparagraph 1 of Regulation (EU) No. 537/2014. (4b) (Repealed) (4c) (Repealed) (4d) An a dministrative offence is deemed to be committed by any person who contravenes Regulation (EU) No. 1286/2014 of the European Pa rliament and of the Council of 26 November 2014 on key i nformation documents for pa ckaged retail and i nsurance-based i nvestment products (PRIIPs) (OJ L 352 of 9 December 2014, pa ge 1; L 358 of 13 December 2014, page 50) and who wilfully or negligently, 1. i n breach of the provisions of a ) Arti cl e 5(1), b) Arti cl e 5(1) i n conjunction with Article 6, c) Arti cl e 5(1) i n conjunction with Article 7(2), d) Arti cl e 5(1) i n conjunction with Article 8(1) to (3), does not draw up or publish a key i nformation document, does not do s o correctly, or completely, or promptly, or i n the prescribed form, 2. does not write or tra nslate a key i nformation document in the prescribed manner i n contravention of Arti cle 5(1) i n conjunction with Article 7(1), 3. does not review a key i nformation document or does not review i t promptly in contravention of section 10(1) s entence 1, 4. does not revise a key i nformation document or does not revise it promptly i n contravention of s ection 10(1) s entence 1, 5. does not make a vailable a key i nformation document or does not make it a vailable promptly i n contravention of s ection 10(1) sentence 2, 6. ma kes statements i n marketing communications that contradict the information in the key i nformation document or di minish i ts significance in contravention of Article 9 s entence 1, 7. does not i nclude the necessary indications i n marketing communications, or does not do so correctly or compl etely, i n contravention of Article 9(2), 8. does not make a vailable a key i nformation document or does not make it a vailable promptly or i n the prescribed form i n contravention of Arti cle 13(1), (3) a nd (4) or Arti cle 14, 9. does not establish appropriate procedures and arrangements for submitting a nd replying to complaints or does not do s o correctly or i n the prescribed manner i n contravention of Arti cle 19(a) and (b), or – Page 190 of 207 – 10. does not establish appropriate procedures and arrangements, or does not do s o correctly, that ensure that effective redress procedures are a vailable to retail i nvestors in the event of cross-border disputes i n contravention of Arti cl e 19(c). (4e) An a dministrative offence is deemed to be committed by a ny person who contravenes the requirements of Regulation (EU) 2015/2365 of the European Pa rliament and of the Council of 25 November 2015 on transparency of s ecurities financing transactions and of reuse and a mending Regulation (EU) No. 648/2012 (OJ L 337 of 23 December 2015, pa ge 1) a nd who wilfully or negligently 1. does not make a report, or does not make i t correctly, or completely, or i n the prescribed manner or promptly i n contra vention of Article 4(1), 2. does not keep records, or does not keep them correctly, or at l east for the required period in contravention of Arti cl e 4(4), 3. reus es fi nancial instruments although the conditions referred to in Arti cle 15(1) have not been met, in contravention of Arti cl e 15(1), or 4. exercises the right of reuse although the conditions referred to i n Article 15(2) have not been met, in contravention of Arti cl e 15(2). (4f) An a dministrative offence is deemed to be committed by a ny person who wilfully or negligently 1. does not correctly establish the identity of a beneficiary who differs from the policyholder in breach of section 54 (1) s entence 1, 2. does not obtain sufficient i nformation about a beneficiary who differs from the policyholder in breach of section 54 (1) s entence 2, 3. does not i dentify the beneficial owner in breach of section 54 (1) s entence 3, 4. i n breach of s ection 54 (2) s entence 1 i n conjunction with s ection 10 (1) number 4 of the Money Laundering Act, does not clarify whether a beneficiary who differs from the policyholder a nd i ts beneficial owner, i f a pplicable, is a pol itically exposed person, i ts family members or a person known to be a cl ose associate, 5. does not establish the identity of the third party a nd its beneficial owner in breach of section 54 (2) sentence 2, 6. does not review the i dentity or does not review i t promptly i n breach of section 54 (2) s entence 3, 7. does not i nform a member of the management level before a payout in breach of section 55 number 1. (4g) An a dministrative offence is deemed to be committed by a ny person who contravenes the requirements of Regulation (EU) 2016/1011 of the European Pa rliament and of the Council of 8 June 2016 on indices used as benchmarks i n fi nancial i nstruments a nd financial contracts or to measure the performance of investment funds a nd a mending Di rectives 2008/48/EC a nd 2014/17/EU and Regulation (EU) No. 596/2014 (OJ L 171 of 29 June 2016, pa ge 1; L 306 of 15 November 2016, page 43), and who wilfully or negligently 1. a s a supervised contributor does not meet the governance and control requirements i n breach of Article 16(1), 2. a s a supervised contributor does not have effective systems, controls a nd strategies to ensure the i ntegrity a nd rel iability of all contributions of i nput data or expert judgement under paragraph (3) to the a dministrator in breach of Arti cl e 16(2) or paragraph (3), 3. a s a supervised contributor does not make a report, or does not make i t correctly, or completely or for the pres cribed period i n breach of Article 16(3) sentence 1, 4. a s a supervised contributor does not fully cooperate, or does not do so correctly, or completely or fully with the a dministrator and the supervisory a uthority i n the auditing and supervision of the provision of a benchmark a nd ma ke a vailable the information and records, in breach of Article 16(4), 5. a s a supervised contributor does not notify the administrator, or does not do so correctly, or completely, or in the pres cribed manner or promptly i n breach of Article 23(3) sentence 1, 6. contra venes a n enforceable order issued by the supervisory a uthority a s a contributor under Arti cle 23(5), as a s upervised entity under Arti cle 23(6) or as a supervised contributor under Article 23(10), – Page 191 of 207 – 7. a s a supervised entity does not produce a plan meeting the requirements s et out in Article 28(2), or does not produce a plan correctly, or completely or i n the prescribed manner, does not update i t, does not provide i t to the s upervisory a uthority, ores do not provide it completely or promptly, or does not reference it, i n contravention of Arti cl e 28(2), 8. a s a supervised entity uses a benchmark that does not meet the requirements s et out in Arti cle 29(1), i n contra vention of Article 29(1), or 9. does not ensure that a prospectus contains the i nformation referred to in Article 29(2) in contravention of Arti cle 15(1). (4h)An a dministrative offence is deemed to be committed by a ny person who selects assets i n contravention of Arti cle 6(2) s entence 1 of Regulation (EU) 2017/2402 of the European Parliament a nd of the Council of 12 December 2017 l a yi ng down a general framework for securitisation and creating a specific fra mework for simple, tra nsparent and s ta ndardised s ecuritisation, and amending Directives 2009/65/EC, 2009/138/EC a nd 2011/61/EU a nd Regulations (EC) No. 1060/2009 a nd (EU) No. 648/2012 (OJ L 347 of 28 December 2017, page 35). (4i ) An a dministrative offence is deemed to be committed by a ny person who contravenes Regulation (EU) No. 2017/2402 wi thi n the scope of this Act a nd wilfully or negligently 1. does not hold a n interest referred to in Arti cle 6(1) s entence 1 i n contravention of Article 6(1) sentence 1, 2. does not make a vailable information, or does not make it a vailable correctly, or completely, or i n the prescribed ma nner or promptly in contravention of Article 7(1) subparagraphs 1 to 4 or 5, 3. us es other criteria or processes in contravention of Article 9(1) sentences 1 or 2, 4. us es a designation referred to i n Article 18 s entence 1 i n contravention of Article 18 s entence 1, or 5. i n contravention of Arti cle 27(4), does not notify the European Securities a nd Ma rkets Authority, or does not do so correctl y, or completely or promptly, or does not i nform the supervisory a uthority, or does not do so correctly, or compl etely or promptly. (4j) An a dministrative offence is deemed to be committed by a ny persons who, with this s cope of this Act, wilfully or negligently 1. do not ensure that they have an effective s ystem i n place in accordance with Article 9(1) sentence 3 of Regulation (EU) 2017/2402, 2. s ecuritise an exposure referred to i n Article 9(3) of Regulation (EU) 2017/2402 wi thout having made the verification referred to there, or 3. ma ke a notification in accordance with Article 27(1) subparagraphs 1, 2 or 3 s entence 2 of Regulation (EU) 2017/2402 conta ining misleading information. (5) 1The a dministrative offence is punishable by a fine not exceeding EUR five million in the cases referred to in s ubsections (4e), (4h), (4i) and (4j), a fine not exceeding EUR seven hundred thousand i n the cases referred to in s ubsection (4d), a fine not exceeding EUR five hundred thousand in the cases referred to in s ubsection (1) number 2 (b), s ubsection (2) number 3 a nd s ubsection (3) numbers 3, 3a , 3b a nd 3c, a nd subsection (4g), a fine not exceeding EUR two hundred thousand i n the cases referred to i n subsection (2) number 2, s ubsection (3) number 2 (a ), subsections (4) and (4f), a fi ne not exceeding EUR one hundred thousand in the cases referred to i n subsection (3) number 7, a nd a fine not exceeding EUR fifty thousand i n all other cases. 2In the cases referred to in s ubsection (3) number 3, a higher fine than s ti pulated i n sentence 1 of up to EUR five million ca n be imposed on a legal person or an association of persons. (6) A hi gher fine than s tipulated i n subsection (5) ca n be imposed on a legal person or a n association of persons in the ca s es referred to in s ubsection (4d); this fine may not exceed the higher of EUR five million or 3 per cent of the total revenue generated by the legal person or a ssociation of persons in the financial year preceding the administrative deci sion. (6a ) A hi gher fine than stipulated in subsection (5) ca n be imposed on a l egal person or an association of persons i n the ca s es referred to in s ubsections (4e), (4h), (4i) and (4j); 1. i n the cases referred to in subsection (4e) numbers 1 a nd 2 a nd subsections (4h), (4i) and (4j), this fine may not – Page 192 of 207 – exceed the higher of EUR five million a nd 10 per cent of the total revenue generated by the l egal person or a s sociation of persons i n the financial year preceding the a dministrative decision, 2. i n the cases referred to in subsection (4e) number 3, this fine may not exceed the higher of EUR fifteen million and 10 per cent of the total revenue generated by the l egal person or association of persons in the financial year preceding the administrative decision. (6b) A hi gher fi ne than stipulated in s ubsection (5) can be i mposed on a legal person or a n association of persons in the event of serious, recurring or systematic vi olations in the cases referred to i n subsection (4f); this fine may not exceed the hi gher of EUR five million and 10 per cent of the total revenue generated by the legal person or association of pers ons in the financial year preceding the a dministrative decision. (6c) A hi gher fine than s tipulated i n subsection (5) can be imposed on a legal person or a n association of persons in the ca s es referred to in s ubsection (4g); this fine may not exceed the higher of EUR one million or 10 per cent of the total revenue generated by the legal person or a ssociation of persons in the financial year preceding the administrative deci sion. (6d) A hi gher fi ne than stipulated in s ubsection (5) can be i mposed on a legal person or a n association of persons in the ca s es referred to in s ubsection (3) numbers 3, 3a , 3b a nd 3c; this fine may not exceed the higher of EUR five mill ion or 5 per cent of the total revenue generated by the legal person or association of persons in the fi nancial year preceding the a dministrative decision. (7) 1Over a nd a bove the amounts referred to in subsections (5), (6), (6a), (6b), (6c) a nd (6d), i n the cases referred to in s ubsection (3) numbers 3, 3a , 3b, 3c, 4d, 4f, 4h, 4i a nd 4j the administrative offence is punishable by a fine of up to twi ce, and in the cases referred to in s ubsections (4e) a nd (4g) by a fine of up to three times, the economic be nefit deri ved from the violation. 2The economic benefit comprises profits gained and losses a voided a nd ca n be estimated. (8) 1Tota l revenue within the meaning of subsections (6), (6a), (6b), (6c) and (6d) means 1. i n the case of i nsurance undertakings, the total amount resulting from the national law applicable to the insurance undertaking i n accordance with Article 63 of Council Directive 91/674/EEC of 19 December 1991 on the annual a ccounts and consolidated accounts of insurance undertakings (OJ L 374 o f 31 December 1991, pa ge 7), a s most recently a mended by Directive 2006/46/EC (OJ L 224 of 16 August 2006, page 1), less va lue added tax a nd other ta xes l evied directly on that revenue, (2) i n other cases the a mount of net revenue as defined by the national law a pplicable to the undertaking in accordance wi th Arti cle 2(5) of Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the a nnual financial s tatements, consolidated financial s tatements a nd related reports of certain types of undertakings, a mending Directive 2006/43/EC of the European Parliament and of the Council a nd repealing Council Directives 78/660/EEC a nd 83/349/EEC (OJ L 182, 29 June 2013, page 19; L 369 of 24 December 2014, page 79), as most recently a mended by Directive 2014/102/E( (OJ L 334 of 21 November 2014, pa ge 86). 2If the l egal person or association of persons is the parent undertaking or a s ubsidiary, the total revenue of the l egal pers on or a ssociation of persons is replaced by the relevant total amoun t reported i n the consolidated financial s ta tements of the parent undertaking that is prepared for the largest number of undertakings. 3If the consolidated fi nancial statements for the largest number of undertakings is not prepared i n accordance with the p rovisions referred to i n s entence 1, total revenue is calculated on the basis of the items of the consolidated financial statements that a re equivalent to the items referred to in s entence 1 numbers 1 a nd 2. 4If annual financial statements or consolidated fi nancial statements are not a vailable for the relevant financial year, the annual or consolidated financial s tatements for the i mmediately preceding financial year must be used; i f these are a lso not available, total revenue can be estimated. (9) 1Secti on 17 (2) of the Act on Breaches of Administrative Regulations is not a pplicable to i nfringements of requirements and prohibitions referred to i n subsection (3) numbers 3, 3a , 3b, 3c a nd s ubsections (4d), (4e), (4f), (4g), (4h), (4i ) and (4j). 2Section 30 of the Act on Breaches of Administrative Regulations also applies to l egal persons and a s sociations of persons that operate through a branch or by providing cross-border services in Germany. 3Administrative offi ces under s ubsection (3) numbers 3, 3a , 3b, 3c a nd subsections (4d), (4e), (4f), (4g), (4h), (4i) and (4j) become statute- ba rred a fter three years. – Page 193 of 207 – Section 333 Competent administrative authority The a dministrative a uthority within the meaning of s ection 36 (1) no. 1 of the German Act on Breaches of Administrative Regulations i s BaFin, provided that BaFin is the a uthority with responsibility for s upervising insurance undertakings. Section 334 Involvement of the supervisory authority and notifications in criminal matters (1) 1In cri minal proceedings against members of the senior management of i nsurance undertakings or pension funds, a ga inst members of the a dministrative or supervisory bodies of i nsurance undertakings or pension funds or a gainst hol ders of qualifying holdings in insurance undertakings or pension funds or their l egal representatives or personally l i able partners as a consequence of a breach of their professional obligations or other cri minal offences during or i n connection with the performance of a tra de or profession or a ny other commercial operation, as well as i n cri minal proceedings relating to criminal offences described in s ection 131, the court, prosecuting a uthority or enforcement a uthority must, in the case of a public action, s end BaFin the following: 1. the i ndictment or the petition in lieu of a written application; 2. the a pplication for the issuing of a s ummary penalty order i f the application is not immediately a ccepted; a nd 3. the decision concluding the proceedings together with the grounds for the decision. 2 If a n appeal has been l odged against the decision, the decision must be communicated together with a reference to the a ppeal that has been l odged. 3In the ca se of proceedings in respect of cri minal offences that have been committed by negligence, the information specified i n sentence 1 nos. 1 a nd 2 only needs to be communicated if, in the vi ew of the a gency s ending the communication, decisions or other measures from BaFin are deemed necessary without delay. (2) 1In the case of cri minal proceedings relating to criminal offences described in section 331 (1) a nd (2) no. 1, the public pros ecutor's office must inform the supervisory a uthority a s early as the point at which it i nitiates its preliminary i nvestigation unless this could jeopardise the purpose of the i nvestigation. 2If the public prosecutor's office is contemplating a discontinuation of the proceedings, i t must consult the s upervisory a uthority. (2a ) 1If public a ction is brought i n criminal proceedings relating to a criminal offence under section 331 (2a), the public pros ecutor's office must communicate the decision concluding the proceedings to the Auditor Oversight Commission (Abschlussprüferaufsichtsstelle) at the Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle). 2If a n appeal has been lodged against the decision, the decision must be communicated together with a reference to the appeal that has been lodged. (3) 1If, i n cri minal proceedings, other facts come to light indicating irregularities in the business operations of an i ns urance undertaking or pension fund, including i ts sales network, and if, in the vi ew of the agency communicating the i nformation, the knowledge thereof is necessary for the i nsurance supervisory authority to ta ke action, the court or the pros ecuting or enforcement a uthority must also pass on this i nformation unless i t is clear to the authority communicating the information that the parties affected have interests that require protection a nd these interests s hould therefore take precedence. 2The extent to which the i nformation to be forwarded is reliable must be ta ken i nto a ccount. 3Facts that i mply a member of the supervisory board, a member of the s enior management, an a ppointed a ctua ry or a holder of a qualifying holding is not a fit and proper person a re generally indicative of irregularities in the bus iness operations. (3a ) The competent a dministrative a uthority under section 333 must communicate all administrative fine decisions under section 332 (4a ) to Auditor Oversight Commission a t the Federal Office of Economics a nd Export Control. (4) If a notification under s ubsection (1) or (2) above relates to an i nsurance undertaking or Pensionsfonds that, under thi s Act, is supervised by the competent authority of a federal state, BaFin must forward s uch notification to this a uthority i mmediately. – Page 194 of 207 – Part 8 Transitional and concluding provisions Section 335 Continuation of business operations Ins urance undertakings that, on 1 January 1902, were authorised to conduct business i n one or more German s tates under the laws of the respective state(s) require no authorisation under this Act to continue business operations within the l imits to which they had restricted operations up to 1 Ja nuary 1902 or wi thin the limits set by their authorisation if thei r permission to conduct business was based on a special a uthorisation. Section 336 Continued application of approved business plans in life insurance 1 For l i fe i nsurance contracts entered into before 29 July 1994 (existing portfolio), the business plan approved by the s upervisory a uthority before that date remains fully a pplicable. 2Section 12 (1) a pplies to changes to this business plan. 3 Secti on 141 (1), (2), (3) a nd (6) applies, with the necessary modifications; section 141 (5) a pplies subject to the pro viso tha t the premium reserve must be calculated in accordance with the applicable business plan. Section 337 Trustees in health insurance If the premiums for insurance contracts entered into before 29 July 1994 i n SLT health insurance may be a djusted under a n a djustment clause subject to the approval of the s upervisory a uthority, such approval by the supervisory a uthority i s repl aced by the consent of the trustee (section 155 (1) a nd (2)). Section 338 Loading in health insurance If a contract for substitutive health insurance was entered into before 1 Ja nuary 2000, s ection 149 a pplies subject to the provi so that: 1. the l oading is to be charged for the first time on 1 Ja nuary of the calendar year that follows 1 Ja nuary 2000; 2. the l oading i n the first year totals 2 per cent of the gross premium and increases by 2 per cent on 1 Ja nuary of each of the following years up to a maximum of 10 per cent of the gross premium, unless i t is terminated because the i ns ured a ttains the age of 60; 3. the i nsurance undertaking must inform the policyholder i n a ti mely manner of the amount and a nnual increases of the l oading before it is charged for the first ti me; 4. the l oading must only be charged if the policyholder does not object i n writing or electronically w ithin three months of receiving the information under no. 3 a bove. Section 339 Provisions relating to accident insurance sub-portfolios 1 Undertakings that, under a comprehensive contract, cover risks attributable to the classes of i nsurance listed under nos. 1 a nd 19 of Annex I may tra nsfer the accident insurance portion of such contracts to another undertaking. 2Section 13 a pplies, with the necessary modifications. Section 340 Grandfathering provision for reinsurance undertakings (1) 1For undertakings that exclusively conduct reinsurance business, operated this business before 21 December 2004 – Page 195 of 207 – a nd a re registered with the s upervisory a uthority as reinsurance undertakings, a uthorisation under s ection 8 (1) is deemed to have been gra nted for the existing sco pe of i ts business operations. 2However, such undertakings are subject to ongoing supervision without limitation. (2) 1In the case of reinsurance undertakings that are domiciled in a third country, that continue to maintain existing bra nches and that notified these a rrangements to BaFin before 31 December 2007, the necessary a uthorisation is deemed to have been gra nted for the s cope of the notified business operations, provided that the undertakings concerned are a uthorised to operate reinsurance business i n their home country, have their central a dministration in tha t country, a re s upervised in that country i n accordance with internationally recognised principles, and mechanisms a re i n place to guarantee a satisfactory l evel of cooperation between the competent authorities in the home country concerned and BaFin. 2Such undertakings a re subject to on-going s upervision without limitation, however. Section 341 Report on solvency and financial position 1 Unti l 31 December 2020, i nsurance undertakings that have b een made subject to a capital a dd-on or that have to use undertaking-specific parameters i n the calculation of the s olvency ca pital requirement only have to disclose the total a mount of the s olvency ca pital requirement without s eparately s pecifying the amount of the capital add-on or the qua ntitative impact of the undertaking-specific parameters. 2This is without prejudice to the obligation to disclose the rea sons for the supervisory measures and the background. Section 342 Compliance with the minimum capital requirement (1) Ins urance undertakings that satisfy the s olvency requirements applicable on 31 December 2015 but whose eligible ba sic own funds are insufficient to cover the minimum capital requirement must have eligible basic own funds i n the a mount of the minimum ca pital requirement by 31 December 2016 a t the latest. (2) If a n i nsurance undertaking falling within the scope of subsection (1) does not have eligible own funds on 31 December 2016 equivalent to the amount of the minimum ca pital requirement, the i nsurance undertaking's a uthorisation to conduct business will be withdrawn. (3) Unti l 31 December 2017, the supervisory a uthority ma y require an insurance undertaking for which a capital a dd-on ha s been imposed to apply the percentages s pecified i n Article 129 (3) s entence 1 of Directive 2009/138/EC exclusively to the s olvency ca pital requirement calculated without the capital add -on. Section 343 Discontinuation of business operations (1) Wi thout prejudice to section 165 (1), the provisions of this Act a pplicable to small insurance undertakings within the mea ning of s ection 211 a pply, upon a pplication, until the dates specified in s ubsection (2) for i nsurance undertakings tha t cease to write new insurance contracts before 1 Ja nuary 2016 a nd administer their i nsurance portfolios s olely with the objective of discontinuing their activities i f 1. the undertaking concerned can demonstrate to the s upervisory a uthority that it will discontinue i ts a ctivities before 1 Ja nuary 2019; or 2. the undertaking is undergoing restructuring measures i n accordance with sections 312 a nd 313 a nd an administrator ha s been appointed. (2) 1For i nsurance undertakings that fall within the scope of 1. s ubsection (1) no. 1, s ubsection (1) no l onger applies from 1 Ja nuary 2019; 2. s ubsection (1) no. 2, s ubsection (1) no l onger applies from 1 Ja nuary 2021. 2The s upervisory authority may s et an earlier date in the cases specified in s entence 1 a bove if the activities of the i ns urance undertaking are unlikely to be discontinued by the dates specified i n sentence 1. (3) Subsections (1) a nd (2) above can be applied to insurance undertakings only i f the following conditions are satisfied: – Page 196 of 207 – 1. the undertaking does not form part of a group or i t belongs to a group i n which all the underta kings are ceasing to wri te new insurance contracts; and 2. the undertaking s ubmits an a nnual report to the competent supervisory authority s etting out the progress made i n the discontinuation of its activities. (4) The s upervisory a uthority must send a list of the insurance undertakings involved to the s upervisory a uthorities of a ll member states or EEA signatory s tates. Sections 344 Time limits for satisfying reporting and disclosure requirements (1) 1The ti me limit for insurance undertakings to submit th e annual i nformation under Article 304(1) of Commission Del egated Regulation (EU) 2015/35 of 10 October 2014 s upplementing Directive 2009/138/EC of the European Pa rl iament and of the Council of 25 November 2009 on the taking-up a nd pursuit of the business of Insurance and Rei nsurance (Solvency II) (OJ L 12 of 17 Ja nuary 2015, pa ge 1), a s amended by Delegated Regulation (EU) 2016/467 (OJ L 85 of 1 Apri l 2016, page 6), is 1. for the fi nancial year ending on or after 30 June 2016 but before 1 Ja nuary 2017, 20 weeks a fter the end of the undertaking's financial year; 2. for the fi nancial year ending on or after 30 June 2017 but before 01 Ja nuary 2018, 18 weeks a fter the end of the undertaking's financial year; 3. for the fi nancial year ending on or after 30 June 2018 but before 1 Ja nuary 2019, 16 weeks a fter the end of the undertaking's financial year; and 4. for the fi nancial year ending on or after 30 June 2019 but before 1 Ja nuary 2020, 14 weeks a fter the end of the undertaking's financial year. 2For i nsurance undertakings whose financial year ends on or a fter 1 Ja nuary 2016 but before 1 July 2017, the time limit is 20 weeks after the end of the financial year. 3In this ca se, the ti me limit is reduced in each of the three s ubsequent fi nancial years by two weeks. 4Sentences 1 to 3 a pply, with the necessary modifications, to i nformation that has to be s ubmitted half-yearly. (2) 1The ti me limit for insurance undertakings to submit the quarterly i nformation under Arti cle 304(1) of Commission Del egated Regulation (EU) 2015/35 is 1. for the fi nancial year ending on or after 30 June 2016 but before 1 Ja nuary 2017, 8 weeks a fter the end of a quarter i n the financial year; 2. for the fi nancial year ending on or after 30 June 2017 but before 01 Ja nuary 2018, 7 weeks a fter the end of a quarter i n the financial year; 3. for the fi nancial year ending on or after 30 June 2018 but before 1 Ja nuary 2019, 6 weeks a fter the end of a quarter i n the financial year; and 4. for the fi nancial year ending on or after 30 June 2019 but before 1 Ja nuary 2020, 5 weeks a fter the end of a quarter i n the financial year. 2 For i nsurance undertakings whose financial year ends on or a fter 1 Ja nuary 2016 but before 1 July 2017, the time limit is 8 weeks after the end of a quarter in the financial year. 3The time limit is reduced i n each of the three subsequent fi nancial years by one week. (3) 1The ti me l imits for i nsurance undertakings to publish the solvency and financial position report i n accordance with s ection 40 a re as follows: 1. for the fi nancial year ending on or after 30 June 2016 but before 1 Ja nuary 2017, 20 weeks a fter the end of the undertaking's financial year; 2. for the fi nancial year ending on or after 30 June 2017 but before 01 Ja nuary 2018, 18 weeks a fter the end of the undertaking's financial year; 3. for the fi nancial year ending on or after 30 June 2018 but before 1 Ja nuary 2019, 16 weeks a fter the end of the – Page 197 of 207 – undertaking's financial year; and 4. for the fi nancial year ending on or after 30 June 2019 but before 1 Ja nuary 2020, 14 weeks a fter the end of the undertaking's financial year. 2 For i nsurance undertakings whose financial year ends on or a fter 1 Ja nuary 2016 but before 1 July 2017, the time limit is 20 weeks after the end of the financial year. 3The time limit is reduced i n each of the three subsequent financial years by two weeks. (4) Subsections (1) to (3) apply in conjunction with s ections 276 a nd 277 a t group l evel, with the necessary modifications, to pa rti cipating insurance undertakings, i nsurance holding companies, mixed-activi ty insurance holding companies and mi xed financial holding companies, whereby the s pecified time limits are extended by s ix weeks in each case. Section 345 Own funds (1) 1Wi thout prejudice to section 92, basic own-fund i tems may be recognised as Tier 1 own funds for up to ten years a fter 1 Ja nuary 2016. 2To be recognised as Tier 2 own funds in this way, the items must satisfy the following criteria: 1. they mus t have entered i nto force before 1 Ja nuary 2016 a nd before the delegated l egislative act under Article 97 of Di rective 2009/138/EC comes i nto force; 2. they mus t have been eligible on 31 December 2015, up to a maximum of 50 per cent, for the required solvency ma rgi n in accordance with section 53c of the German Insurance Supervision Act a s amended 31 December 2015 a lso i n conjunction with section 121a (1) sentence 2 of the German Insurance Supervision Act a s amended 31 December 2015; a nd 3. they would not otherwise be classified as Tier 1 or Ti er 2 own funds in accordance with section 92. (2) 1Wi thout prejudice to section 92, basic own-fund i tems may be recognised as Tier 2 basic own funds for up to ten yea rs after 1 Ja nuary 2016. 2To be recognised as Tier 2 own funds i n this way, the items must satisfy the following cri teria: 1. they mus t have entered i nto force before 1 Ja nuary 2016 a nd before the delegated l egislative act under Article 97 of Di rective 2009/138/EC comes i nto force; 2. they mus t have been eligible on 31 December 2015, up to a maximum of 25 per cent, for the required solvency ma rgi n in accordance with section 53c of the German Insurance Supervision Act a s amended 31 December 2015 a lso i n conjunction with section 121a (1) sentence 2 of the German Insurance Supervision Act a s amended 31 December 2015; a nd Section 346 Investments in credit securitisations The requirements s pecified in delegated l egislative acts of the European Commission under Arti cle 135(2) of Directive 2009/138/EC a pply to i nsurance undertakings that i nvest in negotiable securities or other financi al instruments on the ba sis of rebundled, securitised loans that were issued before 1 Ja nuary 2011 only i f underlyi ng l oans are newly a dded or repl aced after 31 December 2014. – Page 198 of 207 – Section 347 Standard parameters (1) Wi thout prejudice to section 89 (1) s entence 1, s ection 96 (1), section 97 (3), section 100 a nd section 109 (2), the fol lowing provisions apply i n respect of the standard parameters to be used: 1. up to 31 December 2017, the s tandard formula calculation of the concentration ri sk and spread ri sk sub-modules will us e the same standard parameters for loans and receivables due to member states or EEA signatory s tates or their centra l banks that a re denominated i n the currency of another member state or EEA signatory s tate a nd that are funded i n this currency as those standard parameters used for l oans and receivables that are denominated in the home currency a nd funded in this currency; 2. i n 2018, the s tandard parameters that are used i n the standard formula calculation of the concentration risk a nd s pread risk s ub-modules will be reduced by 80 per cent for l oans and receivables due to the member s tates or EEA s i gnatory s tates or their central banks that are denominated in the currency of another member s tate or EEA s i gnatory s tate and a re funded in this currency; 3. i n 2019, the s tandard parameters that are used i n the standard formula calculation of the concentration risk a nd s pread risk s ub-modules will be reduced by 50 per cent for l oans and receivables due to the member s tates or EEA s i gnatory s tates or their central banks that are denominated in the currency of another member s tate or EEA s i gnatory s tate and a re funded in this currency; 4. from 1 Ja nuary 2020, the standard parameters that a re used i n the standard formula calculation of the concentration risk a nd spread risk s ub-modules will no longer be reduced for l oans a nd receivables due to the member states or EEA signatory s tates or their central banks that a re denominated i n the currency of a nother member state or EEA signatory s tate a nd a re funded in this currency. (2) 1Wi thout prejudice to section 89 (1) s entence 1, s ection 97 (3), s ection 98 (1), s ection 100 a nd section 109 (2), the s ta ndard parameters that are to be used in the s tandard formula calculation of the equity risk sub -module i n respect of equities that the undertaking acquired on or before 1 Ja nuary 2016 a re to be calculated as weighted mean values based on the following: 1. the s tandard parameter that is to be used in the calculation of the equity ri sk s ub-module in a ccordance with Arti cle 304 of Di rective 2009/138/EC a nd 2. the s tandard parameter that is to be used in the calculation of the equity ri sk s ub-module in a ccordance with section 106. 2The weighting of the parameter specified in sentence 1 no. 2 must rise at least on a s traight-line basis at the end of each yea r from 0 per cent during the year beginning 1 Ja nuary 2016 to 100 per cent on 1 Ja nuary 2023. Section 348 Solvency capital requirement (1) If a n i nsurance undertaking does not comply with the solvency capital requirement i n 2016 i n derogation of section 134, but would have complied with the required solvency margin in accordance with the law applicable up to 31 December 2015, the s upervisory a uthority will, upon application, grant an extension of the deadline for compliance with the s olvency ca pital requirement up to 31 December 2017 i f the insurance undertaking a grees to carry out the following: 1. ta ke the action necessary to i ncrease eligible own funds or reduce the risk profile such that the undertaking complies wi th the s olvency ca pital requirement by 31 December 2017; a nd 2. s ubmit a progress report to the supervisory a uthority every three months, s uch report to i nclude a description of the a cti on taken and the progress achieved in establishing compliance with the solvency ca pital requirement. (2) The extension granted in accordance with subsection (1) must be withdrawn if the progress report s hows that there wa s no significant progress i n achieving the establishment of compliance with the s olvency ca pital requirement between – Page 199 of 207 – the da te on which non-compliance with the solvency ca pital requirement was identified and the date on which the progress report was s ubmitted. Section 349 Partial internal model for a subgroup 1 Upon a pplication, the supervisory a uthority ma y authorise the ultimate participating i nsurance undertaking to use a n i nternal group model that only applies to part of the group. 2The preconditions are that both the ultimate participating i ns urance undertaking and also the ultimate participating insurance undertaking i n the subgroup must be domiciled in Germa ny a nd the subgroup must form a definable part of the business for which the risk profile is significantly different from tha t of the rest of the group. 3The authorisation may only be issued for a fixed period; the period must end no later tha n 31 Ma rch 2022. Section 350 Group provisions 1Wi thout prejudice to section 250, the following sections apply, with the necessary modifications, a t group level: s ections 345 to 347, s ection 351 a nd section 352. 2If the ultimate participating insurance undertaking satisfies the a pplicable provisions for the adjusted solvency requirement in accordance with Article 9 of Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary s upervision of i nsurance and rei nsurance undertakings in a n insurance or reinsurance group (OJ L 330 of 5 December 1998, pa ge 1), most recently a mended by Directive 2011/89/EU (OJ L 326 of 8 December 2011, pa ge 113), but the participating i nsurance undertaking, the participating insurance holding company, the participating mixed -activity i nsurance holding company or the pa rticipating mixed financial holding company does not satisfy the s olvency ca pital requirement for the group, s ection 348 a pplies, with the necessary modifications, without prejudice to section 250. Section 351 Risk-free interest rates (1) Subject to the a uthorisation of the s upervisory a uthority a nd with due regard to the permissible i nsurance obl igations, insurance undertakings may temporarily a djust the relevant risk-free i nterest rate term s tructure. (2) 1The a djustment is calculated for each currency a s a proportion of the difference between 1. the i nterest ra te that has been set by the insurance undertaking i n accordance with section 65 of the German Ins urance Supervision Act a nd the associated issued statutory order, in each case in the versions applicable up to 31 December 2015; a nd 2. the effective annual i nterest rate, determined as that constant discount rate that, when a pplied to the financial pos ition from the portfolio of permissible insurance obligations, leads to a va lue that reflects the best estimate for the portfolio of permissible insurance or reinsurance obligations if the ti me va lue of money is ta ken i nto a ccount us i ng the relevant risk-free interest rate term s tructure i n accordance with section 77 (1). 2The proportion referred to in sentence 1 must be reduced at the end of each calendar year on a straight-line basis from 100 per cent in 2016 to 0 per cent on 1 Ja nuary 2032. 3If i nsurance undertakings apply the volatility a djustment i n a ccordance with s ection 82, the relevant risk-free reference ra te under sentence 1 no. 2 must i nclude the volatility a djustment i n accordance with section 82. (3) Onl y i nsurance obligations that meet the following cri teria are deemed to be permissible insurance obligations within the meaning of s ubsection (1): 1. the contracts from which the i nsurance obligations a rise were entered i nto before 1 Ja nuary 2016; extensions to thes e contracts on or a fter this date to do not lead to permissible insurance obligations; 2. the technical provisions for the insurance obligations have been recognised i n accordance with section 65 of the Germa n Insurance Supervision Act a nd the associated issued statutory order, i n each case in the relevant versions – Page 200 of 207 – a pplicable up to 31 December 2015; a nd 3. no ma tching a djustment in accordance with section 80 i s applied for the insurance obligations. (4) If i nsurance undertakings apply s ubsection (1) a bove, the following requirements also apply: 1. the i nsurance undertakings concerned must not allow the permissible insurance obligations to be included in the ca l culation of the volatility adjustment in a ccordance with section 82; 2. the i nsurance undertakings must not apply s ection 352; 3. i n their s olvency a nd financial position report i n accordance with section 40, the insurance undertakings must di s close that they are ca rrying out a temporary a djustment of the relevant ri sk-free i nterest ra te term structure and qua ntify the impact on their fi nancial position of not a pplying this tra nsitional measure. Section 352 Technical provisions (1) 1Subject to the approval of the supervisory a uthority, i nsurance undertakings may temporarily apply a deduction wi thin the meaning of s ubsection (2) to technical provisions. 2The deduction may be applied a t the level of the homogeneous risk groups as described i n section 75 (3). (2) 1The temporary deduction must correspond to a proportion of the difference between the following two amounts: 1. technical provisions net of the amounts recoverable from reinsurance contracts a nd special purpose entities ca l culated a t 1 January 2016 i n accordance with section 75; 2. technical provisions net of the amounts recoverable from reinsurance contracts calculated i n accordance with the l egal and a dministrative requirements that have been recognised in a ccordance with s ections 341e to 341h of the Germa n Commercial Code and section 65 of the German Insurance Supervision Act each as a mended up to 31 December 2015 a nd in a ccordance with the statutory orders issued under s ection 330 of the German Commercial Code a nd section 65 of the German Insurance Supervision Act i n each case as amended up to 31 December 2015. 2The ma ximum deductible proportion must be reduced at the end of each calendar year on a straight-line basis from 100 per cent during the year from 2016 to 0 per cent on 1 Ja nuary 2032. 3If i nsurance undertakings apply the volatility a djustment i n accordance with section 82 on 1 Ja nuary 2016, the a mount specified in no. 1 must be calculated with the vol a tility a djustment a pplicable on this date. (3) Ins urance undertakings are permitted with the a pproval of the supervisory a uthority, or a re under a n obligation i n res ponse to a requirement from the supervisory a uthority, to recalculate the amounts of the technical provisions and, if a ppropriate, the amount of the volatility a djustment used to calculate the temporary deduction in a ccordance with s ubsection (2) sentence 1 nos. 1 a nd 2, s uch recalculations to be ca rried out every 24 months, or more frequently i f the ri s k profile of the undertaking changes significantly. (4) The deduction i n accordance with subsection (2) may be limited by the s upervisory a uthority i f the appl ication of the deduction could lead to a situation in which the financial resources requirements applicable to the undertaking decrease compa red with the requirements that were calculated in a ccordance with the German Commercial Code, the German Ins urance Supervision Act a nd the associated issued statutory orders each as amended up to 31 December 2015. (5) If i nsurance undertakings apply s ubsection (1) a bove, they a re not permitted to a pply section 351 a nd must ca rry out the following: 1. i f they a re only a ble to satisfy the solvency ca pital requirement by a pplying the temporary deduction, submit a n a nnual report to the competent supervisory a uthority describing the measures necessary to i ncrease eligible own funds or reduce the risk profile such that compliance with the s olvency ca pital requirement is established a nd des cribing the progress attained in this regard; a nd 2. i n the solvency and financial position report, disclose that they are a pplying the temporary deduction within the mea ning of s ubsection (2) to the technical provisions and quantify the i mpact on their financial position if this temporary deduction were not applied. – Page 201 of 207 – Section 353 Plan concerning the gradual introduction of transitional measures for risk -free interest rates and technical provisions (1) 1Ins urance undertakings that apply the transitional measures in accordance with section 351 or s ection 352 must noti fy the supervisory a uthority wi thout delay if they i dentify that there is a ri sk the solvency capital requirement will n o l onger be covered a t the end of the transitional period once these tra nsitional measures come to an end. 2In such cases, the s upervisory a uthority must impose on the insurance undertaking concerned a requirement to instigate the measures tha t a re necessary a nd a ppropriate to ensure compliance with the solvency ca pital requirement at the end of the tra nsitional period. (2) 1If a n insurance undertaking identifies that i t would not comply with the s olvency ca pital requirement without the tra nsitional measures i n accordance with section 351 or s ection 352, i t must submit to the supervisory authority, within two months of the date on which this situation is i dentified, a plan describing the gradual introduction of the measures i ntended to i ncrease eligible own funds or reduce the risk profile such that compliance with the s olvency ca pital requirement is re -established a t the end of the transitional period. 2The i nsurance undertaking concerned may update thi s plan during the transitional period. (3) 1Every 12 months, the i nsurance undertaking concerned must submit to the s upervisory a uthority a report describing the measures i ntended to ensure compliance with the s olvency ca pital requirement at the end of the tra nsitional period a nd presenting the details of the progress a chieved i n this regard. 2If it becomes cl ear from the progress report that it is unrealistic to expect compliance with the solvency capital requirement to be re -established a t the end of the tra nsitional peri od, the s upervisory a uthority must revoke its authorisation for the application of the tra nsitional measures i n a ccordance with s ection 351 or s ection 352. Section 354 Review of long-term guarantees and measures against equity risk Unti l 1 Ja nuary 2021, Ba Fin must each year i nform the European Insurance a nd Occupational Pensions Authority of the fol lowing: 1. the a vailability of long-term guarantees for i nsurance contracts i n its internal market and the conduct of i nsurance undertakings as long-term investors; 2. the number of insurance undertakings that a pply the matching adjustment, the volatility a djustment, the extension of the ti me l imit for re -establishing s ound financial circumstances i n accordance with section 134 (4), the duration- ba sed equity ri sk s ub-module and the tra nsitional measures i n a ccordance with sections 351 a nd 352; 3. the i mpact of the matching adjustment, the volatility adjustment, the symmetric adjustment of the ca pital requirement for equity i nvestments in a ccordance with section 106 (1), the duration-based equity ri sk s ub-module a nd the transitional measures in accordance with sections 351 a nd 352 on the financial position of insurance undertakings at national level and, on an anonymised basis, for each undertaking; 4. the i mpact of the matching adjustment, the volatility adjustment, the symmetric adjustment of the ca pital requirement for equity i nvestments in a ccordance with section 106 (1) a nd the duration-based equity ri sk s ub- module on the investment behaviour of insurance undertakings a nd whether this leads to inapp ropriate capital rel ief; 5. the i mpact of an extension of the ti me limit for re -establishing sound financial ci rcumstances in accordance with s ection 134 (4) on the efforts of insurance undertakings to increase eligible own funds or reduce their ri sk profi le s o tha t they comply wi th the solvency capital requirement; 6. deta ils on whether the plans concerning transitional measures in a ccordance with section 353 a re successfully i mplemented or not by i nsurance undertakings that a pply these transitional measures in a ccordance with sections 351 a nd 352 a nd the probability of lower dependency on these transitional measures, including measures that have – Page 202 of 207 – been ta ken, or a re expected to be ta ken, by the undertakings a nd the supervisory a uthorities, whereby the a pplicable regulatory environment must be taken into account. Section 355 Decisions by the supervisory authority resulting from the entry into force of this Act (1) From 11 Apri l 2015, the supervisory a uthority has the power to decide on the authorisation of th e following: 1. a ncillary own funds under section 90; 2. the cl assification of i tems of own funds under section 91 (5); 3. undertaking-specific parameters under section 109 (2); 4. ful l or partial i nternal models under sections 111 a nd 112; 5. a ncillary own funds of a n intermediate i nsurance holding company or a n i ntermediate mixed financial holding compa ny under section 257 (2); 6. a n i nternal model for the group under sections 261, 262 a nd 265 (5); 7. the us e of the matching adjustment for the relevant risk-free reference ra te under sections 80 a nd 81; 8. the us e of the volatility a djustment for the relevant risk-free reference rate under s ection 82; 9. the us e of the transitional measure for risk-free interest ra tes under s ection 351; 10. the us e of the transitional measure for technical provisions under section 352. (2) From 1 Apri l 2015, the supervisory a uthority has the power to ca rry out the following: 1. s pecify the l evel and scope of group-wide supervision under sections 245 to 249; 2. the Group Supervisor under s ections 279 a nd 280; 3. cons titute a college of supervisors under section 283. (3) From 1 Jul y 2015, the s upervisory a uthority has the power to carry out the following: 1. deci de on the deduction of a holding under section 259 (2); 2. s elect the method for ca lculating the solvency of the group under section 252; 3. deci de on equivalence in accordance with sections 258 a nd 288; 4. permit, i n accordance with section 268, i nsurance undertakings to be treated within the scope of sections 269 a nd 270; 5. ma ke the s tipulations under s ections 289 a nd 290; 6. deci de that transitional measures under sections 343 to 350 a pply. (4) Deci sions i n accordance with subsections (1) to (3) come i nto effect on 1 Ja nuary 2016 unless a later date is specified i n the decision. Section 356 Transitional provision on section 35 (1) sentence 1 numbers 5 to 8 1 Secti on 35 (1) s entence 1 numbers 5, 6 a nd 7 a pplies for the first ti me to audits of annual financial statements for the fi nancial year beginning after 31 December 2017. 2Section 35 (1) s entence 1 number 8 a pplies for the first time to audits of a nnual financial statements for the financial year beginning after 31 December 2018. – Page 203 of 207 – Annex 1 Classification of risks by class of insurance (Source of the original text: Federal La w Gazette I 2015, 555 - 556) 1. Acci dent a ) fi xed benefit insurance b) i ndemnity insurance c) combi ned benefits d) i njury to passengers 2. Hea lth a ) da ily a llowance b) i ndemnity insurance c) combi ned benefits 3. La nd vehicles (other than railway rolling stock) Al l damage to or l oss of: a ) l a nd motor vehicles b) l a nd vehicles other than motor vehicles 4. Ra i lway rolling s tock Al l damage to or l oss of railway rolling stock 5. Ai rcra ft Al l damage to or l oss of aircraft 6. Shi ps (sea, lake, a nd ri ver and canal vessels) Al l damage to or l oss of: a ) ri ver a nd ca nal vessels b) l a ke vessels c) ves sels 7. Goods in transit Al l damage to or l oss of goods in tra nsit, irrespective of the form of tra nsport 8. Fi re a nd natural forces Al l damage to or l oss of property (other than property damage or l oss included in classes 3 to 7) due to: a ) fi re b) expl osion c) s torm d) na tural forces other than storm – Page 204 of 207 – e) nucl ear energy f) l a nd subsidence 9. Ha i l, frost and other damage to property Al l damage to or l oss of property (other than property damage or l oss included in classes 3 to 7) due to hail or fros t, a nd a ny event such as theft, other than those included under 8 10. Motor vehi cle l iability a ) motor vehicle liability b) thi rd-party l iability arising out of the use of motor vehicles operating on the l and c) other 11. Li a bility Al l third-party l iability arising out of the use of aircraft (including carrier's l iability) 12. Li a bility related to s hips (sea, lake, a nd ri ver a nd canal vessels) Al l third-party l iability arising out of the use of ships, vessels or boats on the sea, lakes, ri vers or canals (including ca rri er’s l iability) 13. General liability Al l third-party l iability other than the types of liability s pecified in classes 10 to 12 14. Credi t a ) (general) b) export credit c) i ns talment credit d) mortga ges e) a gri cultural credit 15. Suretys hip 16. Mi s cellaneous financial l oss a ) employment risks b) i ns ufficiency of income (general) c) ba d weather d) l oss of benefits e) conti nuing general expenses f) unforeseen tra ding expenses g) l oss of market va lue h) l oss of rent or revenue i) other i ndirect tra ding l oss j) other non-trading financial loss k) other forms of financial l oss 17. Lega l expenses 18. As s istance for persons who get into difficulties a ) whi le tra velling or while away from their home or their habitual residence – Page 205 of 207 – b) i n other ci rcumstances unless such risks are covered by other classes of insurance 19. Li fe (unl ess listed under classes 20 to 24) 20. Ma rri a ge insurance, birth insurance 21. Uni t-linked l ife i nsurance 22. Tonti nes 23. Ca pi tal redemption operations 24. Opera tions relating to the administration of retirement provision s chemes 25. Pens ion fund operations Annex 2 Designations for authorisations granted for more than one class of insurance Source of the original text: Federal Law Gazette I 2015, 557 Where the authorisation simultaneously covers: 1. nos . 1 (d), 3, 7 a nd 10 (a ), i t is issued under the ti tle ‘motor vehicle insurance’; 2. nos . 1 (d), 4, 6, 7 a nd 12, i t is issued under the designation ‘marine and transport insurance’; 3. nos . 1 (d), 5, 7 a nd 11, i t is issued under the designation ‘aviation insurance’; 4. nos . 8 a nd 9, i t is issued under the designation ‘insurance against fire and other damage to property’; 5. nos . 10 to 13, i t i s issued under the designation ‘third-party liability i nsurance’; 6. nos . 14 a nd 15, i t is issued under the designation ‘credit and suretyship i nsurance’; 7. nos . 1, 3 to 13, a nd 16, i t is issued under the designation ‘property a nd casualty i nsurance’. Annex 3 Standard formula for calculating the solvency capital requirement (SCR) (Source of the original text: Federal La w Gazette I 2015, 558 - 559) 1. Calculation of the basic solvency capital requirement (BSCR) The basic solvency ca pital requirement described i n section 100 i s determined as follows: whereby SCR i denotes ri sk module i and SCR j risk module j; "i , j" means that all possible combinations of i and j s hould be covered in the total. In the calculation, the following replace SCR i and SCR j: SCR non-life: non-life underwriting risk module; SCR life: l i fe insurance underwriting risk module; SCR health: hea lth insurance underwriting risk module; SCR market: ma rket risk module; SCR default: counterparty default ri sk module. The "Corr i , j" fa ctor denotes the figure set out i n row i and column j of the following correlation matrix: – Page 206 of 207 – j Counterparty Hea lth Ma rket Li fe i nsurance Non-life insurance i default i ns urance Ma rket 1 0.25 0.25 0.25 0.25 Counterparty default 0.25 1 0.25 0.25 0.5 Li fe i nsurance 0.25 0.25 1 0.25 0 Hea lth insurance 0.25 0.25 0.25 1 0 Non-life insurance 0.25 0.5 0 0 1 2. Calculation of the non-life underwriting risk module The non-life underwriting ri sk module s pecified i n section 101 i s calculated as follows: whereby SCR i denotes s ub-module i and SCR j s ub-module j; "i, j" means that all possible combinations of i and j s hould be covered in the total. In the calculation, the following replace SCR i and SCR j: SCR nlpremium/reserve: non-life insurance premium a nd reserve risk s ub-module; SCR nlcatastrophe: non-life catastrophe risk sub-module. 3. Calculation of the life underwriting risk module The l ife underwriting risk module specified in s ection 102 i s calculated as follows: whereby SCR i denotes the s ub-module i and SCRj the s ub-module j; "i, j" means that all possible combinations of i a nd j s hould be covered in the total. In the calculation, the following replace SCR i a nd SCR j: SCR mortality : morta lity ri sk s ub-module; SCR longevity : l ongevity ri sk sub-module; SCR disability : di s ability/morbidity risk sub-module; SCR life expense: Li fe insurance expense risk sub-module; SCR revision: revi s ion risk sub-module; SCR lapse: l a pse risk sub-module; SCR lifecatastrophe: l i fe ca tastrophe risk s ub-module; 4. Calculation of the market risk module Structure of the market risk module The ma rket risk module s pecified in section 104 i s calculated as follows: whereby SCR i denotes s ub-module i and SCR j s ub-module j; "i, j" means that all possible combinations of i and j s hould be covered in the total. In the calculation, the following replace SCR i and SCR j: SCR interest rate: i nterest ra te ri sk sub-module; SCR equity : equity risk sub-module; SCR property : property ri sk sub-module; SCR spread: s pread risk s ub-module; SCR concentration: ma rket risk concentrations s ub-module; SCR currency : currency ri sk s ub-module. – Page 207 of 207 –