Insurance companies in Germany represent an investment volume of around €1.5 trillion and are thus, together with banks, the most important capital market investors. As from 1 January 2016 fundamentally new framework conditions will apply in broad areas to investor groups subject to insurance regulation. In addition to the fully revised and extended German Insurance Supervision Law (“VAG 2016”), through which the Solvency II Directive (2009/138/EC) and the Omnibus II Directive (2014/51/EU) are implemented in German law, account must be taken, in particular, of the Commission Delegated Regulation (EU) 2015/35 on the Solvency II Directive (“Delegated Regulation”), which will apply uniformly throughout Europe. Under these new rules capital investments are required for the first time to be backed by capital.
At the same time, compared to the current legal position – which is particularly affected in Germany by the Investment Regulation last amended in March 2015 and a series of BaFin circulars – there will be substantial amendments regarding the principles governing capital investment. Both matters concern the suitability and structuring of securitisations as capital investment products for “VAG investors”.
The solvency capital requirements under Solvency II will essentially apply to all primary insurance and reinsurance companies, with exceptions being made, for example, for small insurance companies. At things stand at present, the solvency capital requirements do not apply to pension organisations or pension funds. Although pension funds come with the sphere of application of insurance regulation (also under VAG 2016), as Institutions for Occupational Retirement Provision (“IORP”) they are not targeted by the new European regulation through Solvency II. Specifically for IORPs, a revision of the IORP Directive (2003/41/EC) on their activities and supervision is planned. It has not yet been conclusively decided which solvability rules will be included in the IORP II Directive.
To date (end-2015) the future status of BaFin’s investment principles (Investment Regulation), which are currently applicable in Germany, has not been resolved, i.e. whether they will cease to apply or whether German supervision will retain them in parallel to Solvency II.
Solvency II provides for a number of delegated acts and implementation standards, which the EIOPA is responsible for drafting. There are also Guidelines and Q&As, whose purpose is to ensure uniform interpretation and application of the law.