BaFin publishes a circular on minimum requirements for the business organization of small insurance companies. It addresses small insurance companies in accordance with Section 211 of the Insurance Supervision Act and explains how they should structure the important areas of their business organization in accordance with section 23 of the Insurance Supervision Act. Considering the principle of proportionality, the circular provides for various simplifications for small insurance companies compared to Solvency II companies. The circular will come into force on April 01, 2020.
The circular provides information on the interpretation of the regulations on business organization in the Insurance Supervision Act. It makes these regulations binding for BaFin and ensures consistent application to all small insurance companies. The circular is based on the approach that the managers of a small insurance company have overall responsibility for the proper and effective business organization of the company.
In the circular, BaFin summarizes the requirements for an appropriate risk culture and highlights that it is important that the risk culture is lived, communicated within the company, and taken into account when building risks. These are important prerequisites for an effective and orderly business organization, which most companies already take into account. BaFin also expects Solvency II insurance companies to have an appropriate risk culture. In the course of the revision of the MaGo circular (02/2017), which has been planned after completion of the Solvency II review, the corresponding section will therefore also be included in this circular, which applies to Solvency II companies.
BaFin expects companies that fall within the scope of this circular to deal with the requirements of the circular. They are required to check whether an adjustment to their business organization is necessary and, if necessary, how this adjustment should be carried out in a manner that is appropriate to the risk profile. Since section 23 of the Insurance Supervision Act has been in force since 2016 and individual companies may have previously assumed a different interpretation, flat-rate transition periods are not appropriate. BaFin will clarify this in individual cases in dialog with the respective company.
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Effective Date: April 01, 2020
Keywords: Europe, Germany, Insurance, Proportionality, Small Insurance Companies, Operational Risk, Insurance Supervision Act, Governance, Risk Culture, BaFin
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