On its website, BaFin has published an interpretative decision on some aspects regarding the conduct of reinsurance business in Germany by insurance undertakings situated in a third country. The decision has the following background: Insurance undertakings (primary insurers and reinsurers) from third countries, i.e. countries that are not member states of the European Union or signatories to the Agreement on the European Economic Area, are subject to authorisation and must establish a German branch office if they wish to carry on primary insurance or reinsurance business in Germany. The requirements for the authorisation application and the establishment of a branch office are based in particular on the provisions of sections 68 and 69 of the Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG).
However, section 67 para. 1 sentence 2 first half-sentence of the VAG provides an exemption for insurance undertakings that wish to carry on solely reinsurance business in Germany. According to this exemption, the requirement for authorisation and the establishment of a branch office does not apply if primary insurers or reinsurers from third countries carry on solely reinsurance business in Germany through provision of cross-border services and if the European Commission has decided in accordance with Article 172 para. 2 or para. 4 of Directive 2009/138/EC that the solvency regimes for reinsurance activities carried out by undertakings in the relevant country are equivalent to the regime described in that Directive.
The interpretative decision explains (i) under which circumstances an insurance undertaking situated in a third country conducts reinsurance business in Germany and (ii) under which circumstances an exemption with respect to the general authorization requirement is available.
With regard to first issue (conducting of reinsurance business in Germany), the decisive element is whether the third-country insurance undertaking deliberately targets the German market (e.g. advertisement of specific products, an Internet presence targeted at the German market, employees of the third-country insurance undertaking visiting customers with the aim of concluding reinsurance contracts) in order to offer reinsurance contracts to German insurers or to initiate such business. According to BaFin deliberate targeting is also the case if the third-country insurance undertaking uses intermediaries situated in Germany or abroad to contact German insurers or to provide offers to the German market.
With regard to the second issued (availability of exemption) equivalence decisions pursuant to Article 172 para. 2 or para. 4 of Directive 2009/138/EC are decisive. If such (positive) equivalence decisions exist, third-country insurance undertakings may conduct reinsurance business in Germany without authorization.