On 18 March 2020 and 21 March 2020 the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – BaFin) published notes in which it referred to and appropriated EIOPA publications on Actions to mitigate the impact of Coronavirus/COVID-19 on the EU insurance sector (dated 17 March 2020) and Recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure (dated 20 March 2020). Now it has added a number of questions and answers for insurers and pension funds to its list of FAQ covering supervisory measures to deal with the effects of the COVID-19 pandemic on regulated entities of the German financial sector (see the related publication in our blog).
Currently, the following questions touching upon operational, reporting and also financial issues are addressed:
How can insurance undertakings communicate with BaFin?
Applications and other correspondence concerning insurance supervisory issues should be sent by e-mail to the address indicated in the FAQ. Confidential information must be sent by encrypted e-mail.
How is BaFin currently dealing with on-site inspections at insurance undertakings?
For the time being, on-site inspections at insurance undertakings will only be carried out in exceptional cases.
What measures has BaFin taken to assist insurance undertakings in dealing with the coronavirus crisis?
BaFin states that insurers face in particular operational challenges. As regards alleviations, it is in close contact with EIOPA and the other EU national supervisory authorities.
Are there alleviations regarding the regulatory reporting requirements?
BaFin refers to the above-mentioned EIOPA Recommendations on supervisory flexibility regarding the deadline of supervisory reporting and public disclosure – Coronavirus/COVID-19.
How does BaFin handle applications for transitional measures or volatility adjustments?
BaFin announces to take care of new applications for transitional measures for technical provisions with priority and to look at them favourably. If needed, a retroactive approval as of 31 March 2020 is possible. Firms that have been granted approval for a transitional measure but not made use of it so far may do so also as of 31 March 2020.
How does BaFin treat a temporary shortfall in covering the secured assets of pension funds?
In case of a shortfall in covering the secured assets of a pension fund of less than 10 percent, the pension fund generally has to submit a plan how to secure the required coverage of the secured assets (coverage plan) within three months. BaFin now declares that such period for submission may be prolonged until up to 1 October 2020. Payments of the employer to secure the coverage will not need to start before the beginning of the year 2021.
Which alleviations apply regarding the submission of the register of guarantee assets as of 31 March 2020?
BaFin extends the 31 March 2020 deadline for the submission of the register of guarantee assets referred to in section 126 of the German Insurance Supervision Act (Versicherungsaufsichtsgesetz – VAG). It permits submission by encrypted e-mail in advance. However, the register must be submitted in paper form by 30 June 2020.
How should firms that are subject to the German Investment Regulation (Anlageverordnung) deal with a passive exceedance of the admissible real estate quota?
The German Investment Regulation applies to the investments of small insurers and certain pension funds (Pensionskassen). To avoid emergency sales triggered by the regulatory framework, BaFin accepts a temporary passive exceedance (that may be caused by volatile/dropping prices) of the real estate quota (25 percent of the secured assets). However, no new investments in real estate may be made as long as the admissible quota is exceeded.
What impact will the coronavirus crisis have on the current review of Solvency II?
BaFin refers to EIOPA’s decision to move the date for the holistic impact assessment for the current Solvency II review to 1 June 2020.
BaFin intends to update the published list of FAQ regularly.