Own funds (insurance)
As equity in is insurance , the economic capital of insurance companies referred.
General
While for non-banks there are no regulatory provisions on the equity base other than the minimum capital in corporations ( share capital , share capital ), the legislator considered it necessary for credit institutions ( own funds (credit institution) ) and insurance companies to regulate the special risks of the banking and insurance business adopt the amount and adequacy of equity. The level of own funds plays a decisive role for the solvency and solvency of these companies.
In insurance companies, the legal term own funds includes more balance sheet items than the mere formal equity capital (share capital) such as, for example, outstanding capital .
Legal issues
According to Section 74 (1) VAG , insurance companies must compile a comparison of assets and liabilities on their balance sheet for the purpose of determining their own funds, the so-called solvency overview . According to Section 75 (1) VAG, this must include technical provisions for all obligations towards policyholders and beneficiaries , according to Section 78 (2) VAG, set a risk margin corresponding to the solvency capital requirement and always have eligible equity capital at least equal to the solvency capital requirement ( Section 89 (1) VAG). According to this, the own funds must always correspond at least to the solvency capital requirement, the eligible basic own funds must always correspond at least to the minimum capital requirement.
species
A distinction must be made between basic own funds and supplementary own funds (Section 89 (2) VAG):
- Basic own funds are the excess of assets over liabilities ( net worth ) minus the amount of own shares in the solvency overview and the subordinated liabilities .
-
Supplementary own funds are those that are not part of the basic own funds and can be called in to compensate for losses:
- the part of the unpaid share capital , of the foundation stock or of the item corresponding to the share capital of stock corporations in the case of public insurance companies that was not claimed;
- in the case of mutual insurance associations with a variable obligation to make additional contributions, the future claims that the association has against its members if it demands additional payments within the following twelve months.
- Letters of credit and guarantees as well
- all other legally binding payment obligations of third parties towards the insurance company.
As soon as part of the supplementary own funds has been paid in or called in, it must be treated as an asset for the purposes of the solvency overview and counts as a basic own funds (section 89 (5) VAG). Additional own funds may only be recognized with the prior approval of the insurance supervisory authority ( Section 90 (1) VAG).
According to § 92 VAG, the own funds are to be classified into three quality classes ( English tiers ), whereby in § 93 VAG specifications are made for the classification of certain own funds components. In order to comply with the minimum capital requirement , the eligible own funds only consist of own funds of quality class 1 and eligible basic own funds of quality class 2. The equity components of quality class 1 must cover at least 50% of the minimum capital requirement ( Section 95 VAG).
economic aspects
According to Solvency II, own funds correspond to those available financial resources of an insurer, which serve as a risk buffer and can absorb any financial losses. The own funds necessary to comply with the capital requirements are determined by creating an economic balance sheet, which must be created in addition to the balance sheet prepared for accounting purposes . As part of this economic balance sheet, assets and liabilities are continuously valued at fair value . Own funds in the sense of the solvency overview are then the excess of the assets over the liabilities as well as the subordinated liabilities, insofar as they meet the own funds criteria of Solvency II. The three quality classes classify the own funds according to their suitability to absorb losses. The criteria of subordination , ability to absorb losses , permanence, duration and the amount of operating effort are used as a basis. Own funds of the highest quality class 1 are characterized by the fact that they are both subordinate, i.e. in the event of insolvency the creditors are only satisfied after all non-subordinate creditors, and can also compensate for losses in ongoing business operations; this applies, for example, to the reserves .
The basic solvency capital requirement of section 100 VAG also reduces the market risk ( interest rate risk , equity risk , real estate risk , spread risk and exchange rate risk ), counterparty risk , risk reduction (such as reinsurance , securitisations and derivatives , claims against insurance intermediaries ) and also the operational risk of section 107 VAG taken into account in own funds. Own funds include the following balance sheet items:
Grundkapital (eingezahlt) + Kapitalrücklagen + Gewinnrücklagen + Gewinnvortrag (nach Dividendenzahlung) + Genussrechtskapital + Rückstellung für Beitragsrückerstattung = Eigenmittel
The provision for premium refunds is only part of the own funds if it may be used to cover losses and it does not relate to fixed profit shares ( Section 214 VAG).
Individual evidence
- ↑ Kay Uwe Erdmann / Detlef Kaulbach / Marc Schlömer / Matthias Schneider, Grundzüge des Versicherungsaufsichtsrechts , 2019, p. 77
- ↑ BT-Drs. 18/2956 of October 22, 2014, draft law for the modernization of financial supervision over insurance , p. 257
- ↑ BT-Drs. 18/2956 of October 22, 2014, draft law for the modernization of financial supervision over insurance , p. 260
- ↑ Kay Uwe Erdmann / Detlef Kaulbach / Marc Schlömer / Matthias Schneider, Grundzüge des Versicherungsaufsichtsrechts , 2019, p. 77
- ↑ BT-Drs. 18/2956 of October 22, 2014, draft law for the modernization of financial supervision over insurance , p. 261
- ↑ only with life and health insurance
