Provision for premium refunds
The provision for premium refunds ( RfB ) is an actuarial provision in the annual financial statements of an insurer . This provision reflects the commercial value of the claims of the policyholders , in particular their collective, for premium reimbursement as of the balance sheet date , unless they have already been finally allocated to individual policyholders and then paid out, shown for payment in a liability or in the individual provision of the relevant contract. It is particularly useful in life and (private) health insurance significant.
The assessment of the RfB in life and health insurance depends largely on the contractual and regulatory provisions governing the policyholder's claims to profit sharing .
Term of the RfB
In the balance sheet structure in Form 1 of the RechVersV , this provision is called a provision for performance-related and non-performance-related premium refunds , but in the Commercial Code and the Insurance Supervision Act it is simply called a provision for premium refunds . In the following it is referred to with the common abbreviation RfB.
According to the name, the RfB is a provision , because both the time of payment or allocation to a specific policyholder and the amount to be allocated are still uncertain. A special feature of the RfB, however, is that the beneficiary is also unknown. Rather, as of the balance sheet date, the current policyholders are obliged to pay out certain amounts to policyholders in any case in the future. As a result, the amounts are finally withdrawn from the insurer and represent a liability to third parties. A provision must be made for these. Since these are claims from an insurance contract, the RfB is also one of the technical provisions.
The name in the RechVersV makes it clear that not only claims from surplus participation , i.e. performance-based premium refunds, but also claims on performance-independent premium refunds are taken into account. Success- dependent means that the claim is based on the overall "success" achieved by the insurer, i.e. the business surplus. The term premium reimbursement refers to the reimbursement of unneeded parts of the premiums in life and health insurance, which are particularly carefully determined due to legal requirements . In other insurance lines there is a performance-independent premium refund . Here the contributions are determined in such a way that they are appropriate for all different risks. Those policyholders whose risks turn out to be rather low will then be reimbursed parts of the premiums, regardless of the total excess the insurer has achieved. The concept of premium refunds must not be confused with the concept of premium refunds, for example in the case of pension insurance with premium refunds or in accident insurance with premium refunds . There the sum of the total contributions paid in the event of death or experience is actually paid as an insurance benefit.
Function of the RfB
Insofar as the profit shares declared in advance are credited to the policyholders by way of direct credit, i.e. at the expense of the following financial year, the insurance company is dependent on actually generating the necessary funds. Insofar as the funds for the surplus participation are withdrawn from the RfB, the insurance company uses funds that have already been generated in previous years and are therefore already available in the RfB.
In life insurance, the goal is to provide policyholders with reliable benefits that can be predicted as early as possible to secure their retirement benefits. Therefore, the declared surplus rates should hardly change over time, but this cannot always be managed over time. The RfB serves as an explicit buffer, shown in the balance sheet, so that a constant profit participation can be granted even with fluctuating results: If sufficient funds are available in the RfB, the allocation can fluctuate in the individual years and an even withdrawal is still possible.
Conversely, it can happen in health insurance that there are years in which a high withdrawal from the RfB is desirable in order to mitigate a strong premium adjustment , while in years in which the contributions hardly increase, only little funds are withdrawn from the RfB " have to". With an almost constant supply, the RfB compensates for the different requirements. The use of funds from the RfB in health insurance sometimes requires the approval of an independent trustee .
RfB as a means of corporate policy
First of all, it is a corporate policy decision how much of the surplus - within the regulatory and stock corporation law limits - will be transferred to the policyholders as a direct credit or as an allocation to the RfB, and how much will remain as annual surplus for the company or its shareholders.
The question also arises as to which amounts from the RfB are credited to the policyholders. If the company pays out too little, it has a poor position in the competition for new customers. If, on the other hand, it reduces the RfB too much, it no longer has any reserves in order to continue to guarantee an appropriate distribution in the event of a negative development.
In addition, the parts of the RfB not tied up for the declared surplus shares of the following year are a substitute for own funds, as they can be used to avert them in an emergency. For this reason, the extent to which own funds are required must also be taken into account with additions, but particularly with withdrawals. It is always preferable for policyholders to avoid costly raising equity in the capital markets even by temporarily foregoing allocation (not the amounts themselves which are only later allocated to them).
Legal basis
Regulatory law
The amounts that are transferred to the RfB may only be used for profit sharing purposes. With the approval of the supervisory authority, unspecified parts of the RfB can be used to avert an emergency in exceptional cases.
In the business plan for profit sharing, an upper limit is set for the RfB for the old life insurance portfolio, so that an unlimited amount of funds cannot be added to the RfB without distributing them back to the insured. According to this, as a rule, the free RfB must not exceed the sum of the transfers in the last two years.
Commercial law
The RfB is to be formed if its exclusive use of the funds for the reimbursement of premiums is guaranteed by law , statutes , business plan declaration or contractual agreement . However, this regulation is not final. Amounts are also to be added to the RfB if surpluses are shown in the annual financial statements that are not yet taken into account in the contractual assessment of the RfB, but are expected to lead to expenses for premium refunds in the future.
Tax law
Contributions to the RfB are tax-free according to § 21 KStG , provided that they are less than the profit before the addition of the past financial year and the exclusive use of the RfB for the surplus participation is guaranteed by the articles of association or by a business plan declaration. The RfB is to be dissolved if it is higher than the total
- from the transfers of the last three years,
- the amount, the distribution of which has been bindingly determined by the insurance company as a profit participation before the balance sheet date,
- in health insurance, the amount whose use to reduce premium increases in the following financial year has been bindingly determined by the insurance company before the balance sheet date,
- in life insurance, the amount that is required to finance the terminal bonuses for the past insurance years.
The tax dissolution of the RfB, however, leads to a significant tax burden for the insurer, since amounts that legally have to be paid to the policyholders are taxed. Therefore, this tax limitation of the RfB represents a quasi-mandatory requirement for the company policy with regard to the RfB. The distributions or binding of amounts must be controlled in such a way that there is no taxation of the RfB.
Success-dependent and success-independent RfB
The performance-based RfB comprises the amounts that depend on the total or the technical result of the insurance business or on the result of an insurance branch or type of insurance.
The non-performance-related RfB comprises the amounts that depend on the claims experience or the profit of one or more insurance contracts, or that are stipulated by law or contractual agreement.
The distinction between success-dependent and non-success-dependent RfB is particularly important in practice for health insurance companies. In life insurance, the performance-based RfB occurs almost exclusively.
RfB in life insurance
Final profit share fund
A partial provision (terminal bonus fund) is set up within the RfB for final profit participation shares that have already been provisionally declared but not yet due. The calculation method for this fund is specified in Section 28 (7) RechVersV. According to this, the fund must be financed over the term of the contract, taking into account interest ("m / n method"), unless another method of the type of contract is more appropriate. The policyholder has only one entitlement to the final profit participation . A claim only arises when the contract is terminated in the amount then declared. According to new case law, there is also an entitlement to a final profit participation component in the event of repurchase or death. However, the declaration may provide for lower terminal bonuses in these cases.
Fixed, bound and free RfB
Through the irrevocable declaration (stipulation) of current or final profit participation shares for the following year or another declaration period, part of the RfB is determined in the amount that funds are likely to be withdrawn to finance these profit participation shares. This part of the RfB is called the defined part. The stipulated part of the RfB together with the final profit share fund is referred to as the bound RfB and the part of the RfB that goes beyond this is called the free or unbound RfB. Terminal bonus funds and free RfB are also referred to together as an undefined part of the RfB. These are the funds that are already legally intended for the purpose of premium reimbursement, but no final decision has yet been taken on their specific use and consequently no specific claims of individual policyholders to these amounts exist. Life insurance companies must provide information on the various parts of the RfB in the notes to the annual financial statements.
RfB in health insurance
Health insurance companies have to subdivide the balance sheet item RfB according to the success-based and the non-success-related RfB. This distinction is in practice even when health insurance companies is important because the premium adjustments are cushioned from the performance-related premium refunds and for the performance-related premium refunds profit sharing system is financed by the premium return.
The pool-relevant RfB from the compulsory long-term care insurance belongs to the success-independent RfB.
See also
supporting documents
- ↑ Surplus study by Assekurata (as of January 16, 2008).
