Act on the Supervision of Insurance Undertakings (Versicherungsaufsichtsgesetz, VAG)

Section 11a Appointed actuary in life insurance

(1) Every life insurance undertaking shall appoint a responsible actuary. This appointed actuary must be reliable and qualified. Qualification presupposes sufficient knowledge of actuarial theory and professional experience. Adequate professional experience shall be deemed given if documentation can be furnished of at least three years of experience as an actuary.

(2) The name of the designated appointed actuary must be submitted to the Supervisory Authority, together with the information necessary to assess reliability and qualification in accordance with subsection (1) above before appointment. If there is evidence that the designated appointed actuary does not meet the requirements for reliability or qualification, the Supervisory Authority may require that another person be appointed. If, after the appointment, there should be evidence of circumstances which would have prevented appointment, or if the appointed actuary does not properly fulfill the duties under this Act, the Supervisory Authority may require that another appointed actuary be appointed. If the designated or the newly appointed actuary in the cases mentioned in sentences 2 and 3 also fails to meet the requirements, or if no new appointment is made, the Supervisory Authority may itself appoint an actuary. The Supervisory Authority shall be informed immediately upon resignation or dismissal of the appointed actuary.

(2a) Appointment or dismissal of the appointed actuary is subject to the approval of the supervisory board. If a small mutual association (section 53) has no supervisory board, the management board appoints the actuary unless the memorandum and articles of association stipulate appointment by the senior representative body.

(3) The duties of the appointed actuary are as follows:

1. To ensure that the calculation of premiums and the premium reserve is in line with the principles of section 11 above and the regulations issued pursuant to section 65 (1) and section 341f of the Commercial Code. In the process, the appointed actuary shall assess the financial situation of the undertaking, in particular with respect to whether or not the undertaking is in a position to fulfill its liabilities under the insurance contracts at all times and whether it disposes of adequate resources in the amount of the solvency margin. 2. Except in the case of a small mutual association (section 53 (1), sentence 1), the appointed actuary shall certify at the end of the balance sheet that the premium reserve has been established in accordance with section 341f of the Commercial Code and the regulations issued in accordance with section 65 (1) below (actuarial certification); this is without prejudice to section 341k of the Commercial Code relating to auditing. He shall specify in a report to the management board of the undertaking the calculation basis and any additional assumptions upon which the certification is based. 3. In the event that, in the performance of the assigned duties, the appointed actuary recognises a possibility that circumstances will preclude the granting of a certification in accordance with number 2, or allow only a qualified certification, he shall inform the management board and, if the board does not immediately remedy the situation, 1 the Supervisory Authority without delay; in the event that, in the performance of the position as appointed actuary, facts are discovered which could threaten the going concern status of the undertaking or seriously hinder its development, he shall immediately inform the management board and the Supervisory Authority. 4. For with-profits policies, the appointed actuary shall submit to the management board proposals for suitable participation in the surplus.

(4) The management board of the undertaking is obliged

1. to make available to the appointed actuary all the necessary information which will enable him to fulfill his duties properly pursuant to subsection (3) above, and 2. to submit to the Supervisory Authority the report accompanying the actuarial certification in accordance with subsection (3) no. 2 above.

(5) Subsection (3) no. 1 sentence 1 and no. 2 sentence 2, as well as subsection (4) no. 2 do not apply to death benefit funds. The assessment obligation pursuant to subsection (3) no. 1 sentence 2 shall also apply in such cases. Subsection (3) no. 2 sentence 1 above applies, except for small mutual associations (section 53 (1) sentence 1), with the proviso that the certification mentioned there is replaced with a certification that the premium reserve has been established in compliance with the approved operating plan (actuarial certification).

(6) The Federal Ministry of Finance is authorized to issue by regulation supplementary provisions on the wording of the actuarial certification and any further details regarding the content and scope as well as the deadline for submission of the report pursuant to subsection (3) no. 2 and subsection (5) above. This power may be delegated by regulation to the Supervisory Authority. The latter shall issue the rules in consultation with the supervisory authorities of the individual federal states.

Section 11d Accident insurance with premium refund

If accident insurance undertakings write contracts with premium refund, sections 11 to 11c above apply accordingly.

Section 11e Premium reserve (Deckungsrückstellung) for benefit obligations in third party liability and accident insurance

For the calculation of the premium reserve for benefit obligations under general third party liability insurance, motor third party liability insurance, motor vehicle accident insurance and general accident insurance without premium refund section 11a above applies accordingly.

Section 12 Substitutive health insurance

(1) To the extent that health insurance is suitable as a full or partial substitute to statutory health insurance (substitutive health insurance) it shall be operated in Germany only in accordance with the technical principles of life insurance, i.e.

2 1. premiums shall be calculated in accordance with actuarial principles on the basis of probability tables and other pertinent statistical data, specifically taking into account any relevant assumptions with respect to the risk of invalidity and illness, to mortality, to the dependence of the risk on age and gender and to the probability of cancellation, also taking into account safety loadings and other loadings and a technical interest rate, 2. the ageing provision is to be recognized in accordance with section 341f of the Commercial Code, 3. in the insurance contract, the right of termination without cause for the insurance undertaking must be excluded, in daily benefits insurance from the fourth policy year at the latest, and a premium increase permitted, 4. the insurance contract shall grant the policyholder the right to policy alteration by choosing other premium scales with comparable coverage while maintaining the rights and ageing provision entitlements acquired so far under the contract.

(2) Insurance undertakings active in substitutive health insurance business shall appoint a responsible actuary. Section 11a (1) sentences 2 to 4, as well as (2) and (2a) apply accordingly.

(3) The duties of the appointed actuary are as follows:

1. To ensure that in calculating the premiums and mathematical provisions, in particular the ageing provision, the actuarial methods (subsection (1) nos. 1and 2 above) are followed and the rules of the regulation issued pursuant to section 12c below are observed. In the process, the appointed actuary shall assess the financial situation of the undertaking, in particular with respect to whether or not the undertaking is in a position to fulfill its liabilities under the insurance contracts at all times and whether it disposes of adequate resources in the amount of the solvency margin. 2. The appointed actuary shall certify at the end of the balance sheet that the ageing provision has been calculated in accordance with no. 1 above (actuarial certification). This does not apply to small mutual associations (section 53 (1) sentence 1).

Section 11a (3) no. 3 and (4) no. 1 apply accordingly.

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