Gruppenaufsicht unter Solvency II

The proposal of the Solvency II Framework Directive substantially changes the supervision of insurance groups. The new concept establishes a genuine authority for group supervision (Group Supervisor) that takes over the competences for group supervision from the national solo-supervisory authorities. The national supervisory authority that has authorized the group’s top-level insurance or reinsurance undertaking regularly acts as Group Supervisor. However, the shift of competences does not go far enough – alongside the supervision of the entire group within the territory of the EU by the Group Supervisor, the Member States are authorized to allow their national supervisory authorities the additional supervision of national subgroups and subgroups covering several Member States.The provisions concerning the determination of the group’s Solvency Capital Requirement (SCR) are of pivotal importance: The SCR can be calculated on the basis of either the standard formula or an internal model approved by the Group Supervisor. As a highly welcome development, diversification effects can be taken into account in the calculation. On the negative side, this possibility is restricted to those groups, calculating on the basis of the consolidated account. Furthermore the group may implement a group support system. Within this system, subsidiaries may cover a part of their solo-SCR by obtaining a commitment of support of the group’s top-level undertaking. Even though the Group Supervisor makes the essential decisions in the field of group solvency and group support, the national supervisory authorities are also provided with some competencies. This leads to the conclusion that the objective of creating a coherent supervision has only been partly achieved.In spite of these shortcomings the modernization of the group supervision is a major improvement of the legal framework for both, companies and supervisory authorities.     

Risk and capital transfer in insurance groups

The aim of this paper is to analyze the effect of capital and risk transfer instruments (CRTIs) on a financial group's risk situation. In this respect, we extend previous literature by accounting for the conglomerate discount on firm value, which is a reduction in shareholder value due to diversification within the group. In general, CRTIs between parent and subsidiaries have a substantial effect on the diversification of risks, economic capital requirements, and default risk, which we study in detail for different types of CRTIs, including intra-group retrocession and guarantees. One main finding is that diversification effects within the group are much lower when taking into account conglomerate discount effects. We believe this aspect to be an important issue in the ongoing discussion on group solvency regulation and enterprise risk management.     

The impact of risk-based regulation on European insurers’ investment strategy

This paper examines the impact of Solvency II on the attainability of target returns, the attainability of portfolio efficiency and the asset allocation of European insurers. I start with a brief introduction to the Solvency II Directive, focusing on the rules for calculating solvency capital requirements (SCR) according to the Solvency II standard formula. The subsequent numerical analysis includes several portfolio optimizations focusing on six relevant asset classes for the 1993–2017 time period. I derive optimal portfolios with respect to the Solvency II capital requirements, with respect to conventional risk measures, and I combine both optimization problems. My results show that the capital requirements according to Solvency II are not adequately calibrated. Nevertheless, due to a solid equity base, the majority of European insurers are still able to attain high target returns and mean-variance-efficiency. However, undercapitalized insurers are not able to hold risk-optimal allocations of equities, real estate and hedge funds any longer. In an environment of very low interest rates, these insurers may also face difficulties obtaining their target returns. To the best of my knowledge, this is the first paper to explicitly incorporate the solvency capital requirement as a numerical constraint into the insurers’ portfolio optimization problem. As a result, my approach first provides insights about the attainable target return and the asset weights as a direct function of insurers’ equity.     

Aktienanlage für Lebensversicherer unter Solvency II

Life insurance companies are among the largest institutional investors. As part of their investment policy they are subject to special legal requirements. In particular the calculation of the solvency capital that has to be deposited for the market risk has changed under Solvency II. A widely spread thesis on this topic is that investments in equity have become unprofitable for life insurers due to solvency capital requirements – compared to previous periods of high equity ratios of temporally over 25%. Therefore insurers might have dropped their average stock quotas to below 5%.The intention of the present study is to analyze whether the capital requirements for the equity investments under Solvency II are a hurdle to achieve a reasonable profitability or – opposite to that – whether the equity investments are a suitable investment to provide an acceptable return on assets. For this purpose the solvency capital requirements of the equity investment under Solvency I considering the BaFin stress test are compared with the new solvency capital requirements under Solvency II including the symmetric adjustment factor (SA). Furthermore the diversification effects are taken into account; they are analyzed on the basis of the SFCR reports of the life insurance companies first published in 2017. As a result the risk capital requirements for equity investments under Solvency II have been reduced to more than 50% compared to prior solvency requirements and depending on the observed scenarios. Whilst Solvency I required an underlying risk capital of 31% at the end of 2017, Solvency II requires only 13.56% following the standard model and after aggregating the risk-mitigating effects in the group scenario. This effect results in a surplus of 7.2%, considering industry-standard capital costs for the underlying solvency capital and an average stock market return of 8% per annum. Consequently the equity investment is suitable to increase the profitability of the investments of German life insurance companies especially in the environment of low interest rates in the capital market for fixed income titles.     

Die Mitgliedschaft EG-ausländischer Versicherungsunternehmen im Sicherungsfond der Lebens- und Krankenversicherung

The present regulation of the German guarantee funds for life and health insurance offers no possibility for insurance enterprises from other memberstates of the EC to become a member of these funds. Whereas an obligatory membership for EC-foreign insurance enterprises would violate the single-license-principle for financial supervision in the EC, community law requires a possibility to become a member of the German guarantee funds on a voluntary basis. The absence of the possibility of such a voluntary membership in the German insurance supervision law leads to an inadmissible restriction of the fundamental economic freedom rights of the common market. Therefore, the German legislator has to add the possibility of a voluntary membership to his national regulation of the guarantee funds to secure an undistorted competition on the common market for insurance in the EC.     

Zur Exaktheit der Standardformel

The Solvency II standard formula permits the approximate computation of the solvency capital requirement for an insurance company. The solvency capital requirement is defined as the 99,5 % quantile of the distribution of the basic own funds of the insurance company taking into account all risks of the company. The standard formula decomposes the total risk into risk units and conducts the aggregation of the solvency capital requirements for the single risk units using their correlations. The present paper provides a condition on the joint distribution of all risk units under which the risk aggregation via the standard formula is exact.     

Does a Parent–Subsidiary Structure Enhance Financing Flexibility?

I examine whether firms exploit a publicly traded parent–subsidiary structure to issue equity of the overvalued firm regardless of which firm needs funds, and whether this conveys opposite information about firm values. Using 90 subsidiary and 37 parent seasoned equity offering (SEO) announcements during 1981–2002, I document negative returns to issuers but insignificant returns to nonissuers in both samples, and insignificant changes in combined firm value and parent's nonsubsidiary equity value in subsidiary SEOs. Firms issue equity to meet their own financing needs. My evidence contrasts with previous studies and suggests that parent–subsidiary structures do not enhance financing flexibility.     

财务再保险与偿付能力最适边界和可解决域研究

偿付能力监管是现代保险监管方法的重要组成部分,更是衡量保险公司经营稳定与安全性的主要指标,如何改善偿付能力是保险业界必须讨论和研究的热点问题。再保险特别是财务再保险,由于其自身所具有的本质特性,将成为改善保险公司偿付能力的主要手段之一。本文基于再保险的角度去探索改善保险公司偿付能力的途径,从财务再保险的基本理论出发,介绍了财务再保险的定义、特征和分类,并结合保险公司偿付能力的有关知识分析了二者之间的关系。通过模型计算,得出了财务再保险与偿付能力最适边界和可解决域,这将极大的方便保险公司在购买财务再保险时的决策。     

Solvenzanforderungen in der Versicherungsaufsicht nach Solvency II und künftigem VAG

Solvency II leads to a new system of solvency requirements for insurance undertakings based on a risk-oriented approach. Risks have to be covered by own funds of the insurance undertakings. This academic legal paper analyzes and systemizes the new insurance related solvency system according to the Solvency II-directive, the proposed Level 2-Regulation and the proposed new German Insurance Supervision Act (VAG). It focuses then on the three problematic areas under the new solvency regime, i.e. complexity, volatility and procyclical effects. Finally it turns to the new roles, which the boards of directors and supervisory boards of insurance undertakings, the supervisory authorities, the courts and the academics will play in the Solvency II-process.     

企业集团现金分布、管理层激励与资本配置效率

本文以母公司为视角,基于科层代理理论和信息不对称理论,研究不同生命周期阶段母子公司现金分布变化对资本配置效率的影响及母公司管理层激励的治理效应。研究发现:在成长期,母公司 “自主型”财控模式下子公司高持现比率导致了过度投资,对母公司管理层薪酬激励和股权激励能够抑制过度投资,此时对母公司管理层激励表现为抑制子公司经理人圈地的监督机制;在成熟期,母公司 “平衡型”财控模式适度降低子公司持现比率,缓解了过度投资,对母公司管理层股权激励能够进一步抑制过度投资,但薪酬激励无效;在衰退期,母公司“家长型”财控模式下过度回笼资金带来投资不足,股权激励能够抑制投资不足,此时对母公司管理层股权激励表现为驱动子公司经理人投资的勉励机制。     

Kartellrecht und GKV

Protagonists of the social health insurance (GKV) often consider competition law as being a disturbing factor for the realisation of the solidarity principle. As a consequence, there have taken place ideological struggles over the applicability of competition rules to health insur-ance funds for years. The paper deals with the four current main battle zones, i.?e., the general applicability of EC competition law to social health insurance funds, the relevance of Sect. 69 of the Social Security Code V (SGB V) as amended, the merger control of health insurance funds and the applicability of procurement law to contracts between health insurance funds and their health care providers. The focus is on the issue whether health insurance funds could be classified as undertakings within the meaning of competition law. The paper shows that the social health insurance and the private health insurance (PKV) converge more and more due to legal intrusions. It follows that exclusions from competition law are less and less legitimate. This is especially true for the offer of comprehensive health insurance including elective rates to voluntarily insured parties.     

An elusive panacea? The impact of the regulatory valuation regime on insurers' investment behaviour

This paper develops a framework to examine how the interactions between the valuation regime and solvency requirements influence investment behaviour of long-term investors with stable liabilities, such as life insurers. The results contribute to the debate over market-based valuation regimes, and shed light on new hybrid regimes explored in policy circles. We show that solvency requirements based on fair value regime can induce procyclical asset sales, but those based on historical cost valuation encourage insurers to engage in risk-shifting to the detriment of policyholders. A hybrid valuation regime, intended to address these unfavourable outcomes, does not strictly dominate the other two regimes on its own. However, market-based regimes can be made effective, if regulators calibrate their responses to solvency breaches using supervisory information about insurers' asset quality.     

Diversification Effects in Insurance Groups — A Regulatory Angle to Efficient Solvency Requirements

The regulatory world is about to test diversification effects in QIS3, taking into account diversification between distinct business lines and legal entities of insurance groups alike. It is to be discussed whether and how these benefits can be (re)allocated between the entities constituting the group. This paper points out the approaches discussed and arguments to be considered. In particular, it takes account of the reasons for adhering to the principle of solo-entity regulation and how it may suffer from the concept of diversified solvency calculation. We intend to contrast the potential benefits of a group focus with its potential inconveniences in order to foster the discussion towards a commensurate regulation and supervision of financial groups within the framework of Solvency II.     

Analyse der Abwicklung von gesetzlichen Krankenkassen per sozialrechtlicher Schließung oder per Insolvenzverfahren

Private as well as statutory health insurers have various ways of insolvency. Although the Insolvency Act has been applied for statutory health insurance since 2010, these new options were not used up to now. Anyway, the legislators laid the preference out of closure. This article investigates how the priority of closure could be in contradiction to the applicability of the Insolvency Act. It is asked, whether the introduction of the insolvency capability of health insurance funds was rather to assimilate the frame conditions relating to pension promises than creating a real alternative. One reason could be, that the Insolvency Act is not only generally applicable in the liquidation of a health insurance fund, but potentially even the best alternative. The insolvency proceedings for example are advantageous for health insurance funds within the same group because the maximum load is split and lower than it would be by a closure by social law and in addition to that the PSV is obligatory. The results show, that the generally-accepted, not limited standard preference of closure as laid out by the legislators in § 171b (3) S. 2 SGB V, seems inexplicable. The paper draws parallels to private health insurance companies under Solvency II and opens up new perspectives for legislative measures.     

Mystery Shopping in der Gesetzlichen Krankenversicherung – Einsatz von Testkäufern zur Qualitätssicherung

Because of raising costs, modified legal regulations and a changed self-perception of many insurants, compulsory health insurance funds have to cope with an intensified competition on their market. Management instruments like Mystery Shopping, as a method for a hidden inspection of ex ante defined quality standards, enter the health care system. This study's aim is to assess the utilisability of this instrument for compulsory health insurance funds.Basing on a literature analysis and the conducted Mystery Shopping-study in cooperation with a German company health insurance fund, it is assessed, that there are already existing successful approaches of using Mystery Shopping in health insurances and further health care sector. Like in the present study, previous existing applications occur primarily in the evaluation of advisory services (primary in those by telephone). Via Mystery Shopping it is possible to identify relevant factors influencing customer's contentment as well as fund's strengths and weaknesses in an objective and detailed manner. Together with conventional customer satisfaction analyses, potential need for action can be revealed. Besides the evaluation of solely service aspects, prospective applications in the further health care system are introduced.     

On the Publicity of Two‐Stage Spin‐Offs and Equity Carve‐Outs

We investigate the effect of pre‐offer publicity on ownership, pricing, and aftermarket performance for equity carve‐outs (ECOs) and two‐stage spin‐offs (COSOs). Contrary to ECOs, for COSOs the parent firm's shareholders end up with free shares in the subsidiary. As the value of large share blocks is likely to be negatively affected by the emergence of new blocks after the divestiture, we hypothesize that parent firms undertaking COSOs may conduct more pre‐offer publicity to attract more retail investors, keeping outside ownership diffuse and inflating aftermarket performance until the distribution of the free shares. We find empirical support for our hypotheses.     

Hedge-Fonds als Asset-Klasse: Betrachtungen aus der Perspektive der deutschen Versicherungswirtschaft

The over performance of hedge funds until the current financial market turbulences led to a large number of insurers increasing their hedge funds quota. In the following this asset class is examined and particularly analyzed with respect to its adequacy for an insurance company's asset allocation by focusing on the axiom of safety, as demanded by national law. The problem of survivorship-bias and the Markowitz requirements of normal-distribution and constant correlations among the asset classes and their impact on a strategic asset allocation are studied.     

Der Einfluss von Cat Bonds-Emissionen auf das ökonomische Zielkapital von Schaden-/Unfallversicherungsunternehmen

One of the major problems in the market development of cat bonds is their impact on the economical capital requirement, while non-indemnity-triggers are used. In this article, an example portfolio is constructed which is heavily exposed to hurricane risks in Florida. A cat bond with a parametric trigger, a reinsurance without collateral and two other reference covers are used on this portfolio and their capital relief effect are calculated by means of monte carlo simulation. Amongst others, it shows that not only basis risk, but also default risk and cost disadvantage lead to the decline of a risk transfer instrument's capital relief effect. In the next step, the simulation is extended to the value based management with the capital requirement being a constraint and the maximization of the company's value being the objective function. In this context, the basis risk shows a much lower influence compared with the cost factors.     

Zum Treuhänder des Sicherungsvermögens unter dem neuen Versicherungsaufsichtsgesetz – Auswirkungen der Solvency II-Umsetzung

This paper is about the consequences of the transposition of the Solvency II Directive into the new German insurance supervisory law (VAG 2016) on the trustee for monitoring of the guarantee assets. The trustee of the guarantee assets is a national security mechanism to protect policyholders in case of insolvency of their insurance undertaking. The previous German Regulation of Investments (AnlV) is not valid any more for insurance undertakings falling under Solvency II since 01.01.2016. Instead of legal investments rules insurance undertakings are now obliged to have a (written) internal investment policy, which is also the basis for monitoring of guarantee assets by the trustee. Challenges arise because of the clash of the accounting view (German local GAAP) and the market valuation view of Solvency II. Our analysis contributes to a better understanding of the interplay between unchanged legal provisions and the new economic, risk based perspective of Solvency II.     

Die Umsetzung der europäischen Compliance-Vorgaben im österreichischen und deutschen VAG 2016

As member states of the European Union both Austria and Germany adopted the provisions of the Solvency II Directive in their national supervisory law. So this European Directive leads to a more convergent, consistent level of regulation and supervision a comparing view on the implementation of the Directive in both countries, Austria and Germany, really seems interesting. This paper compares the Austrian and German Supervisory Law in special respect to the current compliance-regulation in this countries.