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Ownership and organisational requirements
Ownership of (re)insurers
Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?
General ownership rules apply when:
- an undertaking seeks authorisation to conduct (re)insurance business; and
- a holding in a (re)insurer is acquired, disposed of or reduced in the course of the ongoing insurance business.
As regards the first bullet point, the applicant must, among other things, notify the Financial Market Authority (FMA) of the identities of any persons that have a qualifying holding in the undertaking – namely a direct or indirect holding which:
- represents 10% or more of the capital or voting rights; or
- makes it possible to exercise a significant influence over the management of the undertaking.
When making a decision regarding an application for authorisation, the FMA must consider the need to ensure the sound and prudent management of the (re)insurer. Thus, it cannot grant a licence if, among other things, it concludes that a party with a qualifying holding does not meet the requirements for said management.
Further, the acquisition of a qualifying holding in an existing (re)insurer that is registered in Austria is subject to the FMA’s prior approval. The FMA must be notified by any party that, alone or acting in concert:
- wants to acquire a qualifying holding;
- has already acquired such a holding and wants to increase it further, which would result in:
- the proportion of the voting rights or capital held reaching or exceeding 20%, 30% or 50%; or
- the (re)insurer becoming a subsidiary of that party; or
- has decided to dispose of a qualifying holding or reduce it so that:
- the proportion of the voting rights or capital held would fall below 20%, 30% or 50%; or
- the (re)insurer would cease to be a subsidiary of that party.
A (re)insurer must inform the FMA of any acquisitions or disposals of holdings in its capital that cause those holdings to exceed or fall below any of the above thresholds. The (re)insurer must also inform the FMA of the names of shareholders and members that possess qualifying holdings and the sizes of thereof.
The FMA may prohibit an acquisition if there are reasonable grounds for doing so.
What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?
Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?
In order to operate, (re)insurers must be:
- a joint stock company;
- a registered European company; or
- a mutual insurance association.
The most common structure used in Austria is the joint stock company.
This requirement does not apply to (re)insurers that:
- have their registered seat in another European Economic Area member state;
- have passported their home member state licence into Austria; and
- have adopted one of the legal forms set out in Annex III of the EU Solvency II Directive (2009/138/EC).
Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?
Corporate governance requirements (Re)insurers must have an effective governance system in place, which:
- provides for sound and prudent management of the business; and
- is proportionate to the nature, scale and complexity of the (re)insurer’s operations.
Such system must, at a minimum, include:
- an adequate and transparent organisational structure with clear allocation and appropriate segregation of responsibilities; and
- an effective system for ensuring the transmission of information within the (re)insurer.
The governance system must also ensure compliance with the requirements regarding:
- governance functions;
- risk management;
- the actuarial function;
- internal control; and
- the fit-and-proper test.
Further, (re)insurers must have written policies regarding:
- risk management;
- internal control;
- internal audit;
- remuneration; and
- outsourcing (where relevant).
In addition, (re)insurers must have specific governance functions in place regarding, at a minimum:
- risk management;
- internal auditing; and
Eligibility criteria for directors and officers (Re)insurers must ensure that the professional qualifications, knowledge and experience of all persons who effectively run the business or are responsible for governance or other key functions are, at all times:
- adequate to enable sound and prudent management (ie, fit); and
- of good repute and integrity (ie, proper).
The same applies to members of the supervisory board. The scope of these requirements depends on the person’s specific duties.
The FMA must be notified of any intended appointment of:
- board members or managing directors at least one month before the appointment; and
- any person who effectively runs the (re)insurer or is responsible for governance or any other key functions immediately after the appointment.
In case of the above appointments, the FMA must also be provided with all information needed to assess the personal and fit-and-proper requirements.
In practice, the FMA undertakes fit-and-proper tests and assessments.
Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?
Prior authorisation from the Financial Market Authority (FMA) is required for (re)insurers that have their registered seat in Austria or outside the European Economic Area. The authorisation may be granted only on application to the FMA. Along with the application, the company must provide a business plan and sufficient evidence and documentation to prove that all authorisation requirements are met.
Depending on the individual facts of the case, the FMA will usually issue an authorisation in writing within four months, provided that the original application was complete.
What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?
(Re)insurers must hold eligible basic own funds to cover the minimum capital requirements, which are:
- €2.5 million for non-life insurers, including captive insurers, unless all or some of the risks included in Classes 10 to 15 (listed in Part A of Annex A to the Insurance Supervisory Act) are covered, in which case it is no less than €3.7 million;
- €3.7 million for life insurers, including captive insurers;
- €3.6 million for reinsurers, except in the case of captive reinsurers, in which case the minimum capital requirement is €1.2 million; and
- the sum of the amounts set out in points one and two above for insurers simultaneously pursuing life and non-life insurance activities.
(Re)insurers must also hold eligible own funds covering the solvency capital requirement (SCR). The SCR is calculated either:
- in accordance with a standard formula, as set out in the Insurance Supervisory Act; or
- using a full or partial internal model, as previously approved by the FMA.
Do any other financial requirements apply?
(Re)insurers must establish technical provisions with respect to all of their (re)insurance obligations towards policyholders and beneficiaries.
Are personnel of (re)insurers subject to any professional qualification requirements?
Any personnel involved in the conclusion of insurance contracts must have relevant knowledge and ability. The term ‘conclusion’ is interpreted broadly. A regulation issued by the Federal Ministry of Science, Research and Economy sets out the relevant criteria for the assessment of the appropriate knowledge and ability.
This requirement does not apply to reinsurers.
What rules and requirements govern the business plans of (re)insurers?
(Re)insurers applying for FMA authorisation must provide, among other things, a business plan, which includes particulars or evidence of:
- the nature of the risks or commitments which the (re)insurer proposes to cover and, in the case of reinsurers, the kind of reinsurance arrangements which they propose to make with ceding undertakings;
- the guiding principles regarding reinsurance and retrocession;
- the basic own-fund items that constitute the absolute floor of the minimum capital requirement;
- an estimate of the costs of establishing the administrative services and organisation for securing business;
- the financial resources intended to meet the above costs; and
- the resources at the insurer’s disposal for the provision of the assistance promised if the risks to be covered are classified in Class 18 (in accordance with Annex A to the Insurance Supervisory Act).
For the first three financial years, the business plan must also include:
- a forecast balance sheet;
- an estimate of the future SCR on the basis of the forecast balance sheet and the calculation method used to derive those estimates;
- an estimate of the financial resources intended to cover technical provisions, the minimum capital requirement and the SCR;
- with regard to non-life insurance and reinsurance:
- an estimate of management expenses other than installation costs – in particular, existing general expenses and commissions; and
- an estimate of premiums or contributions and claims; and
- with regard to life insurance, a plan setting out detailed estimates of income and expenditure in respect of direct business and reinsurance acceptances and cessions.
If the (re)insurer applies for an authorisation for the first time, the business plan must also include its articles of incorporation.
What risk management systems and procedures must (re)insurers adopt?
(Re)insurers must have an effective risk management system in place comprising the strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report – on a continuous basis and at an individual and aggregated level – the risks to which they are and could be exposed and their interdependencies.
The risk management system must be effective and well integrated into the (re)insurer’s organisational structure and decision-making processes, with proper consideration of the individuals who effectively run the undertaking or have other key functions.
The risk management system must cover the risks to be included in the calculation of the SCR and those which are not or are only partially included in this calculation. The risk-management system must cover, at a minimum:
- underwriting and reserving;
- asset liability management;
- investment – in particular, derivatives and similar commitments;
- liquidity and concentration risk management;
- operational risk management; and
- reinsurance and other risk-mitigation techniques.
Further, (re)insurers must provide for a risk management function (see above). The key purpose of this function is to assist the board with and facilitate the implementation of the risk management system.
Reporting and disclosure
What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?
(Re)insurers must publish a solvency and financial condition report (SFCR). They must also make their annual report, including their annex and management report, publicly available at their seat and all of their other business premises. Certain information from the annual report must be published in the Official Journal of the Wiener Zeitung or another nationwide daily newspaper.
Within pre-defined periods, (re)insurers must provide the FMA with:
- an SFCR;
- a regular supervisory report;
- an own risk and solvency assessment supervisory report; and
- quantitative templates specifying in greater detail and supplementing the information presented in the SFCR and regular supervisory report.
In addition, (re)insurers must submit:
- an annual report;
- a management report, including a corporate governance report;
- an auditor's report and proof of the approval of the financial statements;
- certain parts of a group annual report; and
- an inventory of their cover funds.
(Re)insurer groups and individual (re)insurers with more than €12 billion in total assets must also submit reports for financial stability purposes.
Do any other operating requirements apply in your jurisdiction?
A (re)insurer’s operation in Austria is subject to prior authorisation, which the FMA must deny if – among other things:
- the company’s central administration is not in Austria;
- the interests of policyholders and beneficiary third parties, according to the business plan, are insufficiently guaranteed – in particular, if the obligations under the insurance contracts cannot be met in the long term;
- the company does not hold eligible basic own funds to cover the absolute minimum capital requirement;
- the company does not hold eligible own funds to cover the SCR;
- the company has failed to show that it can meet the governance requirements;
- the board does not comprise at least two persons or managing directors or the articles of association do not explicitly exclude any individual power of attorney regarding the entire business process;
- a person with a qualifying holding does not meet the requirements regarding the sound and prudent management of a (re)insurer; or
- due to certain circumstances, the FMA can expect that it will be unable to duly supervise the (re)insurer.
What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?
The FMA may impose penalties and orders to remedy a (re)insurer’s non-compliance and may ultimately revoke its authorisation.
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