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:

  • General ownership rules apply when someone applies for an insurance licence from the Financial Market Authority (FMA). The applicant must, among other things, notify the FMA of the identities of any persons having a ‘qualifying holding’ in the application. A ‘qualifying holding’ means a direct or indirect holding of 10% or more of the capital or voting rights or which otherwise results in the possibility to exercise significant influence over the management of a (re)insurer. The FMA must refuse to issue a licence if persons with a qualifying holding do not meet the requirements to ensure the sound and prudent management of a (re)insurer.

    Further, general ownership rules apply when a natural or legal person (or such persons acting in concert) decide to:

  • directly or indirectly acquire a qualifying holding in a (re)insurer or further increase, directly or indirectly, such a qualifying holding in a (re)insurer as a result of which the proportion of voting rights or capital held would reach or exceed 20%, 30% or 50% or so that the (re)insurer would become its subsidiary; or
  • directly or indirectly dispose of a qualifying holding in a (re)insurer or reduce that person’s qualifying holding so that the proportion of voting rights or capital held would fall below 20%, 30% or 50% or so that the (re)insurer would cease to be a subsidiary of that person.

 

The acquisition, disposal or reduction of a holding to the extent described above must be notified to the FMA, including by the (re)insurer itself as soon as the (re)insurer becomes aware of it. The FMA may prohibit the acquisition of a holding as described 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?

The direct or indirect acquisition of a ‘qualifying holding’ in a (re)insurer or the direct or indirect increase of such a qualifying holding by a natural or legal person or such persons acting together as a result of which the proportion of the voting rights or capital held would reach or exceed 20%, 30% or 50% or so that the (re)insurer would become its subsidiary is governed by the Insurance Supervisory Act and the Regulation on Owner Control and must be notified to the FMA. A qualifying stake means a direct or indirect stake of at least 10% of the share capital or the voting rights of a (re)insurer or which results in another way to significantly influence the management of the (re)insurer. 

The FMA may oppose the proposed transaction within an assessment period of 60 working days from the written acknowledgement of receiving the notification and all documents required if there are reasonable grounds for doing so. The relevant criteria for the assessment include the reputation of the proposed acquirer, the reputation and experience of any person who will direct the (re)insurer’s business as a result of the proposed acquisition and the financial soundness of the proposed acquirer.

If the FMA does not oppose the proposed acquisition within the assessment period in writing, it is deemed to be approved.

Organisational requirements

Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?

(Re)insurers must adopt the following legal forms in order to operate: a joint stock company, a 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 are licensed and based in another EU or EEA member state, which may carry out (re)insurance business in any other legal form set out in Annex III to Article 17 of the EU Solvency II Directive (2009/138/EC) provided that they have passported their home member state licence into Austria.

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;
  • outsourcing;
  • 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;
  • compliance;
  • internal auditing; and
  • actuary.

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
  • that said persons are 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.