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Market spotlight

Trends and prospects

What are the current trends in and future prospects for the insurance and reinsurance markets in your jurisdiction?

At present, the Austrian insurance industry is facing rapid technological changes. While the majority of insurance products are still sold either directly through (re)insurers or indirectly through intermediaries, (re)insurers are not immune to digitisation, which has been felt in various fields. Online sales are growing steadily. Further, insurers seem to be reacting to the fact that customers are now used to communicating digitally and thus want to communicate with their insurer in the same way. Surveys indicate that until 2020 79% of customers would prefer to work with their insurers online – from receiving services and information to filing claims. The development of suitable and, at the same time, secure online communication tools (eg, apps) as a complete solution to this issue is a major challenge for insurers.

The development of such up-to-date tools, which is important for the big industry players, should also keep new competitors at bay – in particular, so-called ‘insurtechs’. These competitors are mostly start-ups that have recently entered the rather conservative Austrian (re)insurance market. While these start-ups contribute ideas and drive innovation, they cannot compete with the incumbent providers' experience and know-how. However, these incumbent providers are not particularly innovative. In future, it is expected that both types of company can act together to satisfy customer demands.

Regulatory framework


What is the primary legislation governing the (re)insurance industry in your jurisdiction?

(Re)insurers are regulated by the Insurance Supervisory Act.

The primary legislation governing insurance contracts are:

  • the Insurance Contract Act;
  • the Civil Code; and
  • the Consumer Protection Act (where the policyholder is a consumer).

Further, the Remote Financial Services Act applies to online or telephone sales.

Reinsurance contracts are not subject to the Insurance Contract Act. Rather, they are exclusively governed by the rules of general contract law, as provided in the Civil Code.


Which government bodies regulate the (re)insurance industry in your jurisdiction and what is the extent of their powers?

     The Financial Market Authority (FMA) is the regulatory body for (re)insurers in Austria. Its powers and their extent, which are regulated by the Insurance Supervisory Act and depend on the type of (re)insurer, are as follows:

  • (Re)insurers having their registered seat in Austria must obtain a licence from the FMA to pursue (re)insurance business in Austria. The Insurance Supervisory Act applies to these (re)insurers in full and the FMA has full supervisory authority over them.
  • (Re)insurers having their registered seat in another European Economic Area (EEA) member state do not need an FMA licence, but can passport their home member state licence into Austria.
  • EEA (re)insurers are subject to the supervision of the regulatory body in their respective home member state. The FMA’s powers over EEA (re)insurers are limited to requiring them to provide all necessary documents required to verify compliance with Austrian provisions concerning insurance contracts and the accepted principles of proper business operation.
  • Where the FMA establishes that an EEA (re)insurer has violated said rules and thereby jeopardised the interests of policyholders or entitled beneficiaries, it may require the (re)insurer to remedy such irregularity. At the same time, the FMA must inform the home member state regulatory body of the concerned EEA (re)insurer. Where the EEA (re)insurer fails to take necessary action, the FMA will inform the home member state regulatory body accordingly and request that it take all appropriate measures to ensure that the EEA (re)insurer remedies the irregular situation.
  • Where a (re)insurer persists in violating Austrian legal provisions – despite measures taken by its home member state authority or because those measures prove to be inadequate or are lacking – the FMA may, after informing the home member state authority, take appropriate measures, including prohibiting the undertaking from operating its insurance business. The FMA may also take appropriate emergency measures to prevent or penalise irregularities where defending the interests of policyholders or entitled beneficiaries is urgently necessary. Only a few other provisions apply to EEA (re)insurers, including provisions regarding portfolio transfers, insurance mediation and information obligations and the mandatory content of insurance contracts. 
  • (Re)insurers having their registered seat outside the EEA must not conduct (re)insurance business in Austria, unless they have previously acquired a licence from the FMA and established a branch in Austria. The Insurance Supervisory Act applies to third-country (re)insurers to the extent explicitly provided for in the statutes. To this extent, the FMA has supervisory power over them.
  • Specific rules apply to (re)insurers that have their registered seat in Switzerland.

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 authorization, the FMA must consider the need to ensure the sound and prudent management of the (re)insurer. Thus, it must not 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 its 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?

See above.

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?

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;
  • 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.

Operating requirements

Authorisation procedure

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.

Financial requirements

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.

Personnel qualifications

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.

Business plan

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.

Risk management

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.

Other requirements

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.



What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?

The Insurance Contract Act contains no provisions regarding the conclusion of (re)insurance contracts. Thus, their conclusion is governed by the general principles of the Civil Code, pursuant to which a contract is entered into by way of a mutual agreement between the contract parties.  

Given that the law provides no formal requirements, (re)insurance contracts may be validly entered into orally, in writing or conclusively.

Mandatory/prohibited provisions

Are (re)insurance contracts subject to any mandatory/prohibited provisions?

Mandatory and prohibited provisions regarding insurance contracts can be found in, among other things:

  • the Insurance Contract Act;
  • the Civil Code;
  • the Consumer Protection Act; and
  • the Act on Distance Selling of Financial Services.

These provisions typically deal with, among other things:

  • the policyholder's rights to withdraw from the insurance contract;
  • the policyholder’s obligation to pay the premium;
  • the communication between the insurer and the policyholder;
  • the duration of the insurance contract’s binding effect;
  • the policyholder's obligation to mitigate damage; and
  • the maturity of the insurer's performance under the insurance contract.

Reinsurance contracts are always business to business. Thus, there are hardly any mandatory or prohibited provisions. However, a reinsurance contract must not violate good morals or any statutory prohibitions.

Implied terms

Can any terms by implied into (re)insurance contracts (eg, a duty of good faith)?

In Austria, the good-faith duty is generally implied in all contracts, including (re)insurance contracts. The Supreme Court has based the interpretation of (re)insurance contracts on this general principle.

Standard/common terms

What standard or common contractual terms are in use?

The Association of Austrian Insurance Undertakings publishes insurance terms and conditions for various insurance products online. They are not mandatory and may be deviated from.

No standard or common contractual terms are in use. All Austrian (re)insurers use terms and conditions which are incorporated into the (re)insurance contract, usually by reference. These vary substantially between not only the different kinds of insurance product, but also the different (re)insurers.

‘Smart’ contracts

What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?

In general, insurance product sales are largely agency and broker driven. The main financial technology used for the conclusion of (re)insurance contracts is the online sale of insurance products, and price comparison websites have gained popularity since entering the market.  In any case, there is still capacity for growth in this respect.

However, the first pilot projects of such ‘smart’ contracts, such as flight delay insurance, are already in place: if the aircraft arrives at the airport too late or the flight is cancelled, this information is documented by the airport and reported to the customer's smart contract. The defined claims settlement processes are set in motion without the customer having to report any damage. The compensation can thus be paid out within a few minutes of landing. A similar crop loss insurance policy has already been set up. Any risk that is reliably digitally documented in the event of a claim is conceivable for a blockchain-based insurance solution.

In addition, (re)insurers offer various smart products as side products to a (re)insurance contract, such as a storm, bad weather or hail early warning system informing customers via text message about said upcoming weather conditions. Further, the development of wearable technology is affecting the health insurance market. For example, a customer may collect bonus points for certain health protection measures that it has taken (eg, running, climbing stairs or undergoing a regular health examination), all of which is tracked over the Internet. At the end of a certain period, the customer may cash in the accumulated bonus points at selected shops or service providers.


What rules and procedures govern breach of contract (for both (re)insurer and insured)?

This depends on the contract provision that has been violated and can be answered only on a case-by-case basis. For example, if the policyholder has infringed its main contractual obligation (ie, to duly pay the premium in full), the Insurance Contract Act explicitly provides that the insurer may, under certain circumstances:

  • withdraw from the contract; or
  • terminate the contract (in case of failure to pay a subsequent premium).

Further, under said Act, the violation of obligations by the policyholder or the insured may, under certain circumstances, release the insurer from its obligations under the insurance contract if the parties have previously agreed on this legal consequence. Conversely, if the insurer denies coverage, the policyholder or the insured may challenge this decision by bringing the insurance claim to court.

Consumer protection


What consumer protection regulations are in place to safeguard the rights of purchasers of insurance products and services?

There are few regulations that specifically safeguard the rights of purchasers of insurance products and services. Rather, the general consumer protection regulations apply to insurance contracts and the provision of insurance services.

The main consumer protection regulations are the Civil Code and the Consumer Protection Act. Further, specific insurance product and service-related consumer protection rules can be found in the Insurance Contract Act and the Act on Distance Selling of Financial Services. These rules mainly concern consumers' withdrawal rights. Austrian consumer protection law is strict and the Austrian courts tend to take a strict approach to protecting consumers.

On 1 October 2018 the legislative measures implementing EU Directive 2016/97 on insurance distribution, to the extent that said directive deals with the direct sale of insurance products to customers, came into force. Among other things, these measures contain comprehensive pre-contractual information obligations as well as the insurer’s obligation to carry out a demands and needs (and in case of life insurance contracts also a suitability) test and to provide advice to the customer prior to the conclusion of the contract.



What general rules, requirements and procedures govern the filing of insurance claims?

No general rules, requirements or procedures govern the filing of insurance claims with respect to reinsurance undertakings, as they are purely contract based and do not fall within the ambit of the Insurance Contract Act.

Regarding insurance contracts, the insured must notify the insurer of an insured event immediately after becoming aware of it (ie, without undue delay). No formal requirements apply to the notification. Insurance contracts usually provide that the notification must be in ‘written’ form (eg, an email or a fax) and identify the person making the statement (no physical or electronic signature is required).

The notification must state that the insured event has occurred and include the claim for coverage.  On receipt of such notice, the insurer may request from the insured any information that it deems necessary to determine the insured event and the scope of its obligation to perform.

Time bar

What is the time bar for filing claims?

The limitation period for filing claims is three years. If a third party has a claim under an insurance contract, the limitation period starts as soon as the third party becomes aware of its right to make a claim. A long-stop limitation period of 10 years applies even if the third party has not been aware of its right to claim.

Where the insured has made a claim to its insurer, the limitation period will be stayed until the insurer has issued a decision in writing setting out, at a minimum, the facts on which the denial of the claim is based and the relevant statutory or contractual provision. In any event, a long-stop limitation of 10 years applies. In addition, the grounds for suspension and interruption of the limitation period recognised in general civil law may be relevant (eg, the limitation period will be stayed during settlement discussions).

Denial of claim

On what grounds can the (re)insurer deny coverage?

In general, a (re)insurer may validly deny coverage on the grounds that the event for which a claim is filed is not covered. Under certain circumstances, it may also argue that the policyholder has violated an obligation under the contract, which – under the contract – would lead to a release of the (re)insurer from its obligations.

With respect to insurers (and not reinsurers), the Insurance Contract Act also provides grounds on which, under certain circumstances, an insurer may deny coverage – for example, in case of:

  • default on or late payment of the premium;
  • the policyholder increasing the risk without notifying the insurer; or
  • the policyholder instigating the insured event in an intentional or grossly negligent manner or violating its obligation to mitigate the damage.

The validity of denial of coverage is always subject to a case-by-case analysis.

What rules and procedures govern the insured’s challenge of the denial of a claim?

Where the claim is denied, the policyholder must bring the denied insurance claim to court within one year after being informed, in writing, of:

  • the denial; and
  • the facts and relevant statutory or contractual provision on which it was based.

Failure to do so will release the insurer from its obligation to perform under the insurance contract.

Third-party actions

On what grounds can a third party file a claim directly with the (re)insurer?

Under the motor car liability insurance regime, the injured person may file a claim directly with the liability insurer. The liable insured and the insurer are then jointly and severally liable to pay damages in accordance with the liability insurance contract.  

In case of other (re)insurers, the applicable grounds depend on the wording of the individual (re)insurance contract.

Punitive damages

Are punitive damages insurable?

Austrian law does not recognise the concept of punitive damages or define an ‘uninsurable interest’. As a basic rule, any insurance contract providing for coverage which is deemed to be contrary to good morals or would cover administrative or penal fines is void.


What regime governs (re)insurers’ subrogation rights?

Where an insured has a damage claim against the injuring party, this claim is, by law, automatically transferred to the insurer if the insurer has covered the insured’s loss. However, if the injuring party is a family member and lives in the same household as the insured party, the claim will not be transferred unless such family member has caused the damage intentionally.

This rule does not apply to reinsurers, as the Insurance Contract Act is not applicable to them.



How are the services of insurance intermediaries regulated in your jurisdiction?

Depending on the specific relationship with the (re)insurer, insurance mediation services can be carried out through insurance agents or brokers.

(Re)insurance intermediaries must be registered with the competent municipal authority where the business is located, provided that they meet the strict professional requirements concerning competence, good repute, professional indemnity cover and financial capacity.

Once registered, detailed information requirements apply to (re)insurance intermediaries. Thus, a (re)insurance intermediary must provide customers with certain information regarding an insurance product’s distribution before the conclusion of any initial insurance contract and, if necessary, on amendment or renewal thereof.


Tax liability

What tax liabilities arise in the conduct of (re)insurance business?

Corporate income tax (Re)insurers are subject to corporate income tax. The statutory rate in Austria is 25%. Special rules apply regarding provisions and premium refunds.

Insurance premium tax Premium payments made by policyholders that are resident in Austria are generally subject to insurance premium tax at a rate of 4% or 11%. The policyholder is the tax debtor, but the (re)insurer is liable for payment of the insurance premium tax. Thus, (re)insurers must self-assess and pay the tax.

(Re)insurers are not subject to insurance premium tax.

Ancillary labour costs In case of employees, (re)insurers must pay up to 30% ancillary labour costs (whereby, in case of social security, contribution maximum assessment amounts apply).



What regime governs the insolvency of (re)insurers?

Insurance undertakings The opening of insolvency proceedings against an insurer requires that it be either illiquid or overindebted. In such case, the board, managing directors or liquidators must immediately notify the Financial Markets Authority (FMA) accordingly.

Only the FMA – and, contrary to the general rules of insolvency law, not any creditor or the insurer itself – is entitled to apply for the opening of insolvency proceedings concerning an insurer. The FMA will assess whether the above requirements are met and, if so, must apply for the opening of insolvency proceedings subject to the following rules:

  • If the avoidance of the insolvency is in the interest of the policyholders and entitled beneficiaries and compatible with their insurance contracts, the FMA must:
  • prohibit payments – in particular, insurance payments, the repurchase of life insurance and payments in advance – to the extent necessary to overcome the payment difficulties; or
  • reduce the life insurer’s obligations in accordance with the existing assets.

These measures will continue until the insurer’s financial situation allows the FMA to lift these measures. This does not affect the policyholder’s obligation to pay the premium in full. The focus of the law is on the avoidance of an insurer’s insolvency.

  • The FMA must not take these measures if it is unlikely that they will remedy the company's illiquidity or overindebtness. Rather it must initiate insolvency proceedings, in which case the insurer will be wound-up and liquidated. There are no reorganisation proceedings for insurers.

Reinsurance undertakings

A reinsurer’s representatives must immediately open insolvency proceedings regarding an illiquid or overindebted reinsurer and any creditor may apply for this. These proceedings can be conducted as either reorganisation or bankruptcy proceedings. In the latter case, the reinsurer will be wound-up and liquidated.

Effect on insureds

How does a (re)insurer’s insolvency affect insureds and the (re)insurer’s obligations to insureds?

By law, the opening of insolvency proceedings against an insurer immediately and automatically terminates all life-insurance contracts, including:

  • fund and index-linked life insurance products;
  • insurance contracts covering risks of birth and marriage; and
  • tontine insurance contracts.

Any other insurance contracts automatically end one month after the opening of the insolvency proceedings, unless they end earlier due to expiration. Insurance coverage remains effective until the insurance contract’s termination or expiration.

Policyholders must pay the proportionate premium until the termination or expiration of the insurance contract. Where the policyholder has paid the premium for the entire insurance period before the opening of the insolvency proceedings, it is entitled to a pro rata refund of the premium for the period between the termination of the insurance contract and the end of the insurance period. The policyholder’s claims under the insurance contract – including claims in case of an insured event that occurred before the opening or during the one-month period after the opening of the insolvency proceedings – are privileged insolvency claims, which means that they take priority over other insolvency claims.

However, policyholders are not entitled to enforce any such insurance claims against the insurer. This right is exclusively reserved to a curator, which will be nominated by the competent bankruptcy court. The curator must investigate and determine the insurance claims and file them in the insolvency proceedings. Policyholders may also file their claims in said proceedings.

The situation is different for reinsurers because the relevant provisions do not apply to them. In case of the insolvency of a reinsurer, the reinsurance contract remains in force. The appointed insolvency administrator may choose to uphold the contract and claim performance under the contract from the creditor (ie, the insurer being the policyholder) or withdraw from the reinsurance contract. In the latter case, the insured cannot claim repayment of the premium, but may, under certain circumstances, claim damages as the insolvency creditor.

Dispute resolution


Are there any compulsory or preferred venues for insurance litigation in your jurisdiction?

There are no preferred venues for insurance litigation in Austria. Compulsory venues are determined first on the basis of the EU Brussels Ia Regulation (1215/2012/EC), which provides for a closed set of rules regarding jurisdiction in matters relating to insurance.

Where said regulation is not applicable or provides only for the international jurisdiction of an Austrian court (and not specifically for the local jurisdiction of a specific court), the venue for the insurance litigation is determined by the Jurisdictional Norm, the Insurance Contract Act and the Insurance Reconstruction Act. The insured can sue the insurer in the responsible court:

  • where the insurer has its seat or a branch; or
  • in cases where the insurance contract was concluded through an insurance agent, where:
    • the insurance agent had a commercial presence when the contract was mediated or concluded; or
    • the insurance agent was domiciled when the contract was mediated or concluded, in cases where it had no commercial presence.

The insurer may sue the insured in the courts at the place where the insured:

  • is domiciled;
  • is a permanent resident; or
  • has its seat or commercial premises.

How are insurance disputes with a cross-border element handled in your jurisdiction?

These disputes are treated equally. However, the parties and the court may have to consider additional elements.

In particular, the responsible judge must determine whether the Austrian courts have international jurisdiction over the case. If not, the statement of claim must be rejected without any further proceedings. In the affirmative, it may turn out that the parties have agreed that a particular national law other than Austrian law will govern the insurance contract. In such case, if the choice of law clause’s validity is challenged, the responsible judge must determine whether it is valid. If yes, the judge must apply the foreign law, unless it contravenes the fundamental principles of Austrian law. If the choice of law clause is not valid, the applicable law is subject to the EU Rome I Regulation (593/2008/EC) or, where this regulation does not apply, the International Private Law Act.

What issues are commonly the subject of insurance litigation?

The most common issues in insurance litigation are claims for coverage after the (re)insurer has denied coverage or claims for payment of compensation (for damages).

What is the typical timeframe for insurance litigation?

Insurance litigation is divided into three instances (ie, first instance, Court of Appeals and the Supreme Court). There is no typical timeframe for these proceedings. In general, it may take up to one year for a decision on the merits to be rendered by the first-instance court. Each party may appeal this decision within four weeks from the date on which the decision was served to the respective party. The other party may answer the appeal in writing within another four weeks. The Court of Appeals usually decides within three to six months. This decision may, in certain circumstances, be appealed to the Supreme Court within the same periods. The Supreme Court deals only with questions of law and usually renders a final decision within six months to one year.


What regime governs the arbitrability of insurance disputes?

Provided that the arbitral tribunal’s seat is in Austria, the Civil Procedure Code applies and governs the arbitrability of a dispute. It provides that any pecuniary claim that can be brought before an Austrian court is arbitrable. Thus, insurance disputes are arbitrable under Austrian law.

However, arbitration agreements between a company (business) and a consumer can be effectively concluded only for disputes that have already arisen and must be individually negotiated in writing (ie, arbitration clauses in terms and conditions are not valid). In practice, this leads to the de facto insignificance of arbitration in business-to-consumer areas.