By interpretative decision dated 31 August 2016, the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) specified some aspects regarding the conduct of reinsurance business in Germany by insurance undertakings situated in a third country, i.e. non-EU/EEA-country.

BaFin's newly issued interpretative decision refers to the conduct of reinsurance business by third-country insurance undertakings only. The regulatory requirements commented on below apply to reinsurance contracts concluded on or after 1 January 2016, including renewals that require a contractual agreement between the parties.

As a general principle, third country insurers need to obtain an authorisation and establish a German branch office if they wish to carry on insurance business in Germany. The German Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG), which stipulates these requirements, provides for an exemption that applies if primary insurers or reinsurers from third countries carry out solely reinsurance business in Germany through provision of cross-border services and if the European Commission has decided in accordance with Article 172 (2) or (4) of Directive 2009/138/EC that the solvency regimes for reinsurance activities carried out by undertakings in the relevant countries are equivalent to the regime described in that Directive, which currently is the case for Switzerland, Bermuda and Japan.

Carrying on business in Germany

BaFin clarified that carrying on reinsurance business in Germany does not only include the execution of legal transactions, but also the main steps leading up to signing the contract as well as the performance of the contract. The decisive element is whether the third-country insurance undertaking deliberately targets the German market (e.g. advertisement of specific products, an internet presence targeted at the German market, employees of the third-country insurance undertaking visiting customers with the aim of concluding reinsurance contracts) in order to offer reinsurance contracts to German insurers or to initiate such business. Deliberate targeting is also the case if the third-country insurance undertaking uses intermediaries situated in Germany or abroad to contact German insurers or to provide offers to the German market. Such activities would be classified as carrying on insurance business in Germany and, thus, trigger the authorisation requirement.

Insurance by correspondence

There is, however, no authorisation requirement if reinsurance contracts are concluded by correspondence (Korrespondenzversicherung), since such activities are not deemed carrying on business in Germany. The crucial elements here are that (i) the initiative to conclude the reinsurance contract must come from the German insurer and (ii) the reinsurance contract must be concluded by way of correspondence, e.g. telephone, fax, e-mail or post. Taking into account the above clarification, for a national insurer's initiative to be given, the respective third-country insurance undertaking must not have distribution structures in Germany or have targeted the German market with e.g. advertisements. Pursuant to BaFin, insurance by correspondence also covers cases where a German insurance undertaking, on its initiative, authorises a third party, e.g. an insurance intermediary, to prepare and/or conclude a reinsurance contract.


Insurers should bear in mind that by law the supervisory authority is granted powers to order also third-country insurance undertakings to cease conducting business immediately and run-off the business without delay. Also, the operation or commencement of reinsurance business without the necessary authorisation is considered a criminal offence under German law.