Insurance companies are becoming increasingly involved in the German market as lenders for large-scale property financing in prime locations. An example of this is the financing for the acquisition of the Deutsche Bank Towers in Frankfurt provided by Allianz to a fund set up by DWS. A few weeks ago, a consortium consisting of Aareal Bank, Landesbank Hessen-Thüringen and Allianz provided a EUR 650 million financing for the CentrO in Oberhausen, Germany’s largest shopping centre. This was the first large-scale property financing deal in Germany involving both banks and insurance companies.


In the wake of the financial crisis, some players have pulled out of the German property financing market while others placed restrictions on new business. At the same time there is a need for insurance companies to invest their customers’ money. Some insurers have reduced their exposure to government bonds and in the stock market, not least because of the volatility of the capital markets. Accordingly, property financing provides an alternative investment class for insurance companies.

Special features

It is essential for insurance companies that their claims under the loan qualify for inclusion in their restricted assets in accordance with section 2 of the Investment Ordinance. In addition to comply with applicable lending limits, the loan must be secured by land charges. Furthermore, the relevant insurer must itself be the owner of the land charge. Appointing a security trustee for the land charge (including in association with use of the refinancing register) is not possible as the law currently stands if the claim under the loan is to be included in restricted assets. Further, the insurer must be capable of selling or otherwise realising its claim. In this respect care must be taken when drafting the loan agreement and the intercreditor agreement that, among other things, certain rights of termination are capable of being exercised by the financing insurance company even without the consent of the other members of the consortium and that the insurance company can at all events dispose of its land charge “in isolation”. The standard majority clause for decisions of the members of the consortium must take into account these special aspects. In addition, an insurance company cannot make a final hold commitment for regulatory reasons. Reconciling the interests of insurance companies and banks in a manner which satisfies the regulatory requirements represents a special challenge with this type of financing arrangement.


There are strong indications that insurance companies will increasingly provide finance for properties in prime locations over the coming years. In the case of large-scale transactions in particular, they can also be expected to act in a consortium with banks.