Austrian Insurance Supervision Act 2016 (VAG 2016)

All English translation of the authentic German text is unofficial and serves merely information purposes. The official wording in German can be found in the Austrian Federal Law Gazette (Bundesgesetzblatt; BGBl.). All translations have been prepared with great care, but linguistic compromises had to be made. The reader should also bear in mind that some provisions of these laws will remain unclear without certain background knowledge of the Austrian legal and political system. Please note that these laws may be amended in the future and check occasionally for updates. Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) Original Version: Federal Law Gazette I 34/2015 Amendments: Federal Law Gazette I unless stated otherwise: 44/2015; 68/2015; 112/2015; 159/2015; 43/2016; 118/2016; 107/2017; 149/2017; 16/2018; 17/2018; 37/2018; 51/2018; 76/2018; 112/2018; 25/2019; 46/2019; 62/2019; 38/2020; 16/2021; 36/2022; 74/2022; 129/2023; 112/2024; 5/2026; 6/2026. Date: 01 April 2026

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TABLE OF CONTENTS
Chapter 1 General provisions
Section 1 Scope of application
Article 1 Scope of application
Article 2 Exceptions in personal insurance
Article 3 Exceptions in non-life insurance
Article 4 Exceptions in reinsurance
Section 2 Definitions
Article 5 Definitions
Section 3 Licence
Article 6 General provisions
Article 7 Scope of the licence
Article 8 Licensing requirements
Article 9 Prior consultation of the supervisory authorities of other Member States
Article 9a Notifying EIOPA and the supervisory authorities of other Member States
Article 10 Business plan
Article 11 Changes in business activities
Article 12 Expiry of the licence
Section 4 Rules pertaining to third countries
Article 13 Business activities of third-country insurance and third-country reinsurance
undertakings in Austria
Article 14 Special licensing requirements
Article 15 Advantages when licences are granted for more than one Member State
Article 16 Business plan of the branch
Article 17 Requirements for taking up business activities
Article 18 Provisions pertaining to ongoing business activities
Article 19 Special provisions applying to the Swiss Confederation
Article 19a Special provisions applying to the United States of America
Section 5 Provisions for the EEA
Article 20 Freedom of establishment: branches in Austria
Article 21 Freedom of establishment: branches in Member States
Article 22 Freedom to provide services: activities in Austria
Article 23 Freedom to provide services: activities in Member States
Section 6 Shareholder control
Article 24 Shareholders
Article 25 Procedures for assessing the acquisition
Article 26 Criteria for assessing the acquisition

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Article 27 Measures in the case of unsuitable shareholders
Section 7 Transfer of portfolio
Article 28 General provisions for transfers of portfolio
Article 29 Approval by the FMA
Article 30 FMA assistance
Article 31 Legal effects of a transfer of portfolio
Article 32 Provisions for the Swiss Confederation
Section 8 Complaints
Article 33 Complaints body
Article 34 (repealed in amendment in BGBl. I 16/2018)
Chapter 2 Mutual associations
Section 1 General provisions
Article 35 Term
Article 36 Name
Article 37 Articles of association
Article 38 Disclosures
Article 39 Establishment
Article 40 Membership
Article 41 Initial fund
Article 42 Entry in the company register
Article 43 Commencement of existence
Article 44 Contributions and supplementary contributions
Article 45 Contingency reserve
Article 46 Subordinated liabilities
Article 47 Appropriation of net income
Article 48 Bodies
Article 49 Management board
Article 50 Supervisory board
Article 51 Supreme body
Article 52 Special audit
Article 53 Assertion of claims for damages
Article 54 Amendments to the articles of association
Article 55 Voidability
Article 56 Nullity
Article 57 Dissolution
Article 58 Winding-up
Article 59 Transfer of portfolio
Article 60 Merger
Article 61 Transformation into a joint stock company

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Article 62 Transfer of insurance activities to a joint stock company
Article 63 Effects of the transfer
Article 64 Rights of the supreme body
Article 65 Effects of restructuring
Article 66 Transformation of legal form into a private foundation
Article 67 Merger of private foundations
Section 2 Small mutual associations
Article 68 General provisions
Article 69 Applicability of the general provisions
Article 70 Own funds requirements
Article 71 Own funds
Article 72 Investments
Article 73 Exceeding the scope of business
Article 74 Maximum amount of liability
Article 75 Bodies
Article 76 Management board
Article 77 Supervisory board
Article 78 Supreme body
Article 79 Accounting
Article 80 Winding-up
Article 81 Merger
Chapter 3 Small insurance undertakings
Section 1 General provisions
Article 82 Applicability of the general provisions
Article 83 Licence
Article 84 Business plan
Section 2 Governance
Article 85 General provisions
Article 86 Outsourcing
Article 87 Reinsurance
Section 3 Solvency margin and investment
Article 88 Own funds requirements
Article 89 Own funds
Article 90 Investments
Chapter 4 Provisions for specific types of insurance
Section 1 General provisions
Article 91 Content of the insurance contract
Section 2 Life insurance
Article 92 General provisions for life insurance

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Article 93 Occupational pension group insurance: general provisions
Article 94 Occupational pension group insurance: information requirements
Article 95 Occupational pension group insurance: cancellation
Article 96 Occupational pension group insurance: transfer of pension expectancies
Article 97 Occupational pension group insurance: advisory committee
Article 98 Occupational pension group insurance: information requirements in the case of
transfers between an occupational pension group insurance scheme and a Pensionskasse
Section 3 Non-life
Article 99 Legal expenses insurance
Article 100 Compulsory insurance on third party motor vehicle liability
Article 101 Health insurance similar to life insurance: general provisions
Article 102 Health insurance similar to life insurance: special provisions
Article 103 Accident insurance similar to life insurance
Section 4 Finite reinsurance and special purpose vehicles
Article 104 Finite reinsurance
Article 105 Special purpose vehicles
Chapter 5 Governance
Section 1 General requirements
Article 106 Responsibility of the management board or administrative board
Article 107 Governance system requirements
Article 108 Governance function
Article 109 Outsourcing
Article 109a Reporting of infringements
Section 2 Risk management
Article 110 Risk management system
Article 111 Own risk and solvency assessment
Article 112 Risk management function
Section 3 Actuarial function and responsible actuary
Article 113 Actuarial function
Article 114 Responsible actuary
Article 115 Appointment as responsible actuary
Article 116 Duties and powers of the responsible actuary
Section 4 Internal control, compliance and internal audit function
Article 117 Internal control system
Article 118 Compliance function
Article 119 Internal audit function
Section 5 Fit and proper requirements
Article 120 General provisions

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Article 121 Proof of good repute
Article 122 Notification to the FMA
Article 123 Provisions for the supervisory board
Article 123a Provisions for insurance distribution
Section 6 Investments
Article 124 Prudent person principle
Article 125 Special provisions for unit-linked and index-linked life insurance
Article 126 Qualitative requirements for investments
Article 127 Acquisition and sale of major holdings
Section 7 Insurance distribution
Article 127a Internal guidelines and procedures
Article 127b Distribution function
Article 127c Records
Article 127d Use of mediation services
Article 127e Complaints
Chapter 6 Information requirements and conduct supervision rules for insurance
distribution
Section 1 General provisions
Article 128 General principles
Article 128a Information conditions
Article 129 Product governance
Article 130 General information requirements
Article 130a General information requirements for the Mediation of Third-Party Products
Article 131 Identification of the wishes and needs of policyholders
Article 132 Advice
Article 133 Product information
Article 134 Cross-selling
Section 2 Additional requirements for the distribution of life insurance policies
Article 135 Conflicts of interest and incentives for the distribution of insurance-based
investment products
Article 135a Advice for the distribution of insurance-based investment products
Article 135b Distribution of insurance-based investment products without advice
Article 135c Additional requirements for life insurance product information
Article 135d Additional requirements for continuing information
Section 3 Additional requirements for the distribution of health and accident insurance similar
to life insurance
Article 135e Additional requirements for product information and continuing information
Chapter 7 Accounting and consolidated accounting
Section 1 General provisions

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Article 136 Applicability of the UGB, AktG and SEG
Article 137 General rules about the annual financial statement, the management report, as well
as the corporate governance report
Article 138 Special provisions for consolidated financial statements
Article 139 Special accounting standards
Section 2 Structure and disclosure
Article 140 General principles for the structure of financial statements and consolidated
financial statements
Article 141 Special provisions for composite undertakings and other undertakings with more
than one balance sheet group
Article 142 Reinsurance with limited risk transfer
Article 143 Risk reserve
Article 144 Structure of the balance sheet and consolidated balance sheet
Article 145 Special provisions for the consolidated balance sheet
Article 146 Structure of the income statement
Article 147 Recognition of expenses and income
Section 3 Valuation
Article 148 General valuation rules
Article 149 Valuation of assets
Article 150 General rules for technical provisions
Article 151 Unearned premiums
Article 152 Life/health insurance provision
Article 153 Provision for claims outstanding
Article 154 Volatility reserve
Section 4 Notes and management report
Article 155 Notes to the (consolidated) financial statements
Article 156 Management report and consolidated management report
Chapter 8 Solvency
Section 1 Solvency balance sheet
Article 157 Valuation of assets and liabilities
Article 158 General rules for technical provisions
Article 159 Calculation of technical provisions
Article 160 Best estimate
Article 161 Risk margin
Article 162 Financial guarantees and contractual options included in insurance and reinsurance
contracts
Article 163 Recoverables from reinsurance contracts and special purpose vehicles
Article 164 Data quality and application of approximations, including case-by-case approaches,
for technical provisions

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Article 165 Comparison with empirical data
Article 166 Matching adjustment to the relevant risk-free interest rate term structure
Article 167 Volatility adjustment to the relevant risk-free interest rate term structure
Article 168 Use of the technical information produced by EIOPA
Section 2 Own funds
Article 169 General provisions
Article 170 Basic own funds
Article 171 Ancillary own funds
Article 172 Classification of own funds into tiers
Article 173 Eligibility of own-fund items
Section 3 Solvency Capital Requirements
Article 174 General provisions
Article 175 Calculation of the Solvency Capital Requirement
Article 176 Frequency of calculation
Section 4 Calculation of the Solvency Capital Requirement using the standard formula
Article 177 Structure of the standard formula
Article 178 Design of the Basic Solvency Capital Requirement
Article 179 Risk modules of the Basic Solvency Capital Requirement
Article 179a Calculation of the sub-module equity risk: symmetric adjustment mechanism
Article 180 Duration-based equity risk sub-module
Article 181 FMA measures on significant deviations from the assumptions underlying the
standard formula calculation
Section 5 Calculation of the Solvency Capital Requirement using an internal model
Article 182 General provisions for the approval of full and partial internal models
Article 183 Specific provisions for the approval of partial internal models
Article 184 Reversion to the standard formula
Article 185 Non-compliance of the internal model
Article 186 Use test
Article 187 Statistical quality standards
Article 188 Calibration standards
Article 189 Profit and loss attribution
Article 190 Validation standards
Article 191 Documentation standards
Article 192 External models and data
Section 6 Minimum Capital Requirement
Article 193 General provisions
Article 194 Special provisions for composite undertakings
Chapter 9 Group supervision
Section 1 Definitions and scope

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Article 195 Definitions
Article 196 General provisions
Article 197 Cases of application of group supervision
Article 198 Exclusion of undertakings from group supervision
Article 199 Subgroup supervision at the level of a national subgroup
Article 200 Subgroup supervision at the level of a subgroup covering several Member States
Article 201 Mixed-activity insurance holding companies
Section 2 Group solvency
Article 202 General provisions
Article 203 Frequency of calculation
Article 204 Choice of method
Article 205 Inclusion of proportional share
Article 206 Elimination of double use of eligible own funds
Article 207 Elimination of the intra-group creation of capital
Article 208 Inclusion of certain companies
Article 209 Inclusion of related third-country insurance and reinsurance undertakings
Article 210 Deduction of the book value of the participation due to non-availability of the
necessary information
Article 211 Default method: consolidation method (method 1)
Article 212 Group internal model for method 1
Article 213 Alternative method: deduction and aggregation method (method 2)
Article 214 Group internal model for method 2
Section 3 Groups with centralised risk management
Article 215 Conditions
Article 216 Decision on the application
Article 217 Determination of the Solvency Capital Requirement
Article 218 Non-compliance with the Solvency and Minimum Capital Requirements
Article 219 End of derogations for a subsidiary
Section 4 Risk concentrations and intra-group transactions
Article 220 Risk concentrations
Article 221 Intra-group transactions
Section 5 Governance at group level
Article 222 General provisions
Article 223 Internal control mechanisms at group level
Article 224 Own risk and solvency assessment at group level
Article 225 Management of insurance holding companies and mixed financial holding
companies
Section 6 Measures to facilitate group supervision
Article 226 Designation of group supervisor

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Article 227 Rights and duties of the group supervisor
Article 228 Colleges of supervisors
Article 229 Cooperation and exchange of information between supervisory authorities
Article 230 Consultation between supervisory authorities
Article 231 Rights to information of the FMA in the capacity of group supervisor
Article 232 Cooperation with authorities responsible for credit institutions and investment firms
Article 233 Professional secrecy and confidentiality
Article 234 Access to information
Article 235 Verification of information
Article 236 Enforcement measures
Section 7 Parent undertakings with head offices in third countries
Article 237 Verification of equivalence
Article 238 Equivalence
Article 239 Absence of equivalence
Article 240 Levels of supervision
Chapter 10 Information
Section 1 Public disclosure requirements for insurance and reinsurance undertakings
Article 241 Solvency and financial condition report: contents
Article 242 Solvency and financial condition report: non-disclosure of certain information
Article 243 Solvency and financial condition report: updates
Article 244 Solvency and financial condition report: written policy
Article 245 Solvency and financial condition report: group level
Article 246 Disclosure of certain information regarding accounting and consolidated accounting
Article 246a Submission of information for the purposes of the European Single Access Point
(ESAP)
Section 2 Reporting obligations of the insurance and reinsurance undertakings to the FMA
Article 247 General provisions
Article 248 Reports to the FMA
Article 249 Lists and statements of assets dedicated to the Deckungsstock
Article 250 Statistical information on cross-border activities
Article 251 Limitation to regular supervisory reporting
Article 252 ESAP collection body for information pursuant to the Disclosure Regulation
Article 253 ESAP collection body for information submitted on a voluntary basis
Section 3 (repealed in amendment in BGBl. I 16/2018)
Section 4 Disclosure requirements of the FMA
Article 256 Transparency and accountability
Article 256a Publication of sanctions and measures
Section 5 Communication requirements of the FMA
Article 257 Communications to the European Commission and EIOPA

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Article 258 Communications to EIOPA
Article 259 Communications to the Association of Insurance Undertakings
Section 6 Statutory auditor
Article 260 Election of the statutory auditor
Article 261 Commissioning of auditors
Article 262 Temporary prohibition on taking up certain activities
Article 263 Auditing duties of the statutory auditor
Article 264 Reporting obligations of the statutory auditor
Article 265 Notification obligation of the statutory auditor
Article 266 Liability for damages of the statutory auditor
Article 266a Applicability of the provisions to independent providers of auditing services
Chapter 11 Supervisory authority and procedures
Section 1 General provisions
Article 267 Objectives of supervision
Article 268 Principles of supervision
Article 268a Market monitoring
Article 268b Authorisation for processing of personal data
Article 269 Form of communication with the FMA – electronic submission
Article 270 Participation of the Federal Computing Centre
Article 271 Costs of insurance supervision
Section 2 Supervision
Article 272 Information, notification and presentation obligations
Article 273 Supervisory review process
Article 273a Reporting of breaches to the FMA
Article 274 On-site inspection
Article 275 Orders by the FMA
Article 276 Convening the annual general meeting or the supervisory board
Article 277 Capital add-on
Article 278 Measures in the event of deteriorating financial conditions: solvency plan
Article 279 Measures in the event of non-compliance with the Solvency Capital Requirement:
recovery plan
Article 280 Measures in the event of non-compliance with the Minimum Capital Requirement:
finance scheme
Article 281 Common provisions relating to the solvency and recovery plan, and the finance
scheme
Article 282 FMA measures relating to technical provisions
Article 283 Prohibition of free disposal of assets
Article 284 Measures in the event of a threat to the interests of the policyholders and
beneficiaries

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Article 285 Revocation of licence
Article 286 Measures following the revocation, expiry or relinquishment of a licence
Article 287 Protection of designations
Article 288 Announcement in the event of unauthorised business
Article 289 Supervision under the freedom of establishment and freedom to provide services
Article 290 On-site inspection under the freedom of establishment
Article 291 Supervision of business activities in third countries
Article 292 (repealed in amendment in BGBl. I 16/2021)
Article 293 International sanctions
Section 3 International cooperation
Article 294 Cooperation within the EEA
Article 294a Cooperation in the supervision of insurance and reinsurance distribution activities
Article 295 Cooperation in the event of restriction or prohibition of disposal of assets
Article 296 Cooperation under the freedom to provide services and freedom of establishment
Article 296a Notifying EIOPA and the supervisory authorities of other Member States
Article 296b Collaboration platforms
Article 297 Cooperation in the event of dissolution of insurance undertakings or recovery
measures within the EEA
Article 298 Cooperation with third-country authorities
Article 299 Cooperation with the supervisory authority of the Swiss Confederation
Chapter 12 Deckungsstock, dissolution of an insurance or reinsurance undertaking,
execution and insolvency rules applicable to insurance undertakings
Section 1 Deckungsstock
Article 300 Establishment of the Deckungsstock
Article 301 Cover requirement
Article 302 Dedication of assets
Article 303 Claims following the discontinuance of business activities
Section 2 Trustees
Article 304 Appointment and powers
Article 305 Responsibilities
Section 3 Dissolution of an insurance or reinsurance undertaking
Article 306 Dissolution of an insurance or reinsurance undertaking
Section 4 Execution and insolvency rules applicable to insurance undertakings
Article 307 Execution of Deckungsstock assets
Article 308 Insurance claims
Article 309 Institution of bankruptcy proceedings
Article 310 Trustee in bankruptcy
Article 311 Expiry of insurance relationships
Article 312 Deckungsstock in bankruptcy proceedings

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Article 313 Filing
Article 314 Priorities
Article 315 Mutual associations
Article 316 Prohibition and reduction of benefits
Chapter 13 Penal provisions
Article 317 Breach of notification, reporting and presentation obligations
Article 318 Breach of obligation to disclose the solvency and financial condition report
Article 319 Breach of information requirements
Article 320 Life/health insurance provision; Deckungsstock
Article 321 Disclosure of secrets
Article 322 Insurance and reinsurance distribution
Article 323 Penal provisions with regard to legal persons
Article 323a Effective punishment of breaches
Article 324 Small mutual associations
Article 325 Group supervision
Article 326 Breach of orders
Article 327 Freedom to provide services and freedom of establishment
Article 328 Other breaches of duty
Article 329 Unauthorised business
Article 330 Violation of the protection of designations
Article 331 Statute of limitation
Article 332 Insolvency
Chapter 14 Transitional and final provisions
Section 1 Transitional provisions
Article 333 General transitional provisions
Article 334 Phasing-in of Solvency II
Article 335 Transitional measures to facilitate the introduction of Solvency II
Article 336 Transitional measure on the risk-free interest rates
Article 337 Transitional measure on technical provisions
Article 338 Phasing-in plan on the transitional measures on risk-free interest rates and on
technical provisions
Article 338a Transitional provision regarding the United Kingdom of Great Britain and Northern
Ireland’s withdrawal from the European Union
Section 2 Final provisions
Article 339 Entry into force
Article 340 Entry into force of amendments based on government bills by the Federal Minister
of Finance
Article 341 Entry into force of other provisions
Article 341a Transposition note

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Article 342 References
Article 343 Gender-neutral use of language
Article 344 Revision of amounts expressed in euro
Article 345 Expiry
Article 346 Enforcement clause
Annex A
Annex B
CHAPTER 1: GENERAL PROVISIONS
SECTION 1: SCOPE OF APPLICATION
Scope of application
Article 1. (1) The following undertakings shall be subject to supervision in accordance with the
provisions of this federal act:

1. insurance undertakings (Article 5 no. 1) and reinsurance undertakings (Article 5 no. 2), with
   head offices in Austria;
2. small insurance undertakings (Article 5 no. 3) pursuant to the provisions of Chapter 3;
3. small associations (Article 5 no. 4) pursuant to the provisions of Section 2 of Chapter 2;
4. third-country insurance undertakings (Article 5 no. 5) and third-country reinsurance
   undertakings (Article 5 no. 6) pursuant to the provisions of Section 4;
5. EEA insurance undertakings (Article 5 no. 7) and EEA reinsurance undertakings (Article 5 no. 8)
   pursuant to the provisions of Section 5;
6. insurance holding companies (Article 195 para. 1 no. 6) and mixed financial holding
   companies (Article 195 para. 1 no. 8), each with head offices in Austria, pursuant to the provisions of Chapter 9;
7. insurance associations whose object is limited to asset management (Article 63 para. 3)
   pursuant to Articles 63 to 65;
8. private foundations (Article 66 para. 1) pursuant to Articles 66 and 67; and
9. special purpose vehicles (Article 5 no. 33) with head offices in Austria, pursuant to Article 105
   and the implementing regulation (EU).
   Sections 1 and 2, Sections 1 and 3 of Chapter 11, Chapters 13 and 14 as well as Articles 288, 292 and 293 shall apply to the undertakings listed in nos. 2 to 9 in addition to the provisions listed under those numbers. The remaining provisions of this federal act shall only be applied to those undertakings if this is explicitly stipulated. (2) Where this federal act includes special provisions for branches of third-country insurance undertakings with head offices in the Swiss Confederation and for branches in the Swiss Confederation of insurance undertakings with head offices in Austria, they shall apply to the pursuit

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 15 / 292 of all insurance classes with the exception of life insurance as referred to in nos. 19 to 22 of Annex A pursuant to Council Decision 91/370/EEC on the conclusion of the Agreement between the European Economic Community and the Swiss Confederation concerning direct insurance other than life assurance, OJ L 205, 27.7.1991, p. 2. Those provisions shall no longer be applied if the 91/370/EEC Agreement is rendered invalid pursuant to its Article 39(8). (3) EEA insurance undertakings that only participate in insurance contracts concluded in Austria by way of co-insurance at Union level shall only be subject to Article 17 para. 4, Article 30 paras. 1, 2 and 4 and Article 31. Article 23 shall not apply to insurance undertakings that participate in insurance contracts concluded within the EEA by way of co-insurance at Union level. Insurance undertakings shall keep statistical data showing the extent of these co-insurance operations in which they participate and the Member States concerned. (4) The Austrian Financial Market Authority (FMA) shall determine whether an undertaking is subject to the provisions of this federal act. Exceptions in personal insurance
Article 2. (1) Pensionskassen (pension companies) pursuant to the Pensionskassen Act
(PKG; Pensionskassengesetz) shall not be subject to the provisions of this federal act. (2) The pursuit of activities in insurance classes belonging to personal insurance by corporations under public law whose policyholders are only their members shall not be subject to the provisions of this federal act. This shall not apply where such insurance activities are primarily pursued in the field of reinsurance. (3) Undertakings which only engage in funeral costs insurance shall only be subject to the provisions of Chapter 3 where the amount of their benefits does not exceed the average funeral costs for a single death or where the benefits are provided in kind. Exceptions in non-life insurance
Article 3. (1) Assistance activity which fulfils the following conditions shall not be considered
contractual insurance activity:

1. the assistance is provided in the event of an accident or breakdown involving a road vehicle
   when the accident or breakdown occurs in the territory of the Member State of the undertaking providing cover;
2. the liability for the assistance is limited to the following operations:
   a. an on-the-spot breakdown service for which the undertaking providing cover uses, in most circumstances, its own staff and equipment, b. the conveyance of the vehicle to the nearest or the most appropriate location at which repairs may be carried out and the possible accompaniment, normally by the same means of assistance, of the driver and passengers to the nearest location from where they may continue their journey by other means, and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 16 / 292
c. the conveyance of the vehicle concerned, possibly accompanied by the driver and
passengers, to their home, point of departure or original destination within the same Member State; and
3. the assistance is not carried out by an undertaking subject to this federal act.
(2) In the cases referred to in para. 1 no. 2 lit. a and b, the condition that the accident or breakdown must have happened in the territory of the Member State of the undertaking providing cover shall not apply where the beneficiary is a member of the body providing cover and the breakdown service or conveyance of the vehicle is provided simply on presentation of a membership card, without any additional premium being paid, by a similar body in the country concerned on the basis of a reciprocal agreement. Exceptions in reinsurance
Article 4. This federal act shall not apply to the activity of reinsurance conducted or fully guaranteed
by the Republic of Austria when it is acting, for reasons of substantial public interest, in the capacity of reinsurer of last resort, including in circumstances where such a role is required by a situation in the market in which it is not possible to obtain adequate commercial cover.
SECTION 2: DEFINITIONS
Definitions
Article 5. For the purposes of this federal act, the following definitions shall apply:

1. Insurance undertaking: an undertaking that pursues contractual insurance activities and has
   received a licence pursuant to Article 6 para. 1 or an authorisation in accordance with
   Article 14 of Directive 2009/138/EC.
2. Reinsurance undertaking: an undertaking that exclusively pursues reinsurance activities
   within the scope of contractual insurance and has received a licence pursuant to Article 6 para. 1 or an authorisation in accordance with Article 14 of Directive 2009/138/EC to pursue reinsurance activities.
3. Small insurance undertaking: an undertaking with its head office in Austria that pursues
   contractual insurance activities and has received a licence pursuant to Article 83 para. 1.
4. Small mutual association: a mutual insurance association with its head office in Austria which
   fulfils the conditions pursuant to Article 68 para. 1 or para. 1a, which pursues contractual insurance activities, and which has been granted a licence pursuant to Article 68 para. 3.
5. Third-country insurance undertaking: an undertaking whose head office is not situated in a
   Member State, which pursues contractual insurance activities and which would require a licence as an insurance undertaking if its head office were situated in Austria.
6. Third-country reinsurance undertaking: an undertaking whose head office is not situated in a
   Member State, which exclusively pursues reinsurance activities within the scope of

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 17 / 292 contractual insurance and which would require a licence as a reinsurance undertaking if its head office were situated in Austria.
7. EEA insurance undertaking: an insurance undertaking whose head office is not situated in
Austria but in another Member State.
8. EEA reinsurance undertaking: a reinsurance undertaking whose head office is not situated in
Austria but in another Member State.
9. Reinsurance: means one of the following activities:
a. accepting risks ceded by an insurance undertaking or third-country insurance undertaking, or by another reinsurance undertaking or third-country reinsurance undertaking; or b. in the case of the association of underwriters known as Lloyd’s, accepting risks ceded by any member of Lloyd’s, by an insurance or reinsurance undertaking other than the association of underwriters known as Lloyd’s; or
c. the provision of insurance coverage by a reinsurance undertaking for an entity that
falls within the scope of application of Directive (EU) 2016/2341
10. Composite undertaking: an undertaking with its head office in Austria that has received a
licence to pursue life insurance activities and at least one other insurance class, with the exception of reinsurance.
11. Member State: a Member State of the European Union or another signatory country to the
Agreement on the European Economic Area, Federal Law Gazette no. 909/1993 as amended by the amendment record in Federal Law Gazette no. 910/1993 (EEA).
12. Third country: a country that is not a Member State.
13. Freedom to provide services: the conclusion of insurance contracts by an insurance or
reinsurance undertaking for risks situated in another Member State unless the contract is concluded by a branch established in that Member State.
14. Home Member State:
a. for non-life insurance, the Member State in which the head office of the insurance undertaking covering the risk is situated; b. for life insurance, the Member State in which the head office of the insurance undertaking covering the commitment is situated; or
c. for reinsurance, the Member State in which the head office of the reinsurance
undertaking is situated.
15. Host Member State: the Member State, other than the home Member State, in which an
insurance or a reinsurance undertaking has a branch or provides services; for life insurance and non-life insurance, the Member State of the provision of services means the Member State of the commitment or the Member State in which the risk is situated, where that commitment or risk is covered by an insurance undertaking or a branch situated in another Member State.
16. Supervisory authority: the national authority or the national authorities of Member States
empowered by law or regulation to supervise insurance or reinsurance undertakings.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 18 / 292
17. Branch of an insurance or reinsurance undertaking: an agency or a branch of an insurance or
reinsurance undertaking in a Member State in which the insurance or reinsurance undertaking does not have its head office. Any permanent presence of an undertaking in the territory of a Member State shall be treated in the same way as a branch, even where that presence does not take the form of a branch, but consists merely of an office managed by the own staff of the undertaking or by a person who is independent but has permanent authority to act for the undertaking as an agency would.
18. Branch of a third-country insurance or third-country reinsurance undertaking: any permanent
presence of a third-country insurance or third-country reinsurance undertaking in the territory of a Member State that has received a licence in that Member State and pursues insurance business.
19. Establishment of an undertaking: its head office or any of its branches.
20. Member State in which the risk is situated means any of the following Member States:
a. with regard to non-life insurance:
aa) the Member State in which the property is situated, where the insurance of risks relates to immovable property and non-permanent buildings, as well as any movable property at the same site and insured by the same contract, bb) the Member State in which the vehicle is registered, where the insurance of risks relates to vehicles of any type; irrespective of this, the risk is deemed to be situated in the country of destination in the case of vehicles that are imported from one Member State to another, in accordance with the choice of the person responsible for the liability insurance may be either the Member State of registration or the Member State of destination for a period of 30 days or less from the time of the vehicle’s delivery, supply or shipment to the buyer, even if the vehicle was not officially registered in the Member State of destination; cc) the Member State where the policyholder performed the legal acts required to conclude the contract in the case of policies of a duration of four months or less covering travel or holiday risks; b. in all other cases of non-life insurance and life insurance not explicitly covered by lit. a, the Member State in which either of the following is situated:
aa) if the policyholder is a natural person, that policyholder’s habitual residence, bb) if the policyholder is a legal person, that policyholder’s establishment to which the contract relates.
21. Parent undertaking: a parent undertaking within the meaning of Article 22(1) and (2) of
Directive 2013/34/EU.
22. Subsidiary undertaking: any subsidiary undertaking within the meaning of Article 22(1) and
(2) of Directive 2013/34/EU, including subsidiaries thereof.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 19 / 292
23. Close ties: a situation in which two or more natural or legal persons are linked by control or
participation, or a situation in which two or more natural or legal persons are permanently linked to one and the same person by a control relationship.
24. Control: the relationship between a parent undertaking and a subsidiary undertaking, as set
out in Article 22(1) and (2) of Directive 2013/34/EU, or a similar relationship between any natural or legal person and an undertaking.
25. Intra-group transaction: any transaction by which an insurance or reinsurance undertaking
relies, either directly or indirectly, on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment.
26. Participation: the ownership, direct or by way of control, of 20% or more of the voting rights
or capital of an undertaking.
27. Qualifying holding: a direct or indirect holding in an undertaking which represents 10% or
more of the voting rights or of the capital or another possibility of exercising a significant influence over the management of that undertaking.
28. Financial undertaking: means any of the following entities:
a. credit institutions, ancillary banking services undertakings or financial institutions within the meaning of Article 3(1), (17) and (22) of Directive 2013/36/EU; b. an insurance undertaking, a reinsurance undertaking or an insurance holding company within the meaning of Article 195 para. 1 no. 6;
c. an investment firm or a financial institution within the meaning of Article 4(1)(1) of
Directive 2014/65/EU; or d. a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC.
29. Captive insurance undertaking: an insurance undertaking, owned either by a financial
undertaking other than an insurance or reinsurance undertaking or a group of insurance or reinsurance undertakings within the meaning of Article 195 para. 1 no. 3 or by a non-financial undertaking, the purpose of which is to provide insurance cover exclusively for the risks of the undertaking or undertakings to which it belongs or of an undertaking or undertakings of the group of which it is a member.
30. Captive reinsurance undertaking: a reinsurance undertaking, owned either by a financial
undertaking other than an insurance or reinsurance undertaking or a group of insurance or reinsurance undertakings within the meaning of Article 195 para. 1 no. 3 or by a non-financial undertaking, the purpose of which is to provide reinsurance cover exclusively for the risks of the undertaking or undertakings to which it belongs or of an undertaking or undertakings of the group of which it is a member.
31. UCITS: an undertaking for collective investment in transferable securities within the meaning
of Article 2 para. 1 of the 2011 Investment Fund Act (InvFG 2011; Investmentfondsgesetz).

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 20 / 292
32. Finite reinsurance: reinsurance under which the maximum economic risk transferred, arising
both from a significant underwriting risk and timing risk transfer, exceeds the premium over the lifetime of the contract by a limited but significant amount, together with at least one of the following features:
a. explicit and material consideration of the time value of money; or b. contractual provisions to moderate the balance of economic experience between the parties over time to achieve the target risk transfer.
33. Special purpose vehicle: any undertaking, whether incorporated or not, other than an existing
insurance or reinsurance undertaking, which assumes risks from insurance or reinsurance undertakings and which fully funds its exposure to such risks through the proceeds of a debt issuance or any other financing mechanism where the repayment rights of the providers of such debt or financing mechanism are subordinated to the reinsurance obligations of such an undertaking.
34. Large risks:
a. transport and transport liability risks pursuant to nos. 4 to 7, 11 and 12 of Annex A; b. credit and suretyship risks pursuant to nos. 14 and 15 of Annex A, where the policyholder is engaged professionally in an industrial or commercial activity or in one of the liberal professions and the risks relate to such activity;
c. risks pursuant to nos. 3, 8, 9, 10, 13 and 16 of Annex A, in so far as the policyholder
exceeds the limits of at least two of the following criteria:
aa) a balance sheet total of EUR 6.6 million, bb) a net turnover of EUR 13.6 million, cc) an average number of 250 employees during the financial year. If the policyholder belongs to a group of undertakings for which consolidated financial statements within the meaning of Directive 2013/34/EU are drawn up, the criteria set out in lit. c shall be applied to the consolidated financial statements.
35. Assistance: benefits provided for persons who get into difficulties while travelling, while away
from their home or their permanent residence and that consist of entering into an obligation, against prior payment of a premium, to make aid immediately available to the beneficiary under an assistance contract where that person is in difficulties following the occurrence of a chance event, in the cases and under the conditions set out in the contract. The aid may comprise the provision of benefits in cash or in kind. The provision of benefits in kind may also be effected by means of the staff and equipment of the person providing them. The assistance activity shall not cover servicing, maintenance, after-sales service or the mere indication or provision of aid as an intermediary.
36. Outsourcing: an arrangement of any form between an insurance or reinsurance undertaking
and a service provider, whether a supervised entity or not, by which that service provider performs a process, a service or an activity, whether directly or by sub-outsourcing, which would otherwise be performed by the insurance or reinsurance undertaking itself.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 21 / 292
37. Function: within a system of governance, an internal capacity to undertake practical tasks; a
system of governance includes the risk management function, the compliance function, the internal audit function and the actuarial function.
38. Underwriting risk: the risk of loss or of adverse change in the value of insurance liabilities, due
to inadequate pricing and provisioning assumptions.
39. Market risk: the risk of loss or of adverse changes in the financial situation resulting, directly
or indirectly, from fluctuations in the level and in the volatility of market prices of assets, liabilities and financial instruments.
40. Credit risk: the risk of loss or of adverse changes in the financial situation, resulting from
fluctuations in the credit standing of issuers of securities, counterparties and any debtors to which insurance and reinsurance undertakings are exposed, in the form of counterparty default risk, spread risk or market risk concentrations.
41. Operational risk: the risk of loss arising from inadequate or failed internal processes,
personnel or systems, or from external events.
42. Liquidity risk: the risk that insurance and reinsurance undertakings are unable to realise
investments and other assets in order to settle their financial obligations when they fall due.
43. Concentration risk: all risk exposures with a loss potential which is large enough to threaten
the solvency or the financial position of insurance or reinsurance undertakings.
44. Risk mitigation techniques: all techniques which enable insurance and reinsurance
undertakings to transfer part or all of their risks to another party.
45. Diversification effects: the reduction in the risk exposure of insurance and reinsurance
undertakings and groups through the diversification of their business, resulting from the fact that the adverse outcome from one risk can be offset by a more favourable outcome from another risk, where those risks are not fully correlated.
46. Probability distribution forecast: a mathematical function that assigns a probability of
realisation to an exhaustive set of mutually exclusive future events.
47. Risk measure: a mathematical function that assigns a monetary amount to a given probability
distribution forecast and increases monotonically with the level of risk exposure underlying that probability distribution forecast.
48. Co-insurance at Union level: co-insurance operations which relate to one or more risks
classified under nos. 3 to 6 of Annex A and which fulfil the following conditions:
a. the risk is a large risk; b. the risk is covered by a single contract at an overall premium and for the same period by two or more insurance undertakings, each for its own part as co-insurer, one of them being the leading insurance undertaking and without them being jointly and severally liable;
c. the risk is situated within the EEA;
d. for the purpose of covering the risk, the leading insurance undertaking is treated as if it were the insurance undertaking covering the whole risk;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 22 / 292 e. at least one of the co-insurers participates in the contract through a head office or a branch established in a Member State other than that of the leading insurance undertaking; f. the leading insurance undertaking fully assumes the leader’s role in co-insurance practice and in particular determines the terms and conditions of insurance and rating.
49. Qualifying central counterparty: a central counterparty that has been either authorised in
accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with
Article 25 of that Regulation.
50. External credit assessment institution or ECAI: a credit rating agency that is registered or
certified in accordance with Regulation (EC) No 1060/2009 or a central bank issuing credit ratings which are exempt from the application of that Regulation.
51. EIOPA: the European Insurance and Occupational Pensions Authority as defined in Regulation
(EU) No 1094/2010.
52. EBA: the European Banking Authority as defined in Regulation (EU) No 1093/2010.
53. ESMA: the European Securities and Markets Authority as defined in Regulation (EU) No
1095/2010.
54. Implementing regulation (EU): Commission Delegated Regulation (EU) 2015/35.
55. ESRB: the European Systemic Risk Board as defined in Regulation (EU) No 1092/2010.
56. Technical standards (EU): regulatory technical standards as defined in Articles 10 to 14 of
Regulation (EU) No 1094/2010 and implementing technical standards as defined in Article 15 of Regulation (EU) No 1094/2010.
57. Guidelines (EIOPA): guidelines as defined in Article 16 of Regulation (EU) No 1094/2010.
58. Recommendations (EIOPA): recommendations as defined in Article 16 of Regulation (EU) No
1094/2010.
59. Insurance distribution: the activities of advising on, proposing, or carrying out other work
preparatory to the conclusion of contracts of insurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim, including the provision of information concerning one or more insurance contracts in accordance with criteria selected by customers through a website or other media and the compilation of an insurance product ranking list, including price and product comparison, or a discount on the price of an insurance contract, when the customer is able to directly or indirectly conclude an insurance contract using a website or other media.
60. reinsurance distribution: the activities of advising on, proposing, or carrying out other work
preparatory to the conclusion of contracts of reinsurance, of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim, including when carried out by a reinsurance undertaking without the intervention of a reinsurance intermediary.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 23 / 292
61. remuneration for distribution: any commission, fee, charge or other payment, including an
economic benefit of any kind or any other financial or non-financial advantage or incentive offered or given in respect of insurance distribution activities.
62. advice: the provision of a personal recommendation to a policyholder, either upon their
request or at the initiative of the insurance undertaking pursuant to Article 1 para. 1 nos. 1 to 5, in respect of one or more insurance contracts.
63. insurance-based investment product: an insurance product which offers a maturity or
surrender value and where that maturity or surrender value is wholly or partially exposed, directly or indirectly, to market fluctuations, and does not include:
a. non-life insurance products as listed in Annex I to Directive 2009/138/EC (classes of non-life insurance); b. life insurance contracts where the benefits under the contract are payable only on death or in respect of incapacity due to injury, sickness or disability;
c. pension products which are recognised in a Federal Act that refers to this provision as
having the primary purpose of providing the investor with an income in retirement, and which entitle the investor to certain benefits; d. officially recognised occupational pension schemes falling under the scope of Directive (EU) 2016/2341 or Directive 2009/138/EC; and e. individual pension products for which a financial contribution from the employer is required by national law and where the employer or the employee has no choice as to the pension product or provider.
64. durable medium: any instrument that:
a. enables a policyholder to store information addressed personally to that policyholder in a way accessible for future reference and for a period of time adequate for the purposes of the information; and b. allows the unchanged reproduction of the information stored.
65. insurance distributor: any insurance intermediary, ancillary insurance intermediary pursuant
to Article 2 (1) (4) of Directive (EU) 2016/97 or insurance undertaking.
66. ESAP: the European Single Access Point established pursuant to Regulation (EU) 2023/2859;
67. ESAP collection body: a collection body as defined in Article 2 point 2 of
Regulation (EU) 2023/2859.
SECTION 3: LICENCE
General provisions
Article 6. (1) The pursuit of contractual insurance activities in Austria requires a licence granted by
the FMA, unless explicitly stated otherwise.
(2) Prior to granting a licence to an undertaking, the FMA must notify the Federal Minister of Finance.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 24 / 292 (3) Apart from contractual insurance, insurance or reinsurance undertakings may only pursue such activities as are directly related to contractual insurance. This may specifically include the mediation of insurance and reinsurance contracts of other undertakings pursuant to Article 1 para. 1 nos. 1 to 5, of home-purchase savings plans, leasing agreements, UCITS and the provision of services in the field of automated data processing as well as the distribution of credit cards. Where reinsurance undertakings hold and manage participations in a subordinate undertaking of the financial sector as referred to in Article 2(8) of Directive 2002/87/EC, such activity may be directly related to contractual insurance activities. (4) (Repealed in amendment published in Federal Law Gazette I 112/2018) Scope of the licence
Article 7. (1) The licence of an insurance or reinsurance undertaking shall be valid for the territory
of all Member States.
(2) The licence granted to insurance or reinsurance undertakings which are subsidiaries of undertakings with head offices in a third country shall, by way of derogation from para. 1, only apply to the territory of the European Union’s Member States as long as a declaration has been made to the effect that the parent undertaking’s country of establishment has limited the number of branches of insurance undertakings with head offices in a signatory country of the Agreement on the European Economic Area which is not a Member State of the European Union, or that restrictions have been imposed on those insurance undertakings which it does not apply to insurance undertakings with head offices in a Member State of the European Union. (3) The licence for the insurance classes of life insurance and the licence for other insurance classes, except for accident insurance, health insurance and reinsurance, are mutually exclusive. The licence for reinsurance may be granted for non-life reinsurance activity, life reinsurance activity or all types of reinsurance activity. (4) The licence shall be granted for a particular class of insurance. The licence granted to insurance and reinsurance undertakings shall cover the entire insurance class, unless the insurance or reinsurance undertaking applied for a licence covering only some of the risks pertaining to that insurance class. In the aforementioned case, an additional licence would be required in order to cover additional risks within the insurance class. The classification of the insurance classes is given in Annex A. (5) An insurance undertaking which holds one or several licences for the insurance classes listed in nos. 1 to 18 of Annex A may also insure ancillary risks that are not covered by the licence, provided that the risks fulfil all the following conditions:

1. the risk is connected with a risk within the scope of a licence (principal risk), it concerns the
   same object as the principal risk and is covered by the same contract.
2. the risk is of subordinate significance compared to the principal risk.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 25 / 292
3. it is not a risk that is covered by nos. 14, 15 and 17 of Annex A. By way of derogation from the
aforementioned, a risk as set out in no. 17 of Annex A may be regarded as a risk ancillary to no. 18 of Annex A if the principal risk:
a. relates solely to the assistance provided for persons who fall into difficulties while travelling, while away from their home or their habitual residence; or b. concerns disputes or claims arising out of, or in connection with, the use of sea-going vessels. Licensing requirements
Article 8. (1) Insurance or reinsurance undertakings shall only be operated with the legal form of a
joint stock company (Aktiengesellschaft), a European Company (SE) or a mutual association. (2) The licence shall be refused where:

1. the head offices are not situated in Austria;
2. based on the business plan, the interests of the policyholders and beneficiaries are not
   sufficiently safeguarded, specifically where ongoing compliance with the obligations under the insurance contracts cannot be expected;
3. the undertaking does not hold eligible basic own funds to cover the absolute floor of the
   Minimum Capital Requirement referred to in Article 193 para. 2 nos. 1, 2 or 3;
4. the undertaking cannot show evidence that it will be in a position to hold eligible own funds
   to consistently cover the Solvency Capital Requirement, as provided for in Article 174;
5. the undertaking cannot show evidence that it will be in a position to hold eligible basic own
   funds to consistently cover the Minimum Capital Requirement, as provided for in Article 193 para. 1;
6. the undertaking cannot show evidence that it will be in a position to comply with the
   provisions of Chapter 5 on the system of governance;
7. the management board does not consist of at least two persons, or not at least two executive
   directors have been appointed, or the articles of association do not rule out any power of sole representation, general managing power of attorney or commercial power of attorney for a single person which covers the entirety of business activities.
8. persons with qualifying holdings in the undertaking do not possess the qualifications required
   to ensure the sound and prudent management of the insurance undertaking or the reinsurance undertaking;
9. it must be expected that:
   a. close links between the undertaking and other natural or legal persons, or b. difficulties involved in the enforcement of the laws, regulations or administrative provisions of a third country governing a natural or legal person with which the undertaking has close links shall prevent the FMA from effectively exercising its supervisory obligation;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 26 / 292
10. due to the lacking transparency of the group structure, the interests of the policyholders and
beneficiaries are impaired or the FMA is prevented from effectively exercising its supervisory obligation; or
11. the undertaking does not communicate the name and address of all claims representatives
appointed pursuant to Article 100 para. 1 upon applying for a licence to pursue third party motor vehicle liability insurance activities (no. 10 of Annex A), other than carrier’s liability. (3) For the determination of the voting rights, Article 130 paras. 2 to 4 of the Stock Exchange Act 2018 (BörseG 2018; Börsegesetz 2018) in conjunction with Article 133 and Article 134 paras. 2 and 3 BörseG 2018 shall be applied, whereas voting rights or shares which investment firms or credit institutions hold as a result of providing the underwriting of financial instruments or placing of financial instruments on a firm commitment basis pursuant to Article 1 no. 3 lit. f of the Securities Supervision Act 2018 (WAG 2018; Wertpapieraufsichtsgesetz 2018) shall not be taken into account, provided that those rights are not exercised or otherwise used to intervene in the management of the issuer and disposed of within one year of the acquisition. (4) In the case of para. 2 nos. 8 and 9, the FMA may grant the licence on conditions which enable it to effectively exercise its supervisory obligation. (5) An insurance undertaking already pursuing life activities (classes 19 to 22 as defined in Annex A) and applying for a licence to pursue accident insurance and/or health insurance activities (classes 1 and 2 as defined in Annex A), or already pursuing accident and/or health insurance activities and applying for a licence to pursue life activities (classes 19 to 22 as defined in Annex A) must additionally demonstrate:

1. that it possesses the eligible own funds to cover the absolute floor of the Minimum Capital
   Requirement for composite undertakings referred to in Article 193 para. 2 no. 4; and
2. that it will be in a position to consistently cover the notional life Minimum Capital
   Requirement referred to in Article 194 para. 1 no. 1 and the notional non-life Minimum Capital Requirement referred to in Article 194 para. 1 no. 2. (6) An insurance or reinsurance undertaking, or a change in its business activity, which requires a licence may only be entered in the company register after the administrative decision (Bescheid) granting the licence has been made available in the original or as a publicly certified copy. The court with jurisdiction over the company register shall submit any orders and decisions concerning such entries to the FMA as well. Prior consultation of the supervisory authorities of other Member States
   Article 9. Before granting a licence to an undertaking that is:
3. a subsidiary of an EEA insurance undertaking, an EEA reinsurance undertaking, a credit
   institution or an investment firm authorised in another Member State;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 27 / 292
2. a subsidiary of an undertaking that is also the parent undertaking of an EEA insurance
undertaking, an EEA reinsurance undertaking, a credit institution or an investment firm authorised in another Member State;
3. controlled by the same person, whether natural or legal, which controls an EEA insurance
undertaking, an EEA reinsurance undertaking, a credit institution or an investment firm authorised in another Member State, the FMA shall consult the supervisory authority of that other Member State. Such consultation may relate in particular to the suitability of the shareholders and the fit and proper requirements of all persons who effectively run the undertaking or have other key functions in the undertaking or in another entity of the same group. Notifying EIOPA and the supervisory authorities of other Member States
Article 9a. (1) If the FMA intends to grant a licence as an insurance or reinsurance undertaking to an
undertaking, the business plan of which refers to the fact that part of the undertakings’ activities are intended to take place in another Member State under the freedom to provide services or the freedom of establishment, and where this business plan moreover states that such activities will be significant for the market of the host Member State, then the FMA shall notify EIOPA and the supervisory authority of the host Member State in question about this. The notification must be sufficiently detailed in order to permit an orderly assessment. (2) The notification by the FMA pursuant to para. 1 of this Article or the FMA pursuant to Article 152a (1) of Directive 2009/138/EC shall not affect the FMA’s supervisory mandate. Business plan
Article 10. (1) A business plan shall be submitted with the application for the licence.
(2) The business plan shall include:

1. the nature of the risks which the insurance undertaking proposes to cover; in the case of
   reinsurance acceptances, also the kind of reinsurance arrangements which the reinsurance undertaking proposes to make with ceding undertakings;
2. the guiding principles as to reinsurance and to retrocession;
3. the basic own-fund items to cover the absolute floor of the Minimum Capital Requirement
   referred to in Article 193 para. 2;
4. estimates of the costs of setting up the administrative services and sales, and evidence that
   the financial resources to meet those costs are available; and
5. when pursuing activities of the insurance class referred to in no. 18 of Annex A, details about
   the resources available to the undertaking that allow it to provide the agreed assistance. (3) In addition to the details set out in para. 2, for the first three financial years the business plan shall include the following:
6. a forecast solvency balance sheet;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 28 / 292
2. estimates of the future Solvency Capital Requirement, on the basis of the forecast solvency
balance sheet referred to in no. 1, as well as the calculation method used to derive those estimates;
3. estimates of the future Minimum Capital Requirement, on the basis of the forecast solvency
balance sheet referred to in no. 1, as well as the calculation method used to derive those estimates;
4. estimates of the financial resources intended to cover technical provisions set out in Section
1 of Chapter 8, the Minimum Capital Requirement and the Solvency Capital Requirement;
5. with regard to non-life insurance and reinsurance, also the following:
a. estimates of commissions payable and other operating expenses (other than installation costs), and b. estimates of premiums and insurance benefits; and
6. with regard to life insurance, also a plan setting out detailed estimates of income and
expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions. (4) The articles of association shall form part of the business plan where the insurance undertaking does not yet hold a licence to pursue contractual insurance activities. Changes in business activities
Article 11. (1) Any amendments to the articles of association require the FMA’s approval. Approval
shall be withheld where, as a result of the amendment to the articles of association, the interests of the policyholders and beneficiaries are no longer sufficiently safeguarded, specifically where ongoing compliance with the obligations under the insurance contracts cannot be expected. (2) The FMA shall be notified of any changes in the nature of the risks which an insurance or reinsurance undertaking proposes to cover or the kind of reinsurance arrangements which an insurance undertaking proposes to make with ceding undertakings. Where insurance undertakings change the coverage of additional risks within an insurance class, such change may only be effected after the aforementioned notification. Where a significant number of additional risks are to be covered, the FMA shall be entitled to request the details pursuant to Article 10 para. 2 nos. 2 and 4 and para. 3. (3) The FMA must be notified of an intention to establish a branch in a third country; Article 21 para. 1 shall apply accordingly to the notification. Where the insurance undertaking requires a certificate pursuant to Article 16 para. 3 no. 1 for this purpose, the FMA shall be obliged to issue such a certificate. A refusal to issue the certificate shall be communicated by means of an administrative decision. The intended commencement of business operations in a third country shall be required to be notified to the FMA three months prior to the planned commencement of operations. (4) If an insurance undertaking applies for a licence for a branch in the Swiss Confederation, the FMA shall state its position on the business plan submitted together with an expert opinion by the Swiss

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 29 / 292 supervisory authority within three months’ time. A refusal to issue the certificate referred to in
Article 19 para. 1 shall be communicated by means of an administrative decision.
(5) The FMA shall oppose a change of registered office of a European Company (SE) as referred to in the second subparagraph of Article 8(14) of Regulation (EC) No 2157/2001 where the interests of the policyholders and beneficiaries are not sufficiently safeguarded. Expiry of the licence
Article 12. (1) The licence shall expire for insurance classes:

1. for which activities have not commenced within one year of granting or extending the licence,
   or for which activities have been terminated for more than six months;
2. for which the insurance or reinsurance undertaking has waived the pursuit of activities;
3. for which the entire related insurance portfolio has been transferred to other insurance or
   reinsurance undertakings.
   (2) The licence of a European Company (SE) expires upon entry in the register of the new country of establishment. (3) The licence of a third-country insurance or third-country reinsurance undertaking shall also expire if the undertaking loses the right to pursue contractual insurance activities in its country of establishment. (4) Insurance and reinsurance undertakings shall immediately notify the FMA in the event of any of the circumstances set out in para. 1. The FMA shall communicate expiry of the licence by means of an administrative decision. (5) Within one year of expiry of the licence pursuant to para. 1 nos. 1 and 2, no new licence may be granted unless there is substantial public interest in the licence being granted. (6) On expiry of the licence insurance contracts may no longer be concluded and existing insurance contracts must be terminated as soon as possible. (7) After expiry of the licence, the FMA shall take all appropriate measures to ensure that the interests of the policyholders and beneficiaries are safeguarded. To this end, the FMA may in particular restrict or prohibit the free disposal of the undertaking’s assets. Article 283 shall apply.
   SECTION 4: RULES PERTAINING TO THIRD COUNTRIES
   Business activities of third-country insurance and third-country reinsurance undertakings in Austria
   Article 13. (1) A third-country insurance or third-country reinsurance undertaking may pursue
   contractual insurance activities in Austria only by way of an Austrian branch and requires a licence from the FMA. The licence of third-country insurance or third-country reinsurance undertakings is valid for Austria only. The conclusion of insurance contracts in Austria or any advertising for them in

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 30 / 292 Austria shall constitute insurance activities pursued in Austria. Article 6 paras. 2 and 3 and Article 7 paras. 2 to 5 shall apply accordingly. (2) An insurance contract shall be considered concluded in Austria where the declaration of intent that is decisive for the conclusion of the insurance contract is made within Austria. Where the insurance contract is related to natural persons who have their habitual residence in Austria or to legal persons who have their branch in Austria, the contract shall in any event be considered concluded in Austria where the contract was concluded with the involvement of a professional intermediary or consultant, irrespective of the form of involvement. This shall not apply to reinsurance contracts or where the risk is not situated within Austria pursuant to Article 5 no. 20. (3) With regard to activities of branches, Sections 7 and 8 of Chapter 1, Chapters 4 to 8, Chapter 10,
Chapter 12 and Articles 272 to 286, Article 291 and Article 316 shall be applied accordingly to third￾country insurance and third-country reinsurance undertakings, unless explicitly stated otherwise.
The branch’s management shall have the same rights and obligations as those applying to the legal representatives of an Austrian undertaking as specified in this federal act. (4) Where the European Commission has determined the solvency regime of a third country to be equivalent in accordance with Article 172(2) or (4) of Directive 2009/138/EC, the provisions of this
Section shall not be applied to third-country reinsurance undertakings having their head office in
that third country. Reinsurance contracts concluded with such undertakings shall be treated in the same manner as reinsurance contracts concluded with reinsurance undertakings. Special licensing requirements
Article 14. (1) In addition to Article 8 para. 2 nos. 2, 9 and 11, para. 3 and para. 5, the licence shall not
be granted to a third-country insurance or third-country reinsurance undertaking where:

1. it does not have a legal form that corresponds to or is comparable to those listed under
   Article 8 para. 1;
2. it is not entitled to pursue contractual insurance business in the respective insurance class
   under the law of the country of establishment;
3. it does not establish a branch in Austria under separate management consisting of at least two
   natural persons who have their main residence in Austria;
4. it does not undertake to set up at the place of management of the branch accounts specific to
   the business which it pursues there, pursuant to Chapter 7, and to keep there all the records relating to the business transacted, and to prepare a solvency balance sheet pursuant to
   Section 1 of Chapter 8;
5. it does not undertake to hold the own funds to cover the Solvency Capital Requirement and
   the basic own funds to consistently cover the Minimum Capital Requirement;
6. it does not possess assets situated in Austria to the extent of the absolute floor of the Minimum
   Capital Requirement pursuant to Article 193 para. 2, and it does not undertake to deposit half of this as security for the duration of the branch’s activities. The administrative decision

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 31 / 292 granting the licence shall define the eligible assets as well as the type and content of the deposit obligation so as not to allow the third-country insurance or third-country reinsurance undertaking to dispose of the assets without the FMA’s approval;
7. it cannot prove that it will be in a position to comply with the provisions of Chapter 5 on the
governance system with regard to the activities pursued by the branch; or
8. the country of establishment does not offer the same competitive opportunities to insurance
and reinsurance undertakings with head offices in Austria as to third-country insurance and third-country reinsurance undertakings with head offices in that third country, and where it does not grant insurance and reinsurance undertakings with head offices in Austria an effective market access comparable to that granted by Austria to third-country insurance and third-country reinsurance undertakings with head offices in that third country, unless there is substantial public interest in the licence being granted; the aforementioned shall not apply to signatory countries of the World Trade Organisation. (2) In the case of third-country insurance undertakings, a licence for life insurance classes and a licence for other classes of insurance shall be mutually exclusive. (3) Own funds and basic own funds as referred to in para. 1 no. 5 shall be deemed such own funds and basic own funds as are allocated to the branch. (4) Article 8 paras. 4 and 6 and Article 9 shall apply accordingly. Advantages when licences are granted for more than one Member State
Article 15. (1) A third-country insurance undertaking which already holds a licence from at least one
other Member State or which has applied for a licence there may apply to the FMA:

1. to have the Solvency Capital Requirement calculated in relation to the entire business of its
   branches in the EEA;
2. to allow it to lodge the deposit in only one of the Member States in which it pursues activities;
   and
3. to allow the total assets representing the Minimum Capital Requirement to be localised in any
   of the Member States in which the undertaking pursues its activities.
   (2) Application to extend the advantages provided for in para. 1 shall be made to the supervisory authorities of all Member States where the third-country insurance undertaking holds a licence or has applied for one. The application shall state the choice of supervisory authority which in future is to supervise the solvency of the entire business of the branches established within the EEA. The undertaking shall give reasons for the choice of supervisory authority. (3) If the FMA has been chosen as supervisory authority pursuant to the second sentence of para. 2, it may approve the application only where objective grounds exist, where approval would not threaten the interests of the policyholders and beneficiaries and where the supervisory authorities of all Member States in which an application has been made agree. The deposit referred to in
   Article 14 para. 1 no. 6 shall in this case be lodged in Austria. The advantages shall take effect from

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 32 / 292 the time when the FMA informs the supervisory authorities in the other Member States concerned that it has given approval. From that time, the FMA shall supervise the state of solvency of the entire business of the branches within the EEA. This includes any order prohibiting the free disposal of the assets pursuant to Article 283 para. 1 nos. 1 to 3. Article 295 shall apply accordingly. At the request of the supervisory authority of one or more of the Member States concerned, the FMA shall withdraw its approval and inform the supervisory authorities of the other Member States concerned. (4) Where the FMA is not the supervisory authority selected pursuant to the second sentence of para. 2, the FMA may grant the advantages only where objective grounds for the choice of supervisory authority are given in the application and approval would not threaten the interests of the policyholders and beneficiaries. The advantages shall take effect from the date when the selected supervisory authority informs the FMA that it has given approval in accordance with
Article 167(3) of Directive 2009/138/EC. The FMA shall provide that supervisory authority with the
information necessary for the supervision of the overall solvency of the branches established in Austria. Where the supervisory authority issues an order as referred to in Article 137, Article 138(5) or
Article 139(3) of Directive 2009/138/EC, Article 295 para. 4 shall be applied accordingly. At the
request of the supervisory authority of one or more of the Member States concerned, the advantages shall no longer be applied simultaneously by all supervisory authorities. Business plan of the branch
Article 16. (1) The articles of association of a third-country insurance or third-country reinsurance
undertaking shall not form part of the business plan. However, where the undertaking does not yet have a licence for contractual insurance activities in Austria, it shall submit the articles of association together with the business plan and inform the FMA of the names of the members of the body authorised to legally represent it and of the undertaking’s supervisory bodies. The FMA shall be informed of any amendments to the articles of association as well as any changes in membership in the aforementioned bodies. (2) Article 10 paras. 1 to 3 shall apply accordingly. In addition, the business plan shall also include:

1. a description of the state of the eligible own funds and eligible basic own funds with respect
   to the Solvency Capital Requirement and Minimum Capital Requirement, and
2. information on the structure of the system of governance.
   (3) The following documents shall be submitted together with the business plan:
3. a certificate issued by the competent authority of the country of establishment, stating the
   insurance classes the undertaking is authorised to pursue in the country of establishment and the insurance classes it actually pursues, and
4. the balance sheet as well as the income statement for each of the last three financial years,
   where the undertaking does not yet have a licence for contractual insurance activities in Austria. If the undertaking has not existed for the period stipulated, such documents shall be submitted for the financial years already completed.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 33 / 292 Requirements for taking up business activities
Article 17. (1) A third-country insurance or third-country reinsurance undertaking may not take up
business activities in Austria until the Austrian branch and its management have been entered in the company register. Article 8 para. 6 shall be applied to the entry of the undertaking and of any change in the activities of its branch. (2) Two members of the management shall be authorised to represent the Austrian branch jointly or one of them together with a person holding a general managing power of attorney (Prokurist). Any power of sole representation which covers the entirety of business activities in Austria shall be ruled out. Articles 73 and 76 of the Stock Corporation Act (AktG; Aktiengesetz) shall apply accordingly. (3) After having been granted their licence, third-country insurance and third-country reinsurance undertakings shall be entitled to conclude insurance contracts on risks situated in Austria only through their Austrian branch. This shall not apply to risks that are classified under the insurance classes listed under nos. 4 to 7, 11 and 12 of Annex A. (4) The place of jurisdiction referred to in Article 99 para. 3 of the Code of Judicial Jurisdiction (JN; Jurisdiktionsnorm) may not be excluded for legal proceedings resulting from business activities pursued in Austria. Provisions pertaining to ongoing business activities
Article 18. (1) Branches of third-country insurance and third-country reinsurance undertakings shall
possess eligible own funds to cover the Solvency Capital Requirement as well as eligible basic own funds to cover the Minimum Capital Requirement. The deposit lodged in accordance with Article 14 para. 1 no. 6 shall be counted towards such eligible basic own funds to cover the Minimum Capital Requirement. (2) For the purpose of calculating the Solvency Capital Requirement and the Minimum Capital Requirement account shall be taken only of the activities pursued by the branch concerned. (3) Any assets dedicated to the Deckungsstock must be situated within Austria. The assets representing the Solvency Capital Requirement must be kept within Austria up to the amount of the Minimum Capital Requirement and the excess within a Member State. (4) Articles 11 and 12 shall apply accordingly. Special provisions applying to the Swiss Confederation
Article 19. (1) Third-country insurance undertakings with head offices in the Swiss Confederation
shall additionally together with the business plan submit a certificate of the Swiss supervisory authority stating:

1. that the undertaking has the required own funds as well as the required resources referred to
   in Article 10 para. 2 nos. 4 and 5;
2. the nature of the risks actually covered;
3. that the undertaking has adopted an admissible legal form;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 34 / 292
4. that, apart from contractual insurance activities, the undertaking pursues only activities that
are directly connected with such.
(2) Prior to granting a licence to a third-country insurance undertaking with head offices in the Swiss Confederation, the FMA shall submit the business plan including an expert opinion to the Swiss supervisory authority for comment. Where the latter does not express its opinion within three months after receipt of the documents, it shall be assumed that the authority does not have any objections to a licence being granted. (3) Prior to the revocation of the licence of a third-country insurance undertaking with head offices in the Swiss Confederation, the Swiss supervisory authority shall be heard. Where, prior to receiving an opinion from that authority, the FMA takes a measure pursuant to Article 284 para. 1 no. 3, it shall immediately inform the Swiss supervisory authority thereof. (4) Austrian branches of third-country insurance undertakings with head offices in the Swiss Confederation shall not be subject to any special own funds requirements. Article 10 para. 2 no. 3 and para. 3, Article 14 para. 1 nos. 1, 5, 6 and 8 and Article 16 para. 2 no. 1 shall not apply. The requirement referred to in Article 14 para. 1 no. 4 to prepare a solvency balance sheet pursuant to
Section 1 of Chapter 8 shall not apply.
Specific provisions for the United States of America
Article 19a. Articles 13 to 18 shall not apply to reinsurance operations in Austria by a third-country
insurance undertaking or third-country reinsurance undertaking with its registered office in the United States of America, if

1. the provision of reinsurance is not performed by an Austrian branch and
2. the conditions pursuant to Article 3 paras. 4 and 8 of the Bilateral Agreement between the
   European Union and the United States of America between the European Union and the United States of America on prudential measures regarding insurance and reinsurance, OJ L 258, 06.10.2017, p. 4 (hereinafter “the Bilateral Agreement”), are observed. In this case the FMA is the host supervisory authority pursuant to Article 2 (i) of the Bilateral Agreement. Where the Republic of Austria is the home party pursuant to Article 2 (f) of the Bilateral Agreement, then the FMA is the home supervisory authority pursuant to Article 2 (g) of the Bilateral Agreement. As the host supervisory authority or as the home supervisory authority the FMA shall apply the provisions of the Bilateral Agreement. In so doing supervisory powers and means shall be afforded to the FMA in the same way and scope as in this Federal Act that it may also make use of in the enforcement of other obligations in accordance with this Federal Act.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 35 / 292
SECTION 5: PROVISIONS FOR THE EEA
Freedom of establishment: branches in Austria
Article 20. (1) Branches of EEA insurance undertakings and EEA reinsurance undertakings in Austria
shall not require a licence in accordance with this federal act. EEA insurance undertakings may pursue contractual insurance activities through a branch, provided that the supervisory authority of the home Member State has submitted to the FMA:

1. that information on the branch which the EEA insurance undertaking has provided to that
   authority pursuant to Article 145(2) of Directive 2009/138/EC, and
2. a certificate attesting that the EEA insurance undertaking covers the Solvency Capital
   Requirement and the Minimum Capital Requirement calculated in accordance with Articles 100 and 129 of Directive 2009/138/EC. If the branch’s business activities extend to motor vehicle liability insurance (no. 10 of Annex A), other than carrier’s liability, the EEA insurance undertaking must submit to the FMA a certificate attesting that it holds a participation in an institution as set out in Article 30 of the 1994 Motor Insurance Act (KHVG 1994; Kraftfahrzeug￾Haftpflichtversicherungsgesetz). (2) The contractual insurance activities may be taken up two months after the FMA receives the information referred to in para. 1. Where, prior to the end of the aforementioned period, the FMA informs the supervisory authority of the home Member State of the conditions under which, in the interest of the general good, the contractual insurance business must be pursued in Austria, the activities may be taken up on receipt of that information by the supervisory authority of the home Member State. (3) In the event of any changes to the branch’s activities that relate to the information pursuant to para. 1 no. 1, para. 2 shall be applied accordingly. The activities shall no longer be allowed as soon as the supervisory authority of the home Member State reaches a final decision stating that, on the basis of the changes in the information provided pursuant to para 1 no. 1, there are reservations about the branch continuing its activities. (4) In the case of risks situated in Austria that do not qualify as large risks, prior to conclusion of the insurance contract the policyholder shall be informed of the Member State in which the EEA insurance undertaking has its head office. Where documents are provided to the policyholder, such information must be included. (5) With regard to the branch’s activities, apart from the provisions of this Article, Article 17 para. 4,
   Article 30 paras. 1 and 2, Article 31, Article 91, Articles 93 to 96, Article 98, Article 101, Articles 127d to
   135e, Article 246 para. 1 second and third sentence and paras. 2 and 4, Article 289 and Article 290 paras. 2 and 3 shall be applied accordingly to EEA insurance and EEA reinsurance undertakings with head offices in a Member State and a branch in Austria. Insofar as these provisions apply to activities in Austria or to risks situated in Austria, they shall be applied to EEA insurance and EEA reinsurance undertakings only to this extent. The name, date of birth, commencement of power of

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 36 / 292 representation and appropriate business address in Austria of the authorised agent for deliveries shall be entered in the company register. Freedom of establishment: branches in Member States
Article 21. (1) Where an insurance undertaking proposes to establish a branch in another Member
State, it shall provide the following information to the FMA:

1. the Member State in which the branch is to be established;
2. a business plan for the branch, which sets out in particular the structural organisation and the
   components listed under Article 10 para. 2 nos. 1, 4 and 5 and para. 3;
3. the address in the Member State of the branch from which documents about the branch’s
   business activities may be obtained and to which all communications to the authorised agent may be delivered; and
4. the name of the branch’s authorised agent who possesses sufficient powers to bind, in relation
   to third parties, the insurance undertaking and to represent it in relations with the authorities and courts of the host Member State. (2) If the branch’s activities are to extend to motor vehicle liability insurance (no. 10 of Annex A), not including carrier’s liability, the insurance undertaking shall produce a declaration that it has become or is a member of the national bureau referred to in point (3) of Article 1 of Directive 2009/103/EC and the national guarantee fund referred to in point (1) of Article 10 of Directive 2009/103/EC. (3) If there are no objections to the establishment of the branch with regard to the adequacy of the system of governance or the financial situation of the insurance undertaking and the authorised agent fulfils all the fit and proper requirements to run the branch, the FMA shall, within three months of receiving all the information and evidence referred to in paras. 1 and 2, communicate that information to the supervisory authority of the Member State in which the branch is to be established. At the same time, the FMA shall attest that the insurance undertaking possesses the necessary own funds to cover the Solvency Capital Requirement as well as the necessary basic own funds to cover the Minimum Capital Requirement. The FMA must not attest the above where the insurance undertaking has informed the FMA of not complying with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as referred to in Articles 279 and 280 and the grounds for the procedure continue to exist. The FMA shall immediately notify the insurance undertaking of the submission of any information and evidence pursuant to paras. 1 and 2 to the supervisory authority of the host Member State. (4) The branch may take up business within two months of submitting the information and evidence referred to in para. 3 to the supervisory authority of the host Member State. If the supervisory authority of the host Member State submits the conditions which, in the interest of the general good apply in accordance with Article 146(3) of Directive 2009/138/EC, the FMA shall communicate them without delay to the insurance undertaking concerned. In this case, the insurance undertaking may take up business from the date it received such a communication. Where the conditions for a

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 37 / 292 submission pursuant to para. 3 are not met, the FMA shall inform the insurance undertaking accordingly by means of an administrative decision. The FMA is obliged to issue such administrative decision no later than three months after having received all information and evidence pursuant to paras. 1 and 2. (5) The FMA shall be informed of any changes in the information pursuant to para. 1 no later than one month prior to implementation of the measure concerned. Where, due to these changes, the conditions for running the branch as set out in para. 3 are no longer fulfilled, the FMA shall inform the insurance undertaking by means of an administrative decision. As soon as this administrative decision becomes legally effective, the supervisory authority of the home Member State shall be immediately notified thereof. Freedom to provide services: activities in Austria
Article 22. (1) EEA insurance and EEA reinsurance undertakings do not require a licence in
accordance with this federal act to provide services. EEA insurance undertakings shall be allowed to provide services if the supervisory authority of the home Member State has:

1. informed the FMA of the classes of insurance which the insurance undertaking has been
   licensed to offer as well as of the nature of the risks which it proposes to cover under the freedom to provide services; and
2. submitted a certificate to the FMA, attesting that the insurance undertaking possesses the
   necessary own funds. Where the activities pursued under the freedom to provide services extend to motor vehicle liability insurance (no. 10 of Annex A), other than carrier’s liability, the EEA insurance undertaking shall submit a certificate to the FMA attesting that it holds a participation in an institution referred to in Article 30 KHVG and it shall provide the name and address of the claims officer (Article 31 KHVG) in Austria. (2) EEA insurance undertakings must not take up business under the freedom to provide services until they have been informed by the supervisory authority of the home Member State of the communication pursuant to para. 1. (3) Where the nature of the risks which the insurance undertaking proposes to cover under the freedom to provide services changes, the provision of services shall only be admissible if the supervisory authority of the home Member State has informed the FMA thereof. The provision of services may be taken up as soon as the supervisory authority of the home Member State has submitted this communication to the EEA insurance undertaking. (4) In the case of risks that do not qualify as large risks, prior to conclusion of the insurance contract the EEA insurance undertaking shall inform the policyholder of the Member State from which the contract is being concluded under the freedom to provide services. Where documents are provided to the policyholder, this information must be included. (5) With regard to activities pursued under the freedom to provide services, apart from the provisions of this Article, Article 17 para. 4, Article 30 paras. 1 and 2, Article 31, Article 91, Articles 93 to 96,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 38 / 292
Article 98, Article 101, Article 127d, Articles 128 to 135e, Article 246 para. 1 second and third sentence
and paras. 2 and 4, Article 289, Article 290 paras. 2 and 3 shall be applied accordingly to EEA insurance and EEA reinsurance undertakings with head offices in a Member State which by way of provision of services cover risks that are situated within Austria. Insofar as these provisions apply to activities in Austria or to risks situated in Austria, they shall be applied to EEA insurance and EEA reinsurance undertakings only to this extent. Freedom to provide services: activities in Member States
Article 23. (1) Where an insurance undertaking intends to take up the provision of services in one or
more Member States, it shall notify the FMA thereof and specify the nature of the risks it proposes to cover. (2) Where the provision of services is to extend to motor vehicle liability insurance (no. 10 of Annex A), not including carrier’s liability, the insurance undertaking shall:

1. produce a declaration that it has become or is a member of the national bureau referred to in
   point (3) of Article 1 of Directive 2009/103/EC and the national guarantee fund referred to in point (1) of Article 10 of Directive 2009/103/EC by the Member State in which the service is being provided; and
2. state the name and address of an officer for claims arising from insurance contracts concluded
   under the freedom to provide services (claims officer).
   (3) Where there are no objections to the taking up of the provision of services, within one month after receiving the notification pursuant to para. 1 along with the documents pursuant to para 2, the FMA shall notify the supervisory authorities of the Member States in which the provision of services is to be taken up, indicating the insurance classes which the undertaking is authorised to pursue as well as the nature of the risks which it proposes to cover under the freedom to provide services. At the same time, the FMA shall attest that the insurance undertaking possesses the necessary own funds to cover the Solvency Capital Requirement as well as the necessary basic own funds to cover the Minimum Capital Requirement. The FMA must not attest the above where the insurance undertaking has informed the FMA of not complying with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as referred to in Articles 279 and 280 and the grounds for the procedure continue to exist. The FMA shall immediately inform the insurance undertaking of that notification. (4) Insurance undertakings may take up the provision of services as soon as the FMA informs the insurance undertaking that the information and evidence referred to in para. 3 have been submitted to the supervisory authority of the host Member State. Where the conditions for the notification pursuant to para. 3 are not met, the FMA shall inform the insurance undertaking thereof by means of an administrative decision. The FMA is obliged to issue such an administrative decision by no later than one month after having received the notification pursuant to para. 1.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 39 / 292 (5) Where the nature of the risks which the insurance undertaking proposes to cover under the freedom to provide services, or the name or address of the claims officer changes, the insurance undertaking shall notify the FMA thereof. Where there are no objections to the change, within one month of having received the notification by the insurance undertaking, the FMA shall notify the supervisory authorities of the Member States concerned of the change and inform the insurance undertaking thereof without delay. Where the conditions for that notification are not met, the FMA shall inform the insurance undertaking thereof by means of an administrative decision. The FMA is obliged to issue such an administrative decision by no later than one month after having received the notification of the insurance undertaking. (6) The following conditions shall apply to the claims officer (para. 2 no. 2):

1. they shall be fit and proper to perform their duties and they shall in particular be able to
   handle the claims in the official language(s) of the state in which the insurance undertaking provides services.
2. they shall have their residence or head office or a branch in the state in which the insurance
   undertaking provides services.
3. they shall be authorised to collect all necessary information in relation to claims which the
   insurance undertaking is required to settle under the freedom to provide services and to take the necessary measures to settle such claims.
4. they shall possess sufficient powers to represent the insurance undertaking, in and out of
   court, in handling and satisfying any claims arising from insurance contracts concluded under the freedom to provide services in relation to persons suffering damage, and to settle such claims.
   SECTION 6: SHAREHOLDER CONTROL
   Shareholders
   Article 24. (1) Persons (proposed acquirers) who, acting alone or in concert with others:
5. intend to acquire, directly or indirectly, a qualifying holding in an insurance or reinsurance
   undertaking with head offices in Austria; or
6. already have such a qualifying holding and intend to increase their holding, directly or
   indirectly, in such a way that they would reach or exceed the limit of 20%, 30% or 50% of the share capital or voting rights, or in such a way that the insurance or reinsurance undertaking would become its subsidiary shall first notify the FMA in writing, indicating the size of the intended holding and the information as referred to in Article 26 para. 3. The notification may be made jointly by all of the persons, by more than one person or by each of the jointly acting persons separately. For the determination of the voting rights, Article 8 para. 3 shall apply. (2) The notification requirements under para. 1 apply in the same way to the decided disposal of a directly or indirectly held qualifying holding or any underrun of the limits indicated in para. 1

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 40 / 292 regarding participations in an insurance undertaking or a reinsurance undertaking or when the insurance undertaking or reinsurance undertaking is no longer a subsidiary. (3) Insurance or reinsurance undertakings shall immediately inform the FMA of any acquisition and disposal of equity interests, which must be notified pursuant to paras. 1 and 2, as soon as they become aware thereof. Moreover, they shall also, at least once a year, inform the FMA of the names and addresses of shareholders who have notifiable qualifying holdings and the sizes of such qualifying holdings, as shown in particular by the information received at annual general meetings or by the information obtained pursuant to Articles 130 to 135 BörseG 2018. Procedures for assessing the acquisition
Article 25. (1) The FMA shall, promptly and in any event within two working days following receipt
of the complete notification required under Article 24 para. 1 as well as following the possible subsequent receipt of the information referred to in para. 2, acknowledge receipt thereof in writing to the proposed acquirer and at the same time inform the proposed acquirer of the date of the expiry of the assessment period. Where the FMA indicates to the proposed acquirer any documents or information obviously omitted from the notification, the last sentence of Article 13 para. 3 of the Code of Administrative Procedure (AVG; Allgemeines Verwaltungsverfahrensgesetz) shall not apply. (2) The FMA may, no later than on the fiftieth working day of the assessment period, request in writing any further information that is necessary to complete the assessment. The assessment deadline pursuant to Article 5 shall be postponed from the date of that request until receipt of a response by the proposed acquirer, but no longer than for 20 working days. (3) The FMA may extend that deadline from 20 working days to 30 working days where the proposed acquirer:

1. has their head office outside the EEA or is regulated outside the EEA; or
2. is not subject to supervision under Directives 2009/65/EC, 2009/138/EC, 2004/39/EC or
   2013/36/EU.
   (4) Any further requests for completion or clarification of the information shall not result in any further postponement of the assessment deadline. (5) The FMA shall prohibit the acquisition of equity interests notified pursuant to Article 24 para. 1, subject to paras. 2 and 3, within an assessment period of 60 working days as from the date of the written acknowledgement of receipt of the notification pursuant to para. 1 and any information to be submitted pursuant to Article 26 para. 3, where there are reasonable grounds for doing so on the basis of the criteria set out in Article 26 para. 1 or where the information provided by the proposed acquirer is incomplete. Where the FMA does not prohibit the acquisition in writing within the assessment period, it shall be considered approved. If the acquisition is not prohibited, the FMA may fix a maximum period within which the acquisition must be made. This maximum period may be extended, where appropriate.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 41 / 292 (6) The FMA shall send the administrative decision prohibiting the proposed acquisition within two working days after reaching the decision. The FMA shall issue an administrative decision at the proposed acquirer’s request also where the acquisition is not prohibited. Where the proposed acquirer is a regulated undertaking as referred to in para. 7, the FMA shall state among the reasons given in the administrative decision any views or reservations expressed by the supervisory authority responsible for the proposed acquirer. The administrative decision may include conditions and requirements for ensuring fulfilment of the criteria set forth in Article 26. At the proposed acquirer’s request, the FMA may make the decision and underlying reasons accessible to the public, provided it complies with the requirements set forth in Article 22c no. 3 lits. a to c of the Financial Market Authority Act (FMABG; Finanzmarktaufsichtsbehördengesetz). (7) The FMA shall work in full consultation with the competent authorities of the other Member States when carrying out the assessment of a proposed acquisition or of an increase of a qualifying holding pursuant to Article 24 para. 1 and shall promptly exchange information that is essential or relevant to the assessment where the proposed acquirer:

1. is a credit institution, insurance or reinsurance undertaking, investment firm or management
   company within the meaning of Article 3 para. 2 no. 1 InvFG 2011;
2. is the parent undertaking of a credit institution, insurance or reinsurance undertaking,
   investment firm or management company within the meaning of Article 3 para. 2 no. 1 InvFG 2011; or
3. controls a credit institution, insurance or reinsurance undertaking, investment firm or UCITS
   management company which is authorised in a Member State other than that in which the acquisition is proposed or by an authority competent for another sector. (8) In the event of a procedure pursuant to para. 7, the FMA shall communicate all essential or relevant information at a competent authority’s request and shall communicate on their own initiative all essential information to the competent authorities, particularly information regarding the assessment of the acquisition and a possible prohibition of the acquisition. The FMA shall obtain the competent authorities’ assessments, in particular against the criteria set out in Article 26 para. 1 nos. 1, 2 and 5. Criteria for assessing the acquisition
   Article 26. (1) In assessing the notification and information referred to in Article 24 para. 1 the FMA
   shall, in order to ensure the sound and prudent management of the insurance or reinsurance undertaking in which an acquisition is proposed, and having regard to the likely influence of the proposed acquirer on the insurance or reinsurance undertaking, appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition against all of the following criteria:
4. the reputation of the proposed acquirer;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 42 / 292
2. the reputation and experience of any person who will direct the business of the insurance or
reinsurance undertaking as a result of the proposed acquisition, in accordance with
Article 120 paras. 1 and 2;
3. the financial soundness of the proposed acquirer, in particular in relation to the type of
business pursued and envisaged in the insurance or reinsurance undertaking in which the acquisition is proposed;
4. whether the insurance or reinsurance undertaking will be able to comply and continue to
comply with the requirements pertaining to contractual insurance activities and with the provisions of the Financial Conglomerates Act (FKG; Finanzkonglomerategesetz), and in particular, whether the group of which the insurance or reinsurance undertaking will become
part has a structure that makes it possible to exercise effective supervision, effectively
exchange information among the competent supervisory authorities and determine the allocation of responsibilities among the competent supervisory authorities;
5. whether there are reasonable grounds to suspect that, in connection with the proposed
acquisition, money laundering (Article 165 of the Criminal Code (StGB; Strafgesetzbuch) – while taking into account asset components derived from a criminal offence committed by the perpetrator) or terrorist financing (Article 278d StGB) is being or has been committed or attempted, or that the proposed acquisition could increase the risk thereof. (2) The proposed acquisition must not be examined in terms of the economic needs of the market. (3) The FMA shall determine by regulation a list specifying the information that must be submitted pursuant to Article 24 para. 1, considering European practice in this area. The information must be suitable and necessary for the prudential assessment of compliance with the criteria as referred to in para. 1. The information required shall be proportionate and adapted to the nature of the proposed acquirer and the proposed acquisition. This shall take into account the size and nature of the qualifying holding as well as the size and business activities of the proposed acquirer and the insurance or reinsurance undertaking in which the acquisition is proposed. The FMA shall also specify in the regulation the nature and form of the transmission of information, in order to enable rapid and accurate identification of the application’s content. (4) Where two or more proposals to acquire or increase qualifying holdings pursuant to Article 24 para. 1 in the same insurance or reinsurance undertaking have been notified to the FMA, the latter shall treat the proposed acquirers in a non-discriminatory manner. Measures in the case of unsuitable shareholders
Article 27. (1) Where there is a risk that persons who have a qualifying holding pursuant to Article 24
para. 1 exercise an influence which is likely to operate against the sound and prudent management of an insurance or reinsurance undertaking, the FMA shall take appropriate measures to eliminate such risk, in particular measures pursuant to Article 284. The court of first instance with jurisdiction over commercial matters responsible for the insurance or reinsurance undertaking’s head office

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 43 / 292 shall, upon application by the FMA, order the suspension of voting rights for those shares which are held by the persons concerned. The suspension of voting rights shall be lifted when the court, upon application by the FMA or the persons concerned, establishes that the risk no longer exists or when the equity interests are acquired by third parties and, where a notification obligation pursuant to
Article 24 para. 1 applies, the deadline for the prohibition of the acquisition pursuant to Article 25
para. 5 has expired for that acquisition. The court shall rule in accordance with the above provisions in non-litigious civil proceedings. (2) Paragraph 1 shall also be applied where a notification pursuant to Article 24 para. 1 has been omitted. Where equity interests have been acquired despite a prohibition pursuant to Article 25 para. 5, any connected voting rights shall be suspended until the FMA determines that the reason for the prohibition no longer exists. (3) Where the court orders the suspension of voting rights pursuant to the second sentence of para. 1, it shall simultaneously appoint a trustee (Treuhänder) who fulfils the requirements in line with sound and prudent management of the insurance or reinsurance undertaking and transfer the voting rights to that party. In the case of the second sentence of para. 2, the FMA shall immediately apply for the appointment of a trustee at the court competent pursuant to the second sentence of para. 1 when it learns that the voting rights have been suspended. The trustee shall be entitled to reimbursement of their expenses as well as to remuneration for their activity, the amount of which shall be determined by the court. The insurance or reinsurance undertaking and the shareholders whose voting rights have been suspended shall be jointly and severally liable to bear such expense. The obligors shall be entitled to appeal (by way of a Rekurs) against decisions determining the amount of the trustee’s remuneration as well as the expenses to be reimbursed. No further appeal shall be possible against the decision of the Higher Regional Court (Oberlandesgericht).
SECTION 7: TRANSFER OF PORTFOLIO
General provisions for transfers of portfolio
Article 28. (1) All or part of the portfolio of insurance and reinsurance contracts concluded under a
licence granted pursuant to this federal act may be transferred within the meaning of the following provisions without the policyholder’s consent. (2) An insurance or reinsurance undertaking with head offices in Austria may transfer its portfolio to another insurance or reinsurance undertaking. The portfolio may also be transferred to a third￾country insurance or third-country reinsurance undertaking’s branch that is established in Austria or another Member State, provided that it contains only risks that are situated in the Member State in which the branch is established. Article 5 para. 20 shall apply when determining where the risk is situated. (3) The Austrian branch of a third-country insurance or third-country reinsurance undertaking may transfer its portfolio to an insurance or reinsurance undertaking.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 44 / 292 Approval by the FMA
Article 29. (1) Transfers of portfolio pursuant to Article 28 paras. 2 and 3 shall require the FMA’s
approval. An approval shall also be required for any legal transactions that entail universal succession. Approval shall be withheld where the interests of the policyholders and beneficiaries are not sufficiently safeguarded. (2) Where the entire insurance activities of an insurance undertaking with head offices in Austria and established with the legal form of a joint stock company (Aktiengesellschaft) are transferred by means of a demerger to a joint stock company with head offices in Austria that has been founded for that purpose, the licence for contractual insurance activities and any approvals given to the demerged insurance business shall be transferred from the transferring to the accepting joint stock company. The FMA may only give its approval as referred to in para. 1 where compliance with the regulations applicable to contractual insurance activities is guaranteed by the accepting joint stock company. (3) If the accepting undertaking is an insurance or reinsurance undertaking with head offices in Austria or the Austrian branch of a third-country insurance or third-country reinsurance undertaking, the approval referred to in para. 1 shall be withheld where:

1. it must be assumed that the transfer will have a negative impact on the entire business of the
   accepting undertaking or the accepting branch;
2. after taking the transfer of portfolio into account the accepting undertaking or the accepting
   branch does not possess the necessary own funds to cover the Solvency Capital Requirement;
3. the accepting undertaking or the accepting branch has informed the FMA of not complying
   with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as referred to in Articles 279 and 280 and the grounds for the procedure continue to exist. Where the branch’s solvency is supervised by the supervisory authority of another Member State due to an approval pursuant to Article 15, the approval referred to in para. 1 may only be given where the supervisory authority certifies that after taking the transfer of portfolio into account the branch possesses the necessary own funds to cover the Solvency Capital Requirement. (4) Where the accepting undertaking is an EEA insurance or EEA reinsurance undertaking, the approval referred to in para. 1 may only be given where the supervisory authority of that Member State certifies that after taking the transfer of portfolio into account the accepting undertaking possesses the necessary own funds to cover the Solvency Capital Requirement (5) Where an insurance undertaking with head offices in Austria transfers the portfolio of one of its branches in a Member State or where the transferred portfolio includes risks that are situated in another Member State, the approval referred to in para. 1 may only be given where the supervisory authorities of those Member States consent to the transfer. Where such a supervisory authority has not responded within three months of receiving the notification of the transfer of portfolio, consent shall be considered given.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 45 / 292 (6) Where there is a transfer of personal data into a third country in connection with the transfer of a portfolio, then the approval in accordance with para. 1 shall only be allowed to be granted, if the transmission is permissible in accordance with Chapter V of Regulation (EU) 2016/679. FMA assistance
Article 30. (1) Where an EEA insurance undertaking transfers the portfolio of one of its Austrian
branches or where the transferred portfolio includes risks that are situated in Austria, within three months of receiving the notification of the transfer of portfolio the FMA shall respond to the supervisory authority of the Member State concerned. The FMA shall deny approval of the transfer where the interests of the policyholders and beneficiaries are not sufficiently safeguarded. (2) Where an EEA insurance or EEA reinsurance undertaking transfers a portfolio to an insurance or reinsurance undertaking with head offices in Austria or an Austrian branch of a third-country insurance or third-country reinsurance undertaking, the FMA shall certify to the supervisory authority of the transferring undertaking that after taking the transfer of portfolio into account the accepting undertaking or the accepting branch possesses the necessary own funds to cover the Solvency Capital Requirement. The FMA must not certify the above where the accepting undertaking or the accepting branch has informed the FMA of not complying with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as referred to in Articles 279 and 280 and the grounds for the procedure continue to exist. (3) Where a third-country insurance or third-country reinsurance undertaking transfers the portfolio of a branch in another Member State to an insurance or reinsurance undertaking with head offices in Austria, the FMA shall certify to the supervisory authority of the transferring undertaking that after taking the transfer of portfolio into account the accepting undertaking possesses the necessary own funds to cover the Solvency Capital Requirement. The FMA must not certify the above where the accepting undertaking has informed the FMA of not complying with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as defined in Articles 279 and 280 and the grounds for the procedure continue to exist. (4) Where the conditions for submitting the certificate pursuant to paras. 2 and 3 are not met, the FMA shall inform the undertaking concerned thereof by means of an administrative decision. Legal effects of a transfer of portfolio
Article 31. (1) The rights and obligations arising from the insurance contracts included in the
transferred portfolio shall be transferred to the accepting undertaking on entry in the company register or, where such entry is not required, on approval of the transfer of portfolio. (2) Where the insurance contracts cover risks situated in Austria, the accepting undertaking or the accepting branch shall immediately following the FMA’s approval inform the policyholders concerned of the transfer of portfolio. They shall be entitled to terminate the insurance contract as per the end of the insurance period during which they were informed of the transfer of portfolio and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 46 / 292 to reclaim that part of the premium due for the period following the insurance relationship’s termination less the costs incurred for that period of time. The insurance undertaking shall inform the policyholders concerned of that right. The insurer shall not be entitled to invoke any agreement deviating from this provision. (3) Where in the case of a transfer of the insurance portfolio for the purpose of reorganisation there is a risk that the interests of the other policyholders and beneficiaries are violated by terminations pursuant to para. 2, or where a transfer of portfolio only serves to change the structure within a group without affecting the interests of the policyholders and beneficiaries, the FMA shall rule out terminations upon request. (4) The second and third sentence of para. 2 shall not apply to any legal transactions that entail a transfer of portfolio by way of universal succession. Provisions for the Swiss Confederation
Article 32. (1) Where the accepting undertaking is the Austrian branch of a third-country insurance
undertaking with head offices in the Swiss Confederation, evidence that after taking the transfer of portfolio into account the undertaking possesses the necessary own funds to cover the Solvency Capital Requirement shall be produced through a certificate by the Swiss supervisory authority. (2) Where the branch in the Swiss Confederation of an insurance undertaking with head offices in Austria requires a certificate attesting the necessary own funds as referred to in para. 1 in order to accept a portfolio, the FMA shall issue such a certificate to the competent Swiss authority. The FMA shall refuse to issue the certificate where the insurance undertaking has informed the FMA of not complying with the Solvency and Minimum Capital Requirements or the FMA has initiated a procedure as referred to in Articles 279 and 280 and the grounds for the procedure continue to exist. (3) Where the conditions pursuant to para. 2 are not met, the FMA shall inform the insurance undertaking thereof by means of an administrative decision.
SECTION 8: COMPLAINTS
Complaints body
Article 33. (1) The Federal Minister of Labour, Social Affairs, Health and Consumer Protection shall
accept complaints from consumers pursuant to Article 1 para. 1 no. 1 of the Consumer Protection Act (KSchG; Konsumentenschutzgesetz) and consumer protection facilities about insurance undertakings, small insurance undertakings as well as third country and EEA insurance undertakings free of charge. Such complaints must in any case be handled and responded to. Where possible mediation should be strived for. (2) For the purposes of the public interest listed in Article 267 paras. 1 and 2, the Federal Minister of Labour, Social Affairs, Health and Consumer Protection pursuant to para. 1 shall transfer cases to the FMA.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 47 / 292 (3) The Federal Ministry of Labour, Social Affairs, Health and Consumer Protection shall cooperate with comparable organisations in other Member States to settle cross-border disputes, and to promote cross-border cooperation with other complaints bodies and ombudsmen.
CHAPTER 2: MUTUAL ASSOCIATIONS
SECTION 1: GENERAL PROVISIONS
Term
Article 35. An association that pursues insurance activities for its members based on the principle
of mutuality (mutual association) requires a licence pursuant to Article 6 para. 1 in order to commence business activities. Name
Article 36. The name of the association shall express the fact that mutual insurance activities are
being pursued.
Articles of association
Article 37. (1) The articles of association must be issued in the form of a notarial deed.
(2) The articles of association shall specify:

1. the name and head office of the association;
2. the object of the undertaking;
3. the form of the association’s disclosures;
4. the beginning of the membership;
5. the initial fund;
6. the manner of funding by the members;
7. the contingency reserve;
8. the appropriation of net income;
9. the bodies of the association and their composition; and
10. the number of members of the supreme body required for exercising minority rights.
    (3) The licence or the approval of an amendment to the articles of association shall be withheld from a mutual association if the members’ interests as arise from the membership relationship are not sufficiently safeguarded by the provisions of the articles of association. Disclosures
    Article 38. Article 18 AktG shall apply accordingly to the association’s disclosures.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 48 / 292 Establishment
Article 39. Upon the issue of the licence pursuant to Article 6 para. 1, the association shall be
considered established.
Membership
Article 40. (1) The membership in a mutual association shall be subject to the existence of an
insurance contract with it.
(2) The association may also conclude insurance contracts without establishing a membership, provided that this is expressly specified in the articles of association. In such a case the articles of association must specify in which insurance classes and to what extent insurance contracts are permitted to be concluded without establishing a membership, while considering that insurance contracts without a membership must not make up the majority. (3) The members shall not be liable towards the association’s creditors. (4) A member shall not be entitled to set off a claim held against the association against a claim held by the association for payment of contributions and supplementary contributions. (5) The members’ contributions and supplementary contributions as well as the association’s benefits paid out on the basis of the membership relationship may, where the same conditions apply, only be determined according to the same principles. Initial fund
Article 41. (1) An initial fund shall be established to cover the costs of establishing and setting up
the association, the organisation costs as well as the other expenses incurred through taking up the business activities. Unless the articles of association determine otherwise, the fund may also be used to cover losses. (2) The articles of association shall contain provisions concerning the repayment of the initial fund and, if it is not repaid, provisions concerning its use. (3) The business activities may only be taken up once the initial fund has been fully deposited in cash. (4) The FMA shall make the issue of the licence for additional insurance classes conditional on an appropriate increase in the initial fund, where the fund has not been repaid and the expense incurred by taking up activities in those insurance classes does not appear secured by other means. (5) The initial fund may only be repaid out of the net income. The repayment made in one year must not exceed the amount allocated to the contingency reserve (Article 45) in that year. Repayment of the initial fund is not permissible where distribution would result in falling below the last reported level of the Solvency Capital Requirement. (6) Those persons who have made the initial fund available must not be entitled to premature repayment. The articles of association may stipulate that and the extent to which those persons shall be entitled to participate in the management of the association, or that they are entitled to an

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 49 / 292 interest payment from the annual income and to a participation in the net income as shown by the financial statements. Entry in the company register
Article 42. (1) Mutual associations shall be entered in the company register.
(2) The application for the entry of the association in the company register shall be made by all members of the management board and supervisory board. The application may only be made once the licence for contractual insurance activities has been issued and the initial fund has been deposited in full. When applying, evidence is to be presented that the management board is not restricted in disposing of the deposited funds, specifically not through counterclaims. The registration shall also include the dates of birth and the power of representation of the management board members. (3) The articles of association, the administrative decision through which the FMA issued the licence for contractual insurance activities, the appointment certificates of the management board and supervisory board as well as a list of the supervisory board members specifying their names and dates of birth shall be appended to the association’s registration. (4) The management board members shall deposit their signatures at court. (5) The documents, in the form of originals, copies or publicly certified copies, shall be taken into the collection of documents (Article 12 of the Company Register Act (FBG; Firmenbuchgesetz)). (6) The court shall verify that the association has been duly established and registered. Where that is not the case, it shall refuse the entry. (7) When entering the association in the company register, the company name, the head office as well as the business address for serving documents, the insurance classes that activities will cover, the names and dates of birth of the chairperson, the chairperson’s deputies and the other members of the supervisory board, the amount of the initial fund, the date on which the licence was issued, as well as the names and dates of birth of the management board members shall be provided. The type of power of representation with which the management board members are vested shall also be entered. If the articles of association contain provisions concerning the duration of the association, such provisions shall also be entered. (8) The disclosure of the entry shall include the form of the association’s disclosures as well as the names and the dates of birth of the members of the initial supervisory board. Commencement of existence
Article 43. The association shall come into existence on entry in the company register. Article 34
para. 1 second sentence and para. 2 AktG shall apply accordingly.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 50 / 292 Contributions and supplementary contributions
Article 44. (1) The articles of association shall contain provisions concerning funding by the
members. The amount required annually shall be defrayed by the members’ contributions determined in advance. (2) The articles of association shall stipulate whether and to what extent the members shall be obliged to make supplementary contributions in the event that other funds do not suffice to cover losses. The articles of association may also stipulate the reduction of insurance benefits instead of or in addition to the obligation to make supplementary contributions. (3) Where supplementary contributions are stipulated, those members who joined or withdrew during a financial year shall also contribute in proportion to the length of their membership in the respective financial year. Where the contributions or the sums insured that serve as the basis for determining the supplementary contributions are changed during the financial year, the supplementary contributions shall be determined based on the higher amount. Contingency reserve
Article 45. The articles of association shall stipulate a reserve (contingency reserve) to cover any
losses resulting from the business activities and shall determine the amounts required to be allocated to it annually as well as the minimum amount it must reach. Subordinated liabilities
Article 46. Mutual associations may, with the supreme body’s consent, enter into subordinated
liabilities pursuant to Article 170 para. 1 no. 2 and issue securities for such. Appropriation of net income
Article 47. (1) The net income for the year as shown by the financial statements shall be distributed
to the members, unless it is allocated to the contingency reserve or other reserves stipulated in the articles of association, or used for the repayment of the initial fund or the payment of remunerations in accordance with the articles of association, or carried forward to the next financial year. (2) The articles of association shall define the principles for distributing the net income and specify in particular whether the net income is also to be distributed to members who withdraw during the financial year. A participation in the net income of a financial year must not be denied solely because membership expired after the end of the financial year. (3) Any distribution of the net income shall be excluded in the event that such distribution would result in falling below the last reported level of the Solvency Capital Requirement.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 51 / 292 Bodies
Article 48. (1) The association must have a management board, a supervisory board and, as its
supreme body, a general meeting of members (council of members).
(2) In cases where provinces or provincial bodies are entitled to perform certain functions at existing mutual associations as specified in the articles of association, the articles of association may continue to stipulate the performance of functions by those provincial bodies, provided the bodies otherwise necessary for the mutual associations are established. Management board
Article 49. (1) The management board shall manage the association on its own responsibility as
required for the good of the association, taking into consideration the interests of the members and employees as well as the public interest. (2) Only a natural person with full legal capacity can be a member of the management board. (3) The association shall be represented by the management board in and out of court. The management board shall be obliged towards the association to comply with the limitations to the extent of its power of representation as specified in the articles of association or by the supervisory board, or that result from a resolution by the supreme body pursuant to Article 51 para. 3. Any limitation of the management board’s power of representation shall be invalid with regard to third parties. (4) Moreover, Article 70 para. 2, Article 71 paras. 2 and 3, Articles 72 and 73 AktG shall apply accordingly to the management and representation of the association by the management board, to the signature of the management board, as well as to the change of the management board and the power of representation of its members. (5) Article 75 paras. 1, 3 and 4 and Article 76 AktG shall apply accordingly to the appointment and dismissal of the management board. (6) Articles 77 to 82 and Article 84 paras. 1, 2 and 4 to 6 AktG shall apply accordingly to the rights and obligations of the management board members. The management board members shall be obliged to pay damages to the association in the event that, contrary to this federal act or the articles of association:

1. interest is paid on the initial fund or the initial fund is repaid in full;
2. the association’s assets are distributed;
3. payments are made after the association has become insolvent or excessively indebted; this
   shall not apply to payments after the aforementioned point in time which are compatible with the due care and diligence of a prudent and conscientious directors; or
4. credit is granted.
   (7) Articles 100 and 101 AktG shall apply accordingly in the event of actions taken to the detriment of the association for the purpose of gaining advantages not in the interests of the association. (8) The regulations concerning the management board members shall also apply to their deputies.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 52 / 292 Supervisory board
Article 50. (1) The supervisory board members shall be elected by the supreme body. Article 86
paras. 1 to 3, and 5 to 9 AktG, Article 87 para. 1 second sentence and paras. 2 to 5 and 7 to 10 AktG and Articles 89 to 91 AktG shall apply accordingly to the election, dismissal and appointment of supervisory board members, to the incompatibility of management board membership with membership in the supervisory board, as well as to disclosures of changes to the supervisory board. The aforementioned shall be without prejudice to Article 110 paras. 2 and 3 of the Labour Constitution Act (ArbVG; Arbeitsverfassungsgesetz). (2) Mutual associations shall be considered equal to corporations with regard to the application of
Article 86 paras. 2, 3 and 6 AktG and Article 30a paras. 2, 3 and 5 of the Act on Limited Liability
Companies (GmbHG; Gesetz über Gesellschaften mit beschränkter Haftung).
(3) Article 92 paras. 1 to 4 and 5, Articles 93 and 94 AktG shall apply accordingly to the supervisory board’s rules of internal order, the participation in its meetings and those of its committees, as well as the convening of the supervisory board. The aforementioned shall be without prejudice to
Article 110 para. 4 ArbVG.
(4) The supervisory board shall supervise the management. The supervisory board shall convene the supreme body when required by the good of the association. Moreover, Article 95 paras. 2, 3, 5, 6 and 7, Articles 96 and 97 AktG shall apply accordingly to the supervisory board’s duties and rights. The aforementioned shall be without prejudice to Article 110 para. 3 ArbVG.
Article 98 AktG shall apply accordingly to the remuneration of supervisory board members. The
aforementioned shall be without prejudice to Article 110 para. 3 ArbVG.
(5) Article 84 paras. 1, 2 and 4 to 6 AktG as well as Article 49 para. 6 second sentence shall apply accordingly to the due diligence required from supervisory board members and to their scope of responsibility. The aforementioned shall be without prejudice to Article 110 para. 3 ArbVG. (6) Articles 100 and 101 AktG shall apply accordingly in the event of actions taken to the detriment of the association for the purpose of gaining advantages not in the interests of the association. Supreme body
Article 51. (1) The members shall exercise their rights in matters of the association within the
supreme body, unless otherwise specified by law.
(2) The supreme body shall either be the meeting of all members (general meeting of members) or the meeting of the members’ representatives (council of members), who themselves must be members of the association. If a council of members is provided for, the articles of association shall specify rules for its composition and for the appointment of its representatives; such rules shall also specify the possibility of allowing a qualified minority of members to nominate members for election. (3) The supreme body shall decide in those cases expressly specified by law or in the articles of association. The supreme body may decide on management issues only where requested by the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 53 / 292 management board or, in the case of a business transaction requiring the consent of the supervisory board as referred to in Article 95 para. 5 AktG, by the supervisory board. (4) Where the provisions of the AktG that are applicable in accordance with this federal act grant rights to a minority of shareholders whose shares make up a specified portion of the share capital, the articles of association shall specify the required minority of members of the supreme body. (5) Article 102 paras. 2 to 6, Article 104, Article 105, Article 106 nos. 1 to 4 and 7 lit. b first half￾sentence, Article 107 paras. 1, 2 and 4, Article 108 paras. 1 to 3 and 5, Article 109 paras. 1 and 2 first and second sentence, Article 116, Article 118, Article 119 paras. 1 and 3, Article 120, Article 121 para. 1, Article 122, Article 126 paras. 1, 3 and 4, Article 127 paras. 1, 3 and 4, Article 128 paras. 1 and 3 AktG shall apply accordingly to the convening of, participation in and conducting of the meeting of the supreme body, as well as to the meeting minutes and to the right of the members of the supreme body to obtain information. Where these provisions refer to shareholders, such shall be substituted with the members of the supreme body. (7) At the meeting of the supreme body, a list of the attending members as well as the representatives of members shall be compiled, specifying their names and places of residence. The list shall be made available for examination prior to the first vote; it shall be signed by the chairperson. (8) The resolutions of the supreme body require a majority of the votes cast (simple majority of votes), unless the law or the articles of association specify a larger majority. For elections, the articles of association may specify other provisions. (9) If the supreme body is a general meeting of members, the voting right may be exercised by a proxy. The power of attorney must be in writing; it shall remain in the safekeeping of the association. A member of the supreme body who is to be discharged or released from an obligation by resolution cannot exercise voting rights either for himself or for another member. The same shall apply where the association adopts a resolution on whether to assert a claim against the member. The articles of association shall otherwise determine the conditions and the form for exercising voting rights. Special audit
Article 52. (1) For the purpose of auditing transactions during the establishment or in the
management of the association, the supreme body can appoint auditors with a simple majority of votes. When adopting such a resolution, members who are also members of the management board or the supervisory board cannot vote either for themselves or for others where the audit is to cover transactions which are related to the discharge of the management board or the supervisory board or to the initiation of a lawsuit between the association and the members of the management board or the supervisory board. (2) Moreover, Article 130 paras. 2 to 4 and Articles 131 to 133 AktG shall apply accordingly to special audits.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 54 / 292 Assertion of claims for damages
Article 53. (1) The claims of the association on the members of the management board or the
supervisory board arising from the management must be asserted where the supreme body adopts such a resolution. (2) Moreover, Article 134 para. 1 second sentence and para. 2 and Article 135 AktG shall apply accordingly to the assertion of claims for damages. Amendments to the articles of association
Article 54. (1) Any amendment to the articles of association shall require a resolution by the
supreme body. The supreme body may transfer to the supervisory board the power to make amendments that concern only the wording. (2) The resolution can be adopted only where timely notice has been given of the planned amendment to the articles of association, expressly indicating the major contents (Article 119 para. 1 second sentence AktG). (3) The management board shall apply for the entry of the amendment to the articles of association in the company register. The full text of the articles of association shall be appended to the application; the text shall bear authentication by a notary public, recording that the amended provisions of the articles of association correspond to the resolution on the amendment to the articles of association and that the unamended provisions correspond to the full text of the articles of association as last entered in the company register. The FMA’s administrative decision approving the amendment to the articles of association shall be appended to the application. (4) Unless the amendment concerns information pursuant to Article 42 para. 7, it shall suffice for the entry to refer to the documents submitted to the courts. Where an amendment concerns provisions whose contents are subject to disclosure requirements, the contents of the amendment shall also be disclosed. (5) The amendment shall be valid only once it has been entered in the company register at the association’s head office. Voidability
Article 55. (1) An action may be brought, on grounds of breach of law or the articles of association,
to contest a resolution adopted by the supreme body (action to set aside a resolution). Such an action can also be on grounds that a member of the supreme body has intentionally attempted through exercising voting rights to gain, for himself or a third party and to the detriment of the association or its members, special advantages not in the interests of the association, where the resolution is suited to this purpose. Article 100 para. 3 AktG shall apply. (2) Moreover, Article 195 paras. 1a, 3 and first sentence of para. 4, as well as Articles 196, 197 and 198 AktG shall apply accordingly to the grounds for contesting a resolution, to the power to contest a resolution and to the action to set aside a resolution. Where the aforementioned provisions refer to

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 55 / 292 shareholders, in the case of Article 198 para. 1 AktG shareholders shall be substituted with the members of the association and in all other cases with the members of the supreme body. Nullity
Article 56. (1) A resolution by the supreme body shall be considered null and void where:

1. the supreme body was not convened pursuant to Article 105 para. 1, Article 106 no. 1 or
   Article 107 para. 2 AktG, unless all members of the supreme body were present or represented
   and no member objected to the resolution;
2. the resolution was not authenticated pursuant to Article 120 paras. 1 and 2 AktG;
3. the resolution conflicts with the nature of a mutual association or its contents violate
   regulations which are solely or predominantly intended to protect the association’s creditors or which are otherwise in the public interest; or
4. the contents of the resolution violate accepted principles of morality.
   (2) Financial statements adopted by the supreme body shall be null and void where no statutory audit pursuant to Article 268 of the Corporate Code (UGB; Unternehmensgesetzbuch) was performed. (3) Financial statements adopted by the management board with the supervisory board’s approval shall be null and void where:
5. the management board or the supervisory board has not properly participated in adopting
   the financial statements;
6. the conditions referred to in para. 1 nos. 3 or 4 apply; or
7. no statutory audit pursuant to Article 268 UGB was performed.
   (4) Moreover, Article 199 para. 2, Article 200, Article 201 and Article 202 paras. 2 and 3 AktG shall apply accordingly to the grounds for nullity, the curing of nullity and the action for declaration of nullity. Dissolution
   Article 57. (1) The mutual association shall be dissolved:
8. through resolution by the supreme body;
9. one year after all licences have expired;
10. on the institution of bankruptcy proceedings over the association’s assets; or
11. when a decision against the institution of bankruptcy proceedings on grounds of inadequate
    cost recovery becomes legally effective.
    (2) Dissolution through a resolution by the supreme body requires a majority of at least three quarters of the votes cast. (3) Any resolution by the supreme body to dissolve the association requires the approval of the FMA. Approval shall only be withheld where the members’ interests as arise from the membership relationship are not sufficiently safeguarded.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 56 / 292 (4) In the event that the association is dissolved through a resolution by the supreme body, the insurance relationships between the association and its members shall be terminated as of the date specified in the resolution, but no sooner than four weeks after the resolution to dissolve the association becomes effective. (5) Article 204 AktG shall apply accordingly to the application and entry of the dissolution. The FMA’s administrative decision approving the dissolution shall be appended to the application. Winding-up
Article 58.(1) On dissolution the association shall be wound up unless bankruptcy proceedings have
been instituted over the association’s assets.
(2) The same regulations shall apply during the winding-up process as prior to dissolution unless others arise from the provisions of this federal act and from the purpose of the winding-up. (3) New insurance contracts must not be accepted during the winding-up process, and existing ones must not be increased or extended. (4) The initial fund may only be repaid if the claims of other creditors, including those held by members arising based on insurance relationships, have been satisfied or secured. Supplementary contributions must not be collected for the repayment. (5) Unless otherwise specified in the articles of association, the assets remaining after all debts have been defrayed or secured shall be distributed to those persons who were members at the time of the dissolution. Distribution shall take place in accordance with the principles governing distribution of the net income. (6) Moreover, Article 206 para. 1 and the first, third and fourth sentences of para. 2, Articles 207 to 211, 213 and 214 AktG shall apply accordingly to the winding-up process. Transfer of portfolio
Article 59. (1) Agreements by means of which the insurance portfolio of an association is entirely or
partially transferred to another undertaking require the supreme body’s consent, Article 29 notwithstanding. The resolution on the transfer of the entire portfolio requires a majority of at least three quarters of the votes cast. (2) The FMA shall also withhold approval of the transfer of portfolio where the members’ interests arising from the membership relationship are not sufficiently safeguarded. Merger
Article 60. (1) Associations may be merged (consolidated) while avoiding winding-up procedures.
The merger can take place:

1. through a transfer of the entirety of an association’s (transferor association’s) assets to
   another association (transferee association), with the members of the transferor association becoming members of the transferee association (merger by absorption); or

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 57 / 292
2. by establishing a new association to which the entirety of the assets of each of the merging
associations is transferred, with the members of the merging associations becoming members of the new association (merger by consolidation). (2) The merger requires the consent of the participating associations’ supreme bodies in order to become valid. The resolutions by the supreme bodies require a majority of at least three quarters of the votes cast. (3) The FMA’s administrative decision approving the merger shall be submitted to the company register. (4) Article 220 para. 3, Article 222, Article 225 para. 1, para. 2 first and second sentence and para. 3,
Article 225a para. 1 and para. 3 nos. 1, 2 and 4 as well as Articles 226 to 230 AktG shall apply
accordingly to any merger by absorption.
(5) Article 220 para. 3, Article 222, Article 225 para. 2 first and second sentence, Article 225a para. 1 and para. 3 nos. 1, 2 and 4, Articles 226 to 228, Article 230 as well as Article 233 para. 1 second sentence, paras. 2, 4 and 5 AktG shall apply accordingly to any merger by consolidation. Transformation into a joint stock company
Article 61. (1) An association can be transformed into a joint stock company through a resolution by
the supreme body. Such a resolution requires a majority of at least three quarters of the votes cast. (2) Every member is entitled to object to the transformation by submitting a registered letter by no later than the end of the third day before the resolution is to be adopted. (3) In the manner of disclosure specified in the articles of association, the management board shall inform all the association’s members of the contents of the intended resolution authorising the transformation (paras. 5 and 6) no later than when the supreme body is convened. Such disclosure shall indicate the option of raising an objection (para. 2) and the rights ensuing from such action. (4) The resolution authorising the transformation requires the approval of the FMA. Approval shall be withheld where the transformation would pose a threat to the members’ interests. (5) The share capital, the par value in the case of par value shares, and the number of shares in the case of no-par value shares shall be specified in the resolution authorising the transformation. The par value of the share capital must not exceed the value of those assets of the association which remain after deduction of debt. The par value of the shares issued on the occasion of the transformation or the amount of the share capital attributable to the individual no-par value share must not exceed EUR 100. (6) Unless the resolution authorising the transformation states otherwise, the association’s members shall participate in the share capital. Unless all members hold an equal share in the share capital, the amount of participation may only be determined in accordance with one or more of the following criteria:

1. the amount of the sum insured;
2. the amount of the contributions;

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3. the amount of the life/health insurance provision;
4. the principles governing distribution of the net income; or
5. the duration of membership.
(7) Where after applying the distribution criteria the value of a member’s share is lower than the lowest par value of the shares or than the pro-rata amount of the share capital that is attributable to the single no-par value share, that member shall not be taken into account when determining the share in the share capital, unless several such members were to agree to be regarded as a collective holding joint ownership in one share as referred to in Article 63 AktG. Furthermore, the shares shall be rounded so as to be divisible by the lowest par value of the shares or the lowest pro-rata amount of the share capital attributable to the single no-par value share and so as to fully account for the share capital. (8) If the par value of the share is higher than the proportional share as determined according to the distribution criteria, the difference shall be paid to the joint stock company. If it is lower or the member is not given a participation, the joint stock company shall render payment to compensate for the difference or the share. (9) Articles 19, 20, 24 to 27, 31, 39 to 47, Article 245 para. 3, Article 246 paras. 2 and 3, Article 247 paras. 2 to 4, Articles 248, 249 and 251 AktG shall apply accordingly. (10) The FMA’s administrative decision approving the resolution authorising the transformation shall be appended to the application for the entry of the transformation in the company register. (11) The association shall continue to exist in the form of a joint stock company as of the date when the transformation is registered. From that time on the members of the association shall be deemed shareholders in accordance with the resolution authorising the transformation. (12) Any member of the association objecting to the transformation as referred to in para. 2 is entitled to an appropriate cash settlement from the company or a third party offering such cash settlement. The second and third sentences of Article 253 AktG shall apply accordingly. (13) After the entry of the transformation in the company register, the shareholders shall be requested in writing to collect the shares due to them, setting a time limit of at least six months.
Article 179 para. 3 AktG shall apply accordingly to shares not collected within the time limit.
Transfer of insurance activities to a joint stock company
Article 62. (1) A mutual association may transfer its entire insurance activities to one or several joint
stock companies by means of universal legal succession in accordance with the following provisions. (2) The transfer shall take place as a contribution in kind at book values as per the end of the financial year. Several transfer transactions made as per the same effective date shall be deemed uniformly made. A transfer balance sheet, which has been audited and approved by the association’s statutory auditor, shall be submitted together with the application for the entry of the joint stock company’s head office in the company register. The transferred insurance activities shall be detailed in the articles of association, in the agreement on the contributions in kind or in an annex thereto in such

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 59 / 292 a way as to allow the transferred creditor and debtor positions to be identified. The balance sheet on which the transfer is based must be drawn up no later than nine months prior to the application for entry in the company register. The own funds ensuing from the transfer shall be allocated to the share capital or the committed capital reserves (Article 229 para. 5 UGB), with the exception of subordinated liabilities. (3) The transfer shall only be admissible:

1. to one or more joint stock companies established for this purpose as their sole shareholder;
2. to one or more joint stock companies established for this purpose together with other
   associations; or
3. to one or more existing insurance joint stock companies, individually or jointly with other
   associations.
   (4) The transfer requires the consent of the supreme body. The resolution of the supreme body requires a majority of at least three quarters of the votes cast. The FMA shall withhold approval of the transfer as referred to in Article 29 where the members’ interests arising from the membership relationship are not sufficiently safeguarded. (5) The transfer shall be considered as establishment by means of contributions in kind (Article 20 para. 1 AktG). Article 226 AktG shall apply with regard to the protection of creditors. Effects of the transfer
   Article 63. (1) The universal legal succession connected to the transfer pursuant to Article 62 shall
   take effect upon the entry of the joint stock company or the capital increase in the company register. The transmission by means of universal succession shall be entered in the company register. The FMA’s administrative decision approving the transfer shall be appended to the application for entry. (2) The transmission of title by means of universal legal succession shall include the entirety of the assets belonging to the insurance activities transferred as well as all rights and obligations connected to the insurance activities transferred. In particular, the licence for contractual insurance activities and the approvals granted for the insurance activities transferred shall be transmitted with the transfer. (3) The transferring mutual association shall continue to exist. Its object shall be limited to asset management. Amendments to the articles of association require the approval of the FMA. The activities of the management board members shall not be considered full-time activities as referred to in Article 120 para. 2 no. 4. The management board shall consist of at least two persons and the articles of association shall rule out any power of sole representation, general managing power of attorney or commercial power of attorney for a single person which covers the entirety of business activities. Article 37, Article 38, Article 40 para. 3, Article 42, Articles 47 to 56, Article 57 para. 1 nos. 1, 3 and 4, paras. 2, 3 and 5, Article 58 paras. 1, 2, 5 and 6, Article 60, Article 85 paras. 3 to 6, Article 122 para. 1 no. 1 first sentence, Article 123 para. 3, Articles 136 to 139, Article 140 paras. 5 and 6, Articles 144 to 148, Article 149 paras. 1 to 3, Article 155, Article 246, Article 248 paras. 2, 3 and 7 to 9,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 60 / 292
Article 260, Article 263, Article 264, Article 272 paras. 1, 4 and 5, Article 274 paras. 1 to 7, Article 275
paras. 1 and 3, Article 276 and Article 309 shall apply accordingly. Article 287 shall not apply. (4) The membership in a mutual association shall be tied to the existence of an insurance relationship with a joint stock company to which the insurance activities have been transferred. The conclusion of an insurance contract with the joint stock company shall establish membership in the mutual association and, in the event that more than one association hold shares, membership in all associations. The membership may also be established by the joint stock company through taking over the insurance portfolio belonging to another mutual association or a joint stock company to which a mutual association’s insurance activities have been transferred pursuant to Article 62. The joint stock company may also conclude insurance contracts without establishing a membership, provided this is expressly specified in the articles of association. (5) Where the association’s share in a joint stock company to which its insurance activities have been transferred falls below 26% of the voting shares, the FMA shall be notified immediately. The FMA shall:

1. order the association to restore compliance with statutory provisions within an appropriate
   period of time;
2. dissolve the association in the event of repetition or continuation. Following dissolution by
   the FMA, the supreme body of the association shall carry out the winding-up process in accordance with Article 58 and adopt a winding-up plan. The winding-up plan requires the approval of the FMA. Approval shall be withheld where the members’ interests are not sufficiently safeguarded. The association shall not be required to be dissolved in the event that the association’s supreme body adopts a resolution to transform it into a private foundation as referred to in Article 66 within the specified period. In this case, the FMA shall set a period within which the transformation must take place. Where several associations have transferred their insurance activities to a joint stock company, the procedures specified under this paragraph shall be applied to all of those associations in the event that the total of their shares falls below 26%. (6) Para. 5 shall not be applied in the event that the members insured with a joint stock company are fully compensated for their rights pursuant to Article 58 para. 5 and other participations constituted pursuant to Article 62 amounting to at least 26% continue to exist. The determination of the total compensation amount requires the approval of the FMA. Approval shall be withheld where the members’ interests arising from the membership relationship are not sufficiently safeguarded. Rights of the supreme body
   Article 64. (1) Following a transfer pursuant to Article 62, in addition to Article 51, the following
   provisions shall apply to the association’s supreme body:
3. The management board of the association shall additionally request a resolution of the
   supreme body in all matters falling within the scope of responsibility of the annual general

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 61 / 292 meeting of a joint stock company. The members’ right to demand information shall also extend to the matters of the joint stock company related to the subject matter of the resolution.
2. For the purpose of auditing transactions occurring during the joint stock company’s
establishment or management, the supreme body may appoint auditors with a simple majority of votes. Article 52 shall otherwise apply.
3. The claims of the joint stock company on the management board or supervisory board
members arising from the management must be asserted where the supreme body adopts such a resolution. Article 53 shall otherwise apply. (2) Article 51 para. 8 shall be applied to the adoption of a resolution pursuant to para 1. Effects of restructuring
Article 65. (1) If, as a result of a legal transaction requiring approval pursuant to Article 29,the entire
insurance activities or insurance portfolio or integral parts thereof belonging to one of the joint stock companies mentioned under Article 62 para. 3 are transferred to another company, Article 63 para. 5 shall not apply:

1. where the management board of the association provides evidence of having informed the
   supreme body of the effects of the legal transaction and the supreme body has granted its approval to that legal transaction by a majority of at least three quarters of the votes cast; and
2. where and as long as the association:
   a. directly holds at least 26% of the voting shares in that other company, b. holds at least 26% of the voting shares in the joint stock company and the latter in turn holds more than 50% of the voting shares in the other company, and provisions in the articles of association or another legal basis guarantee that the association has significant influence on that other company, or
   c. directly holds voting shares in that other company or in the joint stock company and
   provisions in the articles of association or another legal basis guarantee that the association has significant influence comparable to that referred to in lit. a on that other company or that the association has significant influence comparable to that referred to in lit. b on the joint stock company and on the other company. Evidence of the possible avenues of influence as specified in lit. b and lit. c is to be presented to the FMA. (2) Article 63 para. 4 shall be applied to the scope of restructuring pursuant to para. 1 under the proviso that membership in the association is tied to the existence or conclusion of an insurance contract with the other company as referred to in para. 1; the rights of the supreme body pursuant to Article 64 shall apply accordingly to the other company mentioned in para. 1 as well. (3) The FMA shall be notified immediately of any breach of the provisions of para. 1 no. 2. The FMA shall:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 62 / 292

1. order the association to restore compliance with statutory provisions within an appropriate
   period of time;
2. dissolve the association in the event of repetition or continuation. Following dissolution by
   the FMA, the supreme body of the association shall carry out the winding-up process in accordance with Article 58 and adopt a winding-up plan. The winding-up plan requires the approval of the FMA. Approval shall be withheld where the members’ interests are not sufficiently safeguarded. (4) In the event that more than one mutual association is transferred to a joint stock company pursuant to Article 62 as of the same date, and those associations:
3. in the case of para. 1 no. 2 lit. a concurrently hold shares in the other company; or
4. in the case of para. 1 no. 2 lit. b concurrently hold shares in the joint stock company,
   those associations’ share are to be totalled. In the case of para. 1 no. 2 lit. c, the decisive criterion is the joint influence able to be exercised by those associations. Transformation of legal form into a private foundation
   Article 66. (1) Mutual associations that have transferred their entire insurance activities to one or
   several joint stock companies may, by resolution of the supreme body, be transformed into a private foundation pursuant to the Private Foundation Act (PSG; Privatstiftungsgesetz) subject to the following provisions (transformation of legal form). The resolution requires a majority of at least three quarters of the votes cast. The foundation deed and the closing balance sheet of the mutual association (para. 5) shall be made available at the association’s head office for the members’ examination for at least one month prior to the day of the meeting of the supreme body at which the resolution on the transformation is to be adopted. Prior to making the documents available, the association’s members shall be informed thereof in the manner specified for the association’s disclosures in the articles of association. (2) The resolution authorising the transformation requires the approval of the FMA. Approval shall be withheld where the foundation deed does not comply with the provisions of this federal act or where the transformation in conjunction with the contents of the foundation deed would pose a threat to the interests of the members as future beneficiaries of the private foundation. (3) The following provisions shall apply to the private foundation resulting from the association’s transformation:
5. The association shall be deemed the donor; it may not reserve the right to amend the
   foundation deed, to establish an appendix to the deed, to revoke the private foundation or to exercise other rights to influence legal relationships.
6. The private foundation shall be established for an indefinite period. Article 35 para. 2 no. 3
   PSG shall not be applied.
7. The private foundation shall invest more than half of its total assets, based on the foundation’s
   most recently audited balance sheet, in companies belonging to the same group (Article 195

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 63 / 292 para. 1 no. 3 lit. a) as the joint stock company to which the transformed association transferred the insurance activities as specified in Article 62. Only shares in share capital and subordinated liabilities pursuant to Article 170 para. 1 no. 2 that are eligible to cover the group’s Solvency Capital Requirement shall be considered investments within the meaning of this paragraph. In addition, the companies belonging to the group shall continue to jointly hold more than 50% of the voting shares in the joint stock company to which the transformed association transferred the insurance activities as specified in the Article 62. Where the private foundation holds shares in a subsidiary of the group, all assets belonging to the subsidiary may, to an extent proportional to the private foundation’s participation in the subsidiary, additionally be included in the calculation of total assets; in this case, the private foundation’s share in the subsidiary is to be deducted. When auditing the financial statements, the statutory auditor shall verify and report on compliance with this provision. In the interests of the beneficiaries, the foundation’s management board shall ensure ongoing compliance with this provision.
4. The FMA shall be immediately notified of any breach of the provisions in no. 3. The FMA shall:
a. order the private foundation to restore compliance with statutory provisions within an appropriate period of time; b. dissolve the private foundation in the event of repetition or continuation. Following dissolution by the FMA, the private foundation’s management board shall carry out the winding-up process in accordance with Article 58, in which case the association shall be substituted with the private foundation and the members with the beneficiaries, and adopt a winding-up plan. The winding-up plan requires the approval of the FMA. Approval shall be withheld where the beneficiaries’ interests are not sufficiently safeguarded. The provisions in no. 3 shall not be considered breached as long as the private foundation’s share in the joint stock company to which the transformed association transferred its insurance activities does not fall below 26% of the voting shares. If the private foundation holds shares in a joint stock company to which several associations transferred their insurance activities, the provisions in no. 3 shall only be considered breached in the event that the private foundation’s share in the joint stock company together with the share of the associations concerned or, if they have been transformed into a private foundation, of the private foundations concerned falls below 26%. Neither shall the provisions in no. 3 be considered breached in the event of a restructuring as defined in Article 65. In this case, Article 65 para. 1 no. 2 and para. 2 shall be applied such that the association shall be substituted with the private foundation, the members’ interests shall be substituted with the beneficiaries’ interests and membership in the association shall be substituted with beneficiary status in the private foundation.
5. Any later amendments to the foundation deed shall be adopted by the bodies of the
foundation. The adopted amendment requires the approval of the FMA. Approval shall be withheld where the amended foundation deed does not comply with the provisions of this

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 64 / 292 federal act or where the amended foundation deed would pose a threat to the beneficiaries’ interests. The foundation’s management board shall apply for entry of the amendment to the foundation deed in the company register. The resolution adopting the amendment, authenticated by a notary public, and the FMA’s administrative decision approving the resolution shall be appended to the application. The court (Article 40 PSG) shall serve on the FMA the decision concerning entry of the amendment to the foundation deed.
6. Beneficiary status in the private foundation shall be tied to the existence of an insurance
relationship with the joint stock company to which the transformed association transferred its insurance activities or branches of insurance activity. The conclusion of an insurance contract with that joint stock company establishes beneficiary status in the private foundation, and in the case of the participation of several private foundations beneficiary status in all of those private foundations. The joint stock company may, provided that this is expressly specified in the articles of association, also conclude insurance contracts without establishing beneficiary status in the private foundation. The detailed conditions may be stipulated by contract between the private foundation and the joint stock company. Even without such a contractual arrangement, the joint stock company shall be obliged to disclose to the private foundation, at its written request, the names and addresses of those persons who acquired beneficiary status by concluding an insurance contract. The end of the insurance relationship results in the end of the beneficiary status.
7. The association’s assets as shown by the closing balance sheet (para. 5) shall be permanently
dedicated to the private foundation and shall be maintained; any net income as shown by the financial statements shall be distributed to the beneficiaries unless it is allocated to the profit reserves or other reserves provided for in the foundation deed, or used for remunerations stipulated in the PSG or is carried forward to new account. The amounts required to maintain the participation of the private foundation in the joint stock company to which the transformed association transferred its insurance activities may always be allocated to the reserves. Article 47 para. 2 shall be applied, with the foundation deed replacing the articles of association. In the case specified in no. 3, amounts equal to the shares in the share capital and in the subordinated liabilities as referred to in Article 170 para. 1 no. 2 of companies belonging to the same group may also be allocated to the reserves.
8. Those persons who were beneficiaries pursuant to no. 6 at the time of dissolution shall be
deemed ultimate beneficiaries. Unless the foundation deed stipulates otherwise, the assets remaining after the winding-up shall be distributed to those beneficiaries in accordance with the principles for the distribution of the net income.
9. The private foundation may also use the designation “Versicherungsverein auf
Gegenseitigkeit” or another designation containing the word “Versicherungsverein” (both meaning mutual association) as part of its name (Article 2 PSG). (4) The following provisions shall apply to the bodies of a private foundation arising from the transformation of an association:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 65 / 292

1. The private foundation shall have a supervisory board.
2. Article 15 paras. 2 and 3 and Article 23 para. 2 last sentence PSG shall not be applied to the
   private foundation.
3. The previous members of the association’s management board shall become members of the
   first management board of the private foundation, and the members of the association’s supervisory board shall become members of the first supervisory board.
4. Succeeding or additional members of the private foundation’s management board shall be
   appointed by the supervisory board. The supervisory board shall also be responsible for the premature dismissal of a management board member for good cause if this is provided for in the foundation deed.
5. The appointment of succeeding or additional members of the supervisory board shall be by
   majority vote of the remaining supervisory board members. Each intended appointment shall be announced in advance at the private foundation’s expense in the official gazette “Amtsblatt zur Wiener Zeitung”. The beneficiaries shall be entitled to submit a written appointment proposal for the attention of the private foundation’s management board within three weeks from the announcement. The foundation deed shall specify the number of beneficiaries required to support the appointment proposal in order for it to be discussed. If more than one nomination meets this condition, only the appointment proposal supported by the majority of the beneficiaries must be discussed. The appointment proposal shall not be binding. If the supervisory board does not yet include a member nominated by the beneficiaries, a deviation from the appointment proposal shall require a majority of two thirds of the remaining supervisory board members.
6. The activities of the members of the foundation’s management board shall not be considered
   full- time activities as referred to in Article 120 para. 2 no. 4. The foundation’s management board shall consist of at least two persons and the foundation deed shall rule out any power of sole representation, general managing power of attorney or commercial power of attorney for a single person which covers the entirety of business activities. (5) The management board of the mutual association shall prepare a closing balance sheet that complies with the provisions of Chapter 7 on accounting and consolidated accounting while taking into account Article 63 para 3. Article 220 para. 3 AktG shall apply accordingly. The management board shall submit the closing balance sheet together with the foundation deed to the FMA in the course of obtaining its approval. (6) The management board shall apply for the entry of the association’s transformation in the company register. The application shall always include:
7. the resolution authorising the transformation authenticated by a notary public;
8. evidence of having announced that the foundation deed and the closing balance sheet have
   been made available for examination;
9. the FMA’s administrative decision approving the resolution authorising the transformation;
10. the association’s closing balance sheet as referred to in para. 5; and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 66 / 292
5. the audit report pursuant to Article 11 para. 3 PSG.
(7) On entry of the transformation in the company register, the association continues to exist as a private foundation. The court (Article 40 PSG) shall serve on the FMA the decision concerning entry of the private foundation. (8) Article 38, Article 85 paras. 3 to 6, Article 122 para. 1 no. 1 first sentence, Article 123 para. 3, Articles 136 to 139, Article 140 paras. 5 and 6, Articles 144 to 148, Article 149 paras. 1 to 3, Article 155,
Article 246, Article 248 paras. 2, 3 and 7 to 9, Article 260, Article 263, Article 264, Article 272 paras. 1,
4 and 5, Article 274 paras. 1 to 7, Article 275 paras. 1 and 3, Articles 276 and 309 shall be applied accordingly. Article 287 shall not apply. Merger of private foundations
Article 67. (1) Private foundations pursuant to Article 66 may be merged by absorption thereby
avoiding winding-up procedures.
(2) The merger agreement shall be concluded in writing.
(3) The merger requires the consent of each of the private foundations’ supervisory boards. In order for the resolution to be valid, at least two thirds of the supervisory board members must be present and the resolution must be approved by a majority of at least three quarters of the votes cast. (4) The merger requires the approval of the FMA. Approval shall be withheld where the merger appears suited to pose a threat to the beneficiaries’ interests. (5) The management board of each of the private foundations shall apply for entry of the merger in the company register with the court in whose district the private foundation has its head offices. The merger agreement as well as the resolutions of the supervisory boards of the private foundations involved in the merger shall be appended to the application of the transferee private foundation in the original or as a certified copy. (6) The court in whose district the transferee private foundation has its head offices shall enter the merger for all the involved private foundations at the same time. On entry of the merger for the transferee private foundation, the assets of the transferor private foundation including its debts shall pass to the transferee private foundation. The beneficiaries of the transferor private foundation shall become beneficiaries of the transferee private foundation. As soon as the merger is entered, the transferor private foundation shall expire. Article 226 AktG shall apply accordingly.
SECTION 2: SMALL MUTUAL ASSOCIATIONS
General provisions
Article 68. (1) The scope of activities of a small mutual association must be limited with regard to
territory, type of business and group of persons. The scope of activities shall be deemed limited with regard to territory where, in accordance with the articles of association, it extends to the federal province in which the association has its head offices as well as to certain immediately neighbouring

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 67 / 292 regions. The scope of activities shall be deemed limited with regard to the type of business where only the risks specified under no. 3, restricted to the risks of fire, storm, hail and other natural forces other than storm, nos. 8 and 9 of Annex A are covered, with the exception of damage caused by nuclear energy. The scope of activities shall be deemed limited with regard to group of persons where the association does not comprise more than 20 000 members. Article 83 para. 2 and the second sentence of para. 7 shall be applied accordingly. (1a) Mutual associations whose activity exclusively consist of the assumption of risks that have been released by small mutual associations, shall also be considered as small mutual associations.
Article 83 para. 2 nos. 1 to 3 and the second sentence of para. 7 shall be applied accordingly.
(2) The FMA shall decide whether a mutual association is to be considered a small mutual association. (3) The licence of a small mutual association shall only be valid within Austria. Any coverage of risks situated in another country is excluded. (4) (repealed in the amendment published in BGBl. I 16/2018). Applicability of the general provisions
Article 69. (1) The provisions of Section 1 shall apply accordingly to small mutual associations, with
the exception of Article 37 para. 1, Article 38, Article 39, Article 40 para. 2, Article 42, Article 43,
Article 46, Article 47 para. 3, Article 48 para. 1, Article 49 paras. 3 to 6, Article 50 paras. 1 to 3, para. 4
third sentence, paras. 5 and 6, Article 51 paras. 5 and 6, Article 52 para. 2, Article 53 para. 2, Article 54 paras. 3 to 5, Article 55, Article 56 para. 1 nos. 1 and 2, para. 2 and para. 3 no. 3, Article 57 para. 5,
Article 58 para. 6, Article 60 paras. 3 to 5 and Articles 61 to 67.
(2) A small mutual association shall be established and shall be deemed to exist upon granting of the licence. Article 6, Article 7 para. 4, Article 8 para. 2 nos. 1, 2 and 4 and para. 6, Article 12 paras. 1 and 4 to 7 and Article 84 shall be applied accordingly. Article 8 para. 2 no. 4 shall apply under the proviso that coverage of the Solvency Capital Requirement shall be substituted with coverage of the own funds requirements pursuant to Article 70 para. 2. (3) Amendments to the articles of association shall become effective with the approval of the FMA. (4) Small associations may apply for entry in the company register on a voluntary basis. In this case,
Article 42 paras. 2 to 8 and Article 54 paras. 3 to 5 shall be applied accordingly. Where a small mutual
association is not entered in the company register, the FMA shall ensure that the small mutual association is entered in the supplementary register for other concerned parties, and that changes that it becomes aware of are also entered. (5) Article 28, Article 29 paras. 1 to 3 and para. 6, Article 31, Article 33, Article 34, Article 86, Article 87 paras. 1 to 4, Article 91, Article 246 paras. 1 and 2, Article 247 para. 2, Article 248 para. 2 and para. 3 no. 1, paras. 7 and 9, Article 252, Article 272, Article 274 paras. 1 to 8, Article 275, Article 276,
Article 278, Article 279 paras. 1 and 2, Article 281, Article 283 para. 1 first case in no. 1, nos. 2 and 4,
paras. 2 to 4, Article 284 and Article 285 paras. 1, 2 and 4, Article 286, Article 306 and Articles 308 to

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 68 / 292 311, Articles 313 to 316 shall apply accordingly to small mutual associations. Article 278 and
Article 279 paras. 1 and 2 shall apply under the proviso that coverage of the Solvency Capital
Requirement shall be substituted with coverage of the own funds requirements pursuant to
Article 70 para. 2.
(6) The dissolution by resolution of the supreme body (Article 57 para. 1 no. 1) shall become effective no earlier than as of the FMA’s approval of the resolution. Own funds requirements
Article 70. (1) The own funds requirements of small insurance undertakings shall be determined on
the basis of the retained earned premiums and the retained total sum insured. The FMA shall define by regulation the detailed provisions for determining the own funds requirements, giving consideration to the special circumstances of small mutual associations and in particular to their limited scope of activities. (2) Small mutual associations must at all times cover the own funds requirements by means of own funds as defined in Article 71. (3) A distribution of the annual surplus to the members shall be excluded, where such a distribution would lead to a shortfall of the most recently reported own funds requirement. Own funds
Article 71. (1) The own funds of small mutual associations consist of the initial fund, provided that
it may be used for the coverage of losses, the contingency reserve, the risk reserve and the other reserves. (2) At the time of their calculation, the own funds shall be free from any foreseeable tax liability or shall be adapted in the event that taxes on income reduce the amount up to which the own funds components can be used to cover risks or losses. Investments
Article 72. (1) Assets belonging to the following categories are eligible to be invested by small
mutual associations:

1. debt securities;
2. shares and other variable yield participations;
3. units in UCITS and other collective investment schemes;
4. loans;
5. land and immovable property rights;
6. cash at bank and in hand.
   (2) The FMA shall determine by regulation the details for investments, in particular the localisation of assets as well as the maximum amounts for the categories and for individual assets, where this is necessary to ensure ongoing compliance with the obligations under the insurance contracts.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 69 / 292 Exceeding the scope of activities
Article 73. (1) Where the activities pursued by a small mutual association exceed the scope defined
in Article 68 para. 1, the FMA shall order the association to choose whether to once again restrict business activities to that scope or to apply for a licence pursuant to Article 6 para. 1 or Article 83 para. 1, setting an appropriate period of time to do so. Where the business activities of a small mutual association exceed the amounts specified in Article 83 para. 2, Article 83 para. 5 shall be applied accordingly. (2) Where the small mutual association does not restrict its activities to the scope defined in
Article 68 para. 1 or where the FMA does not grant a licence pursuant to Article 6 para. 1 or Article 83
para. 1, the FMA shall prohibit business activities. The prohibition shall have the same effect as a resolution to dissolve the association. Maximum amount of liability
Article 74. (1) The articles of association of a small mutual association shall define a retention
amount up to which the association may bear any accepted risks (maximum amount of liability). (2) Approval of this amendment to the articles of association shall be withheld where the interests of the policyholders and beneficiaries are not sufficiently safeguarded, specifically where ongoing compliance with the obligations under the insurance contracts cannot be expected. Bodies
Article 75. (1) Small mutual associations must have a management board and, as its supreme body,
a general meeting of members or a council of members.
(2) The articles of association may stipulate the appointment of a supervisory board. Small mutual associations with more than 2 000 members must have a supervisory board. Management board
Article 76. (1) The association shall be represented by the management board in and out of court.
The management board may consist of only one person where the business activities do not require a greater number of management board members. (2) The management board members must be fit and proper to perform their duties. Whether they are of good repute (proper) shall be evaluated based on Article 120 para. 2 no. 2. (2a) The appointment and resignation of management board members shall be notified to the FMA without delay. All documents are to be attached to the notification of appointment that are necessary to permit the checking of their fitness and propriety pursuant to para. 2. Article 122 para. 2 shall apply accordingly. (3) The management board shall be obliged towards the association to comply with the limitations to the extent of its power of representation as specified in the articles of association or by the supervisory board, or that result from a resolution by the supreme body. Any limitation of the power

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 70 / 292 of representation shall be invalid with regard to third parties. Moreover, Article 70 para. 2, Article 71 para. 2 and Article 72 AktG shall apply accordingly to the management and representation of the association by the management board and to the signature of the management board. (4) The management board members shall be appointed by the supervisory board for a maximum period of five years, provided this is expressly specified in the articles of association, or by the supreme body for no longer than until the end of that meeting of the supreme body at which the decision is taken over the discharge for the fourth financial year after the financial year when the appointment was made. A recurrent appointment shall be admissible. The body responsible for the appointment shall be entitled to revoke the appointment where there is good cause. Such cause shall be in particular gross breach of duty or incapacity of due business management. (5) If the management board lacks the required members, in urgent cases they shall be appointed by the FMA at the request of a party involved for a period until the deficiency has been remedied. (6) The management board members may be granted appropriate remuneration for their expenditure of time and work. The remuneration amount shall be determined as a fixed sum by the supreme body, or if a supervisory board has been appointed, by that supervisory board, taking the financial situation of the association and the workload of the management board into account. (7) The association may grant a loan to the management board members and employees of the association, their spouses and minor children as well as to third parties acting on account of one of those persons, only with the consent of the FMA. Consent shall be refused where this would otherwise pose a threat to the interests of the policyholders and beneficiaries. (8) Article 84 para. 1 AktG shall apply accordingly to the management board members’ due diligence obligation. Management board members who culpably violate their obligations shall be obliged to compensate the association for the resulting damage as joint and several debtors. Claims of the association arising from this obligation must be asserted where the supreme body adopts such a resolution or at the request of one tenth of the members of the supreme body. (9) In the event of a lawsuit against management board members, the association shall be represented by the supervisory board or, where such has not been appointed, by authorised parties elected by the supreme body. Supervisory board
Article 77. (1) The supervisory board members shall be elected by the supreme body for no longer
than until the end of that meeting of the supreme body at which the decision is taken over the discharge for the fourth financial year after the financial year when the board was elected. Re￾election shall be admissible. The supreme body shall be entitled to revoke the appointment of a supervisory board member prior to the expiry of the term of office. Otherwise Article 86 para. 1 AktG shall apply accordingly.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 71 / 292 (2) The members of the supervisory board must be members of the association. They cannot simultaneously be management board members and permanently represent management board members; they also must not manage the affairs of the association in the capacity of employees. (2a) The appointment and resignation of management board members as well as the election and termination of the function as chairperson of the supervisory board shall be notified to the FMA without delay. (3) Article 94 shall apply accordingly to the convening of the supervisory board. (4) Article 95 para. 2 first sentence, paras. 3, 4 and 5, Article 96 para. 1 and Article 97 para. 1 AktG shall apply accordingly to the duties and rights of the supervisory board. (5) Article 84 para. 1 AktG shall apply accordingly to the supervisory board members’ due diligence obligation. Supervisory board members who culpably violate their obligations shall be responsible for compensating the association for any resulting damage. Claims of the association arising from this obligation must be asserted where the supreme body adopts such a resolution or at the request of at least one tenth of the members of the supreme body. Supreme body
Article 78. (1) Within the first five months of every financial year, the supreme body shall decide on
the discharge of the management board members and, if appointed, of the supervisory board members. (2) The supreme body shall be convened in the cases expressly specified by law or in the articles of association. The supreme body shall also be convened at the written request of at least one tenth of its members stating the purpose and the reasons. The members of the supreme body shall be entitled to request, in the same manner, the supreme body to announce in advance matters to be decided by resolution. If the management board does not comply with the request, the FMA may authorise the members of the supreme body who stated the request to convene the supreme body or to announce the matter. (3) Where the supreme body consists of a general meeting of members, its convening shall be made known by publication or by notifying the members in writing, with the detailed provisions having to be specified in the articles of association. Where the supreme body consists of a council of members, the individual representatives shall in any case be notified in writing. Moreover, Article 105 paras. 1 and 2, Article 106 nos. 1 and 3, Article 107 paras. 1 and 4, Article 108 paras. 1 to 3 as well as the first half-sentence of the first sentence and the second sentence of para. 5, Article 116 para. 2, Article 118,
Article 119 paras. 1 and 3, Article 121 para. 1, Article 122 and Article 128 paras. 1 and 3 AktG shall
apply accordingly to the convening of the supreme body and participation in its meetings. Where these provisions refer to shareholders, such shall be substituted with the members of the supreme body.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 72 / 292 (4) The chairperson of the management board or the deputy shall chair the meeting of the supreme body; in the absence of such persons, the most senior member of the supreme body by age shall chair the meeting to elect a chairperson. (5) Minutes shall be taken of the meeting of the supreme body, with the minutes signed by the chairperson. (6) The management board shall provide all members of the supreme body at their request with information on matters of the association. Accounting
Article 79. (1) Within the first three months of the financial year, the management board of a small
mutual association shall prepare the financial statements and a management report for the preceding financial year. Within the first five months of the financial year, the supreme body shall decide on the adoption of the financial statements. Article 137 para. 1, Article 140 paras. 5 and 6,
Article 143 para. 1, Article 147 para. 1 nos. 1 to 3, 6 and 7 and para. 2, Article 149 paras. 1 to 3, Articles
151 and 153 shall apply accordingly to the accounting of small mutual associations. 10% of the profit for the year shall be allocated to the risk reserve until the reserve reaches 25% of the amount of the contingency reserve specified in the articles of association. The risk reserve shall take precedence over the contingency reserve with respect to the coverage of losses. (2) The articles of association shall specify an audit of the financial statements by one or more auditors. The articles of association shall also include detailed provisions specifying the scope of the audit, the appointment of the auditor as well as the audit report made to the supreme body. Members of the management board or of the supervisory board must not be appointed as auditors. (3) The FMA is entitled to request any details necessary for the ongoing supervision of the insurance undertakings’ business activities and for the keeping of insurance statistics. In this context, the FMA shall, with the consent of the Federal Minister of Finance, impose by regulation such special orders as are necessary for the accounting of small mutual associations with regard to the special nature of contractual insurance activities, the appropriate scope of information concerning the business activities that are provided to the policyholders and the general public, and the requirements for supervision of business activities by the FMA. The regulation shall take into account the special circumstances of small mutual associations and specify advantages. Taking these requirements into account, the orders of the FMA may include the following in particular:

1. regulations on the determination and calculation of the technical provisions;
2. regulations on the special valuation of assets;
3. regulations on the report to the FMA as well as on submission deadlines;
4. regulations on the structuring of the balance sheet and the income statement;
5. regulations on the details to be included in the notes to the financial statements and the
   management report;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 73 / 292
6. regulations on requirements for the financial statements and the management report to be
personally signed;
7. regulations on electronic transmission of the information to the FMA, which can comprise
definitions of data attributes including the data record format; and
8. regulations on the disclosure of the financial statements.
Winding-up
Article 80. (1) Unless other persons are appointed in the articles of association or by a decision of
the supreme body, the management board members shall in the capacity of liquidators be responsible for the winding-up. (2) At the request of at least one tenth of the members of the supreme body or of the supervisory board, the FMA shall appoint or dismiss the liquidators where there is good cause. The supreme body may dismiss at any time liquidators who have not been appointed by the FMA. (3) While making reference to the dissolution of the association, the liquidators shall invite the association’s creditors to file their claims. The invitation shall be published in the official gazette “Amtsblatt zur Wiener Zeitung” and in a local newspaper or in a manner otherwise customary in the area. (4) The liquidators shall render accounts at the beginning of the winding-up process and continue to prepare financial statements at the end of each year. The previous financial year of the association may be retained. (5) The supreme body shall decide on the rendering of accounts at the beginning of the winding-up process, on the financial statements and on the discharge of the liquidators and the supervisory board. (6) The assets may be distributed only after the passage of one year from the day when the invitation to the creditors pursuant to para. 3 was published. Moreover, Article 209 paras. 1 and 2, Article 210 paras. 1 to 4 and Article 213 paras. 2 to 3 AktG shall apply accordingly to the winding-up process. (7) On completion of the winding-up process and after rendering the final accounts, the liquidators shall notify the FMA of the completion of the winding-up. Merger
Article 81. (1) It shall not be admissible to merge by absorption an association that is not a small
mutual association with a small mutual association or to newly form an association through a merger by consolidation of associations that are not small mutual associations with small mutual associations. (2) Article 222, Article 225a para. 3 nos. 1, 2 and 4, as well as Articles 226 to 228 AktG shall apply accordingly to any merger by absorption. (3) Article 222, Article 225a para. 3 nos. 1, 2 and 4, Articles 226 to 228 and Article 233 para. 1 second sentence and para. 2 AktG shall apply accordingly to any merger by consolidation.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 74 / 292 (4) Where a small mutual association merges by absorption with an association that is not a small mutual association, the management board of the transferee association shall apply for the entry in the company register. Article 225 para. 1 second sentence nos. 1 to 3 AktG shall apply accordingly.
Article 229 AktG shall apply accordingly to the liability for damages of the management board and
supervisory board members of the transferee association.
(5) Where a small mutual association merges by absorption with another small mutual association,
Article 76 para. 8 and Article 77 para. 5 shall apply to the liability for damages of the management
board and supervisory board members of the transferee association. The period of limitation for asserting claims for damages as referred to in Article 76 para. 8 and Article 77 para. 5 shall commence with the FMA’s approval of the merger. (6) Where the merger by consolidation of small mutual associations results in an association that is not a small mutual association, Article 229 and Article 233 para. 4 second and third sentence and para. 5 AktG shall apply accordingly. The court competent for the company register in whose district the new association is established shall enter the merger. (7) In the cases where the aforementioned provisions do not require entry of the merger in the company register, approval by the FMA shall be substituted for the entry of the merger in the company register or for its public announcement.
CHAPTER 3: SMALL INSURANCE UNDERTAKINGS
SECTION 1: GENERAL PROVISIONS
Applicability of the general provisions
Article 82. Article 28, Article 29 paras. 1 to 3 and 6, Article 31, Articles 91 to 99, Articles 101 to 103,
Article 123 paras. 7 to 9, Article 123a, Article 127c, Article 127d, Articles 128 to 135e, Articles 142 to
156, Article 246, Article 247 para. 2, Article 248 paras. 2 to 3 and paras. 7 to 9, Article 249, Article 260 paras. 1, 3 and 4, Article 261, Article 263 para. 1 nos. 2, 3, 6 to 8 and para. 2, Articles 264 to 266,
Article 272, Article 274 paras. 1 to 8, Article 275, Article 276, Article 278, Article 279 paras. 1 and 2,
Article 281, Article 283 para. 1 no. 1 first case, no. 2 and no. 4 and paras. 2 to 4, Article 284, Article 285
paras. 1, 2 and 4, Article 286, Article 300 to Article 302 para. 1 first sentence and paras. 2 to 6 and Articles 303 to 316 shall apply accordingly to small insurance undertakings. Article 278 and
Article 279 paras. 1 and 2 shall apply under the proviso that coverage of the Solvency Capital
Requirement shall be substituted with coverage of the own funds requirements pursuant to
Article 90.
Licence
Article 83. (1) The licence of a small insurance undertaking shall be valid only within Austria. Small
insurance undertakings may only be operated in the legal form of a joint stock company or a mutual

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 75 / 292 association. In the case of small insurance undertakings, a licence for life insurance classes and a licence for other classes of insurance shall be mutually exclusive. Article 6, Article 7 paras. 4 and 5,
Article 8 para. 6 and Article 12 paras. 1 and 4 to 7 shall apply accordingly.
(2) The application for a licence in accordance with para. 1 must demonstrate that, according to the business plan submitted for the next five financial years, the insurance undertaking’s business activities fulfil the following conditions:

1. the direct gross amount of annual premiums written and earned does not exceed EUR 5.4
   million;
2. the total technical provisions pursuant to Section 1 of Chapter 8, gross of the amounts
   recoverable from reinsurance contracts and special purpose vehicles does not exceed EUR 26.6 million;
3. where the undertaking belongs to a group, the total technical provisions pursuant to Section 1
   of Chapter 8 of the group defined as gross of the amounts recoverable from reinsurance contracts and special purpose vehicles do not exceed EUR 26.6 million; and
4. the indirect gross amount of premiums written and earned does not exceed EUR 0.6 million or
   10% of the direct gross amount of premiums written and earned, or the technical provisions pursuant to Section 1 of Chapter 8 for reinsurance acceptances gross of the amounts recoverable from reinsurance contracts and special purpose vehicles do not exceed EUR 2.7 million or 10% of the technical provisions pursuant to Section 1 of Chapter 8 for direct business gross of the amounts recoverable from reinsurance contracts and special purpose vehicles. (3) The granting of a licence for one of the insurance classes listed in Annex A nos. 10, 11, 12, 14 and 15 to small insurance undertakings shall be excluded. Small insurance undertakings may not cover risks attributed to these classes of insurance as ancillary risks as referred to in Article 7 para. 5. (4) In addition to Article 8 para. 2 nos. 1, 2 and 7 to 9, no licence shall be granted where:
5. the undertaking does not possess own funds to cover the minimum amount of the own funds
   requirements;
6. the undertaking cannot show evidence that it will be in a position to consistently hold own
   funds to cover the own funds requirements pursuant to Article 88 para. 1; or
7. the undertaking cannot show evidence that it will be in a position to establish a system of
   governance in accordance with the provisions of Section 2 or the articles of association do not rule out any power of sole representation, general managing power of attorney or commercial power of attorney for a single person which covers the entirety of business activities. (5) Where the business activities of a small insurance undertaking have exceeded the amounts set out in para. 2 in a financial year, the undertaking shall submit a new business plan for the next three financial years to the FMA for approval. The undertaking shall demonstrate in the business plan that the business activities will no longer exceed the amounts set out in para. 2 in the second financial year at the latest or that it will be in a position to comply with the provisions applicable to insurance undertakings pursuant to Article 1 para. 1 no. 1 from the beginning of the fourth financial year at the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 76 / 292 latest. If the business activities have exceeded the amounts set out in para. 2 for three consecutive years, the undertaking shall be subject to supervision as an insurance undertaking pursuant to
Article 1 para. 1 no. 1 as from the fourth year. If the undertaking shows evidence that it fulfils the
licensing requirements as set out in Articles 6 to 10, the FMA shall determine by administrative decision that the undertaking’s licence is to be considered a licence pursuant to Article 6 para. 1 as from the fourth year. If evidence is not provided within a reasonable period of time, the FMA shall prohibit the business activities by means of an administrative decision. (6) The FMA shall establish whether an insurance undertaking qualifies as a small insurance undertaking at the undertaking’s request. This shall result in the licence being considered a licence pursuant to Article 83 para. 1 and the undertaking being subject to supervision pursuant to Article 1 para. 1 no. 2. To this end the insurance undertaking shall submit evidence to the effect that:

1. it does not pursue activities in accordance with Section 5 of Chapter 1 in other Member States;
2. it has met the conditions set out in para. 2 for the past three years and is expected to meet
   them during the next five years; and
3. it fulfils the conditions set out in para. 3.
   (7) Small insurance undertakings shall calculate the amounts referred to in para. 2 by the balance sheet date and have them reviewed by the statutory auditor. Where this leads to an equivalent result, the technical provisions pursuant to Chapter 7 may be used in place of the technical provisions pursuant to Section 1 of Chapter 8 for calculating the amounts set out in para. 2. Business plan
   Article 84. (1) A business plan shall be submitted with the application for the licence.
   (2) The business plan of a small insurance undertaking shall include:
4. the nature of the risks which the undertaking proposes to cover; in the case of reinsurance
   acceptances, also the kind of reinsurance arrangements which the insurance undertaking proposes to make with ceding undertakings;
5. the guiding principles as to reinsurance;
6. the composition of its own funds;
7. estimates of the costs of setting up the administrative services and sales, and evidence that
   the financial resources to meet those costs are available; and
8. for pursuing the insurance class referred to in no. 18 of Annex A, details about the resources
   available to the undertaking to provide the assistance promised.
   (3) In addition to the details set out in para. 2, the business plan for the first three financial years shall include the following:
9. a forecast balance sheet and a forecast income statement;
10. estimates of the future own funds requirements on the basis of the forecasts referred to in
    no. 1;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 77 / 292
3. estimates of the financial resources intended to cover the obligations and the own funds
requirements;
4. with regard to non-life insurance and reinsurance, also the following:
a. estimates of commissions payable and other operating expenses (other than installation costs), and b. estimates of premiums and insurance benefits; and
5. with regard to life assurance, also a plan setting out detailed estimates of income and
expenditure in respect of direct business, reinsurance acceptances and reinsurance cessions. (4) The articles of association shall form part of the business plan where the insurance undertaking does not yet hold a licence to pursue contractual insurance activities. (5) Article 11 paras. 1 and 2 shall apply accordingly.
SECTION 2: GOVERNANCE
General provisions
Article 85. (1) The management board of the small insurance undertaking shall be responsible for
compliance with the provisions applicable to contractual insurance activities and the recognised principles of orderly pursuit of business. Article 120 para. 2, as well as Articles 121 and 122 shall apply accordingly to members of the management board. (2) The FMA shall be immediately notified of the election or retirement of members of the small insurance undertaking’s supervisory board. (3) Small insurance undertakings shall, for all the activities pursued on the basis of a licence granted pursuant to Article 83 para. 1, set up an internal audit function which shall report directly to the management board and whose sole purpose shall be to continuously and comprehensively verify that the business and the activities of the small insurance undertaking are conducted in a lawful, proper and appropriate manner. Taking into consideration the scope of the business, this function shall be designed in such a way as to ensure that its duties can be appropriately performed. (4) Decisions concerning the internal audit function must be made jointly by at least two management board members. The internal audit function shall report to all management board members. It shall also report to the chairperson of the supervisory board, informing them of the audit areas and significant audit findings based on the audits performed on a quarterly basis. The chairperson of the supervisory board shall report to the supervisory board on the audit areas and significant audit findings at the next supervisory board meeting. (5) Small insurance undertakings shall provide for proper administration and accounting as well as for appropriate internal control mechanisms geared in particular towards the early recognition of developments which might threaten ongoing compliance with the obligations under the insurance contracts.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 78 / 292 (6) Small insurance undertakings shall set up a risk management function to identify, assess and control the risks related to the insurance activities. This also covers the risk of money laundering and terrorist financing. Where required for the purposes of ongoing compliance with the obligations under the insurance contracts, appropriate processes and procedures shall be established for this purpose. This includes in particular the early recognition of risk potentials, the establishment of hedging and risk prevention mechanisms, as well as a comprehensive assessment of risks among the organisational units. (7) Small insurance undertakings shall, in accordance with Article 114, appoint a responsible actuary as well as a deputy. Articles 115 and 116 shall apply accordingly. Outsourcing
Article 86. (1) The FMA shall be notified in a timely manner of contracts concluded by small
insurance undertakings through which parts of the business activities within the scope of the licence granted pursuant to Article 83 para. 1 – sales, portfolio management, handling of claims, accounting, internal audit, risk management, asset investment or asset management in particular – are to be transferred wholly or to a significant extent to another undertaking (outsourcing contracts), prior to the outsourcing. Such contracts shall be subject to prior approval by the FMA. (2) Approval shall be withheld where the outsourcing contract, due to its nature or its contents, or the overall extent of the outsourcing, poses a threat to the interests of the policyholders and beneficiaries. (3) Where deemed appropriate to safeguard the interests of the policyholders and beneficiaries, the approval may be granted subject to conditions. (4) The outsourcing small insurance undertaking shall immediately notify the FMA of any substantial subsequent changes related to the functions and activities outsourced pursuant to para. 1. Where the circumstances referred to in para. 2 occur after approval has been granted or where they apply in the case of an outsourcing contract that is not subject to approval, the FMA may call for the contractual relationship to be terminated. (5) The FMA may call on the insurance undertaking to submit all necessary information on the undertaking with which the outsourcing contract is to be concluded or has been concluded, particularly the financial statements as well as other appropriate business records. Such information may not be refused on the grounds of a confidentiality obligation existing pursuant to other provisions. Reinsurance
Article 87. (1) In the case of reinsurance cessions, small insurance undertakings shall ensure that
their own obligations arising from the insurance contracts as well as the reinsurer’s obligations can be fulfilled and that the risks are appropriately diversified.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 79 / 292 (2) Prior to the conclusion of a reinsurance contract, the ceding small insurance undertaking shall provide documentary evidence confirming that the legal conditions for the conclusion of the reinsurance contract are met, and demonstrably obtain information on the net assets, financial position and results of operations as well as significant non-financial information on the reinsurer, in order to enable a sufficiently reliable assessment as to whether the reinsurer can be expected to pay its benefits according to the contract and without delay. (3) The obligations of insurance and reinsurance undertakings arising from reinsurance acceptances shall be deemed as being able to be met as referred to in para. 1. Reinsurance contracts concluded with third-country insurance and reinsurance undertakings shall be treated in the same manner where the European Commission has determined that the third country’s solvency regime is equivalent in accordance with Article 172(2) of Directive 2009/138/EC. (4) The FMA shall be immediately notified of significant changes in the reinsurance relationships. The expected effects of the changed reinsurance relationships on the amount of the own funds requirements shall be set out in particular. (5) In the case of reinsurance acceptances, the undertaking shall ensure that it can meet its own obligations arising from direct insurance.
SECTION 3: SOLVENCY MARGIN AND INVESTMENT
Own funds requirements
Article 88. (1) The own funds requirements of a small insurance undertaking shall be calculated in
accordance with Annex B and shall amount to at least:

1. EUR 1.5 million for non-life and
2. EUR 1.8 million for life insurance.
   (2) Small insurance undertakings shall at all times hold own funds pursuant to Article 89 to cover the own funds requirements. Own funds
   Article 89. (1) Own funds shall be:
3. in the case of joint stock companies the paid-up share capital, and in the case of mutual
   associations the initial fund where it may be used to cover any losses;
4. the capital reserves, the profit reserves and the risk reserve; and
5. the net profit for the year not allocated for distribution.
   (2) The provisions for bonuses in health insurance and the provision for participation in profits in life insurance shall be added to the own funds, provided that they may be used to cover any losses. (3) The following shall be deducted from the own funds:
6. the net loss;
7. the book value of own shares;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 80 / 292
3. the book value of the intangible assets;
4. participations in insurance and reinsurance undertakings, third-country insurance and third￾country reinsurance undertakings, in small insurance undertakings, credit institutions,
financial institutions, investment firms, payment institutions and electronic money institutions; and
5. shares in participation capital, supplementary capital and other subordinated capital of
undertakings referred to in no. 4 in which the small insurance undertaking holds a participation. (4) At the time of their calculation, the own funds shall be free from any foreseeable tax liability or shall be adapted in the event that taxes on income reduce the amount up to which the own funds components can be used to cover risks or losses. (5) Where a change in the reinsurance relationships is expected to result in a significant increase in the own funds requirements, the FMA may issue an order pertaining to the deduction of reinsurance that derogates from Annex B, with the current calculation already being based on the changed reinsurance contracts. (6) Upon request and on the production of proof, the FMA shall approve the inclusion of hidden reserves arising out of the undervaluation of assets in the own funds, insofar as those hidden reserves are not of an exceptional nature. This approval shall be granted for a fixed period. For the purpose of determining the extent to which hidden reserves may be included in the calculation of own funds, all valuation methods applied to assets and liabilities as well as the usability of the assets concerned shall be taken into account. The principles of Article 201 para. 2 nos. 2 and 4 UGB shall be adhered to. The inclusion of hidden reserves shall be limited to 50% of the own funds requirements. Where a small insurance undertaking does not meet the own funds requirements, this limit shall refer to the own funds. (7) Without prejudice to para. 6, any inclusion of hidden reserves in the own funds shall be ruled out where those hidden reserves do not exceed the amount of write-downs not made pursuant to the second sentence of Article 149 para. 2. (8) Where the hidden liabilities of the small insurance undertaking exceed the hidden reserves eligible pursuant to paras. 6 and 7, the FMA may demand that the difference be deducted from the own funds. Investments
Article 90. (1) Assets belonging to the following categories are eligible to be invested by small
insurance undertakings:

1. debt securities;
2. shares and other variable yield participations;
3. units in UCITS and other collective investment schemes;
4. loans;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 81 / 292
5. land and immovable property rights;
6. cash at bank and in hand.
(2) Derivative instruments such as options, futures and swaps may be used only where related to assets and liabilities and only insofar as they contribute to a reduction of investment risk or facilitate the effective management of security portfolios. (3) The FMA shall determine by regulation the details for investments, in particular the localisation of assets as well as the maximum amounts for the categories and for individual assets, where this is necessary to ensure ongoing compliance with the obligations under the insurance contracts.
CHAPTER 4: PROVISIONS FOR SPECIFIC TYPES OF
INSURANCE
SECTION 1: GENERAL PROVISIONS
Content of the insurance contract
Article 91. (1) A direct insurance contract covering risks situated in Austria shall in particular contain
provisions:

1. concerning the events on whose occurrence the insurer shall be obliged to pay out benefits,
   as well as concerning the cases for which this obligation shall be excluded or rescinded for special reasons;
2. concerning the type, extent and maturity of the benefits paid out by the insurer;
3. concerning the determination and payment of the premium which the policyholder must
   make to the insurer, as well as concerning the legal consequences ensuing in the event that the policyholder defaults on those payments;
4. concerning the term of the insurance contract, in particular whether and in what way it can be
   tacitly renewed and whether, in what way and at what time it can be terminated or otherwise rescinded in full or in part, as well as concerning the insurer’s obligations in those cases;
5. concerning the loss of the claims arising from the insurance contract where deadlines are not
   met; and
6. in addition, with regard to life insurance, concerning the conditions for and the extent to
   which advance payments will be granted on policies.
   (2) The gender factor must not result in premiums or benefits that differ between women and men.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 82 / 292
SECTION 2 - LIFE INSURANCE
General provisions for life insurance
Article 92. (1) Insurance undertakings that pursue life insurance activities in Austria or in another
Member State based on a licence granted in accordance with Article 6 para. 1 (nos. 19 to 22 of
Annex A) must submit to the FMA the actuarial bases used for calculating scales of premiums and
technical provisions:

1. prior to first using them; and
2. in the event of any change or addition to them, prior to their use.
   In the cases of unit-linked, index-linked and investment-oriented life insurance and state-sponsored retirement provision pursuant to Articles 108g to 108i of the 1988 Income Tax Act (EStG 1988; Einkommensteuergesetz), the principles of investment shall also form part of the actuarial bases. The FMA may determine by regulation more detailed rules on the content, structure and manner of transmission of the actuarial bases. (2) In the case of state-sponsored retirement provision pursuant to Article 108g to 108i EStG 1988, a detailed description of the model used to control and manage the investment risk, including the parameters used, shall be submitted to the FMA together with the actuarial bases. In addition, the insurance undertaking shall obtain an opinion from an independent expert on the quality of this model with regard to its suitability for controlling and managing the investment risk unless it covers the investment risk by means of a capital guarantee extended by a third party licensed to pursue guarantee activities. Based on that opinion, the responsible actuary shall examine the suitability of the model and the parameters used, taking the obligations arising from the insurance contracts into account. The result of that examination as well as the opinion by the independent expert shall be submitted to the FMA together with the actuarial bases. Any change or addition to the independent expert’s opinion shall be examined by the responsible actuary. The result of that examination as well as the changed or supplemented opinion shall also be submitted to the FMA. (3) The premiums for newly concluded insurance contracts must be sufficient, in accordance with actuarially based assumptions, to guarantee ongoing compliance with the obligations under the insurance contracts, and in particular to allow the establishment of appropriate technical provisions. (4) In the case of insurance contracts that include participation in profits, policyholders shall receive an appropriate portion of the surplus. Where necessary to safeguard the interests of the policyholders and beneficiaries, the FMA may, taking the market conditions into account, determine more specifically by regulation the method for setting the amount of the participation in profits, with due regard to the respective bases for assessment, and the information required to be provided to policyholders. In particular, the FMA may request evidence of the ability to fund the participation in profits and specify detailed provisions for such evidence.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 83 / 292 (5) The amounts allocated to the provision for bonuses and/or participation in profits may only be used for policyholders’ profit sharing. As yet undeclared amounts of the provision for bonuses and/or participation in profits may be released in exceptional cases, in order to avoid in the interests of the policyholders and beneficiaries any emergency situation. The insurance undertaking shall immediately notify the FMA of such use and provide evidence of the reasons indicating that the emergency situation exists. (6) The insurance undertaking shall make available for inspection, at the undertaking’s head office, documents that show the bases and methods used for calculating the technical provisions, including the provision for bonuses. Written information on the above shall be provided to anyone on request and against reimbursement of expenses. (7) The FMA may determine by regulation a maximum amount for customary funeral costs, in order to safeguard the interests of the policyholders and beneficiaries in the cases of Article 159 paras. 2 and 3 of the Insurance Policy Act (VersVG; Versicherungsvertragsgesetz). (8) The district health insurance funds (Gebietskrankenkassen) shall forward notifications of death pursuant to Article 360 para. 5 of the General Social Insurance Act (ASVG; Allgemeines Sozialversicherungsgesetz) in electronic form to insurance undertakings that pursue life insurance activities, by way of the Main Association of Austrian Social Security Institutions (Hauptverband) and against reimbursement of expenses. Occupational pension group insurance: general provisions
Article 93. (1) Occupational pension group insurance is pension insurance for groups that meets the
following conditions:

1. The insurance contract is concluded by an employer for their employees on the basis of a shop
   agreement, a collective agreement or on the basis of agreements between the employer and the individual employees, which are to be structured according to a contract sample taking account of Article 18 of the Company Pension Act (BPG; Betriebspensionsgesetz).
2. The insurance contract grants only an old-age and a survivors’ pension; an invalidity pension
   may be granted in addition. Old-age pensions are to be paid for life, invalidity pensions for the duration of invalidity and survivors’ pensions for the period specified in the insurance contract. A lump sum payment shall only be admissible where, on occurrence of the benefit event, the cash value of the amount to be paid out does not exceed the amount set out in
   Article 1 paras. 2 and 2a PKG.
3. The acquisition costs are evenly distributed over the entire duration of premium payments.
4. In the case of insurance contracts that include participation in profits, the surpluses for the
   benefit of the insured person are credited to the life/health insurance provision of individual insured persons no later than by the end of the financial year following the financial year in which the surpluses were generated.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 84 / 292 (2) Occupational pension group insurance must not be managed as unit-linked, index-linked or investment-oriented life insurance. (3) Occupational pension group insurance may also be concluded for:

1. employers who concluded occupational pension group insurance for their employees;
2. persons who pursuant to Article 1 para. 2 BPG are entitled to future benefits as specified in the
   insurance contract as a result of premiums paid by the employer and, where applicable, which they themselves paid;
3. members of representative bodies of legal persons under private law who derive income from
   this activity other than such from employment pursuant to Article 25 EStG 1988 where the employer has concluded occupational pension group insurance for the benefit of their employees;
4. persons who, based on an existing employment relationship or as members of representative
   bodies of legal persons under private law, derive from this activity income from employment pursuant to Article 25 EStG 1988, where in the course of the termination of the employment relationship or public employment a direct guarantee pursuant to Article 96 is transferred to an occupational pension group insurance. (4) For persons referred to in para. 3 nos. 1 and 3, occupational pension group insurance may only be concluded where Article 18 para. 2 BPG is taken into account when drafting the insurance contract and where the rights and obligations of such persons correspond entirely to those of the persons referred to in para. 1 no. 1, while in all cases:
5. any deadlines set forth in the VAG and the BPG shall be applied equally to all insured persons,
   and
6. no differentiation with respect to qualifying dates for the inclusion in occupational pension
   group insurance or the expulsion from occupational pension group insurance shall be allowed. (5) Where persons as referred to in para. 3 nos. 1 and 3 are included:
7. the insurance contract shall additionally include the following provisions:
   a. for persons referred to in para. 3 nos. 1 and 3, the amount of the assessment basis for the contribution, while the assessment basis must not exceed the higher amount of either two times the annual contribution ceiling pursuant to the ASVG or 150% of the assessment basis for the employee with the highest salary, b. the retirement age; it shall correspond to the retirement age as stipulated for employees in the insurance contract,
   c. the conditions for granting a disability provision, while a benefit must be paid out only
   where a legally effective administrative decision granting an occupational invalidity pension has been issued by a statutory pension insurance institution or a professional pension institution;
8. the following provisions shall be applied in addition:
   a. Article 6a para. 4 BPG with respect to additional own premiums,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 85 / 292 b. Article 6b BPG with respect to the restraints on disposal and execution of vested pension expectancies pursuant to Article 6c BPG,
c. Article 6c BPG with respect to the vesting of the payment of contributions; the
retirement from the function as defined in para. 3 nos. 1 or 3 shall be equated to the termination of a public employment contract, d. Article 6d BPG with respect to the discontinuance, suspension or restriction of the payment of premiums. (6) For persons as referred to in para. 3 no. 4, the insurance contract as based on an individual agreement to be concluded between such persons and the employer shall in particular contain the amount of the cover requirement pursuant to Article 96 and the entitlement to benefits. (7) Article 91 para. 2 shall not apply to occupational pension group insurance. Occupational pension group insurance: information requirements
Article 94. (1) The employer and the insured persons shall immediately inform the insurance
undertaking in writing of any circumstances relevant to the calculation and modification of the premiums and insurance benefits. Where such information is not furnished at all or not in due time, the employer and the insured persons shall bear any resulting disadvantages. The details shall be stipulated in the insurance contract. (2) The insurance undertaking shall keep an account for each insured person, divided according to employer’s and employee’s premiums. (2a) The information pursuant to paras. 3 to 6 must

1. be regularly updated,
2. be formulated in a clear, concise and comprehensible manner,
3. avoid the use of jargon, where generally comprehensible language may be used,
4. be consistent and not misleading both substantively as well as regarding the terminology
   used,
5. be designed in an easy-to-read format,
6. be written in German, unless the insured person has explicitly agreed to another language
   being used, and
7. be made available free of change on a durable medium pursuant to Article 5 no. 8 PKG or a
   website or upon request free of charge on paper.
   (3) The employer shall inform those natural persons who are authorised to enter into an insurance contract, prior to their inclusion in the insurance contract, about the following:
8. the name, address of the registered office of, and legal form of the insurance undertaking,
   where applicable also of the branch from where the policy is managed, as well as the fact that the undertaking is an insurance undertaking;
9. the designation and address of the competent supervisory authority for the insurance
   undertaking;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 86 / 292
3. how operational group insurance works in general, its scope, as well as all relevant options
that are made available to them;
4. the possibility to pay own premiums and the administrative processing of these premium
payments;
5. how premiums and benefits are treated from a tax perspective as well as
6. where further information is available from.
Where they are affected by this, the employer shall inform the beneficiaries (entitled) and insurance undertaking shall inform the beneficiaries (recipients) about every subsequent amendment of the insurance contract. The insurance undertaking and the employer shall provide the insured person at the latter’s request with a copy of the relevant parts of the insurance contract that apply to them in paper form. (3a) The insurance undertaking shall make all relevant information available to the employer that the latter requires for providing information pursuant to para. 3. (3b) The insurance undertaking shall make the following general information available to the insured person:

1. the name, address of the registered office of, and legal form of the insurance undertaking,
   where applicable also of the branch from where the policy is managed, as well as the fact that the undertaking is an insurance undertaking;
2. the designation and address of the competent supervisory authority for the insurance
   undertaking;
3. the rights and obligations of the insurance undertaking, the employer as well as the insured
   persons;
4. the principles regarding the investment policy;
5. the type of financial risks to be borne by the insured person;
6. a description about the type and scope of a guarantee made by the insurance undertaking;
7. the options that remain open as applicable in the occurrence of the benefit event;
8. the elective possibilities and modalities of a transfer pursuant to Article 6c para. 2 BPG;
9. the principles for calculating the participation in profits pursuant to Article 135c para. 1 no. 3;
10. a presentation of the development of the respective Deckungsstock pursuant to Article 300
    para. 1 no. 2 over the course of the last five years and
11. the structure of the costs.
    (4) The insurance undertaking shall inform the beneficiaries (entitled) annually with the reference date of 31 December of the preceding financial year about
12. The name of the beneficiary (entitled) as well as the pensionable age determined in the
    insurance contract,
13. the name, address of the registered office and legal form of the insurance undertaking, where
    applicable also of the branch from where the policy is managed, as well as the fact that the undertaking is an insurance undertaking,
14. a guarantee as well as details about where further information may be obtained,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 87 / 292
4. the premiums paid in by the employer and the employee during this financial year,
5. retained costs,
6. change in the premium reserve during the course of this financial year as well as its amount at
the end of this financial year,
7. a forecast about the likely amount of pension benefits including a disclaimer that this forecast
may deviate from the final amount of pension benefits,
8. the investment and performance of the Deckungsstock pursuant to Article 300 para. 1 no. 2,
9. all additional information to be able to fulfil obligations arising from the insurance contract.
Material changes compared to the information provided for the previous year must be clearly highlighted. Furthermore, the beneficiaries (entitled) are also to be made aware of any options that may be exercised, of the Solvency and Financial Condition Report pursuant to Article 241 by means of a specific reference that makes it possible to access this information in a simple manner, as well as where applicable about the information pursuant to Article 98. (5) The insurance undertaking shall inform the beneficiaries (recipients) annually about the state as of 31 December of the preceding financial year about the performance of the premium reserve during the course of the financial year and their amount at the end of this financial year as well as the retained costs. Furthermore, the insurance undertaking shall inform the beneficiaries (recipients) about the investment and performance of the Deckungsstock pursuant to Article 300 para. 1 no. 2 as well as all other relevant information to be able to fulfil obligations arising from the insurance contract. Material changes compared to the information provided for the previous year must be clearly highlighted. In additional, the beneficiaries (recipients) must also be informed about any changes made to the pension benefits. The pension benefit shall only be allowed to be cut at the end of the third month after the month in which the information about a reduction in pension benefit was made available to the beneficiaries (recipients). (6) The insurance undertaking must inform

1. the beneficiaries (entitled) when they reach the pensionable age stipulated in the insurance
   contract or upon request about the options for pay-out; and
2. the beneficiaries (recipients) when the benefit event occurs about the acquired claim to
   benefits for old-age, surviving dependants or invalidity as well as the method of payments and options for pay-out of the pension. (7) The FMA shall, with the consent of the Federal Minister of Finance, determine the calculation method and scenarios for the forecast pursuant to para. 4 no. 7 as well as the content of the information pursuant to para. 3a and the content and the format of the information pursuant to paras. 3b, 4, 5 and 6 by means of a Regulation, where this is necessary in the interests of the insured persons and for better comparability and transparency. (8) The insurance undertaking shall make available to an employee interest group that is eligible to enter into collective agreements, at their request, those parts of the actuarial bases relevant to benefits that are necessary for verifying the details pursuant to paras. 4 to 6 in an individual case and at the request of an insured person or beneficiary (recipient).

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 88 / 292 Occupational pension group insurance: cancellation
Article 95. (1) A cancellation of the insurance contract by the employer or by the insurance
undertaking or a termination of the insurance contract by mutual consent shall only be admissible and legally effective where it is ensured that the assets to be transferred pursuant to para. 3 will be transferred to an occupational pension group insurance scheme of another insurance undertaking licensed to pursue business activities in Austria, a Pensionskasse, an institution within the meaning of Article 5 no. 4 PKG or an institution of supplementary pension insurance pursuant to Article 479 ASVG. The cancellation or termination by mutual consent shall be legally effective only where carried out jointly for all insured persons, unless the shop agreement, the collective agreement or the agreements according to the contract sample stipulate that all pensioners or all insured persons and pensioners with non-contributory expectancies will remain with the occupational pension group insurance scheme when the insurance contract is cancelled. (1a) By way of derogation from para. 1 final sentence, in the case of an intended transfer to an institution pursuant to Article 5 no. 4 PKG the termination of the insurance contract or its cancellation by mutual consent shall also require prior approval of the majority of affected beneficiaries (entitled) and the majority of the affected beneficiaries (recipients). The insurance undertaking shall inform the beneficiaries (entitled and recipients) in writing about:

1. the intended termination or cancellation by mutual consent of the insurance contract,
2. the written agreement between the insurance undertaking and the institution pursuant to
   Article 5 no. 4 PKG about the conditions of the transfer,
3. the company name and the location of the central headquarters of the institution pursuant to
   Article 5 para. 4 PKG as well as the Member State in which the institution pursuant to Article 5
   no. 4 PKG is entered in the register or approved,
4. the company name and location of the central headquarters of the employer,
5. the main characteristics of the commitment to be managed by the institution pursuant to
   Article 5 no. 4 PKG for this employer,
6. the description of the liabilities to be transferred or premium reserves and other rights and
   obligations as well as the corresponding assets,
7. the right of approval as well as
8. the modalities of the voting procedure.
   The voting procedure must be conducted in such a way that it may not be possible to trace voting behaviour back to individual persons. An appropriate period of time shall be given to beneficiaries (entitled and recipients) for exercising their right of approval. Where not otherwise agreed, all costs of the insurance undertaking that arise in relation to the voting procedure shall be borne by the employer. (1b) The approval of termination or a cancellation by mutual consent shall be deemed to have been granted, provided respectively that more than half of the beneficiaries (entitled and recipients) addressed by the proposed termination or cancellation by mutual consent participate in the vote,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 89 / 292 and more than half of these beneficiaries (entitled and recipients) approve the termination or cancellation by mutual consent. (1c) In the event of the termination of the insurance contract by the insurance undertaking is and the intended transfer to an institution pursuant to Article 5 no. 4 PKG the termination shall require the approval of the employer in question. By way of derogation from para. 1a final sentence, provided not otherwise agreed, all costs of the insurance undertaking that arise in relation to the voting procedure shall be borne by the insurance undertaking. (2) Where the insurance contract is cancelled by the employer or the insurance undertaking, the period of notice shall be one year. The cancellation may only be made with effect as of the insurance undertaking’s balance sheet date. The termination of the insurance contract by mutual consent shall become effective no earlier than as of the insurance undertaking’s balance sheet date that is at least six months after the agreement on the termination of the insurance contract by mutual consent. (3) The value of the assets to be transferred in the event of a cancellation shall correspond to the life/health insurance provision attributed to the insurance contract. Occupational pension group insurance: transfer of pension expectancies
Article 96. (1) The transfer of pension expectancies and benefit obligations from direct guarantees
or claims arising from the Salary Act (BezG; Bezügegesetz) to an occupational pension group insurance scheme shall be admissible under the following conditions:

1. The cover requirement plus the assumed interest shall be remitted to the insurance
   undertaking within ten years from the time of the transfer.
2. At least one tenth of the cover requirement plus the assumed interest shall be remitted
   annually; advance remittances shall be admissible.
3. The obligation accepted by the employer to remit the cover requirement in instalments shall
   remain unaffected by:
   a. the occurrence of the benefit event; b. the loss of the claim; or
   c. the termination of the employment relationship during the period of the transfer.
   In the case of payment of a lump sum (Article 93 para. 1 no. 2, Article 6c para. 4 BPG or Article 5 para. 2 of the Employment Contract Law Adaptation Act – AVRAG; Arbeitsvertragsrechts￾Anpassungsgesetz) or a transfer (Article 6c para. 2 nos. 1 to 4 BPG) of a vested amount, the employer shall prematurely remit the outstanding part of the cover requirement to the insurance undertaking by no later time than the payment of the lump sum or the transfer. (2) Where the employer does not comply with the obligation to remit the cover requirement pursuant to para. 1 because conditions exist:
4. as specified in Article 6d para. 1 no. 2 BPG; or

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 90 / 292
2. for the institution of insolvency proceedings (Articles 66 and 67 of the Insolvency Code –
IO; Insolvenzordnung), the insurance undertaking shall adapt the pension expectancies and benefit obligations concerned accordingly. The employer shall provide the insurance undertaking with plausible evidence of the conditions referred to in Article 6d para. 1 no. 2 BPG. In order for the employer to discontinue the remittance of the cover requirement, the employer must first revoke their ongoing premium payments to the insurance undertaking. (3) Where the employer does not comply with their obligation to remit the cover requirement due to the occurrence of one of the conditions referred to in para 2 nos. 1 or 2, a claim from the employer’s direct guarantee shall arise from the outstanding part of the cover requirement. The claim shall be calculated in accordance with the basis for calculation used by the insurance undertaking for occupational pension group insurance. Section 3 of the BPG shall be applied to that claim with regard to the employer. The other benefit conditions pertaining to that direct guarantee result from the agreements between the employer and the insured persons on which the insurance contract is based. (4) The vested amount to which the insured person is entitled from the employer shall be calculated based on the claim pursuant to para. 3 in accordance with the following provisions:

1. the vested amount shall correspond to the cash value of the pension expectancies resulting
   from the claim pursuant to para. 3;
2. the assumed rate of interest used for occupational pension group insurance shall form the
   basis for calculating the vested amount;
3. the risk of invalidity shall not be taken into account for calculating the vested amount;
4. the vested amount shall be limited to the amount of the outstanding part of the cover
   requirement.
   (5) Where the vested amount for the direct guarantee pursuant to para. 3 when calculated in accordance with the provisions of Article 7 para. 3 no. 1 BPG exceeds the vested amount calculated pursuant to para. 4, interest having been paid at the assumed rate of interest (Article 14 para. 6 no. 6 EStG 1988), the higher value shall prevail. (6) In the case of a transfer pursuant to para. 1, employee contributions paid can also be transferred, with:
5. the employee being allowed to demand such a transfer only prior to the transfer pursuant to
   para. 1; and
6. the remittance of the employee contributions having to be made in full at the time of the
   transfer pursuant to para. 1.
   (7) In the case of the transfer of pension expectancies and benefit obligations from a direct guarantee without a survivors’ pension pursuant to para. 1 that had been granted before 1 July 1990, the insurance undertaking shall not be required to grant a survivors’ pension, Article 93 para. 1 no. 2 notwithstanding. However, this shall only extend to those insured persons to whom that benefit had been guaranteed before 1 July 1990 and to those direct guarantees to which no major changes have

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 91 / 292 been made since 1 July 1990 as well as in the course of the transfer. Once the transfer has taken place, such guarantees may only be changed where they subsequently comply with Article 93 para. 1 no. 2. Paragraphs 1 to 5 shall be applied to the remittance of the cover requirement. Occupational pension group insurance: advisory committee
Article 97. (1) An advisory committee shall be set up for pursuing occupational pension group
insurance activities.
(2) The advisory committee is entitled:

1. to make proposals for the investment policy;
2. to demand information about the occupational pension group insurance activities from the
   management board, the supervisory board or the administrative board and the managing directors;
3. to send representatives to the annual general meeting or the meeting of the supreme body
   who are entitled to pose questions about the occupational pension group insurance activities; and
4. to demand the inclusion of items of occupational pension group insurance in the agenda of
   the supervisory board or administrative board and to send a representative to the supervisory board or administrative board who participates in the discussion of those agenda items without a voting right. (3) The advisory committee consists of four members, two of whom are to be appointed by the insurance undertaking’s management board or managing directors and one each of whom is to be delegated by a voluntary employee interest group entitled to enter into collective bargaining agreements and a statutory employee interest group. (4) The advisory committee draws up its own rules of procedure and elects one chairperson and one deputy from among its members. It reaches decisions with a simple majority of votes. In the event of an equal number of votes, the chairperson has the casting vote. Occupational pension group insurance: information requirements in the case of transfers between an occupational pension group insurance scheme and a Pensionskasse
   Article 98. (1) The insurance undertaking shall inform an insured person or a beneficiary (entitled)
   (Article 5 no. 1 PKG), at their request, of a pending decision pursuant to Article 5 para. 5, Article 5a para. 1, Article 6c para. 5 or Article 6e para. 1 BPG, by means of durable data medium as referred to in Article 3(1) of Commission Delegated Regulation (EU) 2017/565. The insurance undertaking shall record details of the information and decision of the insured person and keep those records for at least seven years. The records shall be kept on a data medium in order to be immediately available to the FMA in future as well. (2) The information pursuant to para. 1 shall include:
5. for the insured person, the vested amount pursuant to Article 6c para. 1 BPG;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 92 / 292
2. the relevant parameters of the actuarial bases used for calculating scales of premiums and
technical provisions;
3. prior to a decision pursuant to Article 5 para. 5 or Article 5a para. 1 BPG, a presentation of the
differences between the occupational pension group insurance scheme and a pension company commitment; and
4. based on the life/health insurance provision or the vested amount pursuant to Article 5 para. 1
BPG and, on the assumption that the premiums or contributions previously paid by the employer and the employee will remain the same, forecasts of the future changes in the insurance benefit and in the old- age pension in each case, with the calculations being based on at least three different assumptions as to yield development in addition to the guaranteed rate. (3) The FMA shall determine by regulation the content and structure of the information pursuant to para. 1 and requirements concerning the calculations pursuant to para. 2 no. 4. The FMA shall in this regard take account of the interest of the insured persons in adequate, comparable and clearly intelligible information.
SECTION 3: NON-LIFE
Legal expenses insurance
Article 99. (1) An insurance undertaking that pursues legal expenses insurance activities (no. 17 of
Annex A) shall ensure that:

1. the persons concerned with claims settlement in that insurance class do not pursue the same
   or a similar activity in another insurance class of that undertaking or for another undertaking related to that undertaking pursuant to Article 189a no. 8 UGB, or
2. claims settlement in that insurance class is transferred to another undertaking.
   (2) The undertaking’s management to whom claims settlement is transferred pursuant to para. 1 no. 2 must be fit and proper in accordance with Article 120 para. 1 and para. 2 nos. 1 and 2. The persons involved in claims settlement in that undertaking must not pursue the same or a similar activity in an undertaking related to that undertaking pursuant to Article 189a no. 8 UGB. (3) Para. 1 shall not apply to risks which refer to disputes or claims arising out of, or in connection with, the use of sea-going vessels. Compulsory insurance on third party motor vehicle liability
   Article 100. (1) The licence for motor vehicle liability insurance (no. 10 of Annex A), other than
   carrier’s liability, may only be granted where the insurance undertaking appoints a claims representative in each of the other Member States. (2) The claims representative has the task of settling such claims for the insurance undertaking as have been inflicted on persons who have their residence or head office in the state for which the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 93 / 292 representative has been appointed, where such claims have been inflicted by a vehicle in another state whose national insurers’ bureau has joined the green card system and where that vehicle is normally based in a Member State other than the country of residence or establishment of the injured person and that vehicle is insured at the head office of an insurance undertaking situated in Austria or a branch of an insurance undertaking situated in Austria with head offices in another Member State than the injured person’s country of residence or establishment, or at the Austrian branch of a third- country insurance undertaking. (3) The following conditions shall apply to the claims representative:

1. The representative shall be fit and proper to perform their duties and shall in particular be
   able to handle the claims in the official language(s) of the state for which they have been appointed.
2. The representative shall have their residence or head office or a branch in the state for which
   they have been appointed.
3. The representative shall be authorised to collect all necessary information in relation to claims
   falling under para. 2 and to take the necessary measures to settle such claims.
4. The representative shall possess sufficient powers to represent the insurance undertaking in
   handling and satisfying the claims falling under para. 2 in relation to injured persons and to settle such claims. (4) The FMA shall be immediately notified of any change of persons or of the address of the claims representative. Health insurance similar to life insurance: general provisions
   Article 101. Where health insurance as referred to in no. 2 of Annex A is subject to an agreement
   pursuant to Article 178f para. 1 VersVG, it may be operated in Austria only in a manner similar to life insurance, with the following conditions applying:
5. the premiums paid shall be calculated on the basis of sickness tables and other relevant
   statistical data in accordance with actuarial bases;
6. a life/health insurance provision (reserve for increasing age) based on actuarial principles
   shall be established;
7. except in the case of group insurance, the policyholder shall be granted the contractual right
   to change to another scale of premiums of the same type of insurance (Article 178b VersVG) up to the previous level of cover, with the rights and the reserve for increasing age acquired during the contractual period being credited. Health insurance similar to life insurance: special provisions
   Article 102. (1) Insurance undertakings which in Austria or in another Member State operate health
   insurance in a manner similar to life insurance based on a licence granted in accordance with no. 2

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 94 / 292 of Annex A, shall submit to the FMA the actuarial bases used for calculating scales of premiums and technical provisions:

1. prior to first using them; and
2. in the event of any change or addition to them, prior to their use.
   The FMA may determine by regulation detailed rules on the content, structure and manner of transmission of the actuarial bases. (2) The premiums for newly concluded or changed insurance contracts must be sufficient, in accordance with actuarially based assumptions, to guarantee ongoing compliance with the obligations under the insurance contracts, and in particular to allow the establishment of appropriate technical provisions. (3) Article 92 paras. 4 to 6 shall be applied to health insurance operated in a manner similar to life insurance. Accident insurance similar to life insurance
   Article 103. Where accident insurance is operated in a manner similar to life insurance (accident
   insurance with return of premiums), Article 92 shall apply.
   SECTION 4: FINITE REINSURANCE AND SPECIAL PURPOSE
   VEHICLES
   Finite reinsurance
   Article 104. Insurance and reinsurance undertakings which pursue finite reinsurance activities shall
   ensure that they are able to properly identify, measure, monitor, manage, control and report the risks arising from those contracts or activities. Special purpose vehicles
   Article 105. (1) Special purpose vehicles with head offices in Austria require a licence granted by the
   FMA in accordance with the provisions set forth in the implementing regulation (EU). (2) Where due to the special purpose vehicle’s legal form an entry in the company register is required, it may only be made after the administrative decision granting the licence is presented in the original or as a publicly certified copy. The court with jurisdiction over the company register shall additionally submit to the FMA any orders and decisions about such entries.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 95 / 292
CHAPTER 5: GOVERNANCE
SECTION 1: GENERAL REQUIREMENTS
Responsibility of the management board or administrative board
Article 106. The management board or administrative board of the insurance or reinsurance
undertaking shall be responsible for compliance with the provisions applicable to contractual insurance activities and the recognised principles of orderly pursuit of business. Governance system requirements
Article 107. (1) Insurance and reinsurance undertakings shall set up an effective system of
governance which provides for sound and prudent management of the business and which is proportionate to the nature, scale and complexity of the business operations. The system of governance shall be subject to regular internal review. (2) The governance system shall at least include:

1. an adequate transparent organisational structure with a clear allocation and appropriate
   segregation of responsibilities;
2. an effective system for ensuring the transmission of information; and
3. compliance with the requirements laid down in Articles 108 to 113, Articles 117 to 119 and
   Articles 120 to 123.
   (3) Insurance and reinsurance undertakings shall prepare and implement written policies in relation to at least the following areas:
4. risk management;
5. internal control;
6. internal audit;
7. remuneration; and
8. where relevant, outsourcing.
   Those written policies shall be subject to prior approval by the management board or administrative board, be adapted without delay in view of any significant change in the area concerned and be reviewed at least annually. (4) Insurance and reinsurance undertakings shall take reasonable steps and develop contingency plans to ensure continuity and regularity in the performance of their activities. To that end, undertakings shall employ appropriate and proportionate systems, procedures and resources, and shall in particular establish and manage network and information systems pursuant to Regulation (EU) 2022/2254.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 96 / 292 Governance function
Article 108. (1) Insurance and reinsurance undertakings shall set up the following governance
functions:

1. risk management function;
2. compliance function;
3. internal audit function; and
4. actuarial function.
   (2) Significant rulings concerning persons that manage the governance functions shall be made jointly by at least two management or administrative board members. Outsourcing
   Article 109. (1) Insurance and reinsurance undertakings which outsource functions or business
   activities to service providers remain responsible for meeting all prudential requirements. The outsourcing insurance and reinsurance undertaking shall ensure that:
5. the service provider cooperates with the FMA;
6. the undertakings themselves, their statutory auditors and the FMA have effective access to
   data related to the outsourced functions or business activities;
7. the FMA has effective access to the business premises of the service provider; and
8. the service provider fulfils the conditions of Article 28 (1) of Regulation (EU) 2016/679 and
   complies with the provisions of Article 28 (3) of Regulation (EU) 2016/679. (2) Contracts by which critical or important functions or activities are outsourced must be notified to the FMA in a timely manner prior to the outsourcing. They shall require the prior approval of the FMA where the service provider is not an insurance or reinsurance undertaking. (3) Outsourcing of critical or important operational functions or activities shall not be undertaken if it will lead, to any of the following:
9. materially impairing the quality of the system of governance of the insurance or reinsurance
   undertaking concerned;
10. unduly increasing the operational risk;
11. impairing the ability of the FMA to monitor the compliance of the outsourcing insurance or
    reinsurance undertaking with the provisions applicable to contractual insurance activities;
12. undermining continuous service provision free from defects to policyholders and
    beneficiaries.
    Where deemed appropriate to avoid occurrence of the cases referred to in nos. 1 to 4 or to avoid otherwise endangering the interests of the policyholders and beneficiaries, approval can be granted subject to conditions. (4) The outsourcing insurance or reinsurance undertaking shall immediately notify the FMA of any substantial subsequent changes related to the functions and activities outsourced pursuant to para. 2. Where the circumstances referred to in paras. 1 and 3 occur after approval has been granted

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 97 / 292 or where these circumstances apply in the case of an outsourcing contract that is not subject to approval, the FMA may call for the contractual relationship to be terminated. (5) The FMA may call on the outsourcing insurance or reinsurance undertaking to submit all necessary information on the service provider with which the outsourcing contract is to be concluded or has been concluded, particularly the financial statements as well as other appropriate business records. Reporting of infringements
Article 109a. Insurance and reinsurance undertakings shall have appropriate procedures in place to
enable their employees, whilst keeping their identity confidential, to report any internal breaches of the provisions contained in this federal act, in regulations or administrative decisions enacted on the basis of this federal act, against the provisions of the implementing Regulation (EU) or Delegated Regulations (EU) 2017/2358 and 2017/2359, of Regulation (EU) 2019/2088, of Articles 5, 6 and 7 of Regulation (EU) 2020/852, and the Technical Standards (EU), or any administrative decision issued on the basis of those Regulations to a suitable body. The procedure in relation to this paragraph must correspond with the requirements set out in Article 273a para. 2 nos. 2 and 3. Article 273a para. 3 shall apply accordingly.
SECTION 2: RISK MANAGEMENT
Risk management system
Article 110. (1) Insurance and reinsurance undertakings shall have in place an effective risk
management system comprising all the required strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report the risks:

1. at an individual and at an aggregated level, to which they are or could be exposed; and
2. the interdependencies between those risks.
   (2) The risk management system shall be required to be effective, integrated into the organisational structure and in the decision-making processes of the insurance or reinsurance undertaking and to properly consider the persons who effectively run the insurance or reinsurance undertaking or have other key functions. It shall cover the risks to be included in the calculation of the Solvency Capital Requirement as well as the risks which are not or not fully included in the calculation thereof, and at least the following areas:
3. underwriting and reserving;
4. asset-liability management;
5. investment, in particular derivatives and similar commitments;
6. liquidity and concentration risk management;
7. operational risk management;
8. reinsurance and other risk mitigation techniques.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 98 / 292 The written policy on risk management referred to in Article 107 para. 3 no. 1 shall comprise strategies relating to the areas referred to in nos. 1 to 6. Where the volatility adjustment is applied, the written policy on risk management referred to in Article 107 para. 3 no. 1 shall comprise criteria for the application of the volatility adjustment. (3) Where insurance or reinsurance undertakings apply the matching adjustment or the volatility adjustment, they shall set up a liquidity plan. The plan shall project the incoming and outgoing cash flows in relation to the assets and liabilities subject to those adjustments. (4) As regards asset-liability management, insurance and reinsurance undertakings shall regularly assess:

1. the sensitivity of their technical provisions pursuant to Section 1 of Chapter 8 and eligible own
   funds in relation to the assumptions underlying the extrapolation of the relevant risk-free interest rate term structure;
2. where the matching adjustment is applied, the insurance and reinsurance undertakings shall
   additionally consider:
   a. the sensitivity of their technical provisions pursuant to Section 1 of Chapter 8 and eligible own funds in relation to the assumptions underlying the calculation of the matching adjustment, including the calculation of the fundamental spread referred to in Article 166 para. 4 no. 2, and the possible effect of a forced sale of assets on their eligible own funds, b. the sensitivity of their technical provisions pursuant to Section 1 of Chapter 8 and eligible own funds in relation to changes in the composition of the assigned portfolio of assets, and
   c. the impact of a reduction of the matching adjustment to zero;
3. where the volatility adjustment is applied, the insurance and reinsurance undertakings shall
   additionally consider:
   a. the sensitivity of their technical provisions pursuant to Section 1 of Chapter 8 and eligible own funds in relation to the assumptions underlying the calculation of the volatility adjustment and the possible effect of a forced sale of assets on their eligible own funds, and b. the impact of a reduction of the volatility adjustment to zero. Where the reduction of the matching adjustment or the volatility adjustment to zero would result in non-compliance with the Solvency Capital Requirement, the undertaking shall submit to the FMA an analysis of the measures it could apply in such a situation to re-establish the level of eligible own funds covering the Solvency Capital Requirement or to reduce its risk profile to restore compliance with the Solvency Capital Requirement. (5) When using external credit rating assessment in the calculation of technical provisions pursuant to Section 1 of Chapter 8 and the Solvency Capital Requirement, insurance and reinsurance undertakings shall assess the appropriateness of those external credit assessments as part of their risk management by using additional assessments wherever practicably possible.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 99 / 292 (6) As regards investment risk, insurance and reinsurance undertakings shall clearly document that they comply with Articles 124 and 125. (7) The risks referred to in para. 1 also cover the risks of money laundering and terrorist financing as well as risks in connection with insurance distribution. Own risk and solvency assessment
Article 111. (1) As part of their risk management system, insurance and reinsurance undertakings
shall conduct their own risk and solvency assessment. That assessment shall be an integral part of the business strategy, shall be taken into account on an ongoing basis in the strategic decisions and include at least the following:

1. the overall solvency needs taking into account the specific risk profile, approved risk tolerance
   limits and the business strategy;
2. the compliance, on a continuous basis, with the Solvency and Minimum Capital
   Requirements, as laid down in the provisions of Chapter 8, Sections 3 to 6, and with the requirements regarding technical provisions, as laid down in Chapter 8, Section 1; and
3. the significance with which the risk profile deviates from the assumptions underlying the
   Solvency Capital Requirement, calculated with the standard formula or by using an internal model. (2) For the purposes of para. 1 no. 1, the undertaking shall have in place processes which are proportionate to the nature, scale and complexity of the risks and which enable the insurance or reinsurance undertaking to properly identify and assess the risks it faces in the short and long term and to which it is or could be exposed. The undertaking shall demonstrate the methods used in the assessment of its overall solvency needs. (3) Where the matching adjustment, the volatility adjustment or the transitional measures referred to in Articles 336 and 337 are used, coverage of the capital requirements referred to in para. 1 no. 2 shall be assessed with and without taking into account those adjustments and transitional measures. (4) Where the Solvency Capital Requirement is calculated by using an internal model, the assessment pursuant to para. 1 no. 3 shall be performed together with the recalibration that transforms the internal risk numbers into the Solvency Capital Requirement risk measure and calibration. (5) Insurance and reinsurance undertakings shall perform the own risk and solvency assessment regularly and without delay following any significant change in their risk profile. (6) The own risk and solvency assessment shall not serve to calculate the Solvency Capital Requirement. The Solvency Capital Requirement shall be adjusted only in accordance with Articles 211 to 214, Article 217 and Article 277.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 100 / 292 Risk management function
Article 112. (1) Insurance and reinsurance undertakings shall provide for a risk management
function and structure it in such a way as to facilitate the implementation of the risk management system. (2) Insurance and reinsurance undertakings using a partial or full internal model in accordance with Articles 182 and 183 shall entrust the risk management function with the following additional tasks:

1. to design and implement the internal model;
2. to test and validate the internal model;
3. to document the internal model and any subsequent changes made to it;
4. to analyse the performance of the internal model;
5. to produce summary reports; and
6. to inform the management board or administrative board and the managing directors about:
   a. the performance of the internal model, b. recommendations on areas needing improvement, and
   c. updating them on the latest improvements made to address the identified
   weaknesses.
   SECTION 3: ACTUARIAL FUNCTION AND RESPONSIBLE ACTUARY
   Actuarial function
   Article 113. (1) Insurance and reinsurance undertakings shall provide for an effective actuarial
   function:
7. to coordinate the calculation of technical provisions pursuant to Section 1 of Chapter 8;
8. to ensure the appropriateness of the methodologies and underlying models used as well as
   the assumptions made in the calculation of technical provisions pursuant to Section 1 of
   Chapter 8;
9. to assess the sufficiency and quality of the data used in the calculation of technical provisions
   pursuant to Section 1 of Chapter 8;
10. to compare best estimates with empirical data;
11. to inform the management board or administrative board and the managing directors of the
    reliability and adequacy of the calculation of technical provisions pursuant to Section 1 of
    Chapter 8;
12. to oversee the calculation of technical provisions pursuant to Section 1 of Chapter 8 within
    the scope of Article 164;
13. to express an opinion on the overall underwriting policy and on the adequacy of reinsurance
    arrangements; and
14. to contribute to the effective implementation of the risk management system referred to in
    Article 110, in particular with respect to the risk modelling underlying the calculation of the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 101 / 292 Solvency and Minimum Capital Requirements, and to the own risk and solvency assessment referred to in Article 111. (2) The responsible actuary or deputy (Article 114 para. 1) may be in charge of the actuarial function provided they fulfil the relevant conditions and the nature, scale and complexity of the business activities of the insurance undertaking is taken account of. Responsible actuary
Article 114. (1) Insurance undertakings which, within the scope of their licence granted pursuant to
Article 6 para. 1, pursue activities in the classes of:

1. life insurance;
2. health insurance similar to life insurance; or
3. accident insurance similar to life insurance
   shall appoint a responsible actuary and a deputy. One responsible actuary and deputy can be appointed for each of the insurance classes set out in nos. 1 to 3. (2) Significant rulings concerning the responsible actuary and deputy shall be made jointly by at least two management or administrative board members. Appointment as responsible actuary
   Article 115. (1) Only natural persons with full legal capacity that are fit and proper may be appointed
   as responsible actuary or deputy. To fulfil the fit requirement, their professional qualifications must include at least three years’ adequate professional experience as an actuary. (2) The insurance undertaking shall inform the FMA of the intended appointment of a responsible actuary and deputy. If there is reasonable doubt that the conditions for the appointment are fulfilled, the FMA shall object to the appointment within three months and demand the appointment of another responsible actuary or deputy. (3) If it turns out after the appointment of a responsible actuary or deputy that the conditions for their appointment are no longer fulfilled, or if it can be otherwise assumed that they will no longer be able to perform their duties in a proper manner, the FMA shall demand the appointment of another responsible actuary or deputy. (4) The insurance undertaking shall immediately notify the FMA of any retirement of a responsible actuary or deputy, also providing the grounds for retirement. (5) The FMA may determine by regulation more specific fit and proper requirements applying to the responsible actuary and their deputy. The regulation may in particular also detail any necessary documents to be submitted to the FMA as proof of compliance with the stipulated requirements. Duties and powers of the responsible actuary
   Article 116. (1) The responsible actuary shall:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 102 / 292

1. ensure that scales of premiums and technical provisions in life insurance and in health
   insurance and accident insurance similar to life insurance are calculated according to the applicable regulations and actuarial bases;
2. ensure that the participation in profits distributed to policyholders in life insurance (Article 92
   para. 4) corresponds to the profit plan;
3. assess, with due regard to the income from the investments, whether ongoing compliance
   with the obligations arising from the insurance contracts can be expected in accordance with the applicable regulations and actuarial bases used for calculating the technical provisions. (2) The management board or administrative board and the managing directors shall provide the responsible actuary with any information they require to perform their duties pursuant to para. 1. (3) The responsible actuary shall report to the management board or administrative board and the managing directors annually in writing regarding the performance of their activities pursuant to para. 1 in the preceding financial year. The insurance undertaking shall immediately but at least within five months of the financial year-end submit the report to the FMA; in justified cases, the FMA may extend this period. The FMA shall determine by regulation more detailed rules on the content, structure and method of transmission of the report. (4) If the responsible actuary finds during the performance of their activities pursuant to para. 1 that the scales of premiums and technical provisions are not calculated according to the applicable regulations and actuarial bases, or that ongoing compliance with the obligations arising from the insurance contracts cannot be guaranteed, they shall immediately notify the management board or administrative board and the managing directors thereof. If the management board or administrative board or the managing directors do not take account of the responsible actuary’s representations, the responsible actuary shall immediately inform the FMA thereof. (5) The responsible actuary shall include an audit opinion in their report (para. 3). In this regard, it shall be expressly stated whether the audit opinion is issued as an unqualified or qualified opinion. The responsible actuary shall sign the audit opinion or note on refusing to issue such, stating the place and date. The audit opinion by the responsible actuary shall not have any bearing on the responsibility of the insurance undertaking’s bodies. (6) Where an unqualified opinion is issued, the responsible actuary shall declare that:
4. the life/health insurance provision as referred to in Article 152 and the unearned premiums as
   referred to in Article 151 were calculated in accordance with the applicable regulations and actuarial bases, and the actuarial bases used for this calculation are appropriate and in line with the prudent person principle; and
5. in life insurance:
   a. the premiums for newly concluded insurance contracts will probably be sufficient to guarantee ongoing compliance with the obligations arising from the insurance contracts, in particular to enable the establishment of appropriate technical provisions pursuant to Chapter 7, and b. the participation in profits distributed to policyholders corresponds to the profit plan.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 103 / 292 (7) Where objections are to be raised, the responsible actuary shall qualify their audit opinion pursuant to para. 6 or refuse its issue. The refusal shall be included in a note, which must not be denoted as an audit opinion. Reasons shall be given for the qualification or refusal. (8) The responsible auditor shall be called upon to attend the audit committee’s meetings pursuant to Article 123 para. 9, which deal with preparing the adoption of the (consolidated) financial statements and their audit, and shall report on the material results of the report (para. 3) and the audit opinion (para. 6) as well as any objections and refusals (para. 7). (9) The responsible actuary shall be required to submit a concluding report in writing to the management board or the administrative board and the managing directors following the end of their activity about their observations in the performance of their activities pursuant to para. 1 for the time period that has not been covered by a report pursuant to para. 3. The insurance undertaking shall submit the report to the FMA without delay. The FMA may issue more precise rules about the content, structure and submission method of the report by way of a Regulation.
SECTION 4: INTERNAL CONTROL, COMPLIANCE AND INTERNAL
AUDIT FUNCTION
Internal control system
Article 117. Insurance and reinsurance undertakings shall have in place an effective internal control
system, which shall at least include the following:

1. administrative and accounting procedures;
2. an internal control framework;
3. appropriate reporting arrangements at all levels of the undertaking; and
4. a compliance function.
   Compliance function
   Article 118. The compliance function shall include the following duties in particular:
5. advising the management board or administrative board and the managing directors on
   compliance with the provisions applicable to contractual insurance activities;
6. assessment of the possible impact of any changes in the legal environment on the operations
   of the insurance or reinsurance undertaking; and
7. identification and assessment of compliance risk.
   Internal audit function
   Article 119. (1) Insurance and reinsurance undertakings shall have in place an effective internal
   audit function. The internal audit function shall evaluate the lawfulness, regularity and usefulness of the insurance or reinsurance undertaking’s operations, and also the adequacy and effectiveness of the internal control system and other elements of the system of governance.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 104 / 292 (2) The internal audit function shall be objective and independent from the operational functions. Any findings and recommendations shall be reported to the management board or administrative board and the managing directors. The management board or administrative board shall determine what actions are to be taken with respect to the findings and shall ensure that those actions are carried out. (3) In addition to para. 2 and the provisions contained in the implementing regulation (EU), the internal audit function shall also report the contents of the audit plan on a quarterly basis, including any major findings and recommendations resulting from performed audits, to the chairperson of the insurance or reinsurance undertaking’s supervisory or administrative board and to the audit committee. The chairperson of the supervisory or administrative board shall report on the audit areas and significant audit findings to the supervisory or administrative board at its next meeting.
SECTION 5: FIT AND PROPER REQUIREMENTS
General provisions
Article 120. (1) Insurance and reinsurance undertakings shall ensure that all persons who effectively
run the undertaking or have governance or other key functions at all times fulfil the following requirements:

1. their professional qualifications, knowledge and experience are adequate to enable sound
   and prudent management (fit); and
2. they are of good repute and integrity (proper).
   (2) The following requirements apply to members of the management board or administrative board and managing directors in addition to those under para. 1:
3. at least two members of the management board or administrative board must have adequate
   knowledge and experience of the insurance business as well as management experience; as a rule this is assumed to be given if they can document that they held an executive position at an insurance or reinsurance undertaking of comparable size and business type for at least three years. If managing directors are not members of the administrative board, this condition must be fulfilled by at least one member of the administrative board and at least one managing director; with regard to the other persons, knowledge and experience in other fields that are of essential significance for the insurance activities as well as an executive position at relevant undertakings shall be considered adequate. At least one member of the management board or administrative board shall have a good command of the German language; if managing directors are not members of the administrative board, at least one member must speak German.
4. members of the management board or administrative board and managing directors shall not
   be deemed to fulfil the proper requirement when there are reasons for exclusion as specified in Article 13 GewO 1994, or if insolvency proceedings have been initiated on the assets of such

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 105 / 292 persons or of any legal entity other than a natural person over whose business these persons have or have had a decisive influence, unless a recovery plan under insolvency law has been agreed upon and fulfilled in the insolvency proceedings. This shall similarly apply where a comparable situation has occurred abroad.
3. members of the management board shall, on ceasing to hold their position, wait for a period
of at least two years before taking up any activity as chairperson of the supervisory board of the same insurance or reinsurance undertaking in which they previously held an executive position. If a management board member accepts a position as chairperson of the supervisory board contrary to this provision, they shall be deemed not elected as chairperson.
4. members of the management board or administrative board and managing directors must
not perform any activity that may interfere with the proper management of the insurance or reinsurance undertaking. They must also not have another full-time occupation outside the insurance, banking or pension company sector or outside payment institutions, e-money institutions, investment firms or investment service providers. (3) Only natural persons with full legal capacity may be put in charge of the following functions:

1. risk management function;
2. compliance function;
3. internal audit function;
4. actuarial function; or
5. other key functions,
   and these persons must hold adequate professional qualifications in the fields relevant to insurance and reinsurance undertakings to fulfil their duties, with such qualifications being proportionate to the nature, scale and complexity of the risks inherent in the business activities. As a rule this is assumed to be given if they have completed a degree in a relevant field and can document at least three years’ relevant professional experience. The actuarial function may furthermore only be headed by persons who have adequate knowledge of actuarial and financial mathematics, commensurate with the nature, scale and complexity of the risks inherent in the business activities, and who are able to demonstrate their relevant experience with applicable professional and other standards. (4) (Repealed in the amendment published in Federal Law Gazette I 46/2019) (5) Taking account of the implementing regulation (EU), the EIOPA guidelines and EIOPA recommendations, the FMA may determine by regulation more specific fit and proper requirements for the persons referred to in para. 3. The regulation may in particular also detail any necessary documents to be submitted to the FMA as proof of compliance with the stipulated requirements. Proof of good repute
   Article 121. (1) The FMA shall in respect of nationals of other Member States accept:
6. the production of an extract from the judicial record; or

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 106 / 292
2. failing such extract form the judicial record, the production of an equivalent document issued
by a competent judicial or administrative authority in the home Member State or the Member State from which the foreign national concerned comes showing that those requirements have been met as sufficient evidence that the requirements referred to in Article 120 para. 1 no. 2 and para. 2 no. 2 have been met. (2) Where the home Member State or the Member State from which the foreign national concerned comes does not issue the document referred to in para. 1, it may be replaced by:

1. a declaration on oath; or
2. failing such declaration of oath pursuant to no. 1, by a solemn declaration made by the foreign
   national concerned before a competent judicial or administrative authority or, where appropriate, a notary in the home Member State or the Member State from which that foreign national comes. The FMA shall recognise the certificate issued by the competent judicial or administrative authority or notary. This shall similarly apply to any declaration in respect of no previous bankruptcy made before a competent professional or trade body in the Member State concerned. (3) The documents, declarations and certificates referred to in paras. 1 and 2 may not be presented more than three months after their date of issue. (4) Paragraphs 1 to 3 shall be applied accordingly to third-country nationals. Notification to the FMA
   Article 122. (1) Insurance and reinsurance undertakings shall notify the FMA of:
3. any intended appointment of members of the management board or administrative board
   and of managing directors no later than one month prior to their appointment; and
4. the appointment of persons who effectively run the undertaking or are responsible for
   governance or other key functions immediately following the appointment.
   The notification to the FMA shall include all documents needed to assess whether these persons are fit and proper. The appointment notification shall be submitted together with the application for the entry of the management or administrative board members and the managing directors in the company register. (2) Where there is reasonable doubt that the fit and proper requirements are fulfilled by the persons appointed in accordance with para. 1, the FMA shall object to the appointment and request that the insurance or reinsurance undertaking appoint other more suitable persons. If, once the appointment has been made, reasonable doubts arise or the conditions for the appointment are no longer fulfilled, or if it can be deduced from other reasons that the persons referred to in para. 1 will no longer be able to perform their duties in a proper manner, the FMA shall request that the insurance or reinsurance undertaking appoint other more suitable persons. (3) The FMA shall be immediately notified in respect of the persons referred to in para. 1 of:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 107 / 292

1. changes in the requirements pursuant to Article 120 paras. 1 to 3;
2. their replacement because of non-compliance with the requirements pursuant to 120 para. 1;
   or
3. their retirement.
   Provisions for the supervisory board
   Article 123. (1) The members of the supervisory board shall meet the requirements referred to in
   Article 120 para. 1.
   (2) In addition to the requirements set forth under para. 1, the chairperson of the supervisory board shall also have adequate theoretical and practical knowledge for the operation and accounting of an insurance or reinsurance undertaking. Moreover, they shall also meet the proper requirements pursuant to Article 120 para. 2 no. 2 as well as the requirements stipulated in the first sentence of
   Article 120 para. 2 no. 4.
   (3) The FMA shall be immediately notified of the election or appointment and the retirement of members of the supervisory board. (4) The FMA shall be immediately notified of the election or retirement of the chairperson of the supervisory board. The notification of the election shall include all documents needed to assess whether these persons are fit and proper. (5) Upon the FMA’s application, the court of first instance with jurisdiction over commercial matters shall revoke the election of the chairperson of the supervisory board in non-litigious civil proceedings if the elected candidate does not meet the requirements referred to in paras. 1 and 2. The application shall be filed within four weeks of the election’s notification. The function of chairperson of the supervisory board shall be suspended until such time as the court reaches a final decision. If the requirements are met at the time of the election and this subsequently changes, the FMA shall, within four weeks of determining that the requirements are not fulfilled, file an application for dismissal to the court of first instance with jurisdiction over commercial matters in non-litigious civil proceedings. Likewise, the function of chairperson of the supervisory board shall also be suspended until such time as the court reaches a final decision. (6) Rights and obligations applicable to the administrative, management or supervisory body pursuant to the implementing regulation (EU) apply to the management board or administrative board and to the managing directors in insurance and reinsurance undertakings, and additionally also to the supervisory board where the fit requirements as set out in Article 273(3) and the remuneration policy as set out in Article 275(1)(c) of the implementing regulation (EU) are concerned. (7) An audit committee shall be appointed in insurance undertakings and reinsurance undertakings, which shall consist of at least three members of the supervisory board or the administrative board. The audit committee must include one person, who possesses the necessary expertise and practical experience in the fields of finance and accounting, as well as in reporting (financial expert). The

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 108 / 292 members of the audit committee, especially the chairperson of the audit committee or the financial expert, must be an independent majority and must be impartial. They may not have served as members of the management board, executives (Article 80 AktG) or as auditors of the company in the last three years, nor may they have signed its audit opinion or the assurance statement. The members of the committee must collectively be familiar with the insurance sector. (8) Insurance undertakings and reinsurance undertakings, whose premiums written for the entire activities pursued on the basis of the licence do not exceed EUR 750 million, and which have not issued transferable securities that are admitted to trading on a regulated market pursuant to
Article 1 no. 2 BörseG 2018, must not appoint an audit committee, provided that the articles of
association or the supervisory board instructs that the tasks pursuant to para. 9 may be performed by the supervisory board. (9) The audit committee shall convene at least twice per financial year. The statutory auditor shall be consulted for the meetings that address the preparation of the drawing up of the financial statement (consolidated financial statement) and it being audited, and shall report about the statutory audit. The auditor of the sustainability reporting shall be consulted in meetings of the audit committee that deal with the audit of the (consolidated) sustainability reporting, and shall report about them. The following tasks shall be conferred upon the audit committee regardless of the competence of the management board and the supervisory board or the administrative board and the managing directors:

1. monitoring the accounting process including where applicable the process for sustainability
   reporting, the process for electronic reporting in accordance with Article 243b para. 10 or
   Article 267a para. 11 UGB and the process for submitting the information in accordance with
   Article 243b para. 2 second sentence or Article 267a para. 2 second sentence UGB, as well as
   issuing recommendations or suggestions to ensure its integrity;
2. monitoring the effectiveness of the internal control system, where applicable the internal
   revision function and the undertaking's risk management system also provided that it relates to sustainability reporting;
3. monitoring of the audit opinion and the consolidated audit opinion taking into consideration
   the findings and conclusions contained in reports, which have been disclosed by the Austrian Audit Oversight Authority (APAB; Abschlussprüferaufsichtsbehörde) in accordance with
   Article 4 para. 2 no. 12 of the Austrian Auditor Oversight Act (APAG; Abschlussprüfer￾Aufsichtsgesetz);
4. reviewing and monitoring of the independence of the statutory auditor (group statutory
   auditor) and the (consolidated) sustainability reporting auditor, in particular with regard to the additional services performed for the undertaking that is the subject of the audit opinion;
   Article 5 of Regulation (EU) No 537/2014 and Article 271a para. 6 UGB shall apply;
5. reporting about the findings of the audit opinion and the auditing of the sustainability
   reporting to the supervisory board and a statement about how the audit opinion has contributed towards the reliability of the financial reporting and how the auditing of the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 109 / 292 sustainability reporting about the reliability of the sustainability reporting, as well as the role of the audit committee in that regard;
6. auditing the annual financial statement and preparing their approval, the proposed
distribution of profits, the management report, the report on solvency and final condition and, where applicable, the corporate governance report, as well as reporting on the findings of the audit to the supervisory board or the administrative board;
7. where applicable, auditing the consolidated financial statements and the consolidated
management report, the group solvency and financial condition report and the corporate governance report on a consolidated basis as well as reporting on the findings of the audit to the supervisory board or the administrative board;
8. the conducting of the procedure for selecting the statutory auditor (group statutory auditor)
and the (consolidated) sustainability reporting auditor taking into consideration the appropriateness of the fee as well as the recommendations for the appointment of the statutory auditor (group statutory auditor) and the (consolidated) sustainability reporting auditor to the supervisory board. Article 16 of Regulation (EU) No 537/2014 shall apply in relation to the statutory auditor (group statutory auditor). Provisions for insurance distribution
Article 123a. (1) Members of the management board or the administrative board and managing
directors that are responsible for the distribution of insurance and reinsurance products to a substantial extent must demonstrably prove that they possess the necessary knowledge and competence with regard to the activity performed and the products that are distributed to perform the duties conferred to them in an orderly manner. (2) Insurance and reinsurance undertakings shall ensure that all other persons involved directly or in a managerial position for the distribution of insurance and reinsurance shall demonstrably prove that they possess the necessary knowledge and competence with regard to the activity performed and the products that are distributed to perform the duties conferred to them in an orderly manner. (3) Insurance and reinsurance undertakings shall be required to check whether the persons listed in para. 2 possess the necessary knowledge and competence, and where necessary to offer them training and continuing professional development opportunities that correspond to the requirements in conjunction with the activities that they perform and the products distributed. In so doing, Regulations that have been issued by the Federal Minister for Digital and Economic Affairs on the basis of Article 18 GewO 1994 in conjunction with Article 137b para. 2 GewO 1994 shall be taken into account. (4) Insurance and reinsurance undertakings shall ensure that the persons listed in para. 2 successfully complete on an ongoing basis continuing professional training and development measures, based on at least 15 hours per year, in order to maintain an adequate level of performance corresponding to the role they perform and the relevant market.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 110 / 292 (5) Insurance and reinsurance undertakings shall ensure that no reasons for exclusion as defined in
Article 13 paras. 1 to 4 GewO 1994 exist for the persons listed in para. 2, or that the waiver conditions
set out in Article 26 GewO 1994 are met in the case of such a reason for exclusion existing. If the insurance or reinsurance undertaking considers that the waiver conditions set out in Article 26 GewO 1994 are met, then it shall notification this to the FMA without delay. The FMA shall prohibit involvement in insurance and reinsurance distribution by means of an administrative decision as defined in para. 1, where it considers that the conditions for a waiver set out in Article 26 GewO 1994 are not met.
SECTION 6: INVESTMENTS
Prudent person principle
Article 124. (1) Insurance and reinsurance undertakings shall invest all their assets in accordance
with the following principles:

1. With respect to the whole portfolio of assets, insurance and reinsurance undertakings shall
   only invest in assets and instruments if they can properly identify, measure, monitor, manage, control and report the associated risks, and appropriately take these risks into account in the assessment of their overall solvency needs in accordance with Article 111 para. 1 no. 1.
2. All assets shall be invested in such a manner as to ensure the security, quality, liquidity and
   profitability of the portfolio as a whole. In addition, the localisation of those assets shall be such as to ensure their availability.
3. Assets held to cover the technical provisions pursuant to Section 1 of Chapter 8 shall
   additionally be invested in a manner appropriate to the nature and duration of the insurance and reinsurance liabilities. Those assets shall be invested in the best interest of all policyholders and beneficiaries taking into account any disclosed policy objective.
4. In the case of a conflict of interest, insurance and reinsurance undertakings, or the entity
   which manages their asset portfolio, shall ensure that the investment is made in the best interest of policyholders and beneficiaries.
5. The use of derivative instruments shall be permitted insofar as they contribute to a reduction
   of risks or facilitate efficient portfolio management; this condition shall at any rate not be deemed to be fulfilled in the case of transactions where there are no underlying exposures (short selling).
6. Investment and assets which are not admitted to trading on a regulated financial market shall
   be kept to prudent levels.
7. Assets shall be properly diversified in such a way as to avoid excessive reliance on:
   a. any particular asset; b. the same issuer, or issuers belonging to the same group or group of undertakings; or
   c. a geographical area,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 111 / 292 and excessive accumulation of risk in the portfolio as a whole. (2) Insurance and reinsurance undertakings shall ensure by appropriate means that coverage of the technical provisions pursuant to para. 1 no. 3 is adequately documented. Special provisions for unit-linked and index-linked life insurance
Article 125. (1) Paragraphs 2 to 4 and Article 124 para. 1 nos. 1 to 4 and para. 2 shall apply to assets
held for unit-linked and index-linked life insurance contracts.
(2) In the case of unit-linked life insurance contracts, insurance undertakings must ensure that the technical provisions pursuant to Section 1 of Chapter 8 are represented as closely as possible by those units in the investment fund. (3) In the case of index-linked life insurance contracts, insurance undertakings must ensure that the technical provisions pursuant to Section 1 of Chapter 8 are represented as closely as possible either by the units deemed to represent the reference value or, in the case where units are not established, by assets of appropriate security and marketability which correspond as closely as possible to those on which the particular reference value is based. (4) Where the life insurance contracts referred to in paras. 2 and 3 include a guarantee and additional technical provisions must therefore be established, Article 124 para. 1 nos. 5 to 7 shall be applied to the assets held to cover these provisions. Qualitative requirements for investments
Article 126. The FMA may, with the consent of the Federal Minister of Finance, determine by
regulation more specific qualitative requirements regarding the prudent person principles defined in Article 124 para. 1 and Article 125. Acquisition and sale of major holdings
Article 127. (1) The FMA shall be immediately notified of the acquisition and sale of shares in
corporations by an insurance or reinsurance undertaking where:

1. the direct or indirect shares exceed 50% of the share capital or nominal capital of that
   company;
2. the purchase price exceeds 10% of the insurance or reinsurance undertaking’s own funds;
3. the acquisition entails the establishment of related undertakings as defined in Article 189a
   no. 8 UGB; or
4. as a consequence of the sale, companies are no longer to be considered related undertakings
   as defined in Article 228 para. 3 UGB.
   This shall also apply to the acquisition and sale of additional shares as well as the increase in the amount of the reported shares if the aforementioned limits have already been exceeded, or if the limits will be exceeded or fall short as a result. When computing the share in the share capital or nominal capital of the external company, the shares of related undertakings shall be added up.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 112 / 292 (2) The FMA shall always be notified of contingent liabilities or profit and loss transfer agreements which are entered into or cancelled in connection with existing or acquired shares, as well as the acquisition and sale of a shareholding in a partnership under company law as a personally liable partner. (3) The FMA shall be notified of the acquisition and sale of shares and holdings, unless this concerns holdings in corporations or the shareholding in a partnership under company law as a personally liable partner, where the purchase price exceeds 1% of the insurance undertaking’s own funds. The same applies to the acquisition and sale of additional shares as well as the increase in the amount of the reported shares if the aforementioned limit has already been exceeded, or if the limit will be exceeded or fall short as a result. (4) The FMA shall be entitled to demand from the insurance or reinsurance undertaking all necessary information on the company in which shares or holdings pursuant to paras. 1, 2 or 3 are held, in particular the submission of the financial statements as well as other appropriate business documents. Such information may not be refused on the grounds of a confidentiality obligation existing pursuant to other provisions.
SECTION 7: INSURANCE DISTRIBUTION
Internal policies and procedures
Article 127a. Insurance and reinsurance undertakings shall draw up or determine and implement
appropriate internal policies and procedures to ensure compliance with the requirements pursuant to Article 123a. These policies shall be approved in writing by the management board or the administrative board, and to be amended without delay in the case of significant amendments, and to be reviewed at least once a year. Distribution function
Article 127b. Insurance and reinsurance undertakings shall establish a distribution function, in
order to ensure the orderly implementation of the approved internal policies and procedures pursuant to Article 127a as well as to ensure the fulfilling of the requirements pursuant to
Article 127c. Article 120 para. 2 no. 2 shall apply accordingly.
Records
Article 127c. (1) Insurance and reinsurance undertakings shall keep, store and keep up-to-date
records of all relevant documents regarding the fulfilment of the requirements pursuant to
Article 123a.
(2) Insurance undertakings that distribute insurance-based investment products, shall be required to keep records that contain the document or documents containing the agreements with their policyholders, which determine the rights and obligations of the parties as well as other conditions,

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 113 / 292 in accordance with which they provide services for the policyholder. It shall be permissible to refer to other documents or legal texts. Use of mediation services
Article 127d. (1) Insurance and reinsurance undertakings shall be allowed subject to para. 2 for
providing insurance and reinsurance distribution activities by third parties in a Member State to only make used of registered insurance and reinsurance intermediaries or registered ancillary insurance intermediaries pursuant to Article 3 of Directive (EU) 2016/97 or authorised undertakings for this purpose pursuant to Article 1 para. 1 nos. 1 to 5. (2) Undertakings pursuant to Article 1 para. 1 nos. 1 to 5 that perform distribution activities via an ancillary insurance intermediary pursuant to Article 1 (3) of Directive (EU) 2016/97, shall

1. take adequate and proportionate precautions to ensure that the requirements pursuant to
   Article 128 paras. 1 to 3 and Article 134 are fulfilled, and that consideration is taken for the
   needs and wishes of the policyholder, prior to a contract being proposed; and
2. to guarantee that the policyholder, prior to giving assent to conclude a contract has received
   the information pursuant to Article 130 para. 1 no. 1 first half-sentence, nos. 2 und 3 and the insurance product information document pursuant to Article 133 para. 3 has been handed out. Complaints
   Article 127e. Insurance and reinsurance undertakings shall establish units and define procedures
   that permit policyholders and other affected parties, in particular consumer protection associations that have a justified interest to submit complaints about the insurance and reinsurance undertaking as well as through insurance and reinsurance distributors that the insurance and reinsurance undertaking makes use of. Such complaints must in any case be handled and responded to.
   CHAPTER 6: INFORMATION REQUIREMENTS AND
   CONDUCT OF BUSINESS RULES FOR INSURANCE
   DISTRIBUTION
   SECTION 1: GENERAL PROVISIONS
   General Principles
   Article 128. (1) Insurance undertakings shall always act in conducting their insurance distribution
   activity honestly, fairly and professionally towards their policyholders and persons entitled to a claim and in their best possible interest.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 114 / 292 (2) All information including marketing communications that the insurance undertakings address to policyholders or disseminate so that such persons are likely to become aware of them, must be clear, and shall not be misleading and must be fair. Marketing communications shall be required to be clearly identifiable as such and shall not be allowed to be in contradiction to the information disclosed pursuant to Regulation (EU) 2019/2088. Furthermore, such information shall not be allowed to use the name of any competent authority in any way that indicates or suggests that the insurance undertaking’s products or services have been approved by the competent authority. (3) Insurance undertakings shall not be allowed to remunerate or reward the performance of their employees or insurance distributors in such a way, or themselves to be remunerated in any way that conflicts with their duty to act in the best possible interests of policyholders and persons entitled to a claim. In particular insurance undertakings shall not be allowed to make any arrangement by way of remuneration for distribution, sales targets or otherwise, that could provide an incentive for the insurance undertaking itself, its employees or insurance distributors, to recommend or offer a specific insurance product to a policyholder, although they could recommend or offer another insurance product that corresponds better to the needs of the policyholder. (4) The FMA may with the consent of the Federal Minister of Finance defined by means of a regulation:

1. which business practices shall be deemed to be dishonest or which information shall be
   deemed to be unclear or missing leading within the meaning of para. 2 and
2. which distribution remuneration and valuation practices are impermissible due to their
   colliding within the meaning of para. 3 with the duty to act in the best possible interest of the policyholders and persons entitled to a claim. (5) The permissibility of sending unsolicited messages to advertise to conclude an insurance contract shall be based on Article 107 of the Telecommunications Act of 2003 (TKG 2003; Telekommunikationsgesetz 2003). Information conditions
   Article 128a. (1) Insurance undertakings shall communicate the information to be provided to
   policyholders in accordance with this Chapter:
3. on paper,
4. is a clear and accurate manner that is comprehensible to the policyholder,
5. in German, unless the policyholder has specifically agreed to the use of another language, and
6. free of charge.
   (2) Insurance undertakings may, unless determined otherwise within this federal act, and in the case of information following the conclusion of the contract provided that the standards of Article 5a para. 1 VersVG are complied with, may by way of derogation from para. 1 no. 1 communicate information by one of the following media:
7. on another durable medium other than paper, when

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 115 / 292 a. the usage of the durable medium is appropriate in the context of the business conducted between the insurance undertaking and the policyholder, and b. the policyholder had the choice between receiving information on paper or on another durable medium, and chose to receive it on the other durable medium.
2. a Website, where
a. the access is personalised for the policyholder, or b. the following conditions are met:
aa) the issuing of information via a website is appropriate in the context of the business conducted between the insurance distributor and the policyholder; bb) the policyholder has agreed to receive such information via a website; cc) the address of the website and the location on the website where the information may be accessed, has been electronically communicated to the policyholder; dd) it is guaranteed that such information shall remain available on the website for as long as they must reasonably be consulted by the policyholder. (3) The provision of information on another durable medium other than paper or via a website in the context of business conducted between the insurance undertaking and the policyholder shall be appropriate, if the policyholder demonstrably has regular Internet access. The communication of an e-mail address by the policyholder for the purposes of such business shall be deemed to be such proof. (4) If the information is made available on a durable medium other than paper or via a website, then the insurance undertaking shall make a paper version of the information available free of charge to the policyholder at the policyholder's request. (5) In the case of telephone selling, the information that is required to be issued prior to the conclusion of the contract, including the insurance product information document, shall pursuant to the Union rules on the distance marketing of consumer financial services. In addition; the information is also to be issued immediately following the conclusion of the insurance contract pursuant to para. 1 or 2. This shall also apply if the policyholder has decided to receive the information to be issued prior to the conclusion of the contract pursuant to para. 2 no. 1 on another durable medium than paper. Product governance
Article 129. (1) Insurance undertakings shall within the meaning of paras. 2 to 7 and Delegated
Regulation (EU) 2017/2385 maintain internal procedures

1. for the manufacturing and releasing of every individual new insurance product as well as any
   significant adaptation of existing insurance products, and
2. for the orderly distribution and regular reviewing of the insurance products that it
   manufactures

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 116 / 292 and to operate, regularly review and as applicable adapt them. Such procedures must be proportionate and must in particular correspond to the type of the insurance product in question. (2) Before insurance undertakings are allowed to market or distribute newly designed insurance products or insurance products that have been significantly adapted in a Member State, they shall be required to submit them to an internal product approval process, during which a specific target market must be determined for the insurance product in question. In so doing insurance undertakings shall assess all relevant risks for this specific target market and shall ensure that the intended distribution strategy corresponds to the target market. (3) Insurance undertakings must understand the insurance products that they manufacture and market or distribute, and must take all reasonable steps within the context of an orderly business organisation to guarantee that the insurance products are marketed or distributed to the defined target market. (4) Insurance undertakings that manufacture insurance products shall make available all appropriate information at the request of all insurance distributors about their insurance products and their product approval process, including the respective defined target market. (5) Insurance undertakings shall regularly review the insurance product that they manufacture and market or distribute. In so doing that shall take into account any events that might have a significant influence on the potential risk for the defined target market, and shall at least assess whether the insurance product and the intending distribution strategy still corresponds to the needs of the defined target market. (6) Insurance undertakings that offer or give advice about insurance products in a Member State that they themselves have not manufactured, must have appropriate provisions in place to be able to receive the information listed in para. 4 and must understand the features of every one of those insurance products as well as their respective determined target market. (7) The obligations set out in paras. 1 to 6 shall not exist for the distribution of insurance for large risks and reinsurance products. (8) Other information requirements and conduct rules for insurance distribution remain unaffected. General information requirements
Article 130. (1) Prior to the conclusion of a direct insurance contract covering risks situated in
Austria, the policyholder is to be issued the following information:

1. Name, address of the registered office and the legal form of the insurance undertaking, and as
   applicable of the branch through which the insurance contract is being concluded as well as a. that the undertaking is an insurance undertaking, and b. that the insurance undertaking provides advice to the policyholder prior to the conclusion of the contract;
2. the designation and address of the competent supervisory authority for the insurance
   undertaking;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 117 / 292
3. the procedures pursuant to Article 33 and Article 127e, that permit the policyholders and
other affected parties, in particular consumer protection organisations, to submit complaints about insurance undertakings including information about where complaints are to be submitted in any case irrespective of the right of the policyholder to take legal action;
4. the out-of-court complaints and redress procedures.
The information pursuant to no. 1 shall be issued prior to the identification of the wishes and needs of the policyholder pursuant to Article 131 para. 1, which the information pursuant to nos. 2 to 4 shall be issued prior to the policyholder submitting their contract declaration. (1a) If the contract is distributed via a third party authorised to do so, then para. 1 no. 1 shall apply subject to the proviso that the obligation to state the circumstances pursuant to lits. a and b shall not apply, and the information is able to be given prior to the policyholder’s submission of the contract declaration. (2) The information pursuant to para. 1 no. 1 must also be apparent, with the exception of the circumstances pursuant to lits. a and b, in any case from the application for insurance as well as from the insurance certificate and all other documents granting coverage. (3) For the duration of the insurance contract the policyholder must be informed about changes to the details pursuant to para. 1 no. 1 as well as changes to the place of business from which the contract is managed. (4) The obligations pursuant to para. 1 no. 1 to communicate the circumstances pursuant to lits. a and b as well as the obligations pursuant to para. 1 nos. 2 and 4 shall not exist for the distribution of insurance for large risks. The obligations pursuant to para. 1 no. 3 shall not exist for the distribution of insurance for large risks, provided that the policyholder is a legal person. (5) Undertakings with their registered office in the United Kingdom shall also inform policyholders prior to the conclusion of the contracts as well as during the term of the insurance contract about the effects of the United Kingdom leaving the European Union and shall update this information where applicable without delay. General information requirements for the Mediation of Third-Party Products
Article 130a. (1) When mediating a direct insurance contract for another undertaking pursuant to
Article 1 para. 1 nos. 1 to 5 in relation to a risk situated within Austria, the following information is to
be provided to the policyholder:

1. Name, address of the registered office and the legal form of the mediating insurance
   undertaking, and as applicable of the branch through which the insurance contract is being mediated as well as the circumstance that a. the mediating insurance undertaking is an insurance undertaking, which mediates insurance contracts for other undertakings pursuant to Article 1 para. 1 nos. 1 to 5 and in so doing acts on behalf of and on the account of these other undertakings, and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 118 / 292 b. that the mediating insurance undertaking provides advice to the policyholder prior to the conclusion of the contract;
2. information pursuant to Article 130 para 1 nos. 2 to 4;
3. whether the mediating insurance undertaking holds a direct or indirect participation of at
least 10% of the voting rights or the capital of a certain insurance undertaking;
4. whether a certain insurance undertaking or the parent undertaking of a certain insurance
undertaking holds a direct or indirect participation of at least 10% of the voting rights or the capital of the mediating insurance undertaking;
5. regarding the recommended or offered contract:
a. whether the mediating insurance undertaking is contractually obliged to exclusively conduct insurance distribution business with one or several insurance undertakings; in this case it must advise about the names of these insurance undertakings, or b. whether the mediating insurance undertaking is not contractually obliged to exclusively conduct insurance distribution business with one or several insurance undertakings, and its advice is not based on a fair and personal analysis; in such a case it shall communicate the names of those insurance undertakings with which is allowed to conduct insurance business with and also does so;
6. the type of remuneration received in relation to the insurance contract and
7. whether the mediating insurance undertaking in relation to the insurance contract
a. works on the basis of a fee, with the remuneration being paid directly by the policyholder, b. works on a commission basis, with the remuneration being contained in the insurance premium,
c. works on the basis of another type of remuneration, including any kind of financial
advantage, which are offered or granted in conjunction with the insurance contract, or d. works on the basis of a combination of types of remuneration listed in lits. a, b, and c.
8. If the fee is to be paid directly by the policyholder, then the mediating insurance undertaking
must information the policyholder about the amount of the fee, or where that is not possible, about the methodology for the calculation of the fee. (2) The information pursuant to para. 1 no. 1 shall be issued prior to the identification of the wishes and needs of the policyholder pursuant to Article 131 para. 1, which the information pursuant to para. 1 nos. 2 to 7 shall be issued prior to the policyholder submitting their contract declaration. (3) Where in the scope of the insurance contract payments are made by the policyholder following the conclusion of the contract, which are neither ongoing premium payments nor regular payments, then the mediating insurance undertaking shall also disclose the information pursuant to para. 1 nos. 3 to 7 for every such payment.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 119 / 292 Identification of the wishes and needs of policyholders
Article 131. (1) Prior to concluding a direct insurance contract covering risks situated in Austria, the
insurance undertaking shall obtain the information it requires from the policyholder to identify their wishes and needs. In so doing the complexity of the insurance product and the defined category of customer shall be taken into account for the target market pursuant to Article 129 para. 2. (2) Any contract offered by an insurance undertaking must correspond to the needs and wishes of the policyholders. (3) The obligations pursuant to para. 1 shall not exist if the contract is distributed by an authorised third party, unless the insurance undertaking has reason to assume that the policyholder is not offered contracts that correspond to their wishes and needs. Advice
Article 132. (1) Except in the case of the insurance of large risks, insurance undertakings shall
address a personal recommendation to the policyholder prior to the policyholder submitting the contract declaration to conclude a direct insurance contract covering risks situated in Austria, in which it is explained, why the recommended contract best corresponds to the needs and wishes of the policyholder. In so doing the complexity of the insurance product and the defined category of customer shall be taken into account for the target market pursuant to Article 129 para. 2. (2) The obligations pursuant to para. 1 shall not exist, if the policyholder wishes to conclude a specific contract and following a warning that the insurance undertaking will not assess, whether the envisaged contract corresponds to their needs and wishes, shall state in a separate declaration that it will not make use of advice. The insurance undertaking shall not be allowed to force the policyholder to forego receiving advice. (3) The obligations pursuant to para. 1 as well as Article 130 para. 1 no. 1 lit. b shall not exist if the contract is distributed by an authorised third party, unless the insurance undertaking has reason to assume that the policyholder is not being provided advice in an orderly manner by the third party. (4) When concluding contracts in relation to a direct insurance contract covering risks situated in Austria, in the case that the policyholder's habitual residence or establishment is not in Austria, then instead of communicating the information pursuant to Article 130 para. 1 no. 1 lit. b, it shall be communicated whether the insurance undertaking offers advice prior to the conclusion of the contract. The obligations pursuant to para. 1 shall only exist, if the policyholder makes use of advice. Product information
Article 133. (1) Prior to submitting their contract declaration for concluding a direct insurance
contract covering risks situated in Austria the policyholder shall be provided – regardless of whether advice has been given and whether the insurance product is part of a package pursuant to Article 134 – the objective information in a comprehensible form about every insurance product and the relevant information about every insurance contract offered to the policyholder that the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 120 / 292 policyholder requires to be able to take a decision on an informed basis. In so doing the complexity of the insurance product and the defined category of customer shall be taken into account for the target market pursuant to Article 129 para. 2. (2) The information pursuant to para. 1 shall in particular be required to contain the following details, except for the insurance of large risks:

1. the type of insurance;
2. a summary of the insurance coverage including the principal risks insured, the sum insured
   and where applicable the geographical scope of the coverage and a summary of the risks that are excluded from coverage;
3. the means of payment of premiums and duration of payments;
4. the most important circumstances under which claims are excluded;
5. duties and obligations at the time of concluding the contract and at the start of the contract;
6. duties and obligations during the term of the contract;
7. duties and obligations in the event of the insured event occurring and making a claim;
8. the term of the insurance contract including the start and end date of the contract;
9. details about terminating the contract;
10. the circumstances under which the policyholder may revoke or cancel the conclusion of the
    insurance contract, as well as the modalities for exercising the right of revocation or cancellation;
11. the law that applies to the insurance contract, in the case that the parties do not have the
    freedom of choice in this regard, or the fact that the parties may choose the applicable law, and the suggestion of the insurance undertaking in this regard; and
12. the type of remuneration that the employees of the insurance undertaking receive in
    connection to the distribution of the insurance contract. In the event that payments are made by the policyholder within the scope of the insurance contract following its conclusion, that are neither continuing premium payments or regular payments, the insurance undertaking shall also disclose the type of every such payment and the type of remuneration for distribution, that the employees of the insurance undertaking received in this regard. (3) When distributing products in the insurance classes pursuant to nos. 1 to 18 of Annex A the information pursuant to para. 1 nos. 1 to 9 shall be made available to the policyholder by means of a standardised insurance product information document on paper or on another durable medium. The insurance product information document is to be designed by the same person that manufactured the product. It shall:
13. be a short and stand-alone document;
14. be presented and laid out in a way that is clear and easy to read, using characters of a readable
    size;
15. be no less comprehensible in the event that, having been originally produced in colour, it is
    printed or photocopied in black and white;
16. be accurate and not misleading;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 121 / 292
5. contain the title "insurance product information document" at the top of the first page;
6. include a statement that complete pre-contractual and contractual information on the
product is provided in other documents.
(4) The policyholder shall be information about changes to the details pursuant to para. 2 nos. 3 and 8 during the term of the insurance contract. (5) The information requirements pursuant to para. 2 no. 11 shall also exist for insurance for large risks, provided that the policyholder is a natural person. Cross-selling
Article 134. (1) When an insurance product is offered together with an ancillary product or service
which is not insurance, as part of a package or the same agreement, the insurance undertaking shall inform the policyholder whether it is possible to buy the different components separately. In this case the insurance undertaking shall provide an adequate description of the different components of the agreement or package as well as separate evidence of the costs and charges of each component. (2) If the risk or the insurance coverage resulting from such a package or agreement offered to the policyholder pursuant to para. 1 is different from that associated with the components taken separately, the insurance undertaking shall provide an adequate description of the different components of the agreement or package and the way in which their interaction modifies the risk or the insurance coverage. (3) Where an insurance product is ancillary to a good or a service which is not insurance, as part of a package or the same agreement, the insurance distributor shall offer the policyholder the possibility of buying the good or service separately. This paragraph shall not apply where an insurance product is ancillary to an investment service or activity as defined in Article 4(1) (2) of Directive 2014/65/EU, a credit agreement as defined in Article 4 (3) of Directive 2014/17/EU, or a payment account as defined in Article 2 (3) of Directive 2014/92/EU. (4) In the cases listed in paras. 1 and 3, insurance undertakings shall identify the needs and wishes of the policyholder in conjunction with the insurance products that are part of the package as a whole or the same agreement. (5) The obligations pursuant to paras. 1 to 3 shall not apply for the distribution of insurance products that over coverage for different types of risks (multi-risk insurance policies).

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 122 / 292
SECTION 2: ADDITIONAL REQUIREMENTS FOR THE
DISTRIBUTION OF LIFE INSURANCE POLICIES
Conflicts of interest and incentives for the distribution of insurance-based investment products
Article 135. (1) Insurance undertakings that distribute insurance-based investment products, shall
maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps, to

1. detect,
2. prevent, and
3. manage
   conflicts of interest pursuant to para. 2, in order to prevent such conflicts of interest from damaging the interests of the policyholders and persons entitled to a claim. Such provisions must be commensurate to the activities performed and the distributed insurance products. Article 128 paras. 1 to 4 shall remain unaffected by this provision. (2) Conflicts of interest in accordance with para. 1 shall be those that arise in insurance distribution activities between the insurance undertaking among itself, including its management body and its employees or other persons directly or indirectly associated with it as a result of control, and its policyholders and persons entitled to a claim, or between policyholders and persons entitled to a claim among themselves. (3) Where organisational or administrative arrangements made by the insurance undertaking to manage conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of policyholders and persons entitled to a claim will be prevented, the insurance undertaking shall clearly disclose to the policyholder the general nature or the sources of the conflicts of interest prior to the policyholder submitting the contract declaration on paper or on another durable medium. Depending on the status of the policyholder the disclosure shall be required to be detailed enough to enable the policyholder to take an informed decision about the insurance distribution activities in the context of which the conflict of interest arises. (4) Insurance undertakings shall only be allowed to pay or be paid any fee or commission, or to provide or be provided with any non-monetary benefit in connection with the distribution of an insurance-based investment product or an ancillary service, when
4. the beneficiary or recipient is the policyholder or a person, who effects or receives the benefit
   on behalf of the policyholder, or
5. the fee, commission or the non-monetary benefit
   a. shall not reasonably have a detrimental effect on the quality of the service in question for the policyholder, and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 123 / 292 b. does not impair the duty of the insurance undertaking or recipient of the benefit to act honestly, fairly and professionally in the best interests of the policyholders and persons entitled to a claim. Information requirements pursuant to Article 133 para. 2 no. 12 shall remain unaffected. (5) Insurance undertakings must not recommend to policyholders the choice of insurance-based investment product provided for in the insurance contract for the purpose of causing the issue prices of investment fund units to move in a certain direction in their own interest or in the interest of a related undertaking. This prohibition shall also apply to all employees and any other persons working for the insurance undertaking. Advice for the distribution of insurance-based investment products
Article 135a. (1) Prior to providing advice about an insurance-based investment product the
insurance undertaking, in addition to the information pursuant to Article 131 para. 1, shall also obtain information

1. regarding the policyholder's knowledge and experience in the investment field relevant to the
   specific type of product or service,
2. the policyholder's financial situation including their ability to bear losses, and
3. the policyholder's investment objectives, including their risk tolerance
   that are required to recommend insurance-based investment products to the policyholder that are suitable for them and that, in particular, are in accordance with their risk tolerance and their ability to bear losses. Where a package of services or products are recommended to the policyholder, that are bundled pursuant to Article 134, the entire bundled package must be suitable for the policyholder. (2) The insurance undertaking must address a personal recommendation pursuant to Article 132 para. 1 to the policyholder prior to the submission of the contract declaration of the policyholder, and shall make a suitability statement available to the policyholder in paper form or on another durable medium. The suitability statement shall contains the advisory capacity provided and the way and manner, in which this corresponds to the preferences, aims and other policyholder-specific features. (3) Moreover the policyholder is to be informed whether the insurance undertaking will perform a regular assessment of the suitability of the recommended insurance-based investment product. (4) If the contract is concluded by using a means of distance communication that does not permit the prior providing of the suitability statement, the insurance undertaking may make the written suitability statement available to the policyholder on paper or on another durable medium immediately after the policyholder has contractually bound itself, where
4. the policyholder has agreed to receive the suitability statement without delay following the
   conclusion of the contract, and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 124 / 292
2. the insurance undertaking has offered the policyholder with the possibility to postpone the
conclusion of the contract, in order to receive the suitability statement in advance. (5) The FMA may with the consent of the Federal Minister of Finance further define the information requirements listed in para. 2 by means of a Regulation, provided that doing so is necessary in the interest of the policyholder, a greater level of comparability and transparency. (6) If the policyholder does not wish to provide the information listed in para. 1, or provides insufficient details, they may, following a warning pursuant to Article 132 para. 2, demonstrably waive the right to make use of advice. The insurance undertaking shall not be allowed to force the policyholder to forego receiving advice. Distribution of insurance-based investment products without advice
Article 135b. (1) Prior to waiving advice pursuant to Article 132 para. 2 the insurance undertaking
shall also warn the policyholder that it does not assess whether the envisaged contract is suitable for the policyholder with regard to their financial situation and investment objectives. (2) In the case of insurance distribution activities in relation to insurance-based investment products where no advice is given, the insurance undertaking shall ask the policyholder – where applicable in addition to the information pursuant to Article 131 para. 1 – to provide information regarding the policyholder's knowledge and experience in the investment field relevant to the specific type of products or services offered or demanded that are required to assess whether the insurance service or product envisaged is appropriate for the policyholder. Where a package of services or products are recommended that are bundled pursuant to Article 134, the entire bundled package must be suitable for the policyholder. (3) Where the insurance undertaking is of the opinion on the basis of the information received that the product or service is inappropriate for the policyholder, then it shall also warn the policyholder of this. Where the insurance policy holder does not supply the information listed in para. 2 about their knowledge and experience, or supplies insufficient information, then the insurance undertaking shall warn the policyholder that it is unable to assess whether the envisaged product or service is appropriate for the policyholder. (4) The warnings pursuant to paras. 1 and 3 may be made in a standardised format. Additional requirements for life insurance product information
Article 135c. (1) The information to be supplied pursuant to Article 133 para. 1 prior to the
submission of the contract declaration by the policyholder shall be required to also contain the following details when concluding a life insurance contract covering risks situated in Austria in addition to the details pursuant to Article 133 para. 2:

1. the benefits paid out by the insurance undertaking, the extent to which they are guaranteed,
   the legal bases applicable and the options to which the policyholder is entitled with respect to these benefits;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 125 / 292
2. the details of any guarantee granted by a third party and, where appropriate, any contingent
liability accepted by the insurance undertaking;
3. the principles for calculating the distribution of bonuses;
4. the surrender values and paid-up insurance benefits and the extent to which they are
guaranteed;
5. the premiums for the main benefit and supplementary benefits;
6. in the case of endowment life insurance, by using the values in the specimen calculation
referred in para. 2, a. all charges and fees, in particular aa) those in relation to the distribution of the insurance product including costs of advice, bb) the charges for the insurance product recommended to the policyholder, as well as cc) all payments to third parties; b. the total effective interest rate of premium payments over the entire term of the contract and, where appropriate, any guaranteed effective interest rate; and
c. estimates of the percentage of insurance tax, of the premiums to cover underwriting
risks (risk premiums), broken down according to individual risks, of the costs accounted for in the premium and the amounts invested (savings premium) in the expected premium sum over the entire term of the contract, in the form of a table also listing details on the expected costs and fees, which are determined on the basis of the invested assets. The information about all costs and charges, including costs and charges in connection with the distribution of the insurance product that are not caused by the underlying market risk are to be provided in aggregated form to allow the borrower to understand the overall cost as well as the cumulative effect on return of the investment. Moreover, the policyholder shall also be informed about the modalities of the payment obligations that apply to it. If requested by the policyholder, in addition an itemised breakdown of the costs and charges must be made available to the policyholder for insurance-based investment product. The policyholder shall be informed about this right.
7. in the case of unit-linked life insurance, the investment funds in which equity interests are held
and the nature of the underlying assets;
8. in the case of index-linked life insurance, the nature of the investment, the reference value and
the underlying factors which are used for the purpose of calculating the insurance benefits;
9. in the case of investment-oriented life insurance, the nature of the investment, the agreed
investment strategy and the conditions for changing the investment strategy;
10. the risks underlying the contract which are assumed by the policyholder. The information
about insurance-based investment products and proposed investment strategies must also

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 126 / 292 include instructions and warnings about the risks associated with the insurance-based investment products or specific proposed investment strategies; 10a. as applicable the pre-contractual disclosures pursuant to Article 6 (1) and (2), Article 7 (1) and (2), Article 8 (1) to (2a) and Article 9 (1) to (4a) of Regulation (EU) 2019/2088 and Articles 5, 6 and 7 of Regulation (EU) 2020/852;
11. the tax arrangements applicable to the insurance, while clearly pointing out that the
respective tax treatment depends on the customer’s personal circumstances and may be subject to future changes;
12. any existing guarantee schemes and the means of accessing them;
13. a concrete reference to the solvency and financial condition report as laid down in Article 241,
allowing the policyholder easy access to this information.
In the case of the distribution of insurance-based investment products information must be issued in such a way that allows the policyholder to reasonably be able to understand the nature and risks of the offered insurance-based investment product and to be make investment decisions on an informed basis. (2) In the case of endowment life insurance the insurance undertaking shall submit a sample calculation to the policyholder, in which the benefits paid out by the insurance undertaking, the surrender values and the paid-up insurance benefits on the basis of the calculation bases for the calculation of premiums and all costs and charges using at least three different interest rates and compared against the premium, the premium sum and, where applicable, any guaranteed value broken down into annual steps. The specimen calculations shall be explained in a clear and comprehensible manner. The policyholder shall be informed that the specimen calculation is only a model of computation based on notional assumptions, and that the policyholder shall not be able to derive any contractual claims against the insurance undertaking from the specimen calculation. (3) When distributing life insurance contracts pursuant to Article 5 no. 63 lit. b the information pursuant to Article 133 para. 2 nos. 1 to 9 shall be made available to the policyholder by means of a standardised life insurance product information document on paper or on another durable medium.
Article 133 para. 3 second and third sentence shall apply.
(4) The FMA may with the consent of the Federal Minister of Finance defined by means of a Regulation:

1. to more specifically define the information requirements listed in paras. 1 and 2; and
2. to prescribe a standardised format for the presentation of the information document
   pursuant to para. 3 for life insurance products, provided that doing so is necessary in the interest of the policyholder, a greater level of comparability and transparency.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 127 / 292 Additional requirements for continuing information
Article 135d. (1) Throughout the term of the insurance contract, the policyholder shall be informed
in writing of the following:

1. changes in the policy conditions, both general and specific;
2. changes in the information pursuant to Article 133 para. 2 no. 10 and Article 135c para. 1 nos. 3
   to 5 and 7 to 9 in the event of a contractual amendment or an amendment of the law specifically applicable to the contract;
3. in the case of unit-linked life insurance plans, a substantial change in the risk classification of
   an investment fund by the insurance undertaking;
4. annually, information on the state of bonuses and the composition of the investments by
   category, in the case of unit-linked life insurance the value of the units allocated to the policyholder, and in the case of index-linked life insurance the performance of the insurance contract’s reference value;
5. in the case of endowment life insurance, annually, the effects of deviations of the current
   values from the values forecast upon conclusion of the contract in the specimen calculation, in the form of newly calculated estimates of maturity payments and stating the current surrender value;
6. in the case of an insurance-based investment product where applicable regularly, in any case
   at least annually, about all costs and charges pursuant to Article 135c para. 1 no. 6 lit. a; 6a. as applicable the disclosures to be made in regular reporting pursuant to Article 11 (1) of Regulation (EU) 2019/2088 and Articles 5, 6 and 7 of Regulation (EU) 2020/852;
7. the use of the provision for bonuses and/or participation in profits to cover losses in
   accordance with Article 92 para. 5.
   (2) Insurance undertakings shall provide policyholders with appropriate reports about the provided services in relation to insurance-based investment products on paper or on another durable medium. Those reports shall take into account the type and the complexity of insurance-based investment products involved and the nature of the service provided to the policyholder. Where applicable, it shall contain the costs associated with the transactions and services undertaken on behalf of the policyholder. (3) Where the insurance undertaking has informed the policyholder that it will carry out a periodic assessment of suitability of the recommended insurance-based investment product, the periodic report pursuant to para. 2 shall contain an updated statement of how the insurance-based investment product meets the preferences, objectives and other policyholder-specific characteristics. (4) The FMA may with the consent of the Federal Minister of Finance further define the information requirements listed in para. 1 by means of a Regulation, provided that doing so is necessary in the interest of the policyholder, a greater level of comparability and transparency.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 128 / 292
SECTION 3: ADDITIONAL REQUIREMENTS FOR THE
DISTRIBUTION OF HEALTH AND ACCIDENT INSURANCE SIMILAR TO LIFE INSURANCE Additional requirements for product information and continuing information
Article 135e. (1) The information to be supplied pursuant to Article 133 para. 1 prior to the
submission of the contract declaration by the policyholder shall be required to also contain the following details when concluding a health or accident insurance contract operated in a manner similar to life insurance covering a risk situated in Austria in addition to the details pursuant to
Article 133 para. 2:

1. the benefits paid out by the insurance undertaking;
2. the conditions under which the insurance undertaking may unilaterally adjust the amount of
   the premium or the insurance cover, and the modalities to be observed in this respect;
3. the principles for calculating the distribution of bonuses;
4. the legal and financial consequences of a termination of the contract for the policyholder;
5. the tax arrangements applicable to the insurance, while clearly pointing out that the
   respective tax treatment depends on the customer’s personal circumstances and may be subject to future changes;
6. a specific reference to the solvency and financial condition report as laid down in Article 241,
   allowing the policyholder easy access to this information.
   (2) Throughout the term of the insurance contract, the policyholder shall be informed in writing of the following:
7. changes in the policy conditions, both general and specific;
8. changes in the information pursuant to para. 1 and Article 133 para. 2 no. 10 in the event of a
   contractual amendment or an amendment of the law specifically applicable to the contract;
9. the extent and reasons for a premium adjustment having been made and
10. the use of the provision for bonuses to cover losses in accordance with Article 92 para. 5.
    (3) The FMA shall with the consent of the Federal Minister of Finance further define the information requirements listed in paras. 1 and 2 by means of a Regulation, provided that doing so is necessary in the interest of the policyholder, a greater level of comparability and transparency.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 129 / 292
CHAPTER 7: ACCOUNTING AND CONSOLIDATED
ACCOUNTING
SECTION 1: GENERAL PROVISIONS
Applicability of the UGB, AktG and SEG
Article 136. (1) The following provisions shall apply for accounting (consolidated accounting),
including the (consolidated) corporate reporting, as well as auditing and consolidated auditing and the auditing of the (consolidated) sustainability reporting:

1. with regard to insurance and reinsurance undertakings as well as small insurance
   undertakings with the legal form of a joint stock company, the provisions of the UGB applicable to public-interest entities, unless this federal act stipulates otherwise;
2. with regard to insurance and reinsurance undertakings with the legal form of a European
   Company (SE), the provisions of the UGB applicable to large joint stock companies and public￾interest companies and the provisions of the European Company Act (SEG; Societas-Europaea￾Gesetz), unless this federal act stipulates otherwise;
3. with regard to insurance undertakings and reinsurance undertakings as well as small
   insurance undertakings in the legal form of a mutual insurance association, that is not a small mutual association, the provisions of the UGB for large stock companies and public-interest entities (PIEs), provided that this Federal Act does not state otherwise. The listed companies shall be classified as public-interest entities (PIEs) pursuant to Article 189a no. 1 lit. c UGB. Articles 96, 104 and 108 AktG shall be applied accordingly in consideration for Article 137 para. 2 and Article 138 para. 3;
4. with regard to insurance associations whose object is limited to asset management (Article 63
   para. 3), the provisions of the UGB applicable to large undertakings, excluding Article 243b and Article 267a UGB unless this federal act stipulates otherwise.
5. for private foundations (Article 66 para. 1) the provisions of the UGB applicable to large
   undertakings, where such provisions are applicable pursuant to Article 18, Article 20 and
   Article 21 PSG, unless this federal act stipulates otherwise.
   (2) With regard to the accounting and auditing of branches of third-country insurance and third￾country reinsurance undertakings, the provisions of the UGB shall apply accordingly to public￾interest companies, unless this federal act stipulates otherwise. Regulation (EU) No 537/2014 shall be applied accordingly. General provisions for the annual financial statement, the management report, as well as the corporate governance report
   Article 137. (1) The management board or the managing directors shall ensure that the financial
   statements comply with the legal requirements.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 130 / 292 (2) Notwithstanding Article 222 para. 1 UGB and Article 96 para. 1 and Article 104 paras. 1 and 2 no. 2 AktG, the financial statements and the management report as well as , where appropriate, the corporate governance report shall be prepared in time and the financial statements adopted in time for compliance with the submission deadlines referred to in Article 248. (3) For Austrian branches of third-country insurance and third-country reinsurance undertakings, the management shall prepare financial statements and a management report on the preceding financial year during the first five months of the current financial year. (4) The financial year of insurance and reinsurance undertakings shall correspond to the calendar year. (5) For the purposes of sustainability reporting, insurance and reinsurance undertakings that are
part of a group pursuant to Article 195 para. 1 no. 3 lit. b and are subject to group supervision
pursuant to Article 213 (2) lits. a to c of Directive 2009/138/EC, are treated like subsidiaries of the parent undertaking of the group pursuant to Article 243b para. 7 UGB and Article 267a para. 8 UGB. Special provisions for consolidated financial statements
Article 138. (1) Article 246 UGB shall not be applied to the consolidated financial statements of
insurance and reinsurance undertakings, or to parent undertakings of insurance and reinsurance undertakings or third-country insurance and third-country reinsurance undertakings. (2) Parent undertakings of insurance and reinsurance undertakings shall be obliged, without prejudice to their legal form, to prepare consolidated financial statements where the sole or predominant purpose of the undertaking is the acquisition or management of holdings, provided that the undertakings to be consolidated are exclusively or predominantly insurance and reinsurance undertakings or third-country insurance and third-country reinsurance undertakings. (3) Article 137 paras. 1 and 2 shall apply accordingly to consolidated financial statements. (4) The consolidated financial statements shall be prepared for the reporting date of 31 December; this shall also apply to the consolidated financial statements and the consolidated management report with a discharging effect. Article 252 para. 1 UGB shall not apply. (5) The uniform valuation stipulated in Article 260 UGB shall apply separately to undertakings with sector-specific valuation rules. The principle of uniform valuation shall not apply to technical provisions; it shall also not apply to assets whose changes in value also affect the rights of policyholders or constitute rights for them. (6) Interim profits need not be eliminated where the transaction has been entered into under ordinary market conditions and legal claims of policyholders have thus been established. (7) Article 251 para. 3 UGB shall not apply. (8) An insurance or reinsurance undertakings or a parent undertaking of insurance and reinsurance undertakings or third-country insurance and third-country reinsurance undertakings drawing up consolidated financial statements as referred to in Article 245a paras. 1 or 2 UGB in accordance with

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 131 / 292 the international accounting standards shall comply with the requirements set forth in Article 245a paras. 1 and 3 UGB. (9) Notwithstanding Article 245a para. 3 UGB, where consolidated financial statements as referred to in para. 8 are disclosed, express mention must be made that the consolidated financial statements have not been prepared in accordance with the provisions of this federal act. Special accounting standards
Article 139. (1) The FMA may, with the consent of the Federal Minister of Finance, impose by
regulation such special orders on the accounting and consolidated accounting of insurance and reinsurance undertakings as are necessary with regard to the special nature of contractual insurance activities, the appropriate scope of information concerning the business activities that are provided to the policyholders and the general public, the requirements for supervision of business activities by the FMA, as well as the enforcement of the provisions of this Chapter for the purposes of insurance supervision. (2) Taking these requirements into account, the orders of the FMA may include the following:

1. regulations on obligatory forms for the financial statements and the details referred to in
   Article 145 para. 1 and Article 155 paras. 8 to 17;
2. regulations on the determination and calculation of the technical provisions;
3. determination of a maximum interest rate for the calculation of the technical provisions in life
   insurance based on the interest rate applicable to bonds by the Republic of Austria minus a safety margin of 40%;
4. regulations on the preparation of a separate income statement for individual insurance
   classes of direct and indirect business;
5. more detailed regulations on the single items of the financial statements as well as on the
   information provided in the notes and in the management report;
6. more detailed regulations on compliance with the presentation obligations referred to in
   Article 248 para. 2 no. 5, para. 3 no. 2 and para. 5 no. 2; and
7. regulations on requirements for the financial statements and the management report to be
   personally signed.
   (3) Paragraph 2 shall apply accordingly to consolidated accounting.
   SECTION 2: STRUCTURE AND DISCLOSURE
   General principles for the structure of financial statements and consolidated financial statements
   Article 140. (1) Life insurance, health insurance as well as non-life and accident insurance shall each
   constitute one balance sheet group. General insurance activities shall comprise health insurance as well as non-life and accident insurance.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 132 / 292 (2) The balance sheet items in the consolidated balance sheet shall be structured according to their allocation to the individual balance sheet groups. (3) A separate technical account shall be prepared for each balance sheet group. The non-technical account referred to in Article 146 para. 5 shall be prepared separately for each balance sheet group up to and including item 7; from item 8 onwards only the total amounts of all balance sheet groups shall be given. (4) Indirect life insurance business shall be allocated to the balance sheet group of life insurance, indirect health insurance business to the balance sheet group of health insurance, and other indirect business to the balance sheet group of non-life and accident insurance. Reinsurance undertakings or insurance undertakings which, in addition to indirect business, also pursue direct business limited to non-life and accident insurance may allocate the entire business to the balance sheet group of non-life and accident insurance. (5) Article 223 paras. 6 and 8 UGB shall not apply. (6) Expenses and income shall, unless they must be entered as separate items in the income statement given their nature, be apportioned to the respective items of the income statement according to cause. (7) The first sentence of para. 1 and para. 2 shall not apply to consolidated financial statements. The balance sheet items of the individual groups may be summarised in the consolidated balance sheet. (8) Para. 3 shall not apply to consolidated financial statements. A separate technical account shall be prepared in the consolidated income statement both for general insurance and life insurance activities. The non-technical account referred to in Article 146 para. 5 shall be prepared separately for general insurance and life insurance activities up to and including item 7; from item 8 onwards only the total amounts shall be given. (9) The items “Extraordinary income” (Article 146 para. 5 no. 8) and “Extraordinary expenses” (Article 146 para. 5 no. 9) shall show income and expenses incurred outside the undertaking’s ordinary business activities. (10) With regard to the balance sheet and the consolidated balance sheet, Article 223 para. 2 UGB shall only apply to the total amounts and not to the amounts of the individual balance sheet groups. (11) Article 225 para. 3 first sentence and para. 6 first sentence, Article 227 second sentence,
Article 237 para. 1 no. 5 and Article 266 no. 3 UGB shall not apply.
Special provisions for composite undertakings and other undertakings with more than one balance sheet group
Article 141. (1) Composite undertakings and other undertakings with more than one balance sheet
group shall allocate expenses and income, unless they belong to a single balance sheet group given their nature, to the individual balance sheet groups by means of allocation methods. The allocation methods must be technically correct and transparent and ensure that expenses and income are apportioned according to cause. It must be guaranteed that the interests of the policyholders and beneficiaries in a balance sheet group are neither impaired nor put at risk. They shall in particular

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 133 / 292 benefit from the profits generated by life insurance activities as if the undertaking exclusively pursued life activities. The allocation methods must be approved by the FMA. (2) Where assets are transferred from the life insurance or health insurance balance sheet group to another balance sheet group and are then sold within a year, any gains shall be allocated to the original balance sheet group. (3) Liabilities pursuant to items A. and B. as referred to in Article 144 para. 3 shall be allocated to the balance sheet groups pursued. The annual result arising in a certain balance sheet group from the apportionment of expenses and income according to cause and the allocation methods referred to in para. 1 affects the liabilities pursuant to items A., B. and C. in this balance sheet group and may not be transferred to another balance sheet group, para. 4 notwithstanding. (4) As long as, in accordance with Article 194, the notional life Minimum Capital Requirement and the notional non-life Minimum Capital Requirement are complied with, liabilities pursuant to items A. and B. may be transferred to another balance sheet group. Reinsurance with limited risk transfer
Article 142. Contracts by means of which the underwriting risks are not transferred at all or only
transferred to a very limited extent shall not be regarded as reinsurance contracts for the purposes of accounting. Risk reserve
Article 143. (1) Insurance and reinsurance undertakings shall establish a risk reserve, which shall be
shown separately in the balance sheet.
(2) 0.6% of the earned premiums of domestic business net of reinsurance shall be allocated to the risk reserve annually. However, the reserve may not exceed 4% of these premiums. It may only be used to cover losses and only after all other reserves stipulated in the articles of association and any other free reserves have been released. Following its release the reserve shall be re-established. (3) Repealed by Federal Law Gazette I no. 68/2015 Structure of the balance sheet and consolidated balance sheet
Article 144. (1) The items listed under paras. 2 and 3 shall be shown separately and in the prescribed
order in the balance sheet and the consolidated balance sheet.
(2) Assets:
A) Intangible assets
I) Goodwill acquired for valuable consideration II) Expenses for the acquisition of an insurance portfolio III) Other intangible assets IV) Difference pursuant to Article 254 para. 3 UGB (applies to consolidated balance sheet only) B) Investments

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 134 / 292 I) Land and buildings II) Investments in related undertakings and participating interests

1. Shares in related undertakings
2. Debt securities and other securities by related undertakings and loans to related
   undertakings
3. Participating interests
4. Debt securities and other securities by and loans to undertakings with which the
   undertaking is linked by virtue of participating interests III) Other investments
5. Shares and other variable-yield securities
6. Debt securities and other fixed-income securities
7. Units in collective investment schemes
8. Loans guaranteed by mortgages
9. Advance payments on policies
10. Other loans
11. Cash at bank
12. Other investments
    IV) Deposits with ceding undertakings
    C) Investments of unit-linked and index-linked life insurance D) Receivables I) Receivables from direct insurance business
13. Policyholders
14. Insurance intermediaries
15. Insurance undertakings
    II) Settlement receivables from reinsurance business III) Unpaid called-up capital IV) Other receivables E) Accrued interest and rent F) Other assets I) Tangible assets (except for land and buildings) and stocks II) Cash at bank and in hand III) Other IV) Repealed by Federal Law Gazette I no. 68/2015 G) Offsetting items with head office H) Prepaid expenses I) Deferred tax assets J) Offsetting items between balance sheet groups K) Assets from credit institutions (when applying Article 145)

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 135 / 292 L) Assets from other undertakings with sector-specific balance sheet regulations (when applying
Article 145)
M) Assets from additional other undertakings (when applying Article 145) (3) Liabilities:
A) Equity capital
I) Share capital

1. Nominal value
   of which own shares
2. Unpaid capital not called up
   II) Endowment capital
   III) Capital reserves
3. Committed
4. Not committed
   IV) Profit reserves
5. Contingency reserve
6. Statutory reserve pursuant to Article 229 para. 6 UGB
7. Other reserves provided for by the articles of association
8. Free reserves
   V) Risk reserve
   VI) Profit/loss for the year, of which profit/loss brought forward VII) Minority interest (applies to consolidated balance sheet only) B) Subordinated liabilities I to III) Repealed by Federal Law Gazette I no. 68/2015 C) Difference pursuant to Article 254 para. 3 UGB (applies to consolidated balance sheet only) D) Technical provisions retained I) Unearned premiums
9. Gross amount
10. Reinsurers’ share
    II) Life/health insurance provision
11. Gross amount
12. Reinsurers’ share
    III) Provision for claims outstanding
13. Gross amount
14. Reinsurers’ share
    IV) Provision for rebates
15. Gross amount
16. Reinsurers’ share
    V) Provision for bonuses and/or policyholders’ participation in profits
17. Gross amount

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 136 / 292
2) Reinsurers’ share
VI) Volatility reserve
VII) Other technical provisions

1. Gross amount
2. Reinsurers’ share
   E) Technical provisions of unit-linked and index-linked life insurance I) Gross amount II) Reinsurers’ share F) Non-technical provisions I) Provisions for severance pay II) Provisions for pensions III) Provisions for taxes IV) Provisions for deferred tax liabilities V) Other provisions G) Deposits received from reinsurers H) Other liabilities I) Liabilities from direct insurance business
3. Policyholders
4. Insurance intermediaries
5. Insurance undertakings
   II) Settlement liabilities from reinsurance business III) Debenture loans (with the exception of supplementary capital) IV) Liabilities to credit institutions V) Other liabilities I) Offsetting items with head office J) Deferred income K) Provisions, liabilities and deferred income from credit institutions (when applying Article 145) L) Provisions, liabilities and deferred income from other undertakings with sector-specific balance sheet regulations (when applying Article 145) M) Provisions, liabilities and deferred income from additional other undertakings (when applying
   Article 145)
   (4) Article 224 UGB shall not apply.
   (5) to (9) Repealed by Federal Law Gazette I no. 68/2015 Special provisions for the consolidated balance sheet
   Article 145. Where undertakings that are not to be included in the group’s calculation of solvency
   are included in the consolidated financial statements, the assets and liabilities of such undertakings are to be shown separately (items K. to M. of Article 144 paras. 2 and 3).

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 137 / 292 Structure of the income statement
Article 146. (1) The income statement shall be presented in report form. The items listed under
paras. 2 to 5 shall be shown separately in the given order.
(2) I. Technical account – General insurance, non-life and accident insurance

1. Earned premiums
   a. Premiums written aa. Gross amount ab. Outward reinsurance premiums b. Change in the provision for unearned premiums ba. Gross amount bb. Reinsurers’ share
2. Investment income from technical business
3. Other technical income
4. Claims incurred
   a. Claims paid aa. Gross amount ab. Reinsurers’ share b. Change in the provision for claims outstanding ba. Gross amount bb. Reinsurers’ share
5. Increase in technical provisions
   a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount bb. Reinsurers’ share
6. Decrease in technical provisions
   a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount bb. Reinsurers’ share
7. Rebates
   a. Gross amount b. Reinsurers’ share
8. Bonuses

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 138 / 292 a. Gross amount b. Reinsurers’ share
9. Operating expenses
a. Insurance acquisition costs b. Other operating expenses
c. Reinsurance commissions and profit shares from reinsurance cessions
10. Other technical expenses
11. Change in the volatility reserve
12. Technical account balance
(3) II. Technical account – General insurance, health insurance

1. Earned premiums
   a. Premiums written aa. Gross amount ab. Outward reinsurance premiums b. Change in the provision for unearned premiums ba. Gross amount bb. Reinsurers’ share
2. Investment income from technical business
3. Other technical income
4. Claims incurred
   a. Claims paid aa. Gross amount ab. Reinsurers’ share b. Change in the provision for claims outstanding ba. Gross amount bb. Reinsurers’ share
5. Increase in technical provisions
   a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount bb. Reinsurers’ share
6. Decrease in technical provisions
   a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 139 / 292 bb. Reinsurers’ share
7. Rebates
a. Gross amount b. Reinsurers’ share
8. Bonuses
a. Gross amount b. Reinsurers’ share
9. Operating expenses
a. Insurance acquisition costs b. Other operating expenses
c. Reinsurance commissions and profit shares from reinsurance cessions
10. Other technical expenses
11. Change in the volatility reserve
12. Technical account balance
(4) III. Technical account – Life insurance

1. Earned premiums
   a. Premiums written aa. Gross amount ab. Outward reinsurance premiums b. Change in the provision for unearned premiums ba. Gross amount bb. Reinsurers’ share
2. Investment income from technical business
3. Unrealised gains on investments pursuant to asset item C.
4. Other technical income
5. Claims incurred
   a. Claims paid aa. Gross amount ab. Reinsurers’ share b. Change in the provision for claims outstanding ba. Gross amount bb. Reinsurers’ share
6. Increase in technical provisions
   a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount bb. Reinsurers’ share

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 140 / 292
7. Decrease in technical provisions
a. Life/health insurance provision aa. Gross amount ab. Reinsurers’ share b. Other technical provisions ba. Gross amount bb. Reinsurers’ share
8. Bonuses and policyholders’ participation in profits
a. Gross amount b. Reinsurers’ share
9. Operating expenses
a. Insurance acquisition costs b. Other operating expenses
c. Reinsurance commissions and profit shares from reinsurance cessions
10. Unrealised losses on investments pursuant to asset item C.
11. Other technical expenses
12. Technical account balance
(5) IV. Non-technical account

1. Technical account balance
2. Investment income and investment return
   a. Income from participating interests, with a separate indication of that derived from related undertakings b. Income from land and buildings, with a separate indication of that derived from related undertakings
   c. Income from other investments, with a separate indication of that derived from
   related undertakings d. Value re-adjustments on investments e. Gains on the realisation of investments f. Other investment income and investment return
3. Investment expenses and interest paid
   a. Asset management expenses b. Value adjustments on investments
   c. Interest paid
   d. Losses on the realisation of investments e. Other investment expenses
4. Investment income transferred to the technical account
5. Other non-technical income
6. Other non-technical expenses
7. Profit or loss on ordinary activities

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 141 / 292
8. Extraordinary income
9. Extraordinary expenses
10. Extraordinary profit or loss
11. Taxes on income
12. Net income/loss for the year
13. Release of reserves
a. Release of capital reserves b. Release of the contingency reserve
c. Release of the statutory reserve pursuant to Article 229 para. 6 UGB
d. Release of other reserves in accordance with the articles of association e. Release of free reserves f. Release of the risk reserve
14. Allocation to reserves
a. Allocation to the contingency reserve b. Allocation to the statutory reserve pursuant to Article 229 para. 6 UGB
c. Allocation to other reserves in accordance with the articles of association
d. Allocation to free reserves e. Allocation to the risk reserve
15. Annual profit/loss
16. Profit/loss brought forward
17. Profit/loss for the year
(6) Article 231 UGB shall not apply.
(7) Where Article 259 para. 2 UGB is applied, items 13 to 17 of para. 5 shall be numbered 14 to 18. (8) Where undertakings that are not to be included in the group’s calculation of solvency are included in the consolidated financial statements, item 7 shall be broken down as follows in the non￾technical account (profit or loss on ordinary activities):
a. profit or loss on ordinary activities of insurance and reinsurance undertakings; b. profit or loss on ordinary activities of credit institutions;
c. profit or loss on ordinary activities of other undertakings with sector-specific balance
sheet regulations; and d. profit or loss on ordinary activities of additional other undertakings. The composition of the results mentioned under lit. b to d shall be shown separately in the notes to the financial statements in accordance with the sectoral rules, with a breakdown that as a minimum is in accordance with the items designated with Arabic numerals in the income statement classification pursuant to Article 231 UGB. This provision shall be applied accordingly to undertakings with sector-specific balance sheet regulations. The items shall be explained, where necessary. The FMA may determine by regulation more detailed provisions relating to these details in the notes. (9) Paragraphs 1 to 5 shall be applied accordingly to the consolidated income statement.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 142 / 292 Recognition of expenses and income
Article 147. (1) The set-off of expenses against income shall be effected for:

1. the fire protection tax charged to policyholders against the fire protection tax expenditure;
2. the remunerations received from co-insurance against the commissions paid for co￾insurance;
3. expense allowances against those expenses for whose cover they are intended;
4. the income against the current land and buildings expenses, except for the write-downs;
5. the income against expenses relating to participating interests, except for the write-downs;
6. proceeds from asset sales against the book values of the sold assets;
7. currency exchange gains against exchange losses from one and the same currency;
8. claims paid against subrogation income and other costs of claims.
   (2) For institutions which are not directly connected to contractual insurance activities, the difference between the expenses and income shall be allocated to the appropriate income statement items. (3) The profit generated from indirect business may be deferred by no more than one year. Incoming statements shall be entered in the books on a regular basis. The statements of an accounting year shall basically be recognised in income during one financial year. For losses incurred up to the balance sheet date and for losses having become known up to the date of balance sheet preparation, appropriate provisions shall be established. A derogation of the chosen extent of any deferred booking of the results from the individual reinsurance contracts shall only be admissible under special circumstances. (4) Reinsurance acceptances from undertakings included in the consolidated financial statements shall be recognised simultaneously for the purpose of preparing the consolidated financial statements; in this respect, para. 3 shall not be applied to the consolidated financial statements.
   SECTION 3: VALUATION
   General valuation rules
   Article 148. (1) The prudent person principle shall be applied taking the special nature of insurance
   activities into consideration.
   (2) Non-securitised claims and liabilities which are denominated in a foreign currency shall be shown at the mean rate on the balance sheet date where the currency risk is not hedged. Valuation of assets
   Article 149. (1) Investments pursuant to item B. of Article 144 para. 2 shall be valued like fixed assets
   with the exception of those listed under para. 2 (Articles 203 and 204 UGB, considering Article 208 UGB). The last sentence of Article 204 para. 2 UGB shall only be applied to these investments where they fall under items B. II., B. III. or B. IV. of Article 144 para. 2.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 143 / 292 (2) Shares, securities on participation and supplementary capital, other variable-yield securities, loan stock rights and shares in investment funds pursuant to item B. of Article 144 para. 2, as well as shares in related undertakings to the extent that these are not intended to be held permanently for business activities pursuant to item B. II of Article 144 para. 2, shall be valued like current assets (Articles 206 and 207 UGB, considering Article 208 UGB). By way of derogation, the mentioned investments may be valued in accordance with the provisions of the UGB; however, write-downs to the lower fair value in the case of a loss of value which presumably is not permanent shall not be required where the total amount of these write-downs not effected does not exceed 50% of the entire, otherwise existing hidden net reserves of the undertaking in the balance sheet group in question. Profits may only be distributed in the case of omitted write-downs inasmuch as reserves that can be released at any time plus profit brought forward and minus any loss brought forward at least correspond to the amount of the omitted write-down’s impact on net income. (3) In the case of units in UCITS and special funds pursuant to Article 163 InvFG 2011 or comparable foreign funds which exclusively or predominantly contain debt securities or other fixed-income securities pursuant to item B. III. of Article 144 para. 2, over which the insurance or reinsurance undertaking can prove a direct or indirect controlling influence and which are managed by an investment fund management company with its head office in a Member State, the securities contained within them may be valued in the same manner as securities that are directly owned by the undertaking. Exercise of this discretion shall be reported on in the notes. (4) Investments of unit-linked and index-linked life insurance pursuant to item C. of Article 144 para. 2 shall be valued at stock exchange or market prices, irrespective of their purchase price or production cost. (5) Article 209 para. 1 UGB shall be applied to tangible assets and stocks pursuant to item F. I. of
Article 144 para. 2.
General rules for technical provisions
Article 150. (1) Technical provisions shall be established as far as necessary in accordance with
sound business judgement in order to guarantee ongoing compliance with the obligations arising from the insurance contracts. The valuation shall be effected taking account of the prudent person principle. (2) Technical provisions shall constitute in particular the unearned premiums, the life/health insurance provision, the provision for claims outstanding, the provisions for bonuses and rebates, the volatility reserve, the technical provisions similar to the volatility reserve, the provision for cancellations, the provision for unexpired risks from the insurance portfolio as well as the provision for losses from reinsurance acceptances, the booking of which is deferred. (3) Where actuarial bases exist for calculating the technical provisions, they shall be applied accordingly. (4) Article 198 para. 8 no. 3 and Article 211 UGB shall not apply to technical provisions.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 144 / 292 Unearned premiums
Article 151. (1) Unearned premiums are those parts of the premiums written which refer to a period
of time after the financial year-end. They shall in principle be computed separately for each insurance contract using an individual calculation on a pro-rata basis. (2) The unearned premiums may also be determined by approximation provided that the results approximate those of a pro-rata individual calculation for each insurance contract. (3) In classes of insurance where the assumption of a temporal correlation between risk experience and premium is not appropriate, calculation methods shall be applied that take account of the differing pattern of risk over time. Life/health insurance provision
Article 152. (1) The life/health insurance provision shall in principle be computed separately for
each contract in life insurance, in health insurance and in all other insurance classes, provided that they are operated in a manner similar to life insurance. The use of recognised statistical or mathematical methods shall be permitted where they may be expected to give approximately the same results as individual calculations. (2) In life insurance and health insurance operated in a manner similar to life insurance, the life/health insurance provision shall comprise the actuarially estimated value of an insurance undertaking’s obligations including profit shares already allocated and promised as well as a provision for administrative expenses and after deducting the actuarial value of future premiums. In the case of the state-sponsored retirement provision pursuant to Article 108g to 108i EstG 1988, the life/health insurance provision shall also comprise provisions for investment risks, provided that they exceed the investment risks of life insurance whose technical provisions are covered by the Deckungsstock pursuant to Article 300 para. 1 no. 1. The FMA may determine by regulation the conditions under which such additional provisions must be established as well as the required amount of these provisions; in this context, particularly the minimum commitment period, the amount of the assumed rate of interest, the expected income from the investments, the volatility of the assets and the type of profit allocation can be used. (3) Negative technical mathematical reserves shall be set to zero. (4) The life/health insurance provision shall be calculated on the basis of recognised actuarial methods. Provision for claims outstanding
Article 153. (1) Provisions for claims outstanding shall be established for benefit obligations as yet
uncertain in terms of reason or amount for claims incurred by the balance sheet date as well as for all claims settlement costs still expected to arise in connection with these claims after the balance sheet date.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 145 / 292 (2) The provision for claims outstanding shall be computed separately for each case. The computation may be carried out in a different manner where the nature of the insurance class means that an individual calculation is not appropriate. A flat-rate valuation shall be permitted where the number of similar risks suggests that it will give approximately the same results as the individual calculation. In the case of co-insurance, the provision shall proportionately at least correspond to the amount determined by the leading insurer. (3) For claims incurred by the balance sheet date and not known at the date of balance sheet preparation, the provision shall be established on the basis of empirical values (provision for claims incurred but not reported). (4) The provision for claims outstanding shall also include the benefit obligations known at the balance sheet date but not yet paid. (5) Recoverable amounts arising out of recourse taken on the basis of insurance claims paid (subrogation) or of the legal ownership of insured property shall be deducted from the provision for claims outstanding. The recoverability and usability of the receivables shall be taken into account and the prudent person principle adhered to. (6) Where in an insurance class not covered by Article 92 benefits must be paid in the form of an annuity, the corresponding provision shall be calculated in accordance with recognised actuarial methods. Volatility reserve
Article 154. (1) To balance fluctuations in annual retained claims expenditure, a volatility reserve
shall be established in accordance with para. 2 for the insurance classes of non-life and accident insurance and for the reinsurance of these insurance classes. (2) The obligation to establish a volatility reserve shall be applicable where considerable fluctuations of retained claims have been observed during an extended observation period and the total retained claims paid and the operating expenses have exceeded the retained earned premiums at least once during the observation period. The establishment of a volatility reserve shall not be required for insurance classes where the amount of earned premiums is not material. (3) The FMA may demand the establishment of technical provisions similar to the volatility reserve for special risks where, due to the special nature of the risks, the computation of the average claim on the basis of an observation period is not an appropriate method to determine the reserve. (4) The volatility reserve and provisions pursuant to para. 3 cannot be established in parallel for the same type of risk. (5) Upon determining the computation rules for the volatility reserve and the provisions pursuant to para. 3, the FMA may give orders that derogate from the general disclosure requirements. Under special circumstances, the FMA may order a derogation from the general computation rules on a case-by-case basis.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 146 / 292
SECTION 4: NOTES AND MANAGEMENT REPORT
Notes to the (consolidated) financial statements
Article 155. (1) Notwithstanding the provisions laid down in the UGB, the notes to the (consolidated)
financial statements shall include the following details:

1. details on the share capital called up during the financial year as well as the amounts allocated
   to the share capital on the basis of this called-up capital and the amounts not yet paid;
2. details on the amounts allocated to the share capital from the profit for the previous year on
   account of the capital not yet paid;
3. details on the shareholders’ shares in the profit for the year where the share capital has not
   yet been fully paid;
4. details on the amount of the share in a controlling undertaking, specifying the undertaking,
   possible obligations to make supplementary contributions and the change in the amount of the share during the financial year;
5. details on bonuses to policyholders and the distribution of the remaining net income to
   members of a mutual association, as well as on the development of the provisions established for that purpose;
6. details on the occurrence of an obligation to make supplementary contributions to be met by
   the members of a mutual association or on the reduction of insurance benefits payable to members of a mutual association as referred to in Article 44 para. 2. (2) The notes to the financial statements shall also specify:
7. the development of items A., B. I. and B. II. of Article 144 para. 2 in the consolidated balance
   sheet; to this end, starting with the balance sheet values at the end of the preceding financial year, the additions, the transfers of entries, the disposals, the write-downs during the financial year, as well as the balance sheet values at the end of the financial year shall be listed separately; Article 226 para. 1 UGB shall not apply; 1a. the balance sheet value of land used for own activities;
8. the UCITS serving as investment in unit-linked life insurance;
9. the amount of the policy loans contained in items B. III.6. of Article 144 para. 2;
10. a breakdown of those other loans not secured by an insurance contract where the amount is
    material;
11. the share in the items D. I., D. II., D. III. and D. IV. of Article 144 para. 2 as well as H I., H. II., H. III.,
    H. IV. and H. V. of Article 144 para. 3 attributable to related undertakings and to undertakings linked by virtue of participating interests;
12. the share in securities, receivables or deposits with credit institutions attributable to related
    undertakings and to undertakings linked by virtue of participating interests and which is shown under investments except item B. II. of Article 144 para. 2;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 147 / 292
7. amounts which are included in items A. III., B. III. 8., D. IV. and F. III. of Article 144 para. 2 as well
as D. VII., F. V. and H. V. of Article 144 para. 3 and are of considerable significance; details on these amounts shall be required in all cases where they exceed 5% of the balance sheet total;
8. amounts which are included under “Other technical income”, “Other technical expenses”,
“Other investment income and investment return”, “Other investment expenses”, “Other non￾technical income” and “Other non-technical expenses” and are of considerable significance; details on these amounts shall be required in all cases where they exceed 5% of the earned premiums;
9. the amount of convertible debenture loans contained in item H. III. of Article 144 para. 3;
10. the amount contained in item H. V. of Article 144 para. 3 attributable to liabilities relating to
taxes and social security;
11. the share of the indirect business in the earned premiums, the booking of which is deferred,
broken down by the length of the deferral; changes shall be explained setting forth their effect on the net assets, financial position and the results of operations;
12. the amounts of the following contained in the items “Claims incurred”, “Operating expenses”,
“Other technical expenses”, “Investment expenses” and “Other non-technical expenses”:
a. salaries and wages, b. expenses for severance pay and contributions to corporate provision funds,
c. expenses for old-age pensions,
d. cost of statutory social security, payroll-related taxes and mandatory contributions, e. other employee benefit costs; these details replace the details referred to in Article 238 para. 1 no. 13 and Article 239 para. 1 no. 2 UGB;
13. the commissions attributable to direct insurance business during the financial year;
14. receivables to be deducted from the provision for claims outstanding pursuant to Article 153
para. 5, where the amount is material;
15. a summary of the principal assumptions made when calculating the life/health insurance
provision;
16. the amount of the cost deductions made when determining the unearned premiums;
17. the principles according to which the capital income transferred from the non-technical part
to the technical part of the income statement is determined;
18. considerable differences in a balance sheet group between the claims paid and the provision
for claims outstanding for previous years at the end of the financial year on the one hand, and the provision for claims outstanding at the beginning of the financial year on the other hand; the differences shall be explained with regard to their type and amount; and
19. the participation in profits in life insurance.
(3) Paragraph 2 with the exception of nos. 5, 6, 11, 15 and 19 shall be applied to the notes to the consolidated financial statements. (3a) Where the amounts of items 8. and 9. of Article 146 para. 5 are essential for the assessment of the results of operations, they shall be explained with regard to their amount and type in the notes

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 148 / 292 to the (consolidated) financial statements. This shall also apply to income and expenses attributable to another financial year, unless they concern claims incurred. (4) The details referred to in Article 237 para. 1 no. 2 UGB shall not pertain to contingent liabilities resulting from insurance contracts. (5) The individual investments referred to in item B. of Article 144 para. 2 shall be shown in the notes to the (consolidated) financial statements at their current values. Moreover, with regard to the mentioned investments, the valuation methods applied to their determination shall be specified, as well as, with respect to land and buildings, the allocation according to the year of their valuation, and with respect to all other investments, the reasons for the use of the valuation methods. (6) Current value shall mean:

1. in the case of land and buildings the price at which they could be sold under private contract
   between a willing seller and an arm’s length buyer on the date of valuation, it being assumed that the property is publicly exposed to the market, that market conditions permit orderly disposal and that a normal period, having regard to the nature of the property, is available for the negotiation of the sale. The current value shall be determined through valuation. The valuation shall be carried out at least every five years for each land and buildings item. Where the value of any land and buildings item has diminished since the preceding valuation, an appropriate value adjustment shall be made, which shall be retained until the next determination of current value (valuation). Where on the date of balance sheet preparation land and buildings have been sold or are to be sold, the current value shall be reduced by the estimated realisation costs.
2. for investments with a market or stock exchange price, the value at the balance sheet date or
   the last day preceding the day for which a market or stock exchange price could be determined. Where on the date of balance sheet preparation an investment has been sold or is to be sold, the current value shall be reduced by the estimated realisation costs. All investments shall be valued on a basis which has prudent regard to the likely realisable value. (7) The notes to the consolidated financial statements shall specify:
3. application of Article 138 para. 5;
4. application of Article 138 para. 6; where the effect on the net assets, financial position and the
   results of operations of all undertakings included in the consolidation is substantial, explanations shall be added; and
5. the amount of deferred taxation.
   (7a) Items A. IV. of Article 144 para. 2 and item C. of Article 144 para. 3 as well as any material changes in these items compared with the previous year shall be explained in the notes to the consolidated financial statements. Where differences on the asset side are set off against those on the liability side, these offset amounts shall be mentioned in the notes to the consolidated financial statements. (7b) The composition of the items referred to in Article 145 shall be shown in the notes to the consolidated financial statements in accordance with the sectoral rules. In this context, items shall be broken down as a minimum in accordance with the items designated with capital letters and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 149 / 292 Roman numerals in the balance sheet classification pursuant to Article 224 UGB. This provision shall be applied accordingly to undertakings with sector-specific balance sheet regulations. The items shall be explained, where necessary. The FMA may determine by regulation more detailed provisions relating to these details in the notes. (8) In addition, the notes to the financial statements shall disclose:

1. with regard to non-life and accident insurance, the gross premiums written, the gross
   premiums earned, the gross claims incurred and the gross operating expenses, as well as the reinsurance balance, broken down into lines of business; and
2. with regard to health insurance and life insurance, the gross premiums written, broken down
   into lines of business, as well as the reinsurance balance.
   (9) For the breakdown into lines of business in non-life and accident insurance, the amounts pursuant to para. 8 no. 1 shall be disclosed for fire and consequential loss, household, other damage to property, motor, third-party liability and other classes, accident, third-party liability, legal expenses, marine, aviation and transport, credit and suretyship, assistance and miscellaneous, each for the direct business, for the marine, aviation and transport reinsurance acceptances as well as for other indirect insurance. (10) For the breakdown into lines of business in health insurance, the premiums written shall be disclosed in the notes to the financial statements for direct individual insurance and group contract insurance and for indirect business. (11) For the breakdown into lines of business in health insurance, the premiums written shall be disclosed in the notes to the financial statements for individual insurance, for group contract insurance, for single premium contracts, for periodic premium contracts, for bonus contracts, for non-bonus contracts, for unit-linked life insurance contracts, for index-linked life insurance contracts and for investment-oriented life insurance contracts, as well as for indirect business. (12) In the notes to the consolidated financial statements:
3. with regard to non-life and accident, the gross premiums written pursuant to para. 9; and
4. with regard to life and health, the gross written premiums shall be broken down into direct
   and indirect business.
   (13) Where reinsurance acceptances are not shown in that balance sheet group to which they would have to be allocated as direct business, for non-life and accident insurance acceptances the amounts pursuant to para. 8 no. 1, and for life insurance and health insurance acceptances the amounts pursuant to para. 8 no. 2 shall be disclosed in the notes to the financial statements, and the balance sheet group that they are shown in shall be stated. (14) For each balance sheet group, the premiums written of the entire business as well as the technical account balance, broken down into direct and indirect business for each of the individual states in which the insurance undertaking concludes insurance contracts through a branch or under the freedom to provide services, shall be disclosed separately in the notes to the (consolidated) financial statements, provided that the share of the respective state exceeds 3% of the premiums written of the entire business of the respective balance sheet group. The details shall not be required

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 150 / 292 where, in accordance with sound business judgement, they could cause a significant disadvantage to the undertaking or to an undertaking in which the undertaking owns at least one fifth of the shares; the application of this exception shall be stated in the notes to the (consolidated) financial statements. (15) The average number of employees during the financial year as well as the staff costs incurred during the financial year shall be indicated separately in the notes to the (consolidated) financial statements according to business creation (sale) and operation; the average number of employees of only proportionally included undertakings pursuant to Article 262 UGB shall be disclosed separately in the notes to the consolidated financial statements. (16) The amounts pursuant to paras. 1, 2 and 5 to 15 can be rounded to the nearest thousand euro. (17) Article 237 para. 1 no. 6, Article 239 para. 1 no. 1 and Article 240 UGB shall not apply. Management report and consolidated management report
Article 156. (1) The management report shall also report on:

1. those parts of the business activities that have been outsourced to another undertaking
   pursuant to Article 109, providing the name and head office of the undertaking; and
2. the development of the undertaking’s business in the individual insurance classes of direct
   business and the effect of the result of indirect business on the profit or loss for the financial year. (2) Article 267 para. 4 UGB shall not apply.
   CHAPTER 8: SOLVENCY
   SECTION 1: SOLVENCY BALANCE SHEET
   Valuation of assets and liabilities
   Article 157. (1) Insurance and reinsurance undertakings shall prepare a solvency balance sheet in
   accordance with the provisions of this Section and of the implementing regulation (EU). The provisions governing the solvency balance sheet shall not affect the accounting rules specified in the UGB and in this federal act. The terms used in this Section shall be interpreted solely based on the provisions specified in this Section. (2) Insurance and reinsurance undertakings shall value their assets and liabilities as follows:
3. assets shall be valued at the amount for which they could be exchanged between
   knowledgeable willing parties in an arm’s length transaction;
4. liabilities shall be valued at the amount for which they could be transferred, or settled,
   between knowledgeable willing parties in an arm’s length transaction.
   When valuing liabilities under no. 2, no adjustment to take account of the own credit standing of the insurance or reinsurance undertaking shall be made.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 151 / 292 General rules for technical provisions
Article 158. (1) Insurance and reinsurance undertakings shall establish technical provisions with
respect to all insurance and reinsurance obligations towards policyholders and beneficiaries of insurance or reinsurance contracts. Technical provisions shall be calculated in a prudent, reliable and objective manner. When calculating, the principle laid down in Article 157 para. 2 shall be followed. (2) The value of technical provisions shall correspond to the current amount insurance and reinsurance undertakings would have to pay if they were to transfer their insurance and reinsurance obligations immediately to another insurance or reinsurance undertaking. (3) The calculation of technical provisions shall make use of and be consistent with information provided by the financial markets and generally available data on underwriting risks (market consistency). Calculation of technical provisions
Article 159. (1) The value of technical provisions shall be equal to the sum of:

1. a best estimate as set out in Article 160; and
2. a risk margin as set out in Article 161.
   The best estimate and the risk margin shall be calculated separately.
   (2) Insurance and reinsurance undertakings shall segment their insurance and reinsurance obligations into homogeneous risk groups, and as a minimum by lines of business, when calculating their technical provisions. (3) However, where future cash flows associated with insurance or reinsurance obligations can be replicated reliably using financial instruments for which a reliable market value is observable, notwithstanding the second sentence of para. 1, the value of technical provisions associated with those future cash flows shall be determined on the basis of the market value of those financial instruments. (4) Other additional factors shall be taken into account when calculating technical provisions:
3. all expenses that will be incurred in servicing insurance and reinsurance obligations;
4. inflation, including expenses and claims inflation;
5. all payments to policyholders and beneficiaries, including future discretionary bonuses,
   which insurance and reinsurance undertakings expect to make, whether or not those payments are contractually guaranteed. Only such future discretionary bonuses paid to policyholders and beneficiaries are to be deducted as result from undeclared amounts, as of the calculation date, of provisions for bonuses in health insurance and of the provision for participation in profits and/or bonuses in life insurance. (5) For the purpose of calculating the technical provisions, an emergency situation as referred to in
   Article 92 para. 5 shall be assumed to exist where:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 152 / 292

1. the assessment basis referred to in Article 92 para. 4 has been non-positive for three
   consecutive years;
2. the additional interest provision has been completely released; and
3. the hidden net reserves in the balance sheet group concerned are no longer sufficient to
   ensure the contractually guaranteed benefits in that particular balance sheet group. Best estimate
   Article 160. (1) The best estimate shall correspond to the probability-weighted average of future
   cash- flows, taking account of the expected cash value (time value of money) and using the relevant risk-free interest rate term structure. (2) The calculation of the best estimate shall be based upon up-to-date and credible information and realistic assumptions and be performed using adequate, suitable and relevant actuarial and statistical methods. (3) The projection of future cash-flows that is used in the calculation of the best estimate shall take account of all the cash in-flows and out-flows required to settle the insurance and reinsurance obligations over their lifetime. (4) The best estimate shall be calculated without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles. Those amounts shall be calculated separately as specified in Article 163. Risk margin
   Article 161. (1) The risk margin shall be such as to ensure that the value of the technical provisions
   is equivalent to the amount that insurance and reinsurance undertakings would be expected to require in order to take over and meet the insurance and reinsurance obligations. (2) Where insurance and reinsurance undertakings value the best estimate and the risk margin separately, the risk margin shall be calculated by determining the cost of capital needed to make available an amount of own funds equal to the Solvency Capital Requirement necessary to support the insurance and reinsurance obligations until the settlement of those obligations. (3) The Cost-of-Capital rate shall be determined in accordance with the implementing regulation (EU). Financial guarantees and contractual options included in insurance and reinsurance contracts
   Article 162. (1) When calculating technical provisions, the value of financial guarantees and any
   contractual options included in insurance and reinsurance policies shall be taken into account. (2) Any assumptions made with respect to the likelihood that policyholders will exercise contractual options, including lapses and surrenders, shall be realistic and based on current and credible information. The assumptions shall take account, either explicitly or implicitly, of the impact that

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 153 / 292 future changes in financial and other framework conditions may have on the exercise of those options. Recoverables from reinsurance contracts and special purpose vehicles
Article 163. Insurance and reinsurance undertakings shall comply with Articles 158 to 162 when
calculating amounts recoverable from reinsurance contracts and special purpose vehicles. In this context, the difference between the dates when the amounts are received and when the payments are made to the beneficiaries shall be considered. The result from that calculation shall be adjusted to take account of expected losses due to default of the counterparty. That adjustment shall be based on an assessment of the probability of default of the counterparty and the average loss resulting from such default. Data quality and application of approximations, including case-by-case approaches, for technical provisions
Article 164. (1) Insurance and reinsurance undertakings shall have internal processes and
procedures in place to ensure the appropriateness, completeness and accuracy of the data used in the calculation of their technical provisions. (2) Where insurance and reinsurance undertakings have insufficient data of appropriate quality to apply a reliable actuarial method to a set or subset of their insurance and reinsurance obligations, or to amounts recoverable from reinsurance contracts and special purpose vehicles, appropriate approximations, including case-by-case approaches, may be used in the calculation of the best estimate. Comparison with empirical data
Article 165. (1) Insurance and reinsurance undertakings shall have processes and procedures in
place to ensure that best estimates, and the assumptions underlying the calculation of best estimates, are regularly compared with empirical data. (2) Where systematic deviation between empirical data and the best estimate calculations occurs, the insurance or reinsurance undertaking shall make appropriate adjustments to the actuarial methods being used or the assumptions being made. Matching adjustment to the relevant risk-free interest rate term structure
Article 166. (1) Insurance and reinsurance undertakings may apply a matching adjustment to the
relevant risk-free interest rate term structure to calculate the best estimate of a portfolio of life insurance or reinsurance obligations, including annuities stemming from non-life insurance or reinsurance contracts subject to approval by the FMA where the following conditions are met:

1. the insurance or reinsurance undertaking has assigned a portfolio of assets, consisting of
   bonds and other assets with similar cash-flow characteristics, to cover the best estimate of

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 154 / 292 the portfolio of insurance or reinsurance obligations and maintains that assignment over the lifetime of the obligations, except where a change is for the purpose of maintaining the replication of expected cash flows between assets and liabilities where the cash flows have materially changed;
2. the portfolio of insurance or reinsurance obligations to which the matching adjustment is
applied and the assigned portfolio of assets are identified, organised and managed separately from the other activities of the undertakings, and the assigned portfolio of assets cannot be used to cover losses arising from other activities of the undertakings;
3. the expected cash flows of the assigned portfolio of assets replicate each of the expected cash
flows of the portfolio of insurance or reinsurance obligations in the same currency and any mismatch does not give rise to risks which are material in relation to the risks inherent in the insurance or reinsurance business to which the matching adjustment is applied;
4. the contracts underlying the portfolio of insurance and reinsurance obligations do not give
rise to future premium payments;
5. the only underwriting risks connected to the portfolio of insurance or reinsurance obligations
are longevity risk, expense risk, revision risk and mortality risk;
6. where the underwriting risk connected to the portfolio of insurance or reinsurance obligations
includes mortality risk, the best estimate of the portfolio of insurance or reinsurance obligations does not increase by more than 5% under a mortality risk stress that is calibrated in accordance with Article 175 para. 3;
7. the contracts underlying the portfolio of insurance or reinsurance obligations include no
options for the insured person or only a surrender option where the surrender value does not exceed the value of the assets, valued in accordance with Article 157, covering the insurance or reinsurance obligations at the time the surrender option is exercised;
8. the cash flows of the assigned portfolio of assets are fixed and cannot be changed by the
issuers of the assets or any third parties; and
9. the insurance or reinsurance obligations of an insurance or reinsurance contract are not split
into different parts when composing the portfolio of insurance or reinsurance obligations for the purpose of this paragraph. Notwithstanding no. 8, insurance or reinsurance undertakings may use assets where the cash flows are fixed except for a dependence on inflation, provided that those assets replicate the cash flows of the portfolio of insurance or reinsurance obligations that depend on inflation. In the event that issuers or third parties have the right to change the cash flows of an asset in such a manner that the investor receives sufficient compensation to allow them to obtain the same cash flows by re￾investing in assets of an equivalent or better credit quality, the right to change the cash flows shall not disqualify the asset for admissibility to the assigned portfolio in accordance with no. 8. (2) Insurance or reinsurance undertakings that apply the matching adjustment to a portfolio of insurance or reinsurance obligations shall not revert back to an approach that does not include a matching adjustment. Where an insurance or reinsurance undertaking that applies the matching

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 155 / 292 adjustment is no longer able to comply with the conditions set out in para. 1, it shall immediately inform the FMA and take the necessary measures to restore compliance with those conditions. Where the undertaking is not able to restore compliance with those conditions within two months of the date of non-compliance, it shall cease to apply the matching adjustment to any of its insurance or reinsurance obligations and shall not apply the matching adjustment for a period of a further 24 months. (3) The matching adjustment shall not be applied with respect to insurance or reinsurance obligations where the relevant risk-free interest rate term structure to calculate the best estimate for those obligations includes a volatility adjustment or transitional measure on the risk-free interest rates under Article 336. (4) For each currency the matching adjustment shall be calculated in accordance with the following principles:

1. the matching adjustment must be equal to the difference of the following:
   a. the annual effective rate, calculated as the single discount rate that, where applied to the cash flows of the portfolio of insurance or reinsurance obligations, results in a value that is equal to the value in accordance with Article 157 of the portfolio of assigned assets, and b. the annual effective rate, calculated as the single discount rate that, where applied to the cash flows of the portfolio of insurance or reinsurance obligations, results in a value that is equal to the value of the best estimate of the portfolio of insurance or reinsurance obligations where the time value of money is taken into account using the basic risk-free interest rate term structure;
2. the matching adjustment must not include the fundamental spread reflecting the risks
   retained by the insurance or reinsurance undertaking;
3. notwithstanding no. 1, the fundamental spread must be increased where necessary to ensure
   that the matching adjustment for assets with sub-investment grade credit quality does not exceed the matching adjustments for assets of investment grade credit quality and the same duration and asset class; and
4. the use of external credit assessments in the calculation of the matching adjustment must be
   in accordance with the implementing regulation (EU).
   (5) For the purposes of para. 4 no. 2, the fundamental spread shall be:
5. equal to the sum of the following:
   a. the credit spread corresponding to the probability of default of the assets, and b. the credit spread corresponding to the expected loss resulting from downgrading of the assets;
6. for exposures to Member States’ central governments and central banks, no lower than 30%
   of the long-term average of the spread over the risk-free interest rate of assets of the same duration, credit quality and asset class, as observed in financial markets; and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 156 / 292
3. for assets other than exposures to Member States’ central governments and central banks, no
lower than 35% of the long-term average of the spread over the risk-free interest rate of assets of the same duration, credit quality and asset class, as observed in financial markets. The probability of default referred to in no. 1 lit. a shall be based on long-term default statistics that are relevant for the asset in relation to its duration, credit quality and asset class. Where no reliable credit spread can be derived from the default statistics, the fundamental spread shall be equal to the portion of the long-term average of the spread over the risk-free interest rate set out in nos. 2 and 3. Volatility adjustment to the relevant risk-free interest rate term structure
Article 167. (1) Insurance and reinsurance undertakings may apply a volatility adjustment to the
relevant risk-free interest rate term structure to calculate the best estimate. (2) For each relevant currency, the volatility adjustment to the relevant risk-free interest rate term structure shall be based on the spread between the interest rate that could be earned from assets included in a reference portfolio for that currency and the rates of the relevant basic risk-free interest rate term structure for that currency. The reference portfolio for a currency shall be representative for the assets which are denominated in that currency and which insurance and reinsurance undertakings are invested in to cover the best estimate for insurance and reinsurance obligations denominated in that currency. (3) The amount of the volatility adjustment to risk-free interest rates shall correspond to 65% of the risk-corrected currency spread. The risk-corrected currency spread shall be calculated as the difference between the spread referred to in para. 2 and the portion of that spread that is attributable to a realistic assessment of expected losses or unexpected credit or other risk of the assets. The volatility adjustment shall apply only to the relevant risk-free interest rates of the term structure that are not derived by means of extrapolation. The extrapolation of the relevant risk-free interest rate term structure shall be based on those adjusted risk-free interest rates. (4) For each relevant country, the volatility adjustment to the risk-free interest rates referred to in para. 3 for the currency of that country shall, before application of the 65% factor, be increased by the difference between the risk-corrected country spread and twice the risk-corrected currency spread, whenever that difference is positive and the risk-corrected country spread is higher than 85 basis points. The increased volatility adjustment shall be applied to the calculation of the best estimate for insurance and reinsurance obligations of products sold in the insurance market of that country. The risk-corrected country spread is calculated in the same way as the risk-corrected currency spread for the currency of that country, but based on a reference portfolio that is representative for the assets which insurance and reinsurance undertakings are invested in to cover the best estimate for insurance and reinsurance obligations of products sold in the insurance market of that country and denominated in the currency of that country.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 157 / 292 (5) The volatility adjustment shall not be applied with respect to insurance obligations where the relevant risk-free interest rate term structure to calculate the best estimate for those obligations includes a matching adjustment. (6) By way of derogation from Article 175, the Solvency Capital Requirement shall not cover the risk of loss of basic own funds resulting from changes of the volatility adjustment. Use of the technical information produced by EIOPA
Article 168. (1) Insurance and reinsurance undertakings shall use the following technical
information published by EIOPA to calculate the technical provisions:

1. a relevant risk-free interest rate term structure to calculate the best estimate, without any
   matching adjustment or volatility adjustment;
2. for each relevant duration, credit quality and asset class a fundamental spread for the
   calculation of the matching adjustment; and
3. the volatility adjustment to the relevant risk-free interest rate term structure.
   Where implementing acts have been issued by the European Commission pursuant to Article 77e (2) of Directive 2009/138/EC containing the technical information listed in this paragraph, then the insurance undertakings and reinsurance undertakings shall use such technical information for the calculation of technical provisions pursuant to nos. 1 to 3. (2) The determination of the relevant risk-free interest rate term structure shall make use of, and be consistent with, information derived from relevant financial instruments. That determination shall take into account relevant financial instruments of those maturities where the markets for those financial instruments as well as for bonds are deep, liquid and transparent. For maturities where the markets for the relevant financial instruments or for bonds are no longer deep, liquid and transparent, the relevant risk-free interest rate term structure shall be extrapolated. The extrapolated part of the relevant risk- free interest rate term structure shall be based on forward rates converging smoothly from one or a set of forward rates in relation to the longest maturities for which the relevant financial instrument and the bonds can be observed in a deep, liquid and transparent market to an ultimate forward rate. (3) With respect to currencies and countries for which no volatility adjustment is contained in the implementing acts pursuant to Article 77e (2) of Directive 2009/138/EC, no volatility adjustment shall be applied to the relevant risk-free interest rate term structure to calculate the best estimate.
   SECTION 2: OWN FUNDS
   General provisions
   Article 169. Own funds shall comprise the sum of basic own funds referred to in Article 170 para. 1
   and ancillary own funds referred to in Article 171.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 158 / 292 Basic own funds
Article 170. (1) Basic own funds shall consist of:

1. the excess of assets over liabilities, valued in accordance with Section 1; and
2. subordinated liabilities.
   (2) The annual general meeting shall exclude from distribution the total assets as defined in the second sentence of Article 104 para. 4 AktG and in the second sentence of Article 62 para. 2 no. 3 SEG, in the event that distribution would result in falling below the last reported level of the Solvency Capital Requirement. In accordance with the implementing regulation (EU), the FMA may approve a distribution of the total assets in exceptional cases. Ancillary own funds
   Article 171. (1) Ancillary own funds shall consist of items other than basic own funds which can be
   called up to absorb losses. Ancillary own funds shall comprise in particular the following items:
3. unpaid share capital or initial fund that has not been called up;
4. letters of credit and guarantees; or
5. any other legally binding payment obligations of third parties towards insurance and
   reinsurance undertakings.
   In the case of a mutual association which pursuant to Article 44 para. 2 has articles of association obliging the members to make supplementary contributions, ancillary own funds may also comprise any future claims which that mutual association may have against its members, where the association calls up supplementary contributions within the following twelve months. (2) Where an ancillary own-fund item has been paid in or called up, it shall be recognised as a corresponding asset. Ancillary own-fund items become basic own-fund items when paid in or called up. (3) Insurance and reinsurance undertakings may take ancillary own funds into account with the approval of the FMA. In accordance with the implementing regulation (EU), the FMA shall approve either of the following:
6. the maximum amount for each ancillary own fund-item; or
7. a method by which to determine the amount of each ancillary own-fund item.
   The amount ascribed to each ancillary own-fund item shall reflect the loss-absorbency of the item and shall be based upon prudent and realistic assumptions. Where an ancillary own-fund item has a fixed nominal value, the amount of that item shall be equal to its nominal value, where it appropriately reflects its loss-absorbency. (4) The FMA shall consider the following when giving approval:
8. the status of the counterparties concerned, in relation to their ability and willingness to pay;
9. the recoverability of the funds, taking account of the legal form of the item, as well as any
   conditions which would prevent the item from being successfully paid in or called up; and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 159 / 292
3. any information on the outcome of past calls which insurance and reinsurance undertakings
have made for such ancillary own funds, to the extent that information can be reliably used to assess the expected outcome of future calls. Classification of own funds into tiers
Article 172. (1) Insurance and reinsurance undertakings shall classify the basic own-fund items that
are specified in the list of own-fund items of the implementing regulation (EU) in Tier 1, Tier 2 or Tier 3, according to the criteria specified in the implementing regulation (EU). Where a basic own-fund item is not covered by that list, the insurance or reinsurance undertaking shall assess and classify that basic own-fund item according to the criteria specified in the implementing regulation (EU). Such classification shall require approval by the FMA in accordance with the implementing regulation (EU). (2) Insurance and reinsurance undertakings shall classify the ancillary own-fund items that are specified in the list of own-fund items of the implementing regulation (EU) in Tier 2 or Tier 3, according to the criteria specified in the implementing regulation (EU). Where an ancillary own-fund item is not covered by that list, the insurance or reinsurance undertaking shall assess and classify that ancillary own-fund item according to the criteria specified in the implementing regulation (EU). Such classification shall require approval by the FMA in accordance with the implementing regulation (EU). (3) Undeclared amounts of the provision for bonuses in health insurance and of the provision for participation in profits and/or bonuses in life insurance shall be considered surplus funds required to be classified in Tier 1 as referred to in Article 96(1) of Directive 2009/138/EC, where such amounts are not used to ensure the contractually guaranteed benefits. Eligibility of own-fund items
Article 173. (1) The own-fund items classified in Tier 1, Tier 2 and Tier 3 in accordance with the
implementing regulation (EU) shall be eligible to cover the Solvency Capital Requirement. The sum of the eligible own-fund items results in the own funds eligible pursuant to Article 174. (2) The basic own-fund items classified in Tier 1 and Tier 2 in accordance with the implementing regulation (EU) shall be eligible to cover the Minimum Capital Requirement. The sum of the eligible basic own-fund items results in the own funds eligible pursuant to Article 193 para. 1.
SECTION 3: SOLVENCY CAPITAL REQUIREMENT
General provisions
Article 174. Insurance and reinsurance undertakings shall hold eligible own funds covering the
Solvency Capital Requirement.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 160 / 292 Calculation of the Solvency Capital Requirement
Article 175. (1) Insurance and reinsurance undertakings shall calculate the Solvency Capital
Requirement either in accordance with the standard formula in Section 4 or using an internal model as set out in Section 5. (2) The Solvency Capital Requirement shall be calculated on the presumption that the insurance or reinsurance undertaking will pursue its business as a going concern. (3) The Solvency Capital Requirement shall be calibrated so as to ensure that all quantifiable risks to which an insurance or reinsurance undertaking is exposed are taken into account. It shall cover existing business, as well as the new business expected to be written over the following twelve months. With respect to existing business, it shall cover only unexpected losses. It shall correspond to the Value-at-Risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5% over a one-year period. (4) The Solvency Capital Requirement shall cover at least the following risks:

1. non-life underwriting risk;
2. life underwriting risk;
3. health underwriting risk;
4. market risk;
5. credit risk; and
6. operational risk.
   Operational risk shall include legal risks, and exclude risks arising from strategic decisions, as well as reputation risks. (5) Insurance and reinsurance undertakings shall take account of the effect of risk mitigation techniques, provided that credit risk and other risks arising from the use of such techniques are properly reflected in the Solvency Capital Requirement. (6) When calculating the Solvency Capital Requirement, insurance and reinsurance undertakings shall use the harmonised inputs published by EIOPA as referred to in Article 109a of Directive 2009/138/EC. Frequency of calculation
   Article 176. (1) Insurance and reinsurance undertakings shall calculate the Solvency Capital
   Requirement at least once a year before submitting the information to the FMA as part of regular supervisory reporting and shall monitor the amount of eligible own funds and the Solvency Capital Requirement on an ongoing basis. If the risk profile of an insurance or reinsurance undertaking deviates significantly from the assumptions underlying the last reported Solvency Capital Requirement, the insurance or reinsurance undertaking concerned shall recalculate the Solvency Capital Requirement without delay and report it to the FMA in the form specified in the technical standards (EU) without delay.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 161 / 292 (2) Where the FMA has evidence to suggest that the risk profile of an insurance or reinsurance undertaking has altered significantly since the date on which the Solvency Capital Requirement was last reported, the FMA may require the insurance or reinsurance undertaking concerned to recalculate the Solvency Capital Requirement.
SECTION 4: CALCULATION OF THE SOLVENCY CAPITAL
REQUIREMENT USING THE STANDARD FORMULA
Structure of the standard formula
Article 177. (1) The Solvency Capital Requirement calculated on the basis of the standard formula
shall be the sum of the following items:

1. the Basic Solvency Capital Requirement as laid down in Article 178;
2. the capital requirement for operational risk as laid down in para. 3; and
3. the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes as
   laid down in para. 4.
   (2) Insurance and reinsurance undertakings shall calculate the Basic Solvency Capital Requirement in accordance with the implementing regulation (EU). (3) The capital requirement for operational risk is calibrated as set out in Article 175 para. 3 and shall reflect operational risks to the extent they are not already reflected in the risk modules referred to in Article 178. With respect to life insurance contracts where the investment risk is borne by the policyholders, the calculation of the capital requirement for operational risk shall take account of the amount of annual expenses incurred in respect of those insurance obligations. With respect to insurance and reinsurance operations other than those referred to in the second sentence, the calculation of the capital requirement for operational risk shall take account of the volume of those operations in terms of earned premiums and technical provisions which are held in respect of those insurance and reinsurance obligations. In this case, the capital requirement for operational risks shall not exceed 30% of the Basic Solvency Capital Requirement relating to those insurance and reinsurance operations. (4) The adjustment for the loss-absorbing capacity of technical provisions and deferred taxes shall reflect potential compensation of unexpected losses through a simultaneous decrease in technical provisions or deferred taxes or a combination of the two. That adjustment shall take account of the risk mitigating effect provided by future discretionary benefits of insurance contracts, to the extent insurance and reinsurance undertakings can establish that a reduction in such benefits may be used to cover unexpected losses when they arise. The risk mitigating effect provided by future discretionary benefits shall be no higher than the sum of technical provisions and deferred taxes relating to those future discretionary benefits. For that purpose, the value of future discretionary benefits under adverse circumstances shall be compared to the value of such benefits under the underlying assumptions of the best-estimate calculation.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 162 / 292 (5) The FMA may, with the consent of the Federal Minister of Finance, determine by regulation detailed rules for calculating the risk mitigating effect provided by future discretionary benefits of insurance contracts, to the extent necessary in order to ensure that the insurance undertakings apply a uniform method of calculation. Design of the Basic Solvency Capital Requirement
Article 178. (1) The Basic Solvency Capital Requirement shall comprise the following risk modules,
which are aggregated in accordance with the implementing regulation (EU):

1. the non-life underwriting risk module;
2. the life underwriting risk module;
3. the health underwriting risk module;
4. the market risk module;
5. the counterparty default risk module; and
6. the intangible assets risk module.
   (2) For the purposes of para. 1 nos. 1 to 3, insurance or reinsurance obligations shall be allocated to the underwriting risk module that best reflects the technical nature of the underlying risks. (3) The correlation coefficients for the aggregation of the risk modules referred to in para. 1, as well as the calibration of the capital requirements for each risk module, shall result in an overall Solvency Capital Requirement which complies with the principles set out in Article 175. (4) With the approval of the FMA, insurance and reinsurance undertakings may, within the design of the standard formula, replace a subset of the parameters by parameters specific to that undertaking as set out in the implementing regulation (EU) when calculating the life, non-life and health underwriting risk modules. Those parameters shall be calibrated on the basis of the internal data of the insurance or reinsurance undertaking concerned, or of data which is directly relevant for the operations of that undertaking using standardised methods. When granting approval, the FMA shall especially verify the completeness, accuracy and appropriateness of the data used. (5) Insurance and reinsurance undertakings may use a simplified calculation for a specific sub￾module or risk module where the nature, scale and complexity of the risks they face justifies it and where it would be disproportionate to require all insurance and reinsurance undertakings to apply the standardised calculation. Calibration shall be performed as set out in Article 175 para. 3. Risk modules of the Basic Solvency Capital Requirement
   Article 179. (1) The non-life underwriting risk module shall reflect the risk arising from non-life
   insurance obligations, in relation to the perils covered and the processes used in the conduct of business. It shall take account of the uncertainty in the results of insurance and reinsurance undertakings related to the existing insurance and reinsurance obligations as well as to the new business expected to be written over the following twelve months. It shall be calculated as a combination of the capital requirements for at least the following sub-modules:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 163 / 292

1. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   fluctuations in the timing, frequency and severity of insured events, and in the timing and amount of claim settlements (non-life premium and reserve risk); and
2. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   significant uncertainty of pricing and provisioning assumptions related to extreme or exceptional events (non-life catastrophe risk). (2) The life underwriting risk module shall reflect the risk arising from life insurance obligations, in relation to the perils covered and the processes used in the conduct of business. It shall be calculated as a combination of the capital requirements for at least the following sub-modules:
3. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   changes in the level, trend or volatility of mortality rates, where an increase in the mortality rate leads to an increase in the value of insurance liabilities (mortality risk);
4. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   changes in the level, trend or volatility of mortality rates, where a decrease in the mortality rate leads to an increase in the value of insurance liabilities (longevity risk);
5. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   changes in the level, trend or volatility of disability, sickness and morbidity rates (disability risk/morbidity risk);
6. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   changes in the level, trend or volatility of the expenses incurred in servicing insurance or reinsurance contracts (life-expense risk);
7. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   fluctuations in the level, trend or volatility of the revision rates applied to annuities, due to changes in the legal environment or in the state of health of the person insured (revision risk);
8. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
   changes in the level or volatility of the rates of policy lapses, terminations, renewals and surrenders (lapse risk); and
9. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from the
   significant uncertainty of pricing and provisioning assumptions related to extreme or irregular events (life-catastrophe risk). (3) The health underwriting risk module shall reflect the risk arising from the underwriting of health insurance obligations, whether it is pursued on a similar technical basis to that of life insurance or not, following from both the perils covered and the processes used in the conduct of business. It shall cover at least the following risks:
10. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
    changes in the level, trend or volatility of the expenses incurred in servicing insurance or reinsurance contracts;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 164 / 292
2. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from
fluctuations in the timing, frequency and severity of insured events, and in the timing and amount of claim settlements at the time of provisioning; and
3. the risk of loss, or of adverse change in the value of insurance liabilities, resulting from the
significant uncertainty of pricing and provisioning assumptions related to outbreaks of major epidemics, as well as the unusual accumulation of risks under such extreme circumstances. (4) The market risk module shall reflect the risk arising from the level or volatility of market prices of financial instruments which have an impact upon the value of the assets and liabilities of the undertaking. It shall properly reflect the structural mismatch between assets and liabilities, in particular with respect to their duration. It shall be calculated as a combination of the capital requirements for at least the following sub-modules:

1. the sensitivity of the values of assets, liabilities and financial instruments to changes in the
   term structure of interest rates or in the volatility of interest rates (interest rate risk);
2. the sensitivity of the values of assets, liabilities and financial instruments to changes in the
   level or in the volatility of market prices of equities (equity risk);
3. the sensitivity of the values of assets, liabilities and financial instruments to changes in the
   level or in the volatility of market prices of real estate (property risk);
4. the sensitivity of the values of assets, liabilities and financial instruments to changes in the
   level or in the volatility of credit spreads over the risk-free interest rate term structure (spread risk);
5. the sensitivity of the values of assets, liabilities and financial instruments to changes in the
   level or in the volatility of currency exchange rates (currency risk); and
6. additional risks to an insurance or reinsurance undertaking stemming either from lack of
   diversification in the asset portfolio or from large exposure to default risk by a single issuer of securities or a group of related issuers (market risk concentrations). (5) The counterparty default risk module shall reflect possible losses due to unexpected default, or deterioration in the credit standing, of the counterparties and debtors of insurance and reinsurance undertakings over the following twelve months. The counterparty default risk module shall cover risk mitigating contracts, such as reinsurance arrangements, securitisations and derivatives, and receivables from intermediaries, as well as any other credit exposures which are not covered in the spread risk sub-module. It shall take appropriate account of collateral or other security held by or for the account of the insurance or reinsurance undertaking and the risks associated with such security. For each counterparty, the counterparty default risk module shall take account of the overall counterparty risk exposure of the insurance or reinsurance undertaking concerned to that counterparty, irrespective of the legal form of its contractual obligations to that undertaking. (6) The intangible assets risk module shall reflect the related risks.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 165 / 292 Calculation of the sub-module equity risk: symmetric adjustment mechanism
Article 179a. (1) The equity risk sub-module calculated using the standard formula includes a
symmetric adjustment of the capital requirement for the equity capital charge for covering the risk associated with changes to the level of the stock price. (2) The symmetric adjustment of the standard equity capital charge for covering the risk associated with changes to the level of the stock price calibrated pursuant to Article 175 para. 3 shall be based on a function of the current level of an appropriate equity index and a weighted average level of that index. The weighted average shall be calculated over an appropriate period of time which shall be the same for all insurance and reinsurance undertakings. (3) The symmetric adjustment made to the standard equity capital charge covering the risk arising from changes in the level of equity prices shall not result in an equity capital charge being applied that is more than 10 percentage points lower or 10 percentage points higher than the standard equity capital charge. Duration-based equity risk sub-module
Article 180. (1) Insurance undertakings that offer retirement benefits as part of pursuing life
activities may, with the approval of the FMA, calculate the equity risk sub-module for a group of insurance contracts, where:

1. the benefits are paid on reaching or in expectation of reaching retirement;
2. the policyholders are entitled to claim a tax deduction for the premiums;
3. the insurance contracts only concern risks situated in Austria; and
4. the average duration of the liabilities held by the undertaking corresponding to those
   insurance contracts exceeds an average of twelve years.
   Where insurance undertakings calculate the sub-module based on the first sentence, they must establish a ring-fenced fund for all of the assets and liabilities corresponding to those insurance contracts and manage and organise those assets and liabilities separately from the other contracts while excluding the option of a transfer. (2) The insurance undertaking shall ensure that the solvency and liquidity position as well as the strategies, processes and reporting procedures with respect to asset-liability management consistently guarantee that the insurance undertaking is in fact able to hold the recorded equity investments for the typical holding period assumed when the calculation was approved. The insurance undertaking shall demonstrate to the FMA that this condition is verified with the level of confidence which provides policyholders and beneficiaries with a level of protection equivalent to that set out in Article 175. (3) Where sufficiently justified grounds exist, insurance undertakings may with the FMA’s approval revert from calculation of the equity risk sub-module based on para. 1 to calculation based on
   Article 179 para. 4 no. 2.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 166 / 292 FMA measures on significant deviations from the assumptions underlying the standard formula calculation
Article 181. (1) The FMA may order an insurance or reinsurance undertaking to apply the parameters
specific to the undertaking as set out in Article 178 para. 4 when calculating the life underwriting risk module, the non-life underwriting risk module and the health underwriting risk module, where the risk profile of the insurance or reinsurance undertaking concerned would deviate significantly from the assumptions underlying the standard formula calculation when calculating the Solvency Capital Requirement in accordance with the standard formula. (2) The FMA may order an insurance or reinsurance undertaking to use an internal model to calculate the Solvency Capital Requirement or the relevant risk modules, where the risk profile of the insurance or reinsurance undertaking concerned would deviate significantly from the assumptions underlying the standard formula calculation when calculating the Solvency Capital Requirement in accordance with the standard formula.
SECTION 5: CALCULATION OF THE SOLVENCY CAPITAL
REQUIREMENT USING AN INTERNAL MODEL
General provisions for the approval of full and partial internal models
Article 182. (1) Insurance or reinsurance undertakings may calculate the Solvency Capital
Requirement using a full or partial internal model. An internal module shall require approval as specified in para. 4. (2) A partial internal model may be used for the calculation of one or more of the following:

1. one or more risk modules, or sub-modules, of the Basic Solvency Capital Requirement;
2. the capital requirement for operational risk; or
3. the adjustment for the loss-absorbing capacity of technical provisions and deferred taxes.
   In addition, partial modelling may be applied to the whole business of insurance and reinsurance undertakings, or only to one or more major business units. (3) The management board or administrative board of the insurance or reinsurance undertaking shall adopt the application for approval of the internal model as referred to in para. 4 as well as the application for approval of any subsequent major changes made to that model. (3a) The FMA shall inform EIOPA in accordance with Article 35 (1) of Regulation (EU) No 1094/2010 about every application to use or change an internal model. The FMA may request EIOPA to provide technical assistance pursuant to Article 8 (1) lit. b) of Regulation (EU) No 1094/2010 in deciding about applications. (4) The FMA shall decide on the application within six months of receiving the complete application for approval of an internal model, presenting details of fulfilment of the requirements set out in Articles 186 to 191. Those requirements shall be applied accordingly to applications for approval of a partial internal model, taking account of the model’s limited scope of application.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 167 / 292 (5) Prior to approving internal or partial internal models as referred to in para. 4, and where those models comprise the market risk module or parts of the market risk module, the FMA shall obtain an expert opinion by the Oesterreichische Nationalbank (OeNB). The OeNB shall assess in such cases whether the market risk module or, where applicable, parts of the market risk module comply with the applicable specifications. (6) The OeNB shall submit expert opinions pursuant to para. 5 under its own responsibility and in its own name. The FMA shall as far as possible base its approval on the expert opinions by the OeNB and may rely on their correctness and completeness, unless it has reasonable doubts as to their correctness or completeness. The OeNB shall forward to the FMA without delay any statements received from the insurance undertaking concerned. (7) The OeNB shall:

1. prepare a list of the expenses directly incurred by expert opinions pursuant to para. 5 during
   the relevant financial year and have the list audited by the auditor referred to in Article 37 of the National Bank Act (NBG; Nationalbankgesetz);
2. forward the audited list to the FMA by 30 April of each following financial year;
3. by 30 September of each year provide the FMA with an estimate for each following financial
   year of the expenses directly incurred by expert opinions pursuant to para. 5; and
4. inform the Federal Minister of Finance and the FMA once a year of the average annual number
   of employees occupied with expert opinions pursuant to para. 5; such information may also be disclosed by publication. (8) After approving the internal model, the FMA may order, stating the relevant reasons, insurance and reinsurance undertakings to present an estimate of the Solvency Capital Requirement determined in accordance with the standard formula as set out in Section 4. (9) Insurance and reinsurance undertakings may change their internal model in accordance with the written policy for changing the internal model, which is to be approved by the FMA as part of the initial approval process. Major changes to the internal model, as well as changes to that written policy, shall always be subject to prior approval by the FMA as laid down in para. 4. Minor changes to the internal model that are in accordance with that written policy may be made without the FMA’s approval. (10) It shall lie within the responsibility of the management board or administrative board to ensure that systems are put in place which ensure that the internal model operates properly on a continuous basis. Specific provisions for the approval of partial internal models
   Article 183. (1) The FMA may approve partial internal models only where:
5. the reason for the limited scope of application of the model is properly justified by the
   insurance or reinsurance undertaking;

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 168 / 292
2. the resulting Solvency Capital Requirement reflects more appropriately the risk profile of the
undertaking and in particular complies with the principles set out in Section 3; and
3. its design is consistent with the principles set out in Section 3 so as to allow the partial internal
model to be fully integrated into the Solvency Capital Requirement standard formula. (2) When approving an application for the use of a partial internal model which only covers certain sub-modules, or some of the business units of an insurance or reinsurance undertaking with respect to a specific risk module, or parts of both, the FMA may require the insurance and reinsurance undertakings concerned to submit a realistic transitional plan to extend the scope of the model. The transitional plan shall set out the manner in which an insurance or reinsurance undertaking plans to extend the scope of the partial internal model to other sub-modules or business units, in order to ensure that it covers a predominant part of the insurance operations with respect to the specific risk module referred to in the first sentence. Reversion to the standard formula
Article 184. After approval of the internal model, insurance and reinsurance undertakings may
revert to calculating the whole or any part of the Solvency Capital Requirement in accordance with the standard formula as set out in Section 4 only in duly justified circumstances and with the FMA’s approval. Non-compliance of the internal model
Article 185. (1) Insurance and reinsurance undertakings shall consistently comply with the
requirements underlying the approval of the internal model, in particular the requirements set out in Articles 186 to 191. (2) Where an insurance or reinsurance undertaking no longer complies with the requirements underlying the approval of the internal model, it shall without delay either present to the FMA a plan suited to ensuring that the undertaking will restore compliance with the requirements within a reasonable period of time, or demonstrate that the effect of non-compliance is immaterial. (3) Where an insurance of reinsurance undertaking fails to implement the plan referred to in para. 2, the FMA may require the undertaking to revert to calculating the Solvency Capital Requirement in accordance with the standard formula as set out in Section 4. Use test
Article 186. (1) Insurance and reinsurance undertakings shall demonstrate that the internal model
is widely used and plays an important role in their system of governance, especially in:

1. their risk management system as laid down in Articles 110 and 112 and their decision-making
   processes; and
2. their economic and solvency capital assessment and allocation processes, including the own
   risk and solvency assessment referred to in Article 111.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 169 / 292 (2) In addition, insurance and reinsurance undertakings shall demonstrate that the frequency of calculation of the Solvency Capital Requirement using the internal model is consistent with the frequency with which they use their internal model for the other purposes covered by the first paragraph. (3) The management board or administrative board shall be responsible for ensuring the ongoing appropriateness of the design and functioning of the internal model, and that the internal model continues to appropriately reflect the risk profile of the insurance and reinsurance undertakings concerned. Statistical quality standards
Article 187. (1) The internal model, and in particular the calculation of the probability distribution
forecast underlying it, shall comply with the criteria set out in paras. 2 to 9. (2) The methods used to calculate the probability distribution forecast shall be based on adequate, applicable and relevant actuarial and statistical techniques and shall be consistent with the methods used to calculate technical provisions. The methods used to calculate the probability distribution forecast shall be based upon current and credible information and realistic assumptions. Insurance and reinsurance undertakings shall be able to justify the assumptions underlying their internal model to the FMA. (3) Data used for the internal model shall be accurate, complete and appropriate. The data sets used in the calculation of the probability distribution forecast shall be updated at least annually. (4) Regardless of the calculation method chosen, risk-ranking by the internal model must ensure that the internal model is widely used and plays an important role in the system of governance as set out in Article 186. The internal model shall cover all of the material risks to which insurance and reinsurance undertakings are exposed, including in the least the risks mentioned in Article 175 para. 4. (5) As regards diversification effects, dependencies within and across risk categories may be taken account of in the internal model, provided that the insurance or reinsurance undertaking demonstrates to the FMA that the system used for measuring those diversification effects is adequate. (6) The effect of risk mitigation techniques may be fully taken account of in the internal model, as long as credit risk and other risks arising from the use of risk mitigation techniques are properly reflected in the internal model. (7) The particular risks associated with financial guarantees and any contractual options shall be accurately assessed in the internal model, where material. The risks associated with both policyholder options and contractual options for insurance and reinsurance undertakings shall also be assessed. For that purpose, the impact that future changes in financial and non-financial conditions may have on the exercise of those options shall be taken account of.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 170 / 292 (8) In the internal model, future management actions may be taken account of to the extent that such actions can be reasonably expected to be taken in specific circumstances. In that case the time necessary to implement such actions shall be considered. (9) All expected payments to policyholders and beneficiaries shall be taken account of in the internal model, whether or not those payments are contractually guaranteed. Calibration standards
Article 188. (1) A different time period or risk measure than that set out in Article 175 para. 3 may be
used in the internal model as long as the outputs of the internal model can be used to calculate the Solvency Capital Requirement in a manner that provides policyholders and beneficiaries with a level of protection equivalent to that set out in Article 175. (2) Where practicable, the Solvency Capital Requirement shall be derived directly from the probability distribution forecast generated by the internal model. The Value-at-Risk measure set out in Article 175 para. 3 shall be used for that purpose. (3) Where the Solvency Capital Requirement cannot be derived directly from the probability distribution forecast generated by the internal model, the FMA may allow approximations to be used in the process to calculate the Solvency Capital Requirement, as long as the insurance or reinsurance undertaking can demonstrate to the FMA that policyholders and beneficiaries are provided with a level of protection equivalent to that provided for in Article 175. (4) The FMA may require an insurance or reinsurance undertaking to run the internal model on relevant benchmark portfolios, using assumptions based on external rather than internal data, in order to verify the calibration of the internal model and to check that its specification is in line with generally accepted market practice. Profit and loss attribution
Article 189. Insurance and reinsurance undertakings shall review, at least annually, the causes and
sources of profits and losses for each major business unit. In that case it shall be demonstrated how the categorisation of risk chosen in the internal model explains the causes and sources of profits and losses. The categorisation of risk and attribution of profits and losses shall reflect the risk profile of the insurance or reinsurance undertaking. Validation standards
Article 190. (1) Insurance and reinsurance undertakings shall have a regular cycle of model
validation which includes monitoring the performance of the internal model, reviewing the ongoing appropriateness of its specification and comparing its results with empirical data. (2) The model validation process shall include an effective statistical process for validating the internal model which enables the insurance or reinsurance undertaking to demonstrate to the FMA that the resulting capital requirements are appropriate. The statistical methods applied shall test

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 171 / 292 the appropriateness of the probability distribution forecast compared not only to loss experience but also to all material new data and information relating to the forecast. (3) The model validation process shall include an analysis of the stability of the internal model and in particular the testing of the sensitivity of the results of the internal model to changes in key underlying assumptions. It shall also include an assessment of the accuracy, completeness and appropriateness of the data used by the internal model. Documentation standards
Article 191. (1) Insurance and reinsurance undertakings shall document the design and operational
details of their internal model. The documentation shall demonstrate compliance with the requirements set out in Articles 186 to 190. (2) The documentation shall provide a detailed outline of the theory, assumptions, and mathematical and empirical bases underlying the internal model and shall describe any circumstances under which the internal model does not work effectively. (3) Insurance and reinsurance undertakings shall document all major changes to their internal model as set out in Article 182 para. 9. External models and data
Article 192. The use of a model obtained from a third party or data obtained from a third party shall
not be considered a justification for exemption from any of the requirements for the internal model set out in Articles 186 to 191.
SECTION 6: MINIMUM CAPITAL REQUIREMENT
General provisions
Article 193. (1) Insurance and reinsurance undertakings shall hold eligible basic own funds, to cover
the Minimum Capital Requirement.
(2) Insurance and reinsurance undertakings shall calculate the Minimum Capital Requirement in accordance with the implementing regulation (EU). It shall have an absolute floor as follows:

1. EUR 2.7 million for non-life insurance undertakings, including captive insurance undertakings,
   save in the case where all or some of the risks listed under nos. 10 to 15 of Annex A are covered; in which case it shall be no less than EUR 4 million;
2. EUR 4 million for life insurance undertakings, including captive insurance undertakings;
3. EUR 3.9 million for reinsurance undertakings, except in the case of captive reinsurance
   undertakings, in which case a Minimum Capital Requirement of EUR 1.3 million shall apply; and
4. the sum of the amounts set out in nos. 1 and 2 for composite undertakings.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 172 / 292 (3) Insurance and reinsurance undertakings shall calculate the Minimum Capital Requirement at least quarterly before submitting the information to the FMA as part of regular supervisory reporting pursuant to the implementing regulation (EU). Calculation shall also be performed immediately after any recalculation of the Solvency Capital Requirement as referred to in the second sentence of
Article 176 para. 1 and shall be reported to the FMA. Where the Minimum Capital Requirement is
determined on the basis of the Solvency Capital Requirement by applying the percentage limits referred to in the first subparagraph of Article 129(3) of Directive 2009/138/EC, insurance and reinsurance undertakings shall provide the FMA with reasons for doing so. The limits shall be calculated based on the last reported Solvency Capital Requirement. Special provisions for composite undertakings
Article 194. (1) Without prejudice to Article 193, composite undertakings shall hold eligible basic
own funds, to cover:

1. the notional life Minimum Capital Requirement, in respect of the life activity; and
2. the notional non-life Minimum Capital Requirement in respect of the non-life activity,
   with the notional Minimum Capital Requirements not allowed to being borne by the other activity. (2) Composite undertakings shall calculate the notional life Minimum Capital Requirement in respect of the life activity and the notional non-life Minimum Capital Requirement in respect of the non-life activity in accordance with the implementing regulation (EU) and report these figures to the FMA at the same time as the report of the Minimum Capital Requirement referred to in Article 193 para. 3. (3) For the purposes of para. 1, composite undertakings shall prepare a statement in which the eligible basic own-fund items of life and non-life activity shall be assigned as follows:
3. the surplus funds shall be assigned to life activity where attributable to the provision for
   participation in profits in life insurance as shown by the financial statements and to non-life activity where attributable to the provision for bonuses in health insurance as shown by the financial statements.
4. the reconciliation reserve shall be assigned in accordance with the proportion used to
   calculate the notional Minimum Capital Requirement as specified in the implementing regulation (EU).
5. the remaining eligible basic own-fund items shall be assigned to life activity where
   attributable to items of the life insurance balance sheet group and to non-life activity where attributable to items of the health insurance and the non-life and accident insurance balance sheet groups. Composite undertakings shall submit this statement to the FMA along with the report referred to in para. 2.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 173 / 292
CHAPTER 9: GROUP SUPERVISION
SECTION 1: DEFINITIONS AND SCOPE
Definitions
Article 195. (1) For the purposes of this Chapter, the following definitions shall apply:

1. Participating undertaking: a parent undertaking or other undertaking which holds a
   participation, or an undertaking linked with another undertaking by a relationship as set out in Article 22(7) of Directive 2013/34/EU.
2. Related undertaking: a subsidiary undertaking or other undertaking in which a participation
   is held, or an undertaking linked with another undertaking by a relationship as set out in
   Article 22(7) of Directive 2013/34/EU.
3. Group: a group of undertakings that:
   a. consists of a participating undertaking, its subsidiaries and the entities in which the participating undertaking or its subsidiaries hold a participation, as well as undertakings linked to each other by a relationship as set out in Article 22(7) of Directive 2013/34/EU; or b. is based on the establishment, contractually or otherwise, of strong and sustainable financial relationships among those undertakings, and that may include mutual or mutual-type associations, provided that one of those undertakings effectively exercises, through centralised coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group, and the establishment and dissolution of such relationships for the purposes of this
   Chapter are subject to prior approval by the group supervisor; the undertaking
   exercising the centralised coordination shall be considered as the parent undertaking, and the other undertakings shall be considered as subsidiaries.
4. Group supervisor: the supervisory authority responsible for group supervision pursuant to
   Article 226.
5. College of supervisors: a permanent but flexible structure for the cooperation, coordination
   and facilitation of decision making concerning the supervision of a group.
6. Insurance holding company: a parent undertaking which is not a mixed financial holding
   company and the main business of which is to acquire and hold participations in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, or third-country insurance or reinsurance undertakings, at least one of such subsidiary undertakings being an insurance or reinsurance undertaking.
7. Mixed-activity insurance holding company: a parent undertaking, other than an insurance
   undertaking, a third-country insurance undertaking, a reinsurance undertaking, a third￾country reinsurance undertaking, an insurance holding company or a mixed financial holding

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 174 / 292 company, which includes at least one insurance or reinsurance undertaking among its subsidiary undertakings.
8. Mixed financial holding company: a mixed financial holding company within the meaning of
Article 2(15) of Directive 2002/87/EC.
(2) For the purposes of this Chapter, the FMA shall:

1. also consider as a parent undertaking any undertaking which, in the FMA’s opinion, effectively
   exercises a dominant influence over another undertaking;
2. also consider as a subsidiary undertaking any undertaking over which, in the FMA’s opinion, a
   parent undertaking effectively exercises a dominant influence; and
3. also consider as a participation the holding, directly or indirectly, of voting rights or capital in
   an undertaking over which, in the FMA’s opinion, a significant influence is effectively exercised. General provisions
   Article 196. (1) Insurance and reinsurance undertakings in a group shall be subject to supervision
   by the FMA at group level in accordance with the provisions of this Chapter if the FMA is appointed as the authority responsible for group supervision in accordance with Article 226. (2) In the absence of any provision to the contrary in this Chapter, the rules for the supervision of insurance and reinsurance undertakings taken individually shall continue to apply to such undertakings. (3) Insurance and reinsurance undertakings must immediately notify the FMA if the circumstances justifying group supervision pursuant to Article 197 occur or cease to apply. Cases of application of group supervision
   Article 197. (1) In its capacity as group supervisor, the FMA must:
4. supervise insurance or reinsurance undertakings which are a participating undertaking in at
   least one insurance undertaking, reinsurance undertaking, third-country insurance undertaking or third- country reinsurance undertaking, in accordance with Articles 202 to 236;
5. supervise insurance or reinsurance undertakings, the parent undertaking of which is an
   insurance holding company or a mixed financial holding company with its head office in a Member State in either case, in accordance with Articles 202 to 236;
6. supervise insurance or reinsurance undertakings, the parent undertaking of which is an
   insurance holding company with its head office in a third country, a mixed financial holding company with its head office in a third country or a third-country insurance or reinsurance undertaking, in accordance with Section 7; and
7. supervise insurance or reinsurance undertakings, the parent undertaking of which is a mixed￾activity insurance holding company, in accordance with Article 201.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 175 / 292 (2) Where the participating insurance or reinsurance undertaking referred to in para. 1 no. 1 or the insurance holding company or mixed financial holding company referred to in para. 1 no. 2, with its head office in a Member State in each case, is itself a related undertaking of a regulated entity or a mixed financial holding company which is subject to supplementary supervision in accordance with
Article 5(2) of Directive 2002/87/EC, the FMA in the capacity of group supervisor may, after consulting
the other supervisory authorities concerned, decide not to carry out at the level of that participating insurance or reinsurance undertaking or that insurance holding company or mixed financial holding company the supervision of risk concentration referred to in Article 220, the supervision of intra￾group transactions referred to in Article 221, or both. (3) Where the participating insurance or reinsurance undertaking referred to in para. 1 no. 1 or the insurance holding company or mixed financial holding company referred to in para. 1 no. 2 is itself a subsidiary undertaking of another insurance or reinsurance undertaking, another insurance holding company or a mixed financial holding company, with its head office in a Member State in each case, there shall be no supervision pursuant to para. 1. Supervision shall be carried out at the level of the insurance or reinsurance undertaking or insurance holding company or mixed financial holding company with its head office in a Member State that is the ultimate parent undertaking at the level of the Member States. (4) Where the ultimate parent undertaking referred to in para. 3, with its head office in a Member State in each case, is either a subsidiary undertaking of a regulated entity or a mixed financial holding company which is subject to supplementary supervision in accordance with Article 5(2) of Directive 2002/87/EC, or is itself such an undertaking or company, the FMA in the capacity of group supervisor may, after consulting the other supervisory authorities concerned, decide not to carry out at the level of that participating insurance or reinsurance undertaking or that insurance holding company or mixed financial holding company the supervision of risk concentration referred to in
Article 220, the supervision of intra-group transactions referred to in Article 221, or both.
(5) Insofar as a mixed financial holding company referred to in para. 1 no. 2 is subject to equivalent rules of this federal act and the FKG, particularly with regard to risk-based supervision, the FMA as the competent authority may, after consulting the other authorities concerned, decide that only the corresponding provisions of the FKG shall apply at the level of that mixed financial holding company. (6) Insofar as a mixed financial holding company as referred to in para. 1 no. 2 is subject to equivalent provisions of this federal act and the BWG, particularly with regard to risk-based supervision, the FMA as the competent authority may decide in agreement with the consolidating authority for the banking and investment services sector that only the provisions of the BWG or of this federal act shall apply at the level of that mixed financial holding company according to the financial sector to which the higher average share of activity can be allocated pursuant to Article 2 no. 7 FKG. (7) The FMA, as the group supervisor, must inform the EBA and EIOPA of any decisions made pursuant to paras. 5 and 6.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 176 / 292 Exclusion of undertakings from group supervision
Article 198. (1) The FMA, as the group supervisor, may decide on a case-by-case basis not to include
an undertaking in group supervision where:

1. the undertaking is situated in a third country where there are legal impediments to the
   transfer of the necessary information, without prejudice to the provisions of Article 210;
2. the undertaking which should be included is of negligible interest with respect to the
   objectives of group supervision; or
3. the inclusion of the undertaking would be inappropriate or misleading with respect to the
   objectives of group supervision.
   However, where several undertakings of the same group, taken individually, may be excluded pursuant to no. 2, they must nevertheless be included where, collectively, they are of non-negligible interest. (2) If the FMA in the capacity of group supervisor is of the opinion that an insurance or reinsurance undertaking should not be included in group supervision in accordance with para. 1 nos. 2 and 3, it shall consult the other supervisory authorities concerned before taking a decision. (3) The ultimate parent undertaking must, upon request from the supervisory authorities of the Member State in which an insurance or reinsurance undertaking that is not included in group supervision pursuant to para. 1 nos. 2 and 3 is situated, supply such authorities with all of the information required by them to facilitate their supervision of the insurance or reinsurance undertaking concerned. For the purposes of supervising an insurance or reinsurance undertaking situated in Austria that is not included in group supervision pursuant to para. 1 nos. 2 and 3, the FMA may request all of the information needed to facilitate supervision from the ultimate undertaking with its head office in a Member State. Subgroup supervision at the level of a national subgroup
   Article 199. (1) The FMA may, where the participating insurance or reinsurance undertaking referred
   to in Article 197 para. 1 no. 1, or the insurance holding company or mixed financial holding company referred to in Article 197 para. 1 no. 2 is itself a subsidiary undertaking of another insurance or reinsurance undertaking, another insurance holding company or a mixed financial holding company, with its head office in a Member State in each case, and after consulting the group supervisor and that ultimate parent undertaking, order that the ultimate parent undertaking at national level, in the form of an insurance or reinsurance undertaking, insurance holding company or mixed financial holding company, with its head office in Austria in each case, be subject to subgroup supervision. (2) The FMA shall explain its decision pursuant to para. 1 to both the group supervisor and the ultimate parent undertaking at the level of the Member States. (3) Subject to paras. 4 to 7, Articles 202 to 214 and Articles 220 to 236 shall apply accordingly.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 177 / 292 (4) Subject to paras. 5 to 7, the FMA may limit subgroup supervision in relation to the ultimate parent undertaking at national level to the following:

1. group solvency in accordance with Section 2;
2. risk concentration and intra-group transactions in accordance with Section 4; or
3. governance at group level in accordance with Articles 222 to 225.
   (5) Where the FMA decides to apply Section 2 to the ultimate parent undertaking at national level, the FMA must recognise as binding and apply the method chosen by the group supervisor for the ultimate parent undertaking at the level of the Member States referred to in Article 197 para. 3. (6) Where the FMA decides to apply Section 2 to the ultimate parent undertaking at national level, and where approval pursuant to Article 212 or Article 214 has been granted to the ultimate parent undertaking at the level of the Member States referred to in Article 197 para. 3 to calculate the group Solvency Capital Requirement, as well as the Solvency Capital Requirement of insurance and reinsurance undertakings in the group, on the basis of an internal model, the FMA must recognise this decision as binding and implement it accordingly. Where the FMA considers that the risk profile of the ultimate parent undertaking at national level deviates significantly from the assumptions underlying the internal model approved at Member State level, and as long as that undertaking has not properly addressed its concerns, the FMA may impose a capital add-on to the Solvency Capital Requirement of the subgroup resulting from the application of such internal model. In exceptional circumstances, where such capital add-on would not be appropriate, the FMA may require the undertaking concerned to calculate the Solvency Capital Requirement for the subgroup on the basis of the standard formula. The FMA shall explain such decisions to both the undertaking and the group supervisor. (7) Any decision pursuant to para. 1 may not be made or upheld if the ultimate parent undertaking at national level is a subsidiary undertaking of the ultimate parent undertaking at the level of the Member States as referred to in Article 197 para. 3 and this undertaking has been given permission to apply the rules for groups with centralised risk management pursuant to Section 3 or Articles 237 or 239 of Directive 2009/138/EC. (8) Where the FMA is the group supervisor and has made a decision in relation to this group pursuant to Article 216(1) or (4) of Directive 2009/138/EC, it must inform the college of supervisors accordingly. Subgroup supervision at the level of a subgroup covering several Member States
   Article 200. (1) Where the conditions pursuant to Article 199 para. 1 are met, the FMA may conclude
   an agreement with supervisory authorities in other Member States in which a related undertaking is located that is also the ultimate parent undertaking at national level, with a view to carrying out subgroup supervision at the level of a subgroup covering several Member States. The FMA shall impose subgroup supervision covering several Member States on this ultimate parent undertaking at national level.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 178 / 292 (2) Where the conditions pursuant to Article 199 para. 1 are met, the FMA may agree with the supervisory authority of a Member State in which a participating undertaking is located that is also the ultimate parent undertaking at national level that this supervisory authority will carry out subgroup supervision at the level of a subgroup covering several Member States, provided that the Member State in question has exercised its right to choose pursuant to Article 216 of Directive 2009/138/EC. In such a case, the FMA must not carry out subgroup supervision at the level of an ultimate parent undertaking referred to in para. 1 with its head office in Austria that is a related undertaking of the ultimate parent undertaking with its head office in another Member State. During any such arrangement, the ultimate parent undertaking at national level must fulfil the obligations pursuant to Article 234 towards the supervisory authority of the other Member State. (3) Article 199 paras. 2 to 7 shall apply accordingly. The FMA, together with the other supervisory authorities concerned, shall explain the arrangement to the group supervisor and the ultimate parent undertaking at the level of the Member States. (4) Where the FMA is the group supervisor and has concluded an agreement in relation to this group pursuant to Article 217 of Directive 2009/138/EC, it must inform the college of supervisors accordingly. Mixed-activity insurance holding companies
Article 201. (1) Where the parent undertaking of one or more insurance or reinsurance undertakings
is a mixed-activity insurance holding company, the FMA as the supervisory authority responsible for the supervision of those insurance or reinsurance undertakings must supervise intra-group transactions between these insurance or reinsurance undertakings and the mixed-activity insurance holding company. (2) Article 221 and Articles 229 to 236 shall apply accordingly.
SECTION 2: GROUP SOLVENCY
General provisions
Article 202. (1) In the case referred to in Article 197 para. 1 no. 1, the participating insurance or
reinsurance undertaking shall ensure that eligible own funds are available in the group which are always at least equal to the group Solvency Capital Requirement as calculated in accordance with Articles 204 to 214. (2) In the case referred to in Article 197 para. 1 no. 2, insurance or reinsurance undertakings in a group shall ensure that eligible own funds are available in the group which are always at least equal to the group Solvency Capital Requirement as calculated at the level of the insurance holding company or mixed financial holding company. Articles 204 to 214 shall apply accordingly for the purposes of this calculation, and this insurance holding company or mixed financial holding company shall be treated in the same way as an insurance or reinsurance undertaking for which the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 179 / 292 provisions of Sections 3 to 5 of Chapter 8 apply accordingly in relation to the Solvency Capital Requirement and the provisions of Section 2 of Chapter 8 apply accordingly with regard to eligible own funds. (3) The measures in the event of a deterioration in financial conditions pursuant to Article 278 and the measures in the event of non-compliance with the Solvency Capital Requirement pursuant to
Article 279 shall apply accordingly.
(4) The participating insurance or reinsurance undertaking in the case referred to in Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in the case referred to in Article 197 para. 1 no. 2 must notify the FMA without delay as soon as they observe that the group Solvency Capital Requirement is no longer complied with or where there is a risk that this Solvency Capital Requirement for the group might cease to be met during the next three months. In its capacity as group supervisor, the FMA must inform the other supervisory authorities in the college of supervisors. (5) Article 157 shall apply accordingly for the purposes of calculating group solvency. Frequency of calculation
Article 203. (1) The participating insurance or reinsurance undertaking in the case referred to in
Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in
the case referred to in Article 197 para. 1 no. 2 must calculate group solvency at least annually before submitting the information to the FMA as part of regular supervisory reporting. (2) The reporting to the FMA in the capacity of group supervisor must be carried out as follows:

1. in the case referred to in Article 197 para. 1 no. 1, by the participating insurance or reinsurance
   undertaking; and
2. in the case referred to in Article 197 para. 1 no. 2, by the insurance holding company, the mixed
   financial holding company or the insurance or reinsurance undertaking identified by the FMA in the capacity of group supervisor after consulting the other supervisory authorities concerned and the group itself. (3) The participating insurance and reinsurance undertaking in the case referred to in Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in the case referred to in Article 197 para. 1 no. 2 shall monitor the group Solvency Capital Requirement on an ongoing basis. Where the risk profile of the group deviates significantly from the assumptions underlying the last reported group Solvency Capital Requirement, the group Solvency Capital Requirement shall be recalculated without delay and reported without delay to the FMA in the capacity of group supervisor by the undertaking responsible pursuant to para. 2. (4) Where the FMA has evidence to suggest that the risk profile of the group has altered significantly since the date on which the group Solvency Capital Requirement was last reported, the FMA in the capacity of group supervisor may require a recalculation of the group Solvency Capital Requirement.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 180 / 292 Choice of method
Article 204. (1) Group solvency shall be calculated using the consolidation method (method 1) as
set out in Articles 211 and 212.
(2) As the group supervisor and after consulting the other supervisory authorities concerned and the group itself and taking into account the conditions of the implementing regulation (EU), the FMA may approve application of the deduction and aggregation method (method 2) in accordance with Articles 213 and 214, or a combination of methods 1 and 2, where the exclusive application of method 1 would not be appropriate. Inclusion of proportional share
Article 205. (1) The calculation of the group solvency shall take account of the proportional share
held by the participating insurance or reinsurance undertaking in its related undertakings. The proportional share shall comprise:

1. where method 1 is used, the percentages used for the establishment of the consolidated
   financial statements; and
2. where method 2 is used, the proportion of the subscribed capital that is held, directly or
   indirectly, by the participating undertaking.
   (2) Where the related undertaking is a subsidiary undertaking and does not have sufficient eligible own funds to cover its Solvency Capital Requirement, the total solvency deficit of the subsidiary shall be taken into account regardless of the method used to calculate group solvency. Where the responsibility of the parent undertaking owning a share of the capital can be proven to be strictly limited to that share of the capital, the FMA, as the group supervisor, may allow for the solvency deficit of the subsidiary undertaking to be taken into account only on a proportional basis. (3) The FMA, as the group supervisor, shall determine, after consulting the other supervisory authorities concerned and the group itself, the proportional share which shall be taken into account in the following cases:
3. where there are no capital ties between some of the undertakings in a group;
4. where the holding, directly or indirectly, of voting rights or capital in an undertaking qualifies
   as a participation because a significant influence is effectively exercised over that undertaking;
5. where an undertaking is a parent undertaking of another because it effectively exercises a
   dominant influence over that other undertaking.
   Elimination of double use of eligible own funds
   Article 206. (1) The double use of eligible own funds among the different insurance or reinsurance
   undertakings taken into account in that calculation shall not be allowed.
   (2) Where the methods pursuant to Articles 211 to 214 do not provide for it, the following amounts shall not be excluded in the calculation of group solvency:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 181 / 292

1. the value of any asset of the participating insurance or reinsurance undertaking which
   represents the financing of own funds eligible for the Solvency Capital Requirement of one of its related insurance or reinsurance undertakings;
2. the value of any asset of a related insurance or reinsurance undertaking of the participating
   insurance or reinsurance undertaking which represents the financing of own funds eligible for the Solvency Capital Requirement of that participating insurance or reinsurance undertaking;
3. the value of any asset of a related insurance or reinsurance undertaking of the participating
   insurance or reinsurance undertaking which represents the financing of own funds eligible for the Solvency Capital Requirement of any other related insurance or reinsurance undertaking of that participating insurance or reinsurance undertaking. (3) Where the methods pursuant to Articles 211 to 214 do not provide for it, the following own-fund items shall not be included in the calculation:
4. subscribed but not paid-up capital which represents a potential obligation on the part of the
   participating undertaking;
5. subscribed but not paid-up capital of the participating insurance or reinsurance undertaking
   which represents a potential obligation on the part of a related insurance or reinsurance undertaking; and
6. subscribed but not paid-up capital of a related insurance or reinsurance undertaking which
   represents a potential obligation on the part of another related insurance or reinsurance undertaking of the same participating insurance or reinsurance undertaking. (4) Without prejudice to paras. 2 and 3, the following own-fund items may be included in the calculation only insofar as they are eligible for covering the Solvency Capital Requirement of the related insurance or reinsurance undertaking concerned:
7. surplus funds arising in a related insurance undertaking of the participating insurance or
   reinsurance undertaking for which the group solvency is calculated; and
8. any subscribed but not paid-up capital of a related insurance or reinsurance undertaking of
   the participating insurance or reinsurance undertaking for which the group solvency is calculated. (5) Where the FMA, as the group supervisor, considers that certain own funds eligible for the Solvency Capital Requirement of a related insurance or reinsurance undertaking other than those referred to in paras. 2 to 4 cannot effectively be made available to cover the Solvency Capital Requirement of the participating insurance or reinsurance undertaking for which the group solvency is calculated, the FMA may require that these own funds only be included in the calculation insofar as they are eligible for covering the Solvency Capital Requirement of the related insurance or reinsurance undertaking. (6) The sum of the own funds referred to in paras. 4 and 5 shall not exceed the Solvency Capital Requirement of the related insurance or reinsurance undertaking.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 182 / 292 (7) Any ancillary own funds of a related insurance or reinsurance undertaking of the participating insurance or reinsurance undertaking for which the group solvency is calculated may be included in the calculation only insofar as they have been authorised by the supervisory authority. Elimination of the intra-group creation of capital
Article 207. (1) When calculating group solvency, no account shall be taken of any eligible own funds
arising out of reciprocal financing between the participating insurance or reinsurance undertaking and any of the following undertakings:

1. a related undertaking;
2. a participating undertaking; and
3. another related undertaking of any of its participating undertakings.
   (2) When calculating group solvency, no account shall be taken of any own funds eligible for the Solvency Capital Requirement of a related insurance or reinsurance undertaking of the participating insurance or reinsurance undertaking for which the group solvency is calculated where the own funds concerned arise out of reciprocal financing with any other related undertaking of that participating insurance or reinsurance undertaking. (3) Reciprocal financing shall be deemed to exist at least where an insurance or reinsurance undertaking, or any of its related undertakings, holds shares in, or makes loans to, another undertaking which, directly or indirectly, holds own funds eligible for the Solvency Capital Requirement of the first undertaking. Inclusion of certain companies
   Article 208. (1) Group solvency shall be calculated by including all related insurance or reinsurance
   undertakings. Where a related insurance or reinsurance undertaking has its head office in another Member State, the Solvency Capital Requirement and own funds calculated on the basis of the applicable law in that Member State shall be taken into account. (2) When calculating the group solvency of an insurance or reinsurance undertaking which holds a participation in a related insurance or reinsurance undertaking, or in a related third-country insurance undertaking or third-country reinsurance undertaking, through an intermediate insurance holding company or an intermediate mixed financial holding company, the situation of such an insurance holding company or mixed financial holding company shall be taken into account, with the company being treated as an insurance or reinsurance undertaking. Sections 3 to 5 of
   Chapter 8 shall apply accordingly with regard to the Solvency Capital Requirement, with Section 2
   of Chapter 8 applying accordingly to own funds eligible for the Solvency Capital Requirement. (3) In cases where an intermediate insurance holding company or an intermediate mixed financial holding company holds subordinated debt or other eligible own funds subject to limitation in accordance with Article 173, they shall be recognised as eligible own funds up to the amounts calculated by application of the limits set out in Article 173 to the total eligible own funds

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 183 / 292 outstanding at group level as compared to the Solvency Capital Requirement at group level. Any eligible own funds of an intermediate insurance holding company or intermediate mixed financial holding company that are subject to prior authorisation from the supervisory authority in accordance with Article 171, if held by an insurance or reinsurance undertaking, may be included in the calculation of the group solvency only insofar as they have been authorised by the FMA in the capacity of group supervisor. (4) A participating insurance or reinsurance undertaking that holds a participation in a credit institution, investment firm or financial institution may apply methods 1 and 2 as set out in Article 6 para. 2 nos. 1 and 2 FKG accordingly in order to calculate group solvency. However, method 1 as defined in the FKG shall be applied only where the FMA in the capacity of group supervisor is satisfied as to the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner over time. The FMA in the capacity of group supervisor may, instead of applying methods 1 or 2 as set out in Annex I of Directive 2002/87/EC, of its own motion or at the request of the participating insurance or reinsurance undertaking, require the deduction of any participation as referred to in the first sentence from the own funds eligible for the group solvency of the participating undertaking. Inclusion of related third-country insurance and reinsurance undertakings
Article 209. (1) When calculating the group solvency of an insurance or reinsurance undertaking
which is a participating undertaking in a third-country insurance or reinsurance undertaking using method 2, the latter shall, solely for the purposes of that calculation, be treated as a related insurance or reinsurance undertaking. (2) By way of derogation from para. 1, the Solvency Capital Requirement and own funds calculated according to the applicable law in the respective third country shall be taken into account where the related third-country insurance or reinsurance undertaking has its head office in the third country for which equivalence has been established pursuant to Article 227(4) or (5) of Directive 2009/138/EC or in accordance with para. 3. (3) The FMA in the capacity of group supervisor may, upon request or of its own motion, and in accordance with the criteria set out in the implementing regulation (EU), conclude that the respective third country has equivalent rules, doing so with the assistance of EIOPA in accordance with Article 33(2) of Regulation (EU) No 1094/2010. The FMA, assisted by EIOPA, shall consult the other supervisory authorities concerned before taking such a decision. The FMA in the capacity of group supervisor may not take any decision in relation to a third country that contradicts any previous decision regarding that third country save where it is necessary to take account of significant changes to the supervisory regime laid down in Title I, Chapter VI of Directive 2009/138/EC and to the supervisory regime in the third country.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 184 / 292 (4) Where the FMA in the capacity of supervisory authority concerned disagrees with a decision taken in accordance with the second subparagraph of Article 227(2) of Directive 2009/138/EC, it may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010 within three months after notification of the decision by the group supervisor. (5) Para. 3 shall no longer apply following a decision by the Commission pursuant to Article 227(4) of Directive 2009/138/EC on whether the solvency regime in a third country is deemed to be equivalent or not. Where a decision adopted by the Commission concludes that the solvency regime in a third country is not equivalent, any decision taken in accordance with para. 3 shall cease to be applicable and the third-country insurance or reinsurance undertaking shall be treated exclusively in accordance with para. 1. Deduction of the book value of the participation due to non-availability of the necessary information
Article 210. Where the information necessary for calculating the group solvency of an insurance or
reinsurance undertaking, concerning a related undertaking with its head office in a Member State or a third country, is not available to the FMA in the capacity of group supervisor, the book value of that undertaking in the participating insurance or reinsurance undertaking shall be deducted from the own funds eligible for the group solvency. In that case, the unrealised gains connected with such participation shall not be recognised as own funds eligible for the group solvency. Default method: consolidation method (method 1)
Article 211. (1) The calculation of the group solvency of the participating insurance or reinsurance
undertaking shall be carried out on the basis of the consolidated financial statements as defined in
Section 2 of this Chapter (group solvency balance sheet), and is the difference between the
following:

1. the own funds eligible to cover the Solvency Capital Requirement at group level, calculated
   on the basis of the group solvency balance sheet; and
2. the Solvency Capital Requirement at group level calculated on the basis of the group solvency
   balance sheet.
   The Solvency Capital Requirement at group level based on the group solvency balance sheet shall be calculated on the basis of either the standard formula by analogy with Sections 3 and 4 of Chapter 8 or an internal model by analogy with Sections 3 and 5 of Chapter 8 and in accordance with the implementing regulation (EU). For the purposes of calculating the own funds eligible to cover the Solvency Capital Requirement at group level, Section 2 of Chapter 8 shall apply accordingly. (2) The group Solvency Capital Requirement shall have as a minimum the sum of the following:
3. the Minimum Capital Requirement of the participating insurance or reinsurance undertaking;
   and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 185 / 292
2. the proportional share of the Minimum Capital Requirement of the related insurance and
reinsurance undertakings.
(3) In determining whether the group Solvency Capital Requirement appropriately reflects the risk profile of the group, the FMA, as the group supervisor, shall pay particular attention to any case where the circumstances referred to in Article 277 para. 1 may arise at group level, in particular where:

1. a specific risk existing at group level would not be sufficiently covered by the standard formula
   or the internal model used, because it is difficult to quantify; or
2. a capital add-on to the Solvency Capital Requirement of the related insurance or reinsurance
   undertakings is duly imposed by the supervisory authority.
   Where the FMA in the capacity of group supervisor is of the view that the risk profile of the group is not adequately reflected, a capital add-on to the group Solvency Capital Requirement may be imposed. Article 277 shall apply accordingly. Group internal model for method 1
   Article 212. (1) The FMA in the capacity of group supervisor shall decide on applications for
   permission to calculate the group Solvency Capital Requirement on the basis of an internal model, applying Sections 3 and 5 of Chapter 8 accordingly and with due account for the implementing regulation (EU). (2) An application for permission to use an internal model to calculate the group Solvency Capital Requirement and the Solvency Capital Requirement of insurance and reinsurance undertakings in the group shall be submitted as follows:
3. in the case referred to in Article 197 para. 1 no. 1, in the name of the participating insurance or
   reinsurance company and in the name of the related insurance or reinsurance undertaking; and
4. in the case referred to in Article 197 para. 1 no. 2, by an insurance or reinsurance undertaking
   in the name of the related insurance or reinsurance undertaking of an insurance holding company or mixed financial holding company to the FMA in the capacity of group supervisor. (3) The FMA as the competent authority for group supervision shall inform the other members of the supervisory college, including EIOPA, without delay about the application pursuant para. 2 being received, including forwarding the documentation submitted by the undertaking. The FMA may request EIOPA to provide technical assistance pursuant to Article 8 (1) lit. b) of Regulation (EU) No 1094/2010 in deciding about applications. (4) The FMA, as the group supervisor, shall cooperate with the other supervisory authorities concerned in the college of supervisors in accordance with the implementing regulation (EU) to decide whether or not to grant permission for an internal model pursuant to para. 2 and to determine the terms and conditions, if any, to which such permission is subject. The FMA, as the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 186 / 292 group supervisor, shall do everything within its power to ensure that the supervisory authorities concerned reach a joint decision on the application within six months from the date of receipt of the complete application by the FMA. This paragraph shall apply accordingly in cases where the FMA is the supervisory authority concerned. (5) Where, prior to the expiry of the six-month period referred to in para. 4, any of the supervisory authorities concerned refers the matter to EIOPA in accordance with Article 19 of Regulation (EU) No 1094/2010, the FMA, as the group supervisor, shall defer its decision and await any decision that EIOPA may take in accordance with Article 19(3) of that Regulation, and shall take its decision in conformity with EIOPA’s decision. In the case that EIOPA does not make a decision pursuant to
Article 19 (3) of Regulation (EU) No 1094/2010, then the FMA shall take the final decision in its
capacity as the competent authority for group supervision. The six-month period shall be deemed the conciliation period within the meaning of Article 19(2) of Regulation (EU) No 1094/2010. As the supervisory authority concerned, the FMA may refer the matter to EIOPA pursuant to Article 19 of Regulation (EU) No 1094/2010 before the expiry of the six-month period referred to in para. 4. (6) In the absence of the adoption of a joint decision pursuant to para. 4 within six months from the date of receipt of the application being made by the group pursuant to para. 2, and if the matter has not been referred to EIOPA pursuant to para. 5, the FMA in the capacity of group supervisor shall make its own decision on the application, taking due account of any views and reservations of the other supervisory authorities concerned expressed during that six-month period. (7) Joint decisions pursuant to para. 4 shall be set out in writing stating the full reasons by the FMA as the group supervisor. In accordance with this decision, the FMA, as the group supervisor, shall issue an administrative decision, to be submitted to the insurance or reinsurance undertakings referred to in para. 2 no. 1 or no. 2 together with a copy of the joint decision. The FMA shall provide a copy of this administrative decision together with a copy of the joint decision to the other supervisory authorities concerned. This administrative decision shall be deemed to have been served on all of the insurance and reinsurance undertakings in whose name the application was made upon its submission to the insurance or reinsurance undertaking referred to in para. 2 no. 1 or no. 2. This undertaking shall immediately notify all of the insurance and reinsurance undertakings in whose name it submitted the application of the administrative decision. The administrative decision shall be directly applicable to insurance and reinsurance undertakings with head offices in Austria. (8) In the absence of a joint decision, the FMA in the capacity of group supervisor shall issue an administrative decision, stating full reasons, and taking due account of the views expressed by the other supervisory authorities concerned. The administrative decision shall be submitted to the insurance or reinsurance undertaking referred to in para. 2 no. 1 or no. 2. It shall be deemed to have been served on all of the insurance and reinsurance undertakings in whose name the application was made upon its submission to the insurance or reinsurance undertaking referred to in para. 2 no. 1 or no. 2. This undertaking shall immediately notify all of the insurance and reinsurance undertakings in whose name it submitted the application of the administrative decision. The

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 187 / 292 administrative decision shall be directly applicable to insurance and reinsurance undertakings with head offices in Austria. The FMA shall forward a copy of it to the other supervisory authorities concerned and to the supervisory authorities involved. (9) The FMA, in the capacity of supervisory authority concerned, shall be required to recognise as binding and to apply any decision reached by the group supervisor in accordance with the law of another Member State in accordance with Article 231(2) to (6) of Directive 2009/138/EC. Such a decision shall be directly applicable to and effective in the case of affected insurance and reinsurance undertakings with head offices in Austria as soon as the decision is served on such undertakings but not until the corresponding administrative decision becomes effective in the applicant’s country of establishment. (10) The FMA, in the capacity of supervisory authority concerned, may in the case defined in para. 9 impose a capital add-on pursuant to Article 277 to the Solvency Capital Requirement resulting from the application of an internal model by an affected insurance or reinsurance undertaking with its head office in Austria where it considers that the risk profile of that insurance or reinsurance undertaking under its supervision deviates significantly from the assumptions underlying the internal model approved at group level, and as long as the undertaking has not properly addressed these concerns. In individual cases, where such capital add-on would not be appropriate, the FMA may require the insurance or reinsurance undertaking concerned to calculate its Solvency Capital Requirement on the basis of the standard formula. In accordance with the cases referred to in
Article 277 para. 1 nos. 1 and 3, the FMA may impose a capital add-on to the Solvency Capital
Requirement of that insurance or reinsurance undertaking resulting from the application of the standard formula. The FMA shall explain any decision taken to the other members of the college of supervisors. Alternative method: deduction and aggregation method (method 2)
Article 213. (1) The group solvency of the participating insurance or reinsurance undertaking shall
be the difference between the following:

1. the aggregated group eligible own funds, as provided for in para. 2; and
2. the value in the participating insurance or reinsurance undertaking of the related insurance
   or reinsurance undertakings and the aggregated group Solvency Capital Requirement, as provided for in para. 3. (2) The aggregated group eligible own funds are the sum of the following:
3. the own funds eligible for the Solvency Capital Requirement of the participating insurance or
   reinsurance undertaking; and
4. the proportional share of the participating insurance or reinsurance undertaking in the own
   funds eligible for the Solvency Capital Requirement of the related insurance or reinsurance undertakings. (3) The aggregated group Solvency Capital Requirement is the sum of the following:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 188 / 292

1. the Solvency Capital Requirement of the participating insurance or reinsurance undertaking;
   and
2. the proportional share of the Solvency Capital Requirement of the related insurance or
   reinsurance undertakings.
   (4) Where a participating insurance or reinsurance undertaking holds a participation in a related insurance or reinsurance undertaking that consists, wholly or in part, of an indirect ownership, the value in the participating insurance or reinsurance undertaking of the related insurance or reinsurance undertaking shall incorporate the value of such indirect ownership, taking into account the relevant successive interests. In this case, the items referred to in para. 2 no. 2 and para. 3 no. 2 shall include the corresponding proportional shares of the Solvency Capital Requirement and of the own funds eligible for the Solvency Capital Requirement of the related insurance or reinsurance undertaking. (5) In determining whether the aggregated group Solvency Capital Requirement, calculated as set out in para. 3, appropriately reflects the risk profile of the group, the FMA as the supervisory authority concerned shall pay particular attention to any specific risks existing at group level which are not sufficiently covered, because they are difficult to quantify. Where the risk profile of the group deviates significantly from the assumptions underlying the aggregated group Solvency Capital Requirement, the FMA in the capacity of group supervisor may impose a capital add-on to the aggregated group Solvency Capital Requirement. Article 277 shall apply accordingly. Group internal model for method 2
   Article 214. (1) An application for permission to use an internal model to calculate the Solvency
   Capital Requirement of insurance and reinsurance undertakings in the group shall be submitted as follows:
3. in the case referred to in Article 197 para. 1 no. 1, in the name of the participating insurance or
   reinsurance company and in the name of the related insurance or reinsurance undertaking; and
4. in the case referred to in Article 197 para. 1 no. 2, by an insurance or reinsurance undertaking
   in its own name and in the name of the related insurance or reinsurance undertaking of an insurance holding company or mixed financial holding company to the FMA in the capacity of group supervisor. (2) Article 212 shall apply accordingly.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 189 / 292
SECTION 3: GROUPS WITH CENTRALISED RISK MANAGEMENT
Conditions
Article 215. (1) Articles 217 and 218 shall apply to insurance or reinsurance undertakings with head
offices in Austria that are subsidiaries of an insurance or reinsurance undertaking where all of the following conditions are satisfied:

1. the subsidiary is included in the group supervision at the level of the parent undertaking;
2. the risk-management processes and internal control mechanisms of the parent undertaking
   cover the subsidiary, and the parent undertaking satisfies the supervisory authorities concerned regarding the prudent management of the subsidiary;
3. the parent undertaking has received the agreements referred to in Article 224 para. 3 and
   Article 245 para. 2; and
4. an application for permission to be subject to the provisions governing groups with
   centralised risk management has been submitted by the parent undertaking and a favourable decision has been made on such application. (2) Articles 215 to 219 shall apply accordingly to insurance and reinsurance undertakings that are subsidiaries of an insurance holding company or a mixed financial holding company. Decision on the application
   Article 216. (1) Applications for permission to be subject to Articles 217 and 218 shall only be
   submitted to the FMA in its capacity as the supervisory authority responsible for the supervision of the subsidiary. The FMA shall inform the other members of the college of supervisors and forward the complete application to them without delay. (2) The FMA shall work together with the other supervisory authorities concerned within the college of supervisors, in full consultation, to decide whether or not to grant the permission sought and to determine the other terms and conditions, if any, to which such permission should be subject. (3) The FMA and other supervisory authorities concerned shall do everything within their power to reach a joint decision on the application within three months from the date of receipt of the complete application by all supervisory authorities within the college of supervisors. This shall similarly apply where the FMA is the authority concerned in accordance with the law of another Member State during a procedure conducted in accordance with Article 237 of Directive 2009/138/EC. (4) Where, prior to the expiry of the three-month period referred to in para. 3, any of the supervisory authorities concerned refers the matter to EIOPA in accordance with Article 19 of Regulation (EU) No 1094/2010, the FMA, as the group supervisor, shall defer its decision and await any decision that EIOPA may take in accordance with Article 19(3) of that Regulation, and shall take its decision in conformity with EIOPA’s decision. In the case that EIOPA does not make a decision pursuant to
   Article 19 (3) of Regulation (EU) No 1094/2010, then the FMA shall take the final decision in its

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 190 / 292 capacity as the competent authority for group supervision. The three-month period shall be deemed the conciliation period within the meaning of Article 19(2) of Regulation (EU) No 1094/2010. (5) In the absence of a joint decision of the supervisory authorities concerned within the three-month period set out in para. 3, the FMA in the capacity of group supervisor shall decide on the application in the form of an administrative decision. During that period the FMA, as the group supervisor, shall duly consider the following:

1. any views and reservations of the supervisory authorities concerned expressed during the
   relevant period; and
2. any reservations of the other supervisory authorities within the college of supervisors.
   The FMA’s administrative decision shall state the full reasons and contain an explanation of any significant deviation from the reservations of the other supervisory authorities concerned. The FMA shall submit the administrative decision to the applicant and provide the other supervisory authorities concerned with a copy of it. (6) The joint decision referred to in para. 3 shall be set out in writing stating the full reasons. In accordance with the joint decision, the FMA, as the supervisory authority responsible for the supervision of the subsidiary undertaking, shall issue an administrative decision and serve it on the applicant together with a copy of the joint decision. The FMA shall provide the other supervisory authorities concerned with a copy of the administrative decision. (7) The FMA shall execute as binding any decision on an application for permission to use the supervisory regime for groups with centralised risk management reached in accordance with the law of another Member State in compliance with the joint decision referred to in Article 237(4) of Directive 2009/138/EC. A parent undertaking with its head office in Austria that has made an application pursuant to para. 1 must inform all subsidiaries concerned without delay of the decision referred to in the first sentence. This decision shall apply directly to subsidiary undertakings with head offices in Austria. Determination of the Solvency Capital Requirement
   Article 217. (1) Without prejudice to Articles 212 and 214, the Solvency Capital Requirement of the
   subsidiary shall be calculated as set out in paras. 2, 4 and 5.
   (2) Where the Solvency Capital Requirement of the subsidiary is calculated on the basis of an internal model approved at group level in accordance with Article 212 or 214, the FMA as the supervisory authority responsible for the supervision of the subsidiary may propose the setting of a capital add￾on to the Solvency Capital Requirement of that subsidiary resulting from the application of such model if it considers that the risk profile of that subsidiary deviates significantly from this internal model and that the conditions set out in Article 277 are not being met. Where such capital add-on would not be appropriate in individual cases, the FMA may require the subsidiary concerned to calculate its Solvency Capital Requirement on the basis of the standard formula. The FMA shall

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 191 / 292 communicate the grounds for its proposals to both the subsidiary and the college of supervisors, and consult the supervisory authorities in the college of supervisors. (3) Where the Solvency Capital Requirement of the subsidiary is calculated on the basis of the standard formula and the FMA, as the supervisory authority responsible for the supervision of the subsidiary, considers that its risk profile deviates significantly from the assumptions underlying the standard formula, the FMA may, in exceptional circumstances, propose that the subsidiary replace a subset of the parameters used in the standard formula calculation by parameters specific to that undertaking when calculating the life, non-life and health underwriting risk modules, as set out in
Article 181 para. 1, or propose the setting of a capital add-on to the Solvency Capital Requirement of
that subsidiary if the conditions defined in Article 277 are met. The FMA shall communicate the grounds for its proposals to both the subsidiary and the college of supervisors, and consult the supervisory authorities in the college of supervisors. (4) The FMA, as the supervisory authority responsible for the supervision of the subsidiary, shall do everything within its power to ensure that the supervisory authorities concerned in the college of supervisors are able to reach a joint decision on the proposal pursuant to paras. 2 or 3 or on other possible measures. This shall similarly apply where the supervisory authorities in the college of supervisors are consulted in conjunction with a proposal from another competent supervisory authority. The FMA, as the supervisory authority responsible for the supervision of the subsidiary, shall set out the joint decision in writing stating the full reasons, issue an administrative decision in accordance with the joint decision and serve the former on the subsidiary together with a copy of the joint decision. The FMA shall provide the college of supervisors with a copy of the decision and the administrative decision. (5) Where the FMA, as the supervisory authority responsible for the supervision of the subsidiary, and the group supervisor disagree, and where no agreement is reached within the college pursuant to para. 4, the FMA may refer the matter to EIOPA and request its assistance within one month of the supervisory authority’s proposal and in accordance with Article 19 of Regulation (EU) No 1094/2010. This shall similarly apply where the FMA is the group supervisor. The one-month period shall be deemed the conciliation period within the meaning of Article 19(2) of Regulation (EU) No 1094/2010. The FMA, as the supervisory authority responsible for the supervision of the subsidiary, shall defer its decision and await any decision that EIOPA may take in accordance with Article 19 of Regulation (EU) No 1094/2010, and shall take its decision in conformity with EIOPA’s decision. The FMA shall state full reasons for its decision, serve the administrative decision on the subsidiary and provide the college of supervisors with a copy of it. Non-compliance with the Solvency and Minimum Capital Requirements
Article 218. (1) Without prejudice to Article 279, the FMA as the supervisory authority responsible for
the supervision of the subsidiary shall, in the event of non-compliance with the Solvency Capital

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 192 / 292 Requirement, forward to the supervisory authorities in the college of supervisors the recovery plan submitted by the subsidiary without delay. (2) The FMA shall do everything within its power to ensure that the supervisory authorities concerned in the college of supervisors can arrive at a joint decision regarding the FMA’s proposal to approve the recovery plan within four months of the date on which non-compliance with the Solvency Capital Requirement was first observed. The FMA, as the supervisory authority responsible for the supervision of the subsidiary, shall set out the joint decision in writing stating the full reasons, issue an administrative decision in accordance with the joint decision and serve the former on the subsidiary together with a copy of the joint decision. The FMA shall provide the college of supervisors with a copy of the decision and the administrative decision. In the absence of such agreement, the FMA shall decide whether the recovery plan should be approved, taking due account of the views and reservations of the other supervisory authorities in the college of supervisors, and shall forward a copy of the administrative decision to the college of supervisors. The first sentence shall similarly apply where the college of supervisors is consulted in conjunction with a proposal from another competent supervisory authority. (3) Where the FMA, as the supervisory authority responsible for the supervision of the subsidiary, identifies deteriorating financial conditions as defined in Article 278, it shall notify the college of supervisors without delay of the proposed measures to be taken. Save in emergency situations, the measures to be taken shall be discussed within the college of supervisors. (4) The FMA shall do everything within its power to ensure that the supervisory authorities in the college of supervisors reach a joint decision on the proposed measures to be taken within one month of notification. The FMA, as the supervisory authority responsible for the supervision of the subsidiary, shall issue an administrative decision in accordance with the joint decision and serve the former on the subsidiary together with a copy of the joint decision. The FMA shall provide the college of supervisors with a copy of the decision and the administrative decision. In the absence of such agreement, the FMA shall decide whether the proposed measures should be approved, taking account of the views and reservations of the other supervisory authorities in the college of supervisors, and forward a copy of the administrative decision to the college of supervisors. The first sentence shall apply where the college of supervisors is consulted in conjunction with a proposal from another competent supervisory authority. (5) Without prejudice to Article 280, the FMA as the supervisory authority responsible for the supervision of the subsidiary shall, in the
event of non-compliance with the Minimum Capital Requirement, forward to the college of supervisors the short-term finance scheme submitted by the subsidiary without delay. The FMA shall also inform the college of supervisors of any measures taken to enforce the Minimum Capital Requirement. (6) The FMA, as the group supervisor, may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010 where they disagree with regard to a group subsidiary with its head office in another Member State:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 193 / 292

1. on the approval of the recovery plan, including any extension of the recovery period, within
   the four-month period referred to in para. 2; or
2. on approval of the proposed measures within the period of one month referred to in para. 4.
   The matter may not be referred to EIOPA in the case of emergency situations as referred to in para. 2. The period of one or four months shall be deemed the conciliation period within the meaning of
   Article 19(2) of Regulation (EU) No 1094/2010. This paragraph shall apply accordingly where the FMA
   is the competent authority for the supervision of the subsidiary.
   (7) If the matter is referred to EIOPA, the FMA as the supervisory authority having authorised that subsidiary shall defer its decision and await any decision that EIOPA may take in accordance with
   Article 19(3) of Regulation (EU) No 1094/2010, and take its final decision in conformity with EIOPA’s
   decision. The FMA shall submit the administrative decision to the subsidiary and provide the college of supervisors with a copy of it. End of derogations for a subsidiary
   Article 219. (1) The provisions provided for in Articles 217 and 218 shall cease to apply where:
3. the condition referred to in Article 215 para. 1 no. 1 is no longer complied with;
4. the condition referred to in Article 215 para. 1 no. 2 is no longer complied with, and the group
   does not restore compliance with this condition in an appropriate period of time; or
5. the conditions referred to in Article 215 para. 1 no. 3 are no longer complied with.
   (2) In the case referred to in para. 1 no. 1, where the FMA in the capacity of group supervisor decides, after consulting the college of supervisors, no longer to include the subsidiary in the group supervision it carries out, it shall immediately inform the supervisory authority concerned and the parent undertaking. (3) The parent undertaking shall be responsible for ensuring that the conditions referred to in
   Article 215 para. 1 nos. 2 and 3 are complied with on an ongoing basis. In the event of
   non-compliance, it shall inform the group supervisor and the supervisor of the subsidiary concerned without delay. The parent undertaking with its head office in Austria shall present a plan to restore compliance within an appropriate period of time to the group supervisor. (4) Without prejudice to para. 3, the FMA, as the group supervisor, shall verify at least annually that the conditions referred to in Article 215 para. 1 nos. 2 and 3 are complied with. The FMA, as the group supervisor, shall also perform such verification upon request from the supervisory authority concerned, where the latter has significant concerns related to the ongoing compliance with those conditions. Where the verification performed identifies weaknesses, the FMA, as the group supervisor, shall require the parent undertaking to present a plan to restore compliance within an appropriate period of time. (5) Where, after consulting the college of supervisors, the FMA, as the group supervisor, determines that the plan referred to in para. 3 or para. 4 is insufficient or that it is not being implemented within the agreed period of time, the conditions referred to in Article 215 para. 1 nos. 2 and 3 shall be

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 194 / 292 deemed to no longer be complied with. The FMA shall immediately inform the supervisory authority concerned. (6) Where, after consulting the college of supervisors, the FMA, as the group supervisor, determines that implementation of the plan referred to in para. 3 or para. 4 can be expected to result in the conditions referred to in Article 215 being complied with again, it shall approve this plan. The parent undertaking must satisfy the group supervisor no later than immediately after the deadline specified in this plan that all of the conditions referred to in Article 215 are complied with again. The FMA in the capacity of group supervisor, after consulting the college of supervisors, shall determine by means of administrative decision that the conditions referred to in Article 215 for the application of Articles 217 and 218 are complied with.
SECTION 4: RISK CONCENTRATIONS AND INTRA-GROUP
TRANSACTIONS
Risk concentrations
Article 220. (1) Any significant risk concentration at group level pursuant to para. 2 must be
reported:

1. in the case referred to in Article 197 para. 1 no. 1, by the participating insurance or reinsurance
   undertaking; and
2. in the case referred to in Article 197 para. 1 no. 2, by the insurance holding company, the mixed
   financial holding company or the insurance or reinsurance undertaking identified for this purpose by the FMA in the capacity of group supervisor after consulting the other supervisory authorities concerned and the group to the FMA in the capacity of group supervisor. (2) The FMA, as the group supervisor, shall determine, after consulting the other supervisory authorities concerned and the group, the following:
3. which type of risk concentrations are always to be reported, taking account of the specific
   group and risk-management structure of the group;
4. appropriate thresholds based on Solvency Capital Requirements, the technical provisions in
   accordance with Section 1 of Chapter 8, or both; or
5. at least annual reporting intervals.
   (3) When reviewing the risk concentrations, the FMA, as the group supervisor, shall in particular monitor the possible risk of contagion in the group, the risk of a conflict of interests, and the level and volume of risks. Intra-group transactions
   Article 221. (1) All significant intra-group transactions by insurance and reinsurance undertakings
   of the group pursuant to para. 2 must be reported:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 195 / 292

1. in the case referred to in Article 197 para. 1 no. 1, by the participating insurance or reinsurance
   undertaking; and
2. in the case referred to in Article 197 para. 1 no. 2, by the insurance holding company, the mixed
   financial holding company or the insurance or reinsurance undertaking identified for this purpose by the FMA in the capacity of group supervisor after consulting the other supervisory authorities concerned and the group to the FMA in the capacity of group supervisor. This reporting obligation includes those intra-group transactions performed with a natural person with close links to an undertaking in the group. (2) The FMA, as the group supervisor, shall determine, after consulting the other supervisory authorities concerned and the group, the following:
3. which type of intra-group transactions are always to be reported, taking account of the
   specific group and risk-management structure of the group;
4. appropriate thresholds based on Solvency Capital Requirements, the technical provisions in
   accordance with Section 1 of Chapter 8, or both; and
5. at least annual reporting intervals.
   (3) All very significant intra-group transactions shall be reported to the FMA in the capacity of group supervisor by the undertakings specified in para. 1. without delay. When reviewing the intra-group transactions, the FMA, as the group supervisor, shall in particular monitor the possible risk of contagion in the group, the risk of a conflict of interests, and the level or volume of risks.
   SECTION 5: GOVERNANCE AT GROUP LEVEL
   General provisions
   Article 222. (1) The requirements set out in Articles 107 to 113, Articles 117 to 119 and Articles 120
   to 122 shall apply accordingly at the level of the group.
   (2) Without prejudice to para. 1, the risk management, internal control systems and reporting procedures shall be implemented consistently in all the undertakings included in the scope of group supervision pursuant to Article 197 para. 1 nos. 1 and 2 so that those systems and reporting procedures can be controlled at the level of the group. (3) In the case referred to in Article 197 para. 1 no. 1, the participating insurance or reinsurance undertaking shall be responsible for compliance with the requirements at group level in accordance with this Article. In the case referred to in Article 197 para. 1 no. 2, the insurance holding company or the mixed financial holding company shall be responsible for compliance with the requirements unless it has appointed another insurance or reinsurance undertaking for this purpose and notified the FMA accordingly. This shall not apply to conducting the own risk and solvency assessment at group level in accordance with Article 224.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 196 / 292 Internal control mechanisms at group level
Article 223. The internal control mechanisms shall include at least the following in addition to the
provisions of Article 222:

1. adequate mechanisms as regards group solvency to identify and measure all material risks
   incurred and to appropriately relate eligible own funds to risks; and
2. sound reporting and accounting procedures to monitor and manage the intra-group
   transactions and the risk concentration.
   Own risk and solvency assessment at group level
   Article 224. (1) The participating insurance or reinsurance undertaking in the case referred to in
   Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in
   the case referred to in Article 197 para. 1 no. 2 must conduct the own risk and solvency assessment at group level as specified in Article 111. (2) Where the calculation of the solvency at the level of the group is carried out in accordance with method 1, the participating insurance or reinsurance undertaking in the case referred to in
   Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in
   the case referred to in Article 197 para. 1 no. 2 shall, in addition to regular supervisory reporting, provide the FMA, as the group supervisor, with a proper understanding of the difference between the sum of the Solvency Capital Requirements of all the related insurance or reinsurance undertakings of the group and the group Solvency Capital Requirement. (3) Subject to the agreement of the FMA in the capacity of group supervisor, the participating insurance or reinsurance undertaking in the case referred to in Article 197 para. 1 no. 1 or the insurance holding company or mixed financial holding company in the case referred to in Article 197 para. 1 no. 2 may undertake the own risk and solvency assessment at the level of the group and at the level of the included subsidiaries at the same time, and may produce a single document covering all the assessments. This document shall be submitted to all of the supervisory authorities concerned at the same time. (4) Before granting an agreement in accordance with para. 3, the FMA in the capacity of group supervisor shall consult the supervisory authorities in the college of supervisors and duly take into account their views and reservations. (5) Exercising the option provided in para. 3 shall not affect the obligation of the included subsidiaries to ensure that the requirements of Article 111 are met. Management of insurance holding companies and mixed financial holding companies
   Article 225. (1) Insurance holding companies and mixed financial holding companies with head
   offices in Austria shall ensure that persons who effectively run an insurance holding company or mixed financial holding company are fit and proper to perform their duties. Articles 120 to 122 shall apply accordingly. The last sentence of Article 120 para. 2 no. 4 shall not apply.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 197 / 292 (2) Insurance or reinsurance undertakings that are subsidiaries of an insurance holding company or a mixed financial holding company with head offices in a third country shall, in accordance with the options provided by company law, ensure that persons who effectively run the parent undertaking are fit and proper to perform their duties. Where these insurance or reinsurance undertakings are of the opinion that the persons who effectively run the parent undertaking do not comply with the fit and proper requirements, and where all options provided by company law to prevent the appointment of such persons or to have them removed from their position have been exhausted without success, they shall notify the FMA of this situation immediately. (3) Where the FMA has reasonable doubts about whether the persons effectively running an insurance holding company or mixed financial holding company referred to in para. 2 comply with the fit and proper requirements, and where such doubts cannot be eliminated by other means, or where there is a risk associated with any delay, the FMA shall be required on the basis of a notification pursuant to para. 2 or of its own motion to apply to the court of first instance with jurisdiction over commercial matters responsible for the insurance or reinsurance undertaking that is the subsidiary of an insurance holding company or a mixed financial holding company to have the voting rights suspended with regard to the shares held by the insurance holding company or a mixed financial holding company in the subsidiary concerned. (4) The court shall order the suspension of the voting rights pursuant to para. 3 upon application by the FMA. The suspension of voting rights shall be lifted when the court, upon application by the FMA, or the insurance holding company or mixed financial holding company, establishes that the persons who effectively run an insurance holding company or mixed financial holding company are fit and proper to perform their duties. The FMA shall be notified thereof. The court shall rule in accordance with the above provisions in non-litigious civil proceedings. (5) If a court orders the suspension of the voting rights pursuant to para. 4, it shall simultaneously appoint a trustee (Treuhänder) who meets the conditions set out in para. 2 and transfer the voting rights to that trustee. The trustee shall be entitled to reimbursement of any expenses as well as to remuneration, the amount of which shall be determined by the court. The insurance holding company or a mixed financial holding company, and insurance or reinsurance undertakings in the form of their subsidiaries shall be jointly and severally liable. The obligors shall be entitled to appeal (by way of a Rekurs) against decisions determining the amount of the trustee’s remuneration as well as the expenses to be reimbursed. No further appeal shall be possible against the
decision of the Higher Regional Court (Oberlandesgericht).
SECTION 6: MEASURES TO FACILITATE GROUP SUPERVISION
Designation of group supervisor
Article 226. (1) The authority responsible for coordination and exercise of group supervision, shall
be designated pursuant to Article 247 of Directive 2009/138/EC.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 198 / 292 (2) In the procedure pursuant to para. 1, the FMA in the capacity of supervisory authority concerned as defined in Article 247(1) of Directive 2009/138/EC may within the period referred to in the third subparagraph of Article 247(3) of Directive 2009/138/EC refer the matter to EIOPA in accordance with
Article 19 of Regulation (EU) No 1094/2010. The joint decision shall be deferred and any decision that
EIOPA may take in accordance with Article 19(3) of that Regulation shall be awaited, and the FMA shall act to ensure that the supervisory authorities concerned take their joint decision in conformity with EIOPA’s decision. (3) If the FMA is designated as group supervisor, it shall set out the joint decision as referred to in
Article 247(3) of Directive 2009/138/EC in writing stating the full reasons. In accordance with the joint
decision, the FMA shall issue an administrative decision in the capacity of group supervisor. This administrative decision and the decision pursuant to the first sentence shall be served, in the case referred to in Article 197 para. 1 no. 1, on the participating insurance or reinsurance undertaking, and in the case referred to in Article 197 para. 1 no. 2, on the insurance holding company or mixed financial holding company. The FMA shall also submit the joint decision to the college of supervisors. Rights and duties of the group supervisor
Article 227. (1) The rights and duties assigned to the FMA as the group supervisor comprise the
following:

1. implementing the supervisory review, focusing in particular on compliance with the following:
   a. group solvency as referred to in Article 202 paras. 1 and 2, b. risk concentrations as referred to in Article 220,
   c. intra-group transactions as referred to in Article 221,
   d. the governance system as referred to in Articles 222 and 223, and e. the own risk and solvency assessment at group level as referred to in Article 224. With regard to b) and c), the FMA, as the group supervisor, shall in particular monitor the possible risk of contagion in the group, the risk of a conflict of interests, and the level or volume of risks.
2. assessing whether the members of the management board or administrative board and the
   managing directors of the participating undertaking subject to group supervision comply with the requirements of Article 120, Article 121 and Article 225 para. 1;
3. coordinating the exchange of information between the supervisory authorities concerned in
   the context of supervisory activities in going-concern as well as in emergency situations;
4. planning and coordinating, through regular meetings held at least annually or through other
   appropriate means, of supervisory activities in going-concern as well as in emergency situations, in cooperation with the supervisory authorities concerned and taking into account the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group; and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 199 / 292
5. other tasks, measures and decisions assigned to the FMA as the group supervisor by this
federal act, the implementing regulation (EU) or technical standards (EU), in particular leading the process for validation of any internal model at group level as set out in Articles 212 and 214, and leading the process for the granting of permission in accordance with Articles 216 to 219. (2) In order to facilitate the exercise of the group supervision tasks referred to in para. 1, a college of supervisors shall be established by the FMA in the capacity of group supervisor. Colleges of supervisors
Article 228. (1) With regard to setting up colleges of supervisors, the FMA, as the group supervisor
pursuant to Article 21 of Regulation (EU) No 1094/2010, shall involve the supervisory authorities of those Member States in which the head offices of all subsidiary undertakings are situated and EIOPA in the capacity of members. As the group supervisor, the FMA shall also be a member of the college of supervisors. In accordance with the terms of the implementing regulation (EU), the supervisory authorities of significant branches and related undertakings shall also be allowed to participate in the college of supervisors. Their participation shall be limited to achieving the objective of an efficient exchange of information. For the purposes of the effective functioning of the college of supervisors, the FMA, as the group supervisor, may, after consulting the supervisory authorities concerned, require that some activities be carried out by a reduced number of supervisory authorities in the college. (2) The FMA, as the group supervisor, shall act to ensure that the college of supervisors effectively applies the cooperation, exchange of information and consultation processes among the supervisory authorities that are members of the college of supervisors pursuant to Section 9, with a view to promoting the convergence of their respective decisions and activities. This shall similarly apply where another supervisory authority is the group supervisor and the FMA is a member of a college of supervisors. (3) Where the group supervisor fails to carry out the tasks referred to in Article 248(1) of Directive 2009/138/EC or where the members of the college of supervisors do not cooperate to the extent required in this Article 248(1) of Directive 2009/138/EC, the FMA in the capacity of supervisory authority concerned may refer the matter to EIOPA and request its assistance in accordance with
Article 19 of Regulation (EU) No 1094/2010.
(4) The FMA, as the group supervisor, shall enter into coordination arrangements with the other supervisory authorities concerned, specifying the establishment and functioning of the college of supervisors, as well as rulings on the exchange of information within the college of supervisors. This shall similarly apply where another supervisory authority is the group supervisor and the FMA is a member of a college of supervisors. In the event of disagreements regarding the coordination arrangement, the FMA, as a member of the college of supervisors, may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010. The FMA, as the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 200 / 292 group supervisor, shall take its final decision in conformity with EIOPA’s decision and shall inform the other supervisory authorities concerned of the decision. (5) Based on the implementing regulation (EU), the coordination arrangements referred to in para. 4 shall specify the procedures for:

1. the decision-making process among the supervisory authorities concerned in accordance
   with Articles 212, 214 and 226; and
2. consultation under para. 4 and under Article 202 para. 4.
   (6) The coordination arrangements may in accordance with the implementing regulation (EU) and in addition to para. 5 set out procedures for:
3. consultation among the supervisory authorities concerned, in particular as referred to in
   Articles 196 to 200, Articles 203 to 205, Article 209, Articles 220 to 224, Article 230, Article 237, Articles 239 and 245;
4. cooperation with other supervisory authorities; and
5. contingency plans for emergency situations.
   (7) The coordination arrangements may entrust additional tasks to the FMA in the capacity of group supervisor, the other supervisory authorities or EIOPA where this would result in the more efficient supervision of the group and would not impair the supervisory activities of the members of the college of supervisors in respect of their individual responsibilities. Cooperation and exchange of information between supervisory authorities
   Article 229. (1) The FMA shall cooperate closely with the supervisory authorities responsible for the
   supervision of the individual insurance and reinsurance undertakings in a group and, in the event that group supervision is carried out in another Member State, with the group supervisor. This shall particularly apply in cases where an insurance or reinsurance undertaking encounters financial difficulties. (2) Within colleges of supervisors, the FMA may process and transmit all information needed to allow and facilitate the exercise of the supervisory tasks of the supervisory authorities responsible for supervision of the individual insurance and reinsurance undertakings of a group and of the group supervisor under Directive 2009/138/EC. Such information shall be communicated without delay as soon as it becomes available or upon request. The information referred to includes, but is not limited to, information about actions of the group and supervisory authorities, and information provided by the group. (3) Where a supervisory authority has not communicated relevant information to the FMA in accordance with Article 249(1) of Directive 2009/138/EC or a request for cooperation, in particular to exchange relevant information, has been rejected or has not been acted upon within two weeks, the FMA may refer the matter to EIOPA. (4) The submission of information to authorities of third countries shall only be permitted insofar as these authorities are subject to a confidentiality obligation that corresponds to professional secrecy

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 201 / 292 pursuant to Article 64 of Directive 2009/138/EC or have undertaken to adhere to such an obligation. Information that has been submitted to the FMA by the supervisory authority of another signatory country may only be disclosed by the FMA with the express agreement of that supervisory authority and only for the purposes agreed by that supervisory authority. (5) The FMA, as the group supervisor, shall call immediately for a meeting of all supervisory authorities involved in group supervision in at least the following circumstances:

1. where they become aware of a significant breach of the Solvency Capital Requirement or a
   breach of the Minimum Capital Requirement of an individual insurance or reinsurance undertaking;
2. where they become aware of a significant breach of the Solvency Capital Requirement at
   group level; or
3. where other exceptional circumstances are occurring or have occurred.
   The FMA, as the supervisory authority responsible for the supervision of the individual insurance and reinsurance undertakings in a group, shall call on the group supervisor in the above cases requesting that a meeting of all of the supervisory authorities involved in group supervision be convened immediately. Consultation between supervisory authorities
   Article 230. (1) Without prejudice to Articles 227 and 228, the FMA shall, where a decision is of
   importance for the supervisory tasks of other concerned supervisory authorities in the college of supervisors, consult those supervisory authorities in the college of supervisors with regard to the following:
4. the approval of changes in the shareholder structure, organisational or management
   structure of insurance and reinsurance undertakings in a group;
5. the decision on the extension of the recovery period under Article 279 para. 3 or 6; or
6. major sanctions or exceptional supervisory measures, such as a capital add-on under
   Article 277 or the imposition of any limitation on the use of an internal model for the
   calculation of the Solvency Capital Requirement under Section 5 of Chapter 8. The group supervisor shall always be consulted before any decision pursuant to nos. 2 and 3 is taken. (2) Where a decision is based on information that was submitted by other supervisory authorities, then the FMA shall also consult the other affected supervisory authorities prior to reaching this decision. (3) Without prejudice to Article 227 and Article 228 the FMA may decide to refrain from a hearing of other supervisory authorities, where speed is of the essence, or where such a hearing might influence the effectiveness of the decision. In this case, the FMA shall inform the other affected supervisory authorities about its decision without delay.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 202 / 292 Rights to information of the FMA in the capacity of group supervisor
Article 231. (1) In cases where the FMA is appointed as the group supervisor pursuant to Article 226
and not the supervisory authority of the Member State in which the parent undertaking referred to in Article 197 para. 3 has its head office at the level of the Member States, the FMA may request that this supervisory authority obtain from the parent undertaking any information which would be relevant for the exercise of its coordination rights and duties as laid down in Articles 227 and 228, and transmit that information to the FMA in the capacity of group supervisor. (2) The FMA, as the group supervisor, shall, when it needs information referred to in Article 234 which has already been given to another supervisory authority in the college of supervisors, contact that supervisory authority whenever possible. Cooperation with authorities responsible for credit institutions and investment firms
Article 232. (1) Where an insurance or reinsurance undertaking and either a credit institution as
defined in Directive 2013/36/EU or an investment firm as defined in Directive 2004/39/EC, or both, are directly or indirectly related or have a common participating undertaking, the FMA shall cooperate closely with the authorities responsible for the supervision of those other undertakings. (2) Upon request from the responsible authorities referred to in para. 1, the FMA shall provide these authorities with any information they need for the performance of their duties. Professional secrecy and confidentiality
Article 233. Information received in the framework of group supervision, and in particular any
exchange of information as set out in this Chapter between the FMA and the supervisory authorities in the EEA or between supervisory authorities and other authorities, shall be subject to the provisions of Articles 294, 298 and 299. Access to information
Article 234. (1) The natural and legal persons included within the scope of group supervision, and
their related undertakings and participating undertakings, shall ensure that they have access to all information which could be relevant for the purposes of group supervision. (2) The insurance and reinsurance undertakings included in the group supervision shall provide the FMA in the capacity of group supervisor with information on all matters and grant access to any information relevant for the purposes of that supervision at any time. The FMA may also directly demand the necessary information from those undertakings in the group that are not insurance or reinsurance undertakings, where such information has been requested from the insurance undertaking or reinsurance undertaking subject to group supervision and has not been supplied by it within a reasonable period of time. Any FMA measures with regard to the insurance or reinsurance undertaking concerned shall remain unaffected by the above.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 203 / 292 Verification of information
Article 235. (1) Subject to the general provisions of Article 272 para. 4 and Article 274, the FMA may
carry out verification of the information referred to in Article 234 on the premises of any of the following:

1. an insurance or reinsurance undertaking subject to group supervision;
2. related undertakings of that insurance or reinsurance undertaking;
3. parent undertakings of that insurance or reinsurance undertaking; and
4. related undertakings of a parent undertaking of that insurance or reinsurance undertaking.
   (2) Where the FMA, as the group supervisor, wishes to verify the information concerning an undertaking, whether regulated or not, which is part of a group and is situated in another Member State, it shall ask the supervisory authority of that other Member State to have the verification carried out. Where this supervisory authority does not carry out the verification directly or arranges for inspection bodies appointed by it to carry it out, the FMA may, provided the supervisory authority of the Member State concerned authorises it, carry out the verification directly or arrange for the verification to be carried out by the inspection bodies appointed pursuant to Article 274 para. 2. The FMA may also participate in the verification when it does not carry out the verification directly. (3) Where the supervisory authority of a Member State wishes to verify the information concerning an undertaking, whether regulated or not, which is part of a group and situated in Austria, the FMA shall carry out the verification itself or arrange for an inspection body appointed by it pursuant to
   Article 274 para. 2 to carry it out, or shall allow the supervisory authority of that Member State or a
   person appointed by it to carry it out. The FMA may participate in this verification. Article 274 para. 2 shall apply. Where the supervisory authority of the Member State concerned does not carry out the verification itself, the FMA shall allow that authority to participate in the process. (4) The FMA shall inform the group supervisor of the action taken pursuant to paras. 2 and 3. (5) Where the request by the FMA to another supervisory authority to have a verification carried out in accordance with para. 2 has not been acted upon within two weeks, or where the FMA is unable in practice to exercise its right to participate in accordance with para. 2, the FMA may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010. Enforcement measures
   Article 236. (1) Where the insurance or reinsurance undertakings in a group do not comply with the
   requirements referred to in Articles 202 to 224, or where the requirements are met but solvency may nevertheless be jeopardised or where the intra-group transactions or the risk concentrations are a threat to the financial position of the insurance or reinsurance undertakings, the FMA shall implement the measures required to rectify the situation as soon as possible:
5. with regard to insurance holding companies or mixed financial holding companies where the
   FMA is the group supervisor; and

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 204 / 292
2. with regard to insurance and reinsurance undertakings in the group with their head office in
Austria.
(2) The FMA shall impose any orders on insurance holding companies or mixed financial holding companies that are required and appropriate in order to ensure that the business activities comply with the provisions of this Chapter and the relevant provisions of the implementing regulation (EU) and the technical standards (EU). (3) Where the concerned insurance or reinsurance undertaking in a group or the insurance holding company or mixed financial holding company has its head office in another Member State, the FMA in the capacity of group supervisor shall inform the supervisory authority in the other Member State of its findings with a view to enabling them to take the necessary measures. (4) Where the FMA is not the group supervisor and where the group supervisor informs the FMA of its findings pursuant to Article 258(1) of Directive 2009/138/EC in relation to the insurance holding company or mixed financial holding at the head of the group or in relation to an insurance or reinsurance undertaking in the group with its head office in Austria, the FMA shall introduce the measures required under the terms of this federal act. (5) The FMA shall coordinate its enforcement measures as referred to in this Article with the other supervisory authorities concerned and with the group supervisor, where appropriate. This shall particularly apply in cases where the central administration or main establishment of an insurance holding company or mixed financial holding company is not located at its head office.
SECTION 7: PARENT UNDERTAKINGS WITH HEAD OFFICES IN
THIRD COUNTRIES
Verification of equivalence
Article 237. (1) In the case referred to in Article 197 para. 1 no. 3, the FMA shall verify, at the request
of the parent undertaking or of any of the insurance or reinsurance undertakings with its head office in a Member State or of its own motion, provided it would be the group supervisor if the criteria set out in Article 226 were to apply (the “acting group supervisor”), based on the criteria set out in the implementing regulation (EU) with the assistance of EIOPA pursuant to Article 33(2) of Regulation (EU) No 1094/2010, whether the insurance and reinsurance undertakings, the parent undertaking of which has its head office in a third country, are subject to supervision, by a third-country supervisory authority, which is equivalent to that provided for by this Chapter at the level of the group in accordance with Article 215 para. 1 nos. 1 and 2. Before taking a decision on equivalence, the FMA shall, assisted by EIOPA, consult the other supervisory authorities concerned. The FMA in the capacity of acting group supervisor shall not take any decision in relation to a third country that is in opposition to any previous decision taken vis-à-vis that third country pursuant to Article 260(1) of Directive 2009/138/EC, save where it is necessary to take into account significant changes to the

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 205 / 292 supervisory regime laid down in Title I of Directive 2009/138/EC and to the supervisory regime in the third country. (2) Where the FMA, in the capacity of supervisory authority concerned, disagrees with a decision taken in accordance with the third subparagraph of Article 260(1) of Directive 2009/138/EC, it may refer the matter to EIOPA and request its assistance in accordance with Article 19 of Regulation (EU) No 1094/2010 within three months after notification of the decision by the acting group supervisor. (3) Para. 1 shall no longer apply following a decision by the Commission pursuant to
Article 260(3) or (5) of Directive 2009/138/EC on whether the solvency regime in a third country is
deemed to be equivalent or not. Where the Commission concludes that a third country’s solvency regime is not equivalent, any decision taken pursuant to para. 1 shall cease to apply. (4) If pursuant to Article 260 (5) of Directive 2009/138/EC a legal act delegated by the Commission is issued, which defined that the supervisory rules of a third country are temporarily classed as being equivalent, then Article 238 shall apply, unless an insurance or reinsurance undertaking with its registered office in a Member State has total assets that are higher than the total assets of the parent undertaking with its registered office in a third country. In this case, the FMA shall assume, provided that it would be competent in application of the criteria pursuant to Article 226 for group supervision (as the authority conducting group supervision), the duty of the competent authority for group supervision. Equivalence
Article 238. (1) In the event of equivalent supervision referred to in Article 237, the FMA as the
supervisory authority concerned shall rely on the group supervision exercised in a third country. (2) Section 6 of Chapter 9 and Article 225 shall apply accordingly to cooperation between the FMA as the supervisory authority for insurance and reinsurance undertakings with head offices in Austria and third-country supervisory authorities. Absence of equivalence
Article 239. (1) In the absence of equivalent supervision referred to in Article 237, the FMA, as the
group supervisor, shall subject insurance and reinsurance undertakings either to the general principles and methods set out in Section 2 and in Sections 4 to 6 or to one of the methods stipulated in para. 3 at the level of the insurance holding company with its head office in a third country, mixed financial holding company with its head office in a third country, third-country insurance or third￾country reinsurance undertaking. (3) For the sole purpose of the group solvency calculation, the parent undertaking shall be treated as if it were an insurance or reinsurance undertaking subject to the same conditions as laid down in
Section 2 of Chapter 8 as regards the eligible own funds and to either of the following:

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 206 / 292

1. a Solvency Capital Requirement determined in accordance with the principles of Article 208
   paras. 2 and 3, where it is an insurance holding company or mixed financial holding company; or
2. a Solvency Capital Requirement determined in accordance with the principles of Article 209,
   where it is a third-country insurance undertaking or a third-country reinsurance undertaking. (3) The FMA, as the group supervisor, may, after consulting the other supervisory authorities concerned, apply other methods which ensure appropriate supervision of the insurance and reinsurance undertakings in a group and guarantee the achievement of the objectives of the group supervision as defined in this Chapter. The FMA, as the group supervisor, may in particular require the establishment of an insurance holding company or mixed financial holding company which has its head office in a Member State, and apply this Chapter at the level of that undertaking. The FMA shall notify the other supervisory authorities concerned and the European Commission of the methods chosen. Levels of supervision
   Article 240. (1) Where the parent undertaking referred to in Article 237 is itself a subsidiary of an
   insurance holding company or a mixed financial holding company having its head office in a third country or of a third-country insurance or reinsurance undertaking, the FMA, as the group supervisor, shall apply the verification provided for in Article 237 only at the level of the ultimate parent undertaking which is a third-country insurance holding company, a mixed financial holding company with its head office in a third country, a third-country insurance undertaking or a third￾country reinsurance undertaking. (2) In the absence of equivalent supervision referred to in Article 237, the FMA may carry out a new verification at a lower level where a parent undertaking of insurance or reinsurance undertakings exists, either at the level of a third-country insurance holding company, a mixed financial holding company with its head office in a third country, a third-country insurance undertaking or a third￾country reinsurance undertaking. In such a case, the FMA shall explain its decision to the group.
   Article 239 shall apply accordingly.
   CHAPTER 10: INFORMATION
   SECTION 1: PUBLIC DISCLOSURE REQUIREMENTS FOR
   INSURANCE AND REINSURANCE UNDERTAKINGS
   Solvency and financial condition report: contents
   Article 241. (1) When preparing and publishing the solvency and financial condition report in
   accordance with the implementing regulation (EU), insurance and reinsurance undertakings shall take the principles set out in Article 248 para. 1 into account.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 207 / 292 (2) For the purposes of the report, insurance and reinsurance undertakings may make use of or, by a concrete reference, refer to public disclosures made in compliance with other legal or regulatory requirements, to the extent that those disclosures are equivalent to the information to be disclosed under para. 1 in both their nature and scope. (3) Insurance and reinsurance undertakings may disclose, on a voluntary basis, any information or explanation related to their solvency and financial condition which is not already required to be disclosed in accordance with para. 1. Solvency and financial condition report: non-disclosure of certain information
Article 242. (1) Subject to the FMA’s approval, an insurance or reinsurance undertaking shall not
need to include certain information, except for the description of the capital management, in the solvency and financial condition report, where:

1. as a result of the disclosure, competitors of the undertaking would gain significant undue
   advantage; or
2. there are obligations to policyholders or third-party relationships binding an undertaking to
   secrecy or confidentiality to a customary extent.
   (2) Where non-disclosure of information in accordance with para. 1 is permitted by the FMA, undertakings shall make a statement to this effect in their solvency and financial condition report and shall state the reasons. Solvency and financial condition report: updates
   Article 243. (1) Insurance and reinsurance undertakings shall disclose major developments that
   significantly affect the relevance of the information disclosed in their solvency and financial condition report. In this regard they shall disclose appropriate information on the nature and effects of such a major development. A major development exists in particular where:
3. non-compliance with the Minimum Capital Requirement is detected and the FMA either
   considers that the undertaking will not be able to submit a realistic short-term finance scheme or that such a scheme will not be submitted within one month of the date on which non￾compliance was detected; or
4. significant non-compliance with the Solvency Capital Requirement is detected and the FMA is
   not presented with a realistic recovery plan within two months of the date on which non￾compliance was detected. (2) Where a major development exists as set out in para. 1, the insurance or reinsurance undertaking shall immediately disclose the amount of non-compliance and an explanation of its origin and consequences, including any remedial measures taken. (3) Where, in spite of a short-term finance scheme considered to be realistic, non-compliance with the Minimum Capital Requirement has not been resolved three months after first being detected, the insurance or reinsurance undertaking shall immediately disclose it, together with an explanation

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 208 / 292 of its origin and consequences, including any remedial measures taken. Where, in spite of a recovery plan considered to be realistic, a significant non-compliance with the Solvency Capital Requirement has not been resolved six months after first being detected, the insurance or reinsurance undertaking shall immediately disclose it, together with an explanation of its origin and consequences, including any remedial measures taken. Solvency and financial condition report: written policy
Article 244. (1) Insurance and reinsurance undertakings shall have appropriate systems and
structures in place to fulfil the requirements laid down in this Section. Moreover, a written policy ensuring the ongoing appropriateness of any information disclosed and to be disclosed in the solvency and financial condition report shall be prepared and implemented. (2) The solvency and financial condition report shall be adopted by the management board or administrative board and may only be published after being adopted in this way. Solvency and financial condition report: group level
Article 245. (1) Participating insurance and reinsurance undertakings subject to supervision in
accordance with Article 197 para. 1 no. 1 or insurance holding companies and mixed financial holding companies subject to supervision in accordance with Article 197 para. 1 no. 2 shall, in accordance with the implementing regulation (EU), apply Articles 241 to 244 accordingly when preparing and publicly disclosing the report on the solvency and financial condition at the level of the group. (2) Subject to the agreement of the FMA as the group supervisor, the undertakings referred to in para. 1 may provide a single group solvency and financial condition report. This shall comprise at least the following:

1. any information which must be disclosed at the level of the group in accordance with para. 1;
   and
2. the information for any of the subsidiaries within the group which must be disclosed in
   accordance with Articles 241 to 244. The information shall be individually identifiable for any of the subsidiaries within the group. This shall have the effect of releasing the subsidiaries within the group from the obligation to publicly disclose a solvency and financial condition report in accordance with Article 241 para. 1. (3) Before granting the agreement in accordance with para. 2, the FMA, as the group supervisor, shall consult the supervisory authorities in the college of supervisors and duly take into account their views and reservations. (4) Where the report referred to in para. 2 fails to include essential information on a subsidiary which is an insurance or reinsurance undertaking with its head office in Austria, the FMA may require the subsidiary to disclose the necessary additional information.

Insurance Supervision Act 2016 (VAG 2016; Versicherungsaufsichtsgesetz 2016) 209 / 292 Disclosure of certain information regarding accounting and consolidated accounting
Article 246. (1) The financial statements including the complete notes as well as the management
report shall be available for inspection, at the head office of the insurance or reinsurance undertaking as well as in all permanent establishments, no later than six months after the financial year-end and until the end of the third calendar year following the financial year. The financial statements and the management report of the Austrian branch of a third-country insurance or third￾country reinsurance undertaking as well as the financial statements and the management report of the undertaking as a whole shall be available for inspection at the head office of the Austrian branch. Where, pursuant to Article 280a UGB, these documents shall be submitted to the company register in German, the documents shall be made available in German. (2) The documents set out in para. 1 shall be provided to anyone on request and against reimbursement of expenses. (3) Insurance undertakings shall publish those details in the notes referred to in Article 198 para. 9,
Article 203 para. 5 last sentence, Article 222 para. 2, Article 223 para. 2, Article 237 para. 1 nos. 1, 2
and 7, Article 238 para. 1 nos. 7, 8, 14, 15, 16 and 19, Article 239 para. 2 and Article 241 no. 6 UGB, as well as the details pursuant to Article 140 para. 9, Articles 145 and 155 in the official gazette “Amtsblatt zur Wiener Zeitung” or in any other newspaper with nationwide circulation. (4) Article 280a UGB shall apply to Austrian branches of third-country insurance and third-country reinsurance undertakings, irrespective of their legal form. (5) The publication of the financial statements shall include a note stating that, pursuant to para. 1, the financial statements and the management report are available for inspection at the head office of the insurance or reinsurance undertaking and in all its permanent establishments or at the head office of the Austrian branch of a third-country insurance or reinsurance undertaking. The publication of the Austrian branch of a third-country insurance or third-country reinsurance undertaking shall additionally include a note stating that the financial statements of the undertaking as a whole have been submitted, in accordance with Article 280a UGB, to the company register court. The company register court and the company register number shall be stated in the publication. (6) The trustee’s audit opinion with regard to the monitoring of the Deckungsstock and the responsible actuary or the note on the refusal to issue such an audit opinion shall be submitted to the company register together with the financial statements and shall be published in the official gazette “Amtsblatt zur Wiener Zeitung” or in any other newspaper with nationwide circulation. (7) Paras. 1 to 3 and 5 shall apply accordingly to the consolidated financial statements and the consolidated management report. (8) Para. 3 shall not apply to the consolidated financial statements and the consolidated management report pursuant to Article 138 para. 8, which are prepared in accordance with the International Financial Reporting Standards. The information set out in Article 245a para. 3 UGB and