Regulatory Alerts2025-06-05 | PPP Circular 05/2025 (VA)BaFin PPP Circular 05/2025 on the Prudent Person Principle for Insurance Undertakings under Solvency II
BaFin issued Circular 05/2025 to establish a binding interpretation of the Prudent Person Principle for German insurance undertakings under Solvency II. The Circular mandates that management boards implement proportionate, risk-based investment processes, conduct independent credit assessments, and prioritize policyholder interests when managing asset portfolios. It further requires documented governance frameworks for non-routine investments, derivatives, sustainability factors, and conflict-of-interest management to ensure portfolio security, liquidity, and profitability.
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