BDO: Regulatory Reform Alters Insurance Supervision in Germany
Germany's Ministry of Finance has unveiled a draft law to implement the EU's Solvency II reform and the Insurance Recovery and Resolution Directive. The new regulations, effective January 2027, introduce significant changes to supervisory practices.
The German Federal Ministry of Finance (BMF) published a draft law on February 10, 2026, concerning the restructuring, resolution, and supervision of insurance companies (VSAAG). The proposed legislation aims to transpose two key European directives into German law: Directive (EU) 2025/2 amending the Solvency II Directive and the Insurance Recovery and Resolution Directive (IRRD).
The new regulations are set to take effect on January 30, 2027, and will introduce structural alterations to Germany's insurance supervisory framework. Larger insurance groups and internationally operating insurers are particularly affected, as their governance and management structures will face closer scrutiny.
The reform is guided by four main objectives: strengthening financial stability in the insurance sector through enhanced crisis prevention and resolution tools, advancing group supervision to better reflect actual economic control within insurance groups, applying proportionality and risk-orientation by tailoring regulatory requirements to company size and risk profile, and integrating sustainability and climate risks into supervisory practices, aligning with European sustainability goals.
A central component of the draft law is the implementation of the IRRD, establishing for the first time uniform EU-wide requirements for recovery and resolution planning for insurance companies. The goal is to ensure orderly restructuring or resolution in crisis situations, safeguarding policyholders and financial stability. In Germany, the Federal Financial Supervisory Authority (BaFin) will assume the role of resolution authority for insurance undertakings.
The reform also includes adjustments to group supervision. The definition of a 'group' will be more closely aligned with the actual economic control of insurance groups. Beyond traditional ownership structures, factors such as centralized decision-making coordination or economic dependencies may become relevant. This ensures that complex corporate structures are adequately supervised. Concurrently, the principle of proportionality is emphasized, potentially offering smaller and less complex companies simplified requirements, for instance, in reporting and governance. Finally, the directive mandates that insurers more thoroughly analyze the impact of sustainability and climate risks on their business models and risk profiles.