Property insurance: Federal government plans security fund for insolvencies

Security Fund

Insolvency: Safety net planned for insured persons

The bankruptcy of the insurer Element shocked thousands of customers last year. Now the federal government wants to better protect the insured.

The roof structure burns, a car accident or your cell phone breaks – risks that many Germans have insured themselves against. Anyone who takes out liability, motor vehicle or home insurance in this country feels safe. But what happens if the insurer itself goes bankrupt?

While customers of life and health insurance are protected by special security funds, such a facility was missing in property insurance. This is said to be the result of the Federal Government However, the planned Insurance Restructuring, Processing and Supervision Amendment Act (VSAAG) will change from next year.

If a property insurer – i.e. an insurer that offers household contents, motor vehicle, building, liability or legal protection insurance – gets into difficulties in the future, a two-tier safety net should come into effect.

• On the one hand, a cross-divisional resolution fund is to be formed, which will be managed by the Federal Financial Supervisory Authority (Bafin). All insurers should pay into this – regardless of whether they are life, health or property insurers. If an insurer gets into financial difficulties, Bafin can provide the insurer with financial support, for example by granting loans or buying up parts of the insurer’s business.
• In addition, a security fund for property insurers is to be created. All insurers who operate property and casualty insurance business in Germany should pay into this. These include providers of motor vehicle, liability, household contents, building, legal protection and accident insurance. Should a property insurer enter the insolvency slip, the claims of the insured should be paid from this fund. If, for example, their own house is destroyed by fire, the insured person will receive compensation for the damage despite the insolvency of their insurer.

There are already corresponding security funds in the areas of life insurance (Protektor) and health insurance (Medicator). However, there is still a gap in protection for property insurance, which was made clear by the bankruptcy of the Berlin insurer Element last year.

“The establishment of a security fund is a great step forward for insured people,” said Stephan Rehmke, board spokesman for the Association of Insured Persons, commenting on the draft law that was discussed in the Finance Committee of the Bundestag this Monday. “The insolvency of Element has shown that company bankruptcies are possible even in a closely regulated market. In the future, consumers will largely be better protected.”

Meanwhile, there is criticism from the insurers’ camp. The cross-divisional security fund in particular is encountering resistance in the industry. The General Association of German Insurers (GDV) and the Association of Private Health Insurers (PKV Association), among other things, fear that their customers’ money could be used to rescue a motor vehicle insurer that has run into difficulties.

• New figures from the arbitration board: Complaint record: These insurance policies annoy many people
• High costs: Financial supervision: These insurances are often too expensive

“Insurance divisions are deliberately managed separately so that each division remains financially stable,” notes GDV Managing Director Jörg Asmussen. However, a blanket collection pot for all sectors would undermine this principle. “In the end, a division is liable for risks that it did not cause itself. This creates a lack of transparency and endangers the stability of the entire system.”

The PKV Association also warned of a high level of bureaucratic effort. This would cause additional costs, which would ultimately have to be borne by the insured in the form of higher contributions.