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Treatises on Solvency II pp 385–424Cite as

Public Disclosure

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Abstract

This chapter treats public disclosure, focusing primarily on the Report on Solvency and Financial Condition under art. 51, para. 1 of the Solvency II Directive. Thus, the first subjects to be addressed are the objectives and addressees of public disclosure. Then the required content of the report is examined. This part concludes by addressing the duty to update the report when information changes significantly. Further inquiry is undertaken into the relationship between such public disclosure and the duty of public disclosure as existing in national capital market and commercial law. Next, the duty of public disclosure for groups and the form of the reports are examined. Finally, some general conclusions concerning public disclosure are set forth, based on the determinations reached.

First published as “Die Veröffentlichungspflichten von Versicherungsunternehmen gegenüber der Allgemeinheit nach Solvency II” [in English: Insurance Undertakings’ Duty of Disclosure to the Public under Solvency II], in Dreher/Wandt, eds., Solvency II in der Rechtsanwendung [in English: Solvency II in Legal Application], Frankfurt Edition, Volume 17, Karlsruhe (2009), 129 ff. with Martin Schaaf as coauthor. Martin Schaaf was at that time a research assistant at the Law School of Johannes Gutenberg University in Mainz.

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Notes

  1. 1.

    A current schedule for the process of implementation into law is available on the homepage of the Commission at http://ec.europa.eu/internal_market/insurance/docs/solvency/solvency2/annex1_timetable_en.pdf.

  2. 2.

    Apparently thus far, a discussion of the content of public disclosure duties can be found from an economic viewpoint only and briefly in Nguyen, WPg (2008), 651 (655 ff.).

  3. 3.

    The Directive of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance – Solvency II in the version of 19 Oct. 2009, available on the Internet at http://register.consilium.europa.eu/pdf/en/09/st03/st03643-re01.en09.pdf; see also the proposal for an amended Directive of 30 Mar. 2009, the second draft of 26 Feb. 2008, COM(2008) 119 final, and concerning the latter, Council, Common Position of 25 Nov. 2008, as well as the first draft of 10 Jun. 2007, COM(2007) 361 final = BR-Drucks. [Document of the German Bundesrat] 510/07. Unless expressly noted otherwise, subsequent statements refer to the version of 19 Oct. 2009, cited as Solvency II.

  4. 4.

    See in detail on the emerging disclosure duties to supervisory authorities under Solvency II and the current obligations under the VAG [German Insurance Supervision Act] Dreher, ZVersWiss (2009), 187 ff. (Chap. 12, above).

  5. 5.

    Currently, disclosure to the public required by insurance supervisory regime appears only in the specific case of the disclosure of “actuarial and statistical data from which the consideration of gender as a factor in risk assessment is derived”, as found in sec. 10a, para. 2a VAG [German Insurance Supervision Act] and likewise provided for in European law.

  6. 6.

    See art. 54 of Solvency II and in this regard Dreher/Schaaf, VersR (2009), 1151 (1166 f.).

  7. 7.

    See the third pillar of Basel II, namely arts. 146 ff. of Directive 2006/48/EC of the European Parliament and of the Council of 14 Jun. 2006 relating to the taking up and pursuit of the business of credit institutions, OJEU No. L 177 of 30 Jun. 2006, p. 1.

  8. 8.

    See also CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 5.2.

  9. 9.

    The decision for or against voluntary disclosure of additional information is part of the disclosure strategy to be documented in writing in accordance with art. 54, para. 1, 2nd clause of Solvency II. On the disclosure strategy see CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.22 ff.

  10. 10.

    For example, according to Nguyen, Rechnungslegung in Versicherungsunternehmen [in English: Accounting in Insurance Undertakings], (2008), p. 928, figure 7–29, included as addressees of publication of insurance undertakings are investors, creditors, shareholders, competitors, ratings agencies, brokers, and government officials. Similarly – although with special emphasis on the policyholder – CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.32 f. On the other hand, according to CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.58, policyholders clearly bring up the rear among the listed addressees of publication.

  11. 11.

    ESC, Opinion on the Proposal for the Solvency II Directive, OJEU (2008), no. C 224 of 30 Aug. 2008, pp. 11, 17.

  12. 12.

    See CEIOPS, Issues Paper of 1 Nov. 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, item 6.2. and CEIOPS, Issues Paper of 15 Aug. 2008, Supervisory Review Process and Undertakings Reporting Requirements, pnt. 6.4 (b) as well as CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.6: “Information required for public disclosure shall […] support market transparency and market discipline.”

  13. 13.

    See CEIOPS, Issues Paper of 1 Nov. 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, item 7.2. and similarly CEIOPS, Issues Paper of 15 Aug. 2008, Supervisory Review Process and Undertakings Reporting Requirements, pnt. 6.14 (a) as well as CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.6.: “Information should be relevant, accessible, meaningful, reliable and readily understandable.” On the parallel problem of excessive information by financial market participants from the number of publications issued in the banking sector see the critique by the German Central Credit Committee, Opinion of 21 Jul. 2006 on the draft of the Solvency Regulation of 31 Mar. 2006, p. 151, which in this respect can also be seen as criticism of the European requirements under Basel II, and on this point Kemmer, in: Ballwieser/Grewe (eds.), Wirtschaftsprüfung im Wandel [in English: Auditing in Transition], (2008), pp. 189, 198.

  14. 14.

    The issuer of the Directive essentially anticipated this risk: See the reference in art. 51, para. 1, subpara. 1 of Solvency II to art. 35, para. 4 (a) of Solvency II, according to which the information submitted to the supervisory authorities must “reflect the nature, scale and complexity of the business of the undertaking concerned”. The same applies with regard to CEIOPS, Issues Paper of 15 Aug. 2008, Supervisory Review Process and Undertakings’ Reporting Requirements, pnt. 6.2.

  15. 15.

    See CEIOPS, Issues Paper of 11 Nov. 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, items 2. and 7. and referring to this, CEIOPS, Issues Paper of 15 Aug. 2008, Supervisory Review Process and Undertakings’ Reporting Requirements, pnt. 4.2. It requires that the “fit for purpose” test has “a clear understanding of why the information is needed and what it will be used for”.

  16. 16.

    On this point see below, at 13.6.

  17. 17.

    On this point see below, at 13.10.2.

  18. 18.

    See in detail on this point Dreher, ZVersWiss (2009), 187 (202 ff.) (Chap. 12, above, at 12.4).

  19. 19.

    On the various supervisory purposes see CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 1.8 and CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.28.

  20. 20.

    The legal basis for the implementation measures can be found in art. 56 of Solvency II. On the four levels of the Lamfalussy process see Rittner/Dreher, Europäisches und deutsches Wirtschaftsrecht [in English: European and German Economic Law], (3rd ed. 2008), sec. 32, ref. 8 and sec. 33, ref. 5; Schmolke, NZG (2005), 912 (913 f.); id., EuR (2006), 432 (433 ff.); Wandt, VW (2007), 473; Bürkle, (VersR) 2007, 1595 (1596 f.); id., CCZ (2008), 50.

  21. 21.

    Due to the different content and supervisory purposes, the system of information categories proposed in the literature for disclosures to the supervisory authority – see Dreher, ZVersWiss (2009), 187 (189) (Chap. 12, above, at 12.2.1) – cannot be fully applied to the disclosure duties to the public. But the categories align to a large extent.

  22. 22.

    For mutual insurance associations, the disclosure of all members who are also policyholders is apparently excluded for reasons of confidentiality. Thus, the disclosure of shareholder composition mainly affects the insurance Aktiengesellschaft (German stock corporation – AG) and Societas Europaea (European Company – SE). It is aimed in particular at the disclosure of shareholders whose influence can be relevant to the development of an undertaking. Therefore, the disclosure of all shareholders known by name is likewise excluded for this reason alone.

  23. 23.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.4 and CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.96.

  24. 24.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.8.

  25. 25.

    Financial and risk reporting overlap at this point.

  26. 26.

    See also CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.7 and CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.38, where a separation between “performance from investment activities” and “performance from underwriting activities” is proposed.

  27. 27.

    On segmentation see art. 80 of Solvency II.

  28. 28.

    The claims ratio for a financial year is the ratio of the undertaking’s expense for insured events (deducting for the reinsurance share) to its earned premiums.

  29. 29.

    The expense ratio describes the ratio of expenses for insurance operations to earned premiums.

  30. 30.

    The combined claims/expense ratio is relevant only for indemnity insurance and not the insurance of persons. It compares the combination of insurance claims and operational expenses to earned premiums.

  31. 31.

    Referring to the second draft (see n. 3), the general explanatory text for art. 74 of Solvency II, requires – in conjunction with implementation measures by the Commission adopted on the basis of the authority in paragraph 2 – valuation standards for solvency purposes for all assets based on the consideration of fair value.

  32. 32.

    See sec. 341e, para. 1 of the HGB [German Commercial Code]. On financial accounting for technical provisions under secs. 341e to 341h of the HGB [German Commercial Code] in conjunction with the Regulation on Insurance Accounting (RechVersV) and the underlying valuation methods see, as one example among many, Nguyen, Rechnungslegung von Versicherungsunternehmen [in English: Accounting in Insurance Undertakings], (2008), p. 331 ff. with further references.

  33. 33.

    In the terminology of the HGB [German Commercial Code], technical reserves are divided into excess premium, coverage provisions, provisions for outstanding claims, provisions performance-related and non-performance-related premium refunds, equalization and similar provisions as well as other technical provisions.

  34. 34.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.9.

  35. 35.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.10.

  36. 36.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.11.

  37. 37.

    See in detail on the individual requirements CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.45; CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.99.

  38. 38.

    On the quality classification of own funds under Solvency II see second draft (n. 3), explanatory text for arts. 86 to 90 of Solvency II.

  39. 39.

    Capital transferability refers to the capacity of an undertaking, in the event it incurs internal losses limited to a particular area, to move capital to where it is specifically needed.

  40. 40.

    Thus ancillary own funds specifically include liabilities that direct insurance and reinsurance undertakings can call on for the purpose of increasing their own capital, for example, supplementary contributions and letters of credit. These require supervisory approval prior to their consideration as own funds in accordance with art. 90, para. 1 of Solvency II.

  41. 41.

    On the (Target) Solvency Capital Requirement and Minimum Capital Requirement see art. 100 ff. and art. 128 ff. Solvency II and from the literature, for example, Romeike, in: Romeike/Müller-Reichart (eds.), Risikomanagement in Versicherungsunternehmen [in English: Risk Management in Insurance Undertakings], (2nd ed. 2008), pp. 115, 135 ff.; Nguyen, Handbuch der wert- und risikoorientierten Steuerung von Versicherungsunternehmen [in English: Handbook of Value and Risk-based Management of Insurance Undertakings], (2008), p. 293; Dreher, VersR (2008), 998 (1000).

  42. 42.

    Under art. 51, para. 2, subpara. 2, sent. 4 of Solvency II, public disclosure of the Solvency Capital Requirement may transpire under notice that the final amount is still subject to supervisory assessment.

  43. 43.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.23 and CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.79.

  44. 44.

    The optional approach for valuation of equity risk regulated in art. 304 of Solvency II (“duration-based equity risk sub-module”) is a value-at-risk approach as described in art. 106 in conjunction with 104, para. 4 of Solvency II. In the financial services sector, value-at-risk is a traditional method for measuring market and interest-rate risk. It represents the negative change in the value measured in monetary units that will not be exceeded at a given probability (confidence level) within a certain period of time. See in general on value-at-risk Nguyen, Handbuch der wert- und risikoorientierten Steuerung von Versicherungsunternehmen [in English: Handbook of Value and Risk-based Management of Insurance Undertakings], (2008), p. 18; Müller-Reichart/Romeike, in: Romeike/Müller/Reichert (eds.), Risikomanagement in Versicherungsunternehmen [in English: Risk Management in Insurance Undertakings], (2nd ed. 2008), pp. 47, 78. The standard approach assumes a fixed one-year time frame at a confidence level of 99.5 %. The alternative approach, presented in art. 304 of Solvency II, is available to undertakings at the outset only if it is recognized in Member State law. If it is so recognized, undertakings may choose a value-at-risk approach based on the usual duration of an equity investment rather than a rigid one-year time frame. However, it is valid only if the confidence level insures that policyholders and beneficiaries are protected to the same extent required by art. 101 of Solvency II.

  45. 45.

    See, however, the opening clause to art. 51, para. 2, subpara. 3 of Solvency II.

  46. 46.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.8.

  47. 47.

    See Recitals 30, 33, 34; CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.8 (b); CEIOPS, Issues Paper of 11 Mar. 2008, Implementing Measures on System of Governance, pnt. 5.2 as well as – especially clear – CEIOPS, Consultation Paper No. 33 of 26 Mar. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: System of Governance, pnts. 3.31 and 3.43: “The other ‘key functions’ are those considered important and critical in the system of governance and include risk management, compliance, internal audit […] functions. Additional key functions may be relevant”.

  48. 48.

    See only CEIOPS of 2 Jul. 2009, Draft CEIOPS “Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements”, pnt. 3.113.

  49. 49.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.12.

  50. 50.

    On the organizational segregation of the risk-management, compliance, and internal audit functions see Dreher, VersR (2008), 998 (1003); Bürkle, VersR (2007), 1595 (1599 f.); id. CCZ (2008), 50 (55).

  51. 51.

    On the extensive scope of risk-related disclosure duties see the requirements extending over nearly 5 pages on CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.41. According to this, for example, the report on risk exposure for each the six risk categories should include the development of the risks over the past financial years and a projection by management for the coming financial years; it should describe the products and investments underlying the respective risks, disclose at least the upper limit, and include a statement on risk tolerance and risk-bearing capacity. Special requirements are added for “financial instruments”.

  52. 52.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.12; especially clear, CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.39 sub B.3. as well as CEIOPS of 2 Jul. 2009, Draft CEIOPS Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnts. 3.114 to 3.116.

  53. 53.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.12.

  54. 54.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.12. The delineation of tasks and responsibilities between the risk-management, compliance, and internal audit functions was addressed under organizational form; see above, at 13.3.3. In view of the significance to risk management of organizational separation at direct insurance and reinsurance undertakings of the staff functions involved in crisis prevention, the delineation of inter-functional tasks and responsibilities can also be counted as risk reporting information. In this respect, the two information categories are hardly distinct from one another.

  55. 55.

    On integration of the internal model with risk management see art. 44, para. 5 of Solvency II.

  56. 56.

    See, on the entirety, Dreher/Schaaf, VersR (2009), 1151 ff.; Dreher, VersR (2008), 998 ff.; id., ZVersWiss (2009), 187 (202 ff.) (Chap. 12, above, at 12.4).

  57. 57.

    See CEIOPS of 25 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.33; CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnts. 3.91 to 3.94.

  58. 58.

    In this respect, lit. (a) makes reference to art. 139, para. 1 of Solvency II. Accordingly, direct insurance and reinsurance undertakings must notify the supervisory authority immediately when the Minimum Solvency Capital Requirement is no longer covered or they see a risk that such a situation could arise within three months. On the submission of a recovery plan see art. 139, para. 2 of Solvency II.

  59. 59.

    In this respect, lit. (b) makes reference to art. 138, para. 1 of Solvency II. Accordingly, direct insurance and reinsurance undertakings must notify the supervisory authority immediately when the Target Solvency Capital Requirement is no longer covered or they see a risk that such a situation could arise within three months. On the submission of a recovery plan see art. 138, para. 2 of Solvency II.

  60. 60.

    On this authority by the supervisory authority to induce the leadership of a direct insurance or reinsurance undertaking to inform the public of critical developments and the proposal by CEIOPS for “naming and shaming” see Wandt, VW (2007), 473 (476); Nguyen, WPg (2008), 651 (656).

  61. 61.

    On the duty under sec. 55, para. 3 of the VAG [German Insurance Supervision Act] see below, n. 78.

  62. 62.

    On the individual disclosure duties under the German Securities Acquisition and Takeover Act (WpÜG) see the section immediately following, under 3.5.2.

  63. 63.

    See for a critique of conformity under European law of the limitation of the regular disclosure duties – reviewed below – incumbent on domestic issuers Mülbert/Steup, NZG (2007), 761 (765 f.).

  64. 64.

    The legal definition of “securities” is found in sec. 2, para. 1 of the WpHG [German Securities Trading Act].

  65. 65.

    Directive 2004/109/EC on the harmonisation of transparency requirements for information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC of 15 Dec. 2004, OJEU no. L 390 of Dec. 31, 2004, p. 38; on implementation in Germany see Rittner/Dreher, Europäisches und deutsches Wirtschaftsrecht [in English: European and German Economic Law], (3rd ed. 2007), sec. 33 ref. 4, n. 21 with further references.

  66. 66.

    In this respect, the requirement refers to sec. 21 of the WpHG [German Securities Trading Act], which itself establishes a disclosure duty to the issuers and the BaFin [Federal Financial Supervisory Authority] but not to the public. The relevant holdings thresholds are 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 %, 50 % and 75 % of total voting rights. On the disclosure obligation under sec. 21 WpHG [German Securities Trading Act] see, among many such references, Weber-Rey, in: Habersack/Mülbert/Schlitt (eds.), Handbuch der Kapitalmarktinformation [in English: Guide to Capital Market Information], (2008), sec. 23 ref. 65 ff.

  67. 67.

    See in detail on this point, particularly on the parallels in the rules of secs. 21 ff. WpHG [German Securities Trading Act] and sec. 35 WpÜG [German Securities Acquisition and Takeover Act], Weber-Rey, in: Habersack/Mülbert/Schlitt (eds.), Handbuch der Kapitalmarktinformation [in English: Guide to Capital Market Information], (2008), sec. 23 ref. 154 ff.

  68. 68.

    See, however, the restriction in sec. 37z, para. 1 of the WpHG [German Securities Trading Act].

  69. 69.

    In detail on the content of the annual financial report see Goetze/Wunderlich, in: Habersack/Mülbert/Schlitt (eds.), Handbuch der Kapitalmarktinformation [in English: Guide to Capital Market Information], (2008), sec. 9, ref. 20; Mülbert/Steup, NZG (2007), 761 (764).

  70. 70.

    See BT-Drucks. [Document of the German Bundestag] 16/2498, p. 43.

  71. 71.

    Excluded from the disclosure obligation under sec. 37w, para. 1 S. 1, 2nd clause of the WpHG [German Securities Trading Act] are issuers whose equity securities are debt titles that fall under sec. 2, para. 1, sent. 1, no. 2 of the WpHG [German Securities Trading Act] or that establish at least a conditional right to acquire securities in accordance with sec. 2, para. 1, sent. 1, no. 1 or 2 of the WpHG [German Securities Trading Act]. Additional reference is made to the exceptions under sec. 37z, para. 1 of the WpHG [German Securities Trading Act].

  72. 72.

    The condensed balance sheet and the condensed profit and loss statement within the condensed financial statements must contain the same headings and subtitles as the prior full-year financial statements. Additional line items must be included only if their omission from the report would render it misleading. The interim management report must provide at least the important events within the reporting period and their impact on the issuer. The major opportunities and risks for the six months of the financial year following the reporting period must be described; see BT-Drucks. [Document of the German Bundestag] 16/2498, p. 44 f.

  73. 73.

    German Accounting Standard no. 16 took effect on 5 May 2008. It is directly applicable only to undertakings that are subject to semi-annual or interim reporting and at the same time are parent companies subject to group accounting. Nevertheless, application of the standard is also explicitly recommended for individual undertakings subject to reporting. DRS [German Accounting Standard] no. 16, pnt. 41 contains a non-exhaustive listing of possible major events. These may be of an external nature, such as in the case of changes to legal conditions, developments in the economy, or interest rates. Alternatively, they may be internal in nature, including, for example, restructuring measures, the introduction of new products, or the development of new markets.

  74. 74.

    Regardless of the ambiguous wording of sec. 37x, para. 2, sent. 1, 2nd clause of the WpHG [German Securities Trading Act], the period represented by the interim statement is not necessarily restricted to three months but depends rather on the date of publication and can vary between two and a half months and four and half months; see BT-Drucks. [Document of the German Bundestag] 16/3644, p. 77.

  75. 75.

    Thus the duty is primarily incumbent upon issuers that are not already required to publish quarterly reports for the first three quarters of financial year under the rules of the Frankfurt stock exchange due to their listing in the particular segment of the official or regulated market that has additional requirements for admittance (Prime Standard) on the Frankfurt Stock exchange; also according to Hutter/Kaulamo, NJW (2007), 550 (552).

  76. 76.

    DRS [German Accounting Standard] no. 16, pnts. 61 ff. and 41 may also be consulted for specifics in this respect.

  77. 77.

    On the term “insurance undertaking” within the meaning of German commercial law see the legal definition in secs. 341, para. 1 and 2 of the HGB [German Commercial Code].

  78. 78.

    In addition, in accordance with sec. 55, para. 3 VAG [German Insurance Supervision Act], direct insurance and reinsurance undertakings must send the annual financial statements and management report to any insured person upon demand in the fiscal year that follows the reporting year.

  79. 79.

    With respect to the description of the profession, sec. 285, sent. 1, no. 10 of the HGB [German Commercial Code] does not refer to one’s professional training but to the actually practiced main profession. It is likely that this requirement is directed mainly at the supervisory board since the office of supervisory board member is designed under the legal model as a secondary position. For the managing board, the requirement can only mean that the area assigned to each managing board member is stated in the framework of a distribution of operating responsibilities. On the whole see Lange, in: Münchener Kommentar HGB [in English: Munich Commentary on the German Commercial Code], (2nd ed. 2008), volume IV, sec. 285, ref. 199 ff.; Merkt, in: Baumbach/Hopt, HGB [in English: The German Commercial Code], (33rd ed. 2008), sec. 285, ref. 10.

  80. 80.

    Thus, for example, human resources developments (see the following section) in this context refer to purely economic factors such as the change in the number of employees in the undertaking; see on this point sec. 285, sent. 1, no. 7 of the HGB [German Commercial Code]. In consideration of the inferences that can be drawn about the financial position of an undertaking from changes in the number of employees, the corresponding information is allocated here to the area of financial reporting. Additionally, information about the legal environment can have organizational relevance, for example, if the outsourcing of significant business functions is reported within the meaning of sec. 5, para. 3, no. 4 of the VAG [German Insurance Supervision Act]. On the outsourcing of internal audit and elements of risk management see Dreher/Schaaf, WM (2008), 1765 (1770 f.).

  81. 81.

    In this respect, sec. 289, para. 1 of the HGB [German Commercial Code] contains hardly any specific requirements; the information specified corresponds to the general opinion in auditing and law; see, for example, the compilation by Lange, in: Münchener Kommentar HGB [in English: Munich Commentary on the German Commercial Code], (2nd ed. 2008), vol. IV, sec. 289, ref. 60; Ballwieser, in: FS [Publication in Honor of] Baetge, 2007, p. 153, 160 f.; Merkt, in: Baumbach/Hopt, HGB [in English: The German Commercial Code], (33rd ed. 2008), sec. 289, ref. 1.

  82. 82.

    See the reference to sec. 289, para. 1, sent. 4 of the HGB [German Commercial Code] in DRS [German Accounting Standard] 5–20, pnt. 2.

  83. 83.

    In detail on risk management under sec. 64a of the VAG [German Insurance Supervision Act] see Dreher, VersR (2008), 998.

  84. 84.

    See Wiedmann, in: Ebenroth/Boujong/Joost/Strohn, HGB [in English: The German Commercial Code], vol. I, (2nd ed. 2008), sec. 289, ref. 29; Lange, in: Münchener Kommentar HGB [in English: Munich Commentary on the German Commercial Code], vol. IV, (2nd ed. 2008), sec. 289, ref. 108; Baumbach/Hopt, HGB [in English: The German Commercial Code], (33rd ed. 2008), sec. 289, ref. 2.

  85. 85.

    The duty to issue financial statements providing information on the financial position, solvency and the risks in class 18 of part a of Annex I is still anchored in art. 33, para. 1 of the draft of the Directive dated 26 Feb. 2008 (n. 3). However, the Council, Common Position of 25 Nov. 2008, deleted the substantial portions of the provision. The new version of art. 33 now refers only to the information exchange between supervisory authorities for the purposes of supervision.

  86. 86.

    Of a different opinion, with regard to the management report, Merkt in: Baumbach/Hopt (eds.), HGB [The German Commercial Code], (33rd. ed. 2008), sec. 289, ref. 1.

  87. 87.

    For a discussion on this point see Lange, in: Münchener Kommentar HGB [in English: Munich commentary on the German Commercial Code], (2nd ed. 2008), vol. IV, sec. 289, ref. 83. On overlap with the major content in the risk strategy see section below at 3.

  88. 88.

    See Bundesministerium der Justiz [German Federal Ministry of Justice – BMJ], Ministerial Draft of BilReG [German Accounting Law Reform Act] of 13 Dec. 2003, p. 25.

  89. 89.

    See also Pfitzer/Oser/Orth, DB (2004), 2593 (2597).

  90. 90.

    On ancillary own funds see above, 13.3.2.3.

  91. 91.

    See on this point Dreher, ZVersWiss (2009), 187 (190 f.) (Chap. 12, above, at 12.2.1).

  92. 92.

    See the legal definition in art. 212, para. 1 (a) of Solvency II, which refers to art. 12, para. 1 of Directive 83/349/EEC of 13 Jun. 1983 concerning consolidated accounts, OJEC no. L 193 of 18 Jul. 1983, p. 1, and thus to the criteria for unified management or identification of management body members.

  93. 93.

    See the legal definition in art. 212, para. 1 (f) of Solvency II.

  94. 94.

    In detail on the content requirements of art. 50 of Solvency II see above, at 13.3.

  95. 95.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.4; CEIOPS of 2 Feb. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.39 sub B.1 (d) and CEIOPS of 2 Jul. 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Supervisory Reporting and Public Disclosure Requirements, pnt. 3.97.

  96. 96.

    See CEIOPS, Advice to the European Commission on Supervisory Reporting and Public Disclosure in the Framework of the Solvency II Project, March 2007, pnt. 4.8.

  97. 97.

    See implications on this point below, 13.10.4.

  98. 98.

    Art. 256, para. 2, subpara. 2 of Solvency II requires that the supervisory authority responsible for group supervision consult and coordinate with the supervisory authorities referred to in art. 248, para. 1 of Solvency II prior to issuing consent.

  99. 99.

    See Council, Common Position of 25 Nov. 2008; also, on the discussion concerning group support and its deletion, the report in the Financial Times of Germany dated 10 Dec. 2008, p. 25.

  100. 100.

    On the criterion defining unified management as well as the concept of control see sec. 341j, para. 1, sent. 1 of the HGB in conjunction with sec. 290, para. 1 to 3 of the HGB.

  101. 101.

    DRS [German Accounting Standard] 5–20 is directly applicable in this respect; see above at 13.5.2.3.

  102. 102.

    On scope of consolidation see secs. 294 ff. of the HGB [German Commercial Code].

  103. 103.

    See sec. 297, para. 3, sent. 1 of the HGB [German Commercial Code].

  104. 104.

    The parallels in the specifics of group accounting that arise under IAS/IFRS (International Accounting Standards/International Financial Reporting Standards) are outside the scope of this article. According to sec. 315a, para. 1 and 2 of the HGB [German Commercial Code], Capital Market-based undertakings are required to issue group financial statements that comply with IAS/IFRS. An overview of the accounting standards of the IASB (International Accounting Standards Board) applicable to group accounting for insurance undertakings is provided in Nguyen, Rechnungslegung in Versicherungsunternehmen [in English: Accounting in Insurance Undertakings], (2008), p. 616 f.

  105. 105.

    On the notes to the group financial statements see sec. 341j, para. 1, sent. 1 of the HGB [German Commercial Code] in conjunction with sec. 313, para. 2 of the HGB [German Commercial Code] concerning disclosures on the scope consolidation.

  106. 106.

    The cash-flow statement centers on the three elements of cash flow from operations, cash flow from financing activity, and cash flow from investment activity. See in detail on this Busse von Colbe, in: Münchener Kommentar HGB [in English: Munich Commentary on the German Commercial Code], (2nd. ed. 2008), vol. IV, sec. 297, ref. 18 ff.; Nguyen, Rechnungslegung von Versicherungsunternehmen [in English: Accounting in Insurance Undertakings], (2008), p. 621 ff.

  107. 107.

    There are also no format requirements in the parallel rules under Basel II; see art. 148, para. 1 of Directive 2006/48/EC: The choice of disclosure medium is generally left to the credit institutions.

  108. 108.

    On the option to refer under arts. 51, para. 1, subpara. 2 and 53, para. 3 of Solvency II see above, at 13.6.1.

  109. 109.

    See above, 13.2.

  110. 110.

    See on this point above, 13.2.

  111. 111.

    See on this point also above, 13.2.

  112. 112.

    The scope of information is still largely uncertain. In this respect, CEIOPS of Feb. 25, 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.45 sub (iii) states only that the information “could include a justification of differing key assumptions from the standard formula if appropriate.” On the information concerning the Solvency Capital Requirement requiring disclosure see above, 13.3.2.3.

  113. 113.

    See above, 13.2.

  114. 114.

    CEIOPS has fully acknowledged this problem: see CEIOPS of Feb. 25, 2009, Draft CEIOPS’ Advice for Level 2 Implementing Measures on Solvency II: Reporting Requirements, pnt. 3.30. However, it does not provide the undertakings with the distinct criteria between essential and non-essential information. The definition of materiality, closely aligned with the work of the IASB, appears to be only slightly helpful from the point of view of an undertaking. According to this definition, information is significant and must be included in the Report on Solvency and Financial Condition if it has the ability to influence the economic decisions of the addressees of publication. Because the very next sentence directly predicates significance on the size of the undertaking, on the one hand, and on the potential for any non-disclosure to be misleading to the addressee on the other, the definition becomes highly adulterated. The same applies to the imprecise treatment from CEIOPS, Issues Paper of Nov. 1, 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, number 7. 1 at the end: “Moreover, particular care should be taken to ensure that the harmonisation of contents and formats is not too burdensome for small and medium-sized insurance undertakings, by applying the proportionality principle to the utmost extent possible.”

  115. 115.

    See in detail on this point Dreher, ZVersWiss (2009), 187 ff. (Chap. 12, above).

  116. 116.

    See above, 13.7.

  117. 117.

    See on this point, based on the group-wide risk management of credit institutions, Schneider, Options and limits in the implementation of the risk management requirements under corporate and banking supervisory law at group level, Dissertation, Mainz (2009).

  118. 118.

    On a parallel situation in banking supervision see Hillen, in: Boos/Fischer/Schulte-Mattler, KWG [The German Credit Services Act], (3rd ed. 2008), sec. 26a, ref. 6.

  119. 119.

    See CEIOPS, Issues Paper of Nov. 1, 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, no. 6.1.

  120. 120.

    See on this point CEIOPS, Issues Paper dated Nov. 1, 2007, Policy on harmonisation of contents and formats for public disclosure and supervisory reporting, no. 6.1: “If undertakings can produce the same figures for regulatory purposes and financial accounting, the cost burden will be significantly reduced.”

  121. 121.

    See sec. 341a, para. 1, sent. 1, 2nd clause of the HGB [German Commercial Code], which waives the three month period in sec. 264, para. 1, sent. 2 of the HGB [German Commercial Code].

  122. 122.

    The deadline can be no later than twelve months after the reporting date of the group financial statement. In compliance with sec. 290, para. 1, sent. 2 of the HGB [German Commercial Code], sec. 341i, para. 3, sent. 2 HGB [German Commercial Code] limits the latest deadline to four months for corporations that are subject to the requirements of sec. 325, para. 4, sent. 1 of the HGB [German Commercial Code], but not simultaneously to the relief provision of sec. 327a of the HGB [German Commercial Code].

  123. 123.

    For a parallel situation in banking supervision, namely in sec. 26a, para. 4 of the KWG [German Credit Services Act], see Hillen, in: Boos/Fischer/Schulte-Mattler, KWG [in English: The German Credit Services Act], (3rd ed. 2008), sec. 26a, ref. 20.

  124. 124.

    On protection of the confidential interests of banks in connection with public disclosures under Basel II see art. 146 of Directive 2006/48/EC.

  125. 125.

    Banks are also required to describe their own funds structure under Basel II; see on this point Annex XII, Part 2, 3, and at a national level, secs. 324 f. of SolvV [Regulation governing the capital adequacy of institutions, groups of institutions and financial holding groups].

  126. 126.

    See art. 146, para. 3 of Directive 2006/48/EC as well as sec. 26a, para. 2 of the KWG [German Credit Services Act].

  127. 127.

    Under sec. 55 of the VwGO [Administrative Court Procedures Code] in conjunction with sec. 172, no. 2 of the GVG [Courts Constitution Act], the public can be excluded for the protection of important business and trade secrets.

  128. 128.

    See Hüttenbrink, in: Kuhla/Hüttenbrink, Der Verwaltungsprozess [in English: Administrative Procedure], (3rd ed. 2002), ref. 233; generally, on the principle of official investigation in administrative procedure, Garloff, in: Posser/Wolf (eds.), Beckscher Online-Kommentar VwGO, [in English: Beck Online Commentary – VwGO [Administrative Court Procedures Code]], as of October, 2008; Dawin, in: Schoch/Schmidt-Assmann/Pietzner (eds.), VwGO [in English: The Administrative Court Procedures Code], 15th supplemental issue, as of September 2007, vol. I, sec. 86 ref. 6 ff.

  129. 129.

    See Hüttenbrink, in: Kuhla/Hüttenbrink, Der Verwaltungsprozess [in English: Administrative Procedure], (3rd ed. 2002), ref. 235. In such cases it does not matter whether the consent of the supervisory authority constitutes an administrative measure – which seems obvious – since the substantive burden of proof in a proceeding for injunctive relief and in a mandamus proceeding is identical.

  130. 130.

    See, on the objectives of the disclosure duties, above, 13.2.

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    Meinrad Dreher

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Dreher, M. (2015). Public Disclosure. In: Treatises on Solvency II. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-46290-4_13

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