Deutscher Ring companies: BaFin issues administrative acts
Basel/Hamburg, 9 February 2010. The Federal Financial Supervisory Authority (BaFin) has issued administrative acts in respect of Baloise’s German subsidiary Deutscher Ring Lebensversicherungs-AG (DR Leben) and Deutscher Ring Krankenversicherungsverein a.G. (DR Kranken) – which latter company is part of the Signal Iduna group of companies.
With these administrative acts, the BaFin quashes the alleged veto right that DR Kranken has continually claimed against DR Leben and establishes that an organisational separation of all significant areas between the two companies is imperative. The BaFin does not demand a separation of the common shareholdings of the two companies.
"The administrative act issued by the BaFin confirms our legal analysis that the current situation for our companies is illegal", says Martin Strobel, CEO of the Baloise Group. "We intend to resolve this illegal situation as quickly as possible and separate the Deutscher Ring companies swiftly for the benefit of all parties involved. Therefore, we are urging Signal Iduna again to resume negotiations immediately."
Alleged veto quashed with immediate effect
The BaFin has quashed the alleged veto right claimed by DR Kranken against DR Leben in respect of managerial decisions and directions to employees with immediate effect. In its reasoning, the Bafin sets out the following findings:
- The current operational and organisational structure of the Deutscher Ring companies, i.e., the current level of integration between the Deutscher Ring companies, violates mandatory insurance supervision law and corporate law.
- For this reason, an individual and self-dependent management of all Deutscher Ring companies must be established.
Organisational separation of all significant areas mandatory
The BaFin shares the perspective that the organisational separation of all significant areas (inter alia: IT, premises, personnel, back office, risk management and other managerial capacities) is mandatory in order to establish an individual and self-dependent management. The BaFin points out that the current situation with multiple employment contracts results in significant operational risks. This organisational shortcoming must be reversed.
Further, the BaFin demands that both companies report their operational situation regularly, in detail and by using their key figures. Thereby, the BaFin will be able to assess the situation in Hamburg continually and – if necessary – can take further actions in order to end the illegal situation.
Finally, the BaFin sets out that no legal barriers as confidentiality agreements and confidentiality instructions would prevent an organisational separation of the Deutscher Ring companies. Against this background, the BaFin demands the Deutscher Ring companies to submit a plan that sets out the relevant precautions, which are taken in the event that the organisational agreement is terminated.
Current situation illegal
The current situation between the Deutscher Ring companies violates imperative competition law, corporate law and insurance supervision law. Signal Iduna is a direct competitor of DR Leben/Sach. To date, on account of the common use of certain resources, DR Kranken invoked an alleged veto right against managerial decisions by DR Leben/Sach; DR Kranken made fundamental management decisions and instructions to the employees subject to its approval. Now, the Bafin has ordered that this practice be abolished with immediate effect. Under German insurance supervision law, it is impossible to make strategic decisions by the management of a company or directions to the employees subject to approval by a third party. Within this context, the other Deutscher Ring companies that belong to a different group of companies are considered third parties. Besides, German corporate law stipulates that stock corporations be managed only and without any restrictions by their duly appointed corporate management.
No separation of common shareholdings required
However, the Bafin notably has not demanded that the common shareholdings with DR Kranken in Deutscher Ring Beteiligungsholding (DR BHG), which shareholding is controlled by DR Leben/Sach, and especially the majority shareholding in OVB be separated. Moreover, the Higher Regional Court at Hamburg has found that DR Leben/Sach controls DR BHG and all shareholdings held via this company. This decision is legally binding.
The BaFin has reserved the right to take further steps depending on the future development of the situation.
More information
Baloise, based in Basel/Switzerland, is a European provider of insurance and pension solutions. Its unique selling point is intelligent prevention under the “Safety World” brand. In Switzerland it operates as a focused financial services provider, combining insurance and banking. Its other markets are Germany, Austria, Belgium, Luxembourg, Liechtenstein, Croatia and Serbia. Its sales network includes its own sales organisation, brokers and other partners. Its innovative pension products for private customers throughout Europe are driven by the Baloise competence centres in Luxembourg and Liechtenstein.
Bâloise Holding Ltd shares are quoted in the main segment on the SIX Swiss Exchange. Baloise employs some 9,400 staff.
Deutscher Ring Lebensversicherungs-AG and Deutscher Ring Sachversicherungs-AG, which have their headquarters in Hamburg, joined the Swiss Baloise Group in 1985. They posted gross premiums of 757 million euros in 2008 with a workforce of around 1,400 employees.