Germany: New BaFin-platform for notifications on outsourcing – what will change for insurers?

A massive failure of cloud services and standard programs at just one of the large providers can trigger a chain reaction for insurance companies and other financial service providers, which in the worst case could destabilize our financial system.

In order to better counter such risks, the supervisory authorities need a cross-sector overview of where and to which external service providers functions are outsourced. Therefore, they now want to collect precise data on all primary and subordinate outsourcing via a central recording system. This will also expand the content of the already existing reporting obligations for insurers.

What will change for insurers and occupational pension institutions?

1. In future, reports will be made exclusively via BaFin’s electronic reporting and publication platform (Melde- und Veröffentlichungsplattform / MVP).
2. To use the platform, companies must register and have their accounts activated.
3. Extended reporting obligation in terms of content.
4. Information must be provided not only about the outsourcing at the first level, but about the entire outsourcing chain, if this information is available to the company when it enters into the contract with the outsourcing service provider or as soon as such information becomes known.
5. Already reported and still relevant outsourcing should also be reported via the platform (BaFin recommendation aiming at having all information recorded together in a standardized manner).

The data submitted by the companies is sorted and collected in a database and evaluated on a regular basis. In the future, the evaluation will be carried out in the form of outsourcing maps, which show the concentration risks and in particular the level at which they arise.

What should insurance companies be prepared for?

At first glance, not too much seems to change for insurance companies. Naturally, there will initially be an extended effort when outsourcing that has already been reported has to be re-reported.

However, taking a closer look at the provisions of the new German regulation (Versicherungs-Ausgliederungsanzeigenverordnung / VersAusgl-AnzV), it becomes clear that the reporting obligation will be significantly expanded and that every detail of a possible outsourcing must be recorded and kept up to date. Affected companies must therefore prepare for additional organizational efforts.

More details on the extended reporting requirements can be found in our Quarterly Update Insurance & Reinsurance 01/2022 here (German only).

When can the changes be expected?

The changes regarding the reporting obligation are determined and implemented by corresponding regulations – e.g., for insurers the VersAusgl-AnzV is decisive. Currently, the corresponding regulation for the banking sector is being examined by the German Bundesbank. Although the VersAusgl-AnzV does not depend on Bundesbank, BaFin is currently still awaiting the review by the German Federal Bank, as the reporting and publication platform is not to be activated until all regulations for all sectors enter into force.

BaFin expects the VersAusgl-AnzV to enter into force in autumn 2022.