German Insurance Supervision Act (VAG)

Concept

The Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG) is the central German law governing state supervision of insurance companies and pension funds. In its current form, it substantially transposes the European Solvency II Directive into national law.

Scope

The VAG governs, among other things, the licensing requirements for insurance companies, requirements for business organization and risk management, own funds and solvency capital requirements, the tasks and powers of the supervisory authority, and the rights and duties of corporate governing bodies.

Significance

As a supervisory law, the VAG aims to safeguard the interests of policyholders and ensure the ongoing ability of insurers to meet their contractual obligations. In Germany, supervision under the VAG is primarily exercised by the Federal Financial Supervisory Authority (BaFin).