Ageing provisions as a liability trap when reinsuring

Liability for ageing provisions lost through reinsurance applies if the customer was not properly informed. Depending on the policyholder’s contract, it already applies to reinsurance in 2006 or earlier.

The BGH had ruled that the lost ageing provision, often amounting to a five-digit euro sum, does not itself constitute a loss.

Rather, he saw a loss only in a premium with the new insurer that – despite only comparable coverage – increased over time more than it would have with the old insurer. This can be determined today, if necessary, or proven as probable for the future by an expert opinion.

The consequence is that the broker who did not provide sufficient information about the ageing provision is liable and in any case risks a corresponding declaratory judgement. Often the insurance cover with the new insurer is worse (but possibly consciously wanted by the customer) – then the premium is usually not higher than with the old insurer in the long term, so that no damage occurs. The inferior insurance cover can also not be claimed as compensation if it was known to the customer.

However, experience from terminated or ongoing court proceedings shows that the customer can successfully argue that he could have switched to a correspondingly emaciated comparable tariff with the old insurer under full crediting of the ageing reserve and then paid there – even from the beginning – even less than with the new insurer.

The court then considers this to be a loss for which the broker is liable, because he has changed the customer’s cover, even though a change of tariff with full crediting of the ageing reserve would have resulted in a significantly lower premium with the old insurer than with the new insurer. In other cases, the customer who was covered in 2006 or earlier has now turned 65 and could switch to the standard tariff (which has existed since 1994).

This tariff is uniform across the industry in terms and conditions and new entrant premiums, so it is automatically comparable. The court sees damage here in the fact that the customer would have paid less with the old insurer in the – otherwise exactly the same – standard tariff as a result of the crediting of the ageing reserve than now with the new insurer after the reinsurance if he switches there to the same standard tariff.

The loss – as the lifelong cash value of the premium difference – corresponds here quite exactly to the ageing provision, which can easily be between 10,000 and more than 50,000 euros.

It does not help the broker if he has only made a general reference to the ageing provision or to the fact that it cannot be taken away. This is because it does not make it sufficiently clear to the customer what disadvantage may arise for him. If the latter then argues with the additional premium that he would have to pay as a result of the change of cover in the later standard tariff, the broker hardly has a real chance against this.

In a recently decided case, the customer alleged an advisory error because the intermediary had not pointed out that in the future it would be possible for existing customers to take part of the ageing provision with them to the new insurer. However, this was not yet foreseeable at that time, because this possibility was even tendentially rejected in the discussion. However, at the latest since the drafting or adoption of the Competition Enhancement Act, i.e. from the end of 2006/beginning of 2007, this possibility had to be known to the intermediary.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm

by courtesy of (published in Performance, issue 06/2010, page 52)

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

(The first phone call is a free get-to-know-you conversation; without consulting. You will learn what we can do for you & what we need from you in terms of information, documents for a qualified consultation.)