Insurance broker is liable for bank creditworthiness for investments after premium collection

The case:

The BFI Bank has never been so broke as it is today. Industry insiders suspected this long before the official bankruptcy petition was filed in court. Lastly, the bank offered credit interest on account balances at a rate far above the market rate, and linked this to a necessary purchase of BFI shares.

Double relevance for second-rate banks:

There are banks which are not members of the Federal Association, but whose deposits are only 90%, and this is limited to 20,000 euros per customer, covered by the compensation scheme. This was the case with BFI-Bank, and incidentally, numerous other credit institutions today.

Significance for the collection agent:

Time and again it can be observed in the market that insurance brokers do not know the difference between turnover and profit. The accounting is not orderly and transparent. The broker starts to use the “foreign money” to manage the insurance premiums collected instead of putting this money aside. The tax advisor may also be responsible for such accounting deficiencies.

BGH Collection Broker Judgement of 21.12.2005:

The Federal Court of Justice has now decided (case no. III ZR 9/05) that a “commercially active trustee” may not invest the premiums collected for an insurer at a bank with second-class insolvency protection. For the insurance broker this means personal liability and responsibility for ensuring that the insurance premiums are available at all times and in full. In the case in question, the broker had invested the premiums in a bank with insufficient deposit insurance as overnight money.

Significance for the investment advisor or broker:

Experts in the field speak of over 10,000 “injured” investors. The intermediary must also inform the normal investment customer about such risks. The Higher Regional Court of Thuringia, Az. 8 U 436/04 ordered a mediator to pay damages by judgment of 11 January 2005. The intermediary had failed to inform the investor that only such a second-class deposit insurance exists with this credit institution (only 90% of the first 20,000 euros of an account balance is replaced by the EdW).


Importance of the credit assessment:

The credit assessment is an obligation for the financial service provider, see § 18 KWG. This applies to the investment of third-party money, asset management, the brokerage of financial investments with credit institutions, and also to advice on closed investments. Occasionally, even with renowned market participants, equity capital is already on the assets side: If a financial services provider cannot read a balance sheet, he will not be able to deduce over-indebtedness from it.


by Dr. Johannes Fiala


by courtesy of (published on 22.05.2006)

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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.
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