New rulings for interest rate differential transactions and leverage models

Why insurers pay the claim when the financial services provider is broke


Instead of effortless wealth, hundreds of thousands of investors often end up with a mountain of debt, and it is not uncommon for them to lose all their savings or even face personal insolvency. This was made possible by well-sounding names such as Lex-Rente, Sicherheits-Kompakt-Rente, Sofort-Rente, Sparenta, leveraged life insurance, Sparrente, Zinsdifferenzgeschäft, loan-financed annuity, guaranteed annuity, leveraged annuity, snow annuity, fixed loan with repayment replacement via life insurance and/or fund investments, leveraged pool, credit-financed investment, fixed loan with redemption substitute, leveraged investment fund, credit-financed investments, special credit scheme, UK life insurance combined with a loan, financed unit-linked life insurance, Euro plan, mixed leveraged annuity, etc.


Insurers or boards of directors have been training intermediaries since the 1980s at the latest: “If an investor wants to invest 50,000 euros, then he will get five or fifteen times as much credit in addition, and can thus invest many times as much money.” The “trick” was to fool the investor into believing that the interest on the loan was only a fraction of what the life insurance or mutual fund investment was earning – a sure profit on paper. The opposite, however, was usually the bitter reality, because the hoped-for insurance or fund returns failed to materialise. Savings and inheritances vanished effortlessly into thin air – the only thing that was secure were the commissions for the agents and distributors. Due to the final withholding tax since 2009, the interest on loans is now usually no longer even tax-deductible – an additional “turbo for current losses”.


Dresden Higher Regional Court sentences Clerical Medical (CMI) to pay damages

The insurance senate of the Dresden Higher Regional Court is the second German higher regional court to order the British insurance company Clerical Medical Ltd. to pay damages in connection with a loan-financed life insurance policy on 19 November 2010 (Case No. 7 U 1358/09). The insurer’s undoing was that the payout amounts included in the application were represented (contrary to the terms of the policy) as firm promises of payment by Clerical Medical. Fixed payouts similar to a guarantee were also shown in numerous policies – but when the money was used up, the insurer has so far stopped the payouts with reference to its non-transparent insurance conditions. Some intermediaries praised British insurers because there was a special British fairness here – but this was primarily aimed at the remaining customers, who were not to be burdened by payouts on worthless policies of others.


Düsseldorf Higher Regional Court sentences ApoBank eG to reverse transaction

The Higher Regional Court of Düsseldorf (judgement of 28.02.2011, ref. I-9 U 150/10) sentenced the Deutsche Apotheker- und Ärztebank (Apo-Bank), which in many cases had provided loans for payments into life insurance policies of CMI, to the obligation to reverse the annuity model. The reason for the conviction was in particular that the life insurance investment and the loan financing were so-called related transactions. The revocation instruction had obviously been designed en masse – because mistakes in such a business are always made systematically in the same “quality” – with several errors. As a result, the right of revocation never expired, and so the entire combined model could still be completely revoked years later. The sales department of the insurers concerned had recommended their loss-making investment models to numerous doctors, dentists and pharmacists in particular, who can thus still part with them by revoking their contracts.


OLG Bamberg sentences CMI to pay damages

The Bamberg Higher Regional Court (judgment of 2 September 2009, Case No. 3 U 81/09) had for the first time ordered the British insurance company CMI to pay damages for losses arising from the leverage transactions. This decision was followed by other similar decisions against the insurer. The deficiency in the clarification lay in particular in the fact that the promised return, which was supposed to ensure a functioning leverage model, had obviously never been achieved in the past and was therefore also unrealistic in the future.


Restoration through revocation

In addition to an action for damages against the initiators of the interest differential transactions, i.e. intermediaries, advisors, sales companies and insurers, it is also possible to declare revocation vis-à-vis the financing bank in suitable cases. The German legislator introduced an unlimited right of withdrawal as of November 2002. There is much to suggest that, for reasons of European law, earlier contracts may also be subject to a right of withdrawal for an unlimited period. Another legal reason for the revocation was provided by the Federal Court of Justice, because the majority of insurers did not show an effective interest rate for instalment payments. The options for investors are manifold – even if some of the parties involved have long since ceased to participate professionally in economic life, it is still possible to stick to the solvent insurer or bank.


Incompetent brokers and advisers sued en masse

The more poorly trained the intermediaries, the more convincing their belief that British consumer protection and insurer fairness put customers in a good position. Even in oral negotiations, advisors and intermediaries defend themselves in a legally misguided manner by claiming that German insurance contract law is not applicable. Such and other former financial service providers now live on Hartz-IV, try their hand at brokering gold certificates and “investment diamonds” without proof of substance or organise Tupper parties. In the future, however, they are likely to receive more German city breaks and extra income financed by proving their sales competence and the false training by the insurance sales force in court and settling this immediately in cash with the court cashier.


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


by courtesy of (published in Network Karriere 04/2011, page 34)

and (published in P.T. Magazine 04/2011, 42-43 under the heading: Reversal of Leverage Models).

and (published 25.05.2011)





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 telephone call about your request is free of charge.