Surrender values of British policies often below statutory minimum surrender value

Additional claims in the multi-digit millions possible

Guarantees with British
usually not until the expiration

British with-profits policies see
lower guarantees than those provided by
offered by German life insurers
Endowment life insurance.
These guarantees are also based on the
scheduled expiry date and shall apply
therefore usually not in the case of premature
Termination or partial termination (partial withdrawals).
British life insurers invest
mainly in shares, in the
Past with a share of
50 to 70% of their net contribution income
on average about five times
as much as German endowment life insurers.
Products from the island were at
the total long-term rate of return
2 to 3 percentage points above the results
of the German competition.
The focus is on achieving a
high return on investment, for which you also get a
accepts a higher level of risk.

Guarantees, maturity bonus
and Smoothing not with

In order to avoid this higher risk for the customer
to cushion the blow, the British
Insurer a smoothing procedure
(Smoothing) on. Within the framework of the so-called
“Smoothing” should thereby
Reserves formed for worse years
will be. Thus, the companies
during a bull market
not completely to the customers
further, to provide a buffer for times of crisis
build up. The security capital
consists to a large extent of the
already generated funds, which
not yet finally guaranteed to the
customers were passed on.
This also includes in particular
Maturity bonuses (final bonus), which are paid in the
value of the shares not included, and
are not guaranteed. With
this part of the contract value is “liable”.
the customer until the expiry of the contract
with for the development of the capital markets
– i.e. the decline of the “unsmoothed
Pool values”. But this will
softened by the smoothing, so
that a certain stability of the expected
results is given.
In the event of premature sale of the shares
however, these guarantees shall, in principle, apply
not at all or only to a very limited extent.
Then they go to the expiration date
guarantees given completely
lost, because at the time of sale the
Policy value due to market price adjustments
to the actual value of the
underlying securities were adjusted.
The calculation of which is recommended
many customers as incomprehensible,
arbitrary or unfair.

Application of British
Methods violates
German law

A common misconception among intermediaries
and insurance customers is the opinion,
British insurers could
after the mostly unknown British
Right “settle what and how
they wanted.” It is true, however, that
German insurance contract law
(VVG) is to be applied.
But the one practiced by the British
Procedure does not correspond to German
right, which makes one very different
the so-called “current value” to be calculated
(if applicable. less reasonable
and agreed actuarial assumptions
lapse deductions) as minimum surrender value
prescribes. In the case of the in
Germany expelled British
so-called “with profi ts” policies is
German law is generally agreed.
These policies are therefore subject to
German insurance contract law.
This saw now since 1995 to 2007
in § 176 VVG1 stipulates that the insurer shall
on termination of an endowment policy
refund the surrender value
who, “according to the recognized
Rules of actuarial mathematics
… to be calculated as the current value of the insurance”

Cancellation deduction must
appropriate and furthermore
be agreed

With regard to the so-called cancellation deduction
§ 176 (4) VVG stipulated “The
Insurer is entitled to a deduction only
if it is agreed and appropriate
Is.” The point cancellation deduction
is not to be questioned here. He
has to do with the effect of, in particular
by market price adjustments due to the capital market situation
reduced surrender values
British policies nothing
to do. In principle, he can also
only be levied if it is objectively
appropriate and (transparently) agreed
is – otherwise results directly from
the law the consequence that it is not deducted
is allowed to be.

Legislators led
1994 the current value

In the course of deregulation in 1994
the German legislator – also for the
German law compatible British
Policies – the concept of current value
introduced something completely new
represents. He’s so new that the old terms
still the imagination
also by lawyers and wide circles of
insurance industry2. The
The legislator states in the explanatory memorandum3
on the revision of section 176
VVG stipulates, inter alia, that the current value of the
capital market situation (more precisely: the
yield expectations until expiry)
at the time of its calculation
– already that is new, since the traditional
Calculation of the surrender value
from the actuarial reserve with
the unchanged at the beginning of the contract
applicable actuarial interest rate. He’s
according to the idea of the legislator
prospectively as the difference between the present values
of future performance and the
future premiums to be paid
to calculate. Thereby recognized
actuarial methods
to be applied.
The calculation bases to be used
(expressly as
Discount rate and mortality assumptions
named) are analogous
§ 9 of the German Valuation Law (BewG). The legislator
assumes that the policyholder
in the fair value “at repurchase
his insurance their real
value “4.

Fair value means discounted
full value of the

From an actuarial point of view, which is decisive here
be in full view
Jaeger5 and Engeländer6 deal with the
fair value. They come
concluded that the
recognized actuarial methods
Investigation methods
of the fair value as the present value difference
of future benefits (of the insurer)
and payable in the future
Premiums (of the policyholder)
are available, while only the valuation
the calculation bases to be used for this purpose
a certain
allows room for manoeuvre, as it does
for fair value calculations in other
areas is typical. Starting point
are in any case only the contractually agreed
Services and the contractual
agreed premiums. The internal
Calculation bases or the
Calculation of the insurer play
is irrelevant: from the customer’s point of view, the time value
to determine. Decisive
it will be on the question of the interest rate
The fair value can be determined from
the contractual provisions
objectively, e.g. by an external
Determine expert – at least
just as objectively and reliably as
other fair values (e.g. B. Yield values
of real estate) likewise, which are
courts – despite the fact that
different experts and
possibly lead to deviating valuations and
Results come – recognized
will be. For example, it is regularly
applied when it comes to the
Pension rights adjustment in the context of a
Divorce goes: In agreement
with the case law of the
Federal Court of Justice (BGH) ensure
Family Courts to ensure that appropriate
Expert opinion
about the value can be obtained.

British methods give way
from time value calculation

He is not simply the British
per market price adjustment ultimately from
the value of the underlying investments
calculated “surrender value” of the
Contract. Because the services and
also the duration of the payment of contributions
from the occurrence of certain “accidental”
Events depend – death or
experience of the process – and on the
Date of repurchase to be discounted
actuarial assumptions are applied.
Methods and
Basis of calculation – discount rate
and mortality probabilities
– into play.
On expiry, the UK policies provide
certain guarantees, including
future current surpluses
and the expected “smoothed”
Maturity Bonus. Not only the achieved
Minimum guarantees, but
all that is realistically possible in the
process is to be expected, must also be
enter the legal time value
– as with the German policies, for example.
also a non-guaranteed terminal bonus
is included in the fair value.
Example: In a non-contributory UK
Policy are one year before expiry already
EUR 148,000 guaranteed at the expiry date.
In addition, there is EUR 2,000 in ongoing
surpluses and a through smoothing
smoothed maturity bonus of currently
expected EUR 50,000, which, however, is still
is not guaranteed. Together these are
EUR 200 000. Because of a stock market downturn.
however – also by means of market price adjustments
– on giving notice
Year before expiry only EUR 140,000 paid out
– Guarantees on expiry apply Yes
then don’t. However, even if the current value
the expected EUR 200 000
owing to the remaining uncertainties
discounted at 7 % to the termination date
would have to be at least almost
EUR 187,000 will be disbursed.

Customers are entitled to at least
the current value of their
insurance at

According to German law, the customer
so you’re entitled to the actual
fair “time value” of his contract, which is
as a result of the guarantees at expiry
even one year before expiry clearly
is above what the British
Insurers due to the current
weak capital market situation calculated
has. The customer therefore has – if still
not statute-barred – a corresponding
Claim for additional payment. Different
Calculations of the British correspond
so simply not German
Right – the customer is entitled to
the full market value (fair value) of its
Policy. Depending on the market
above all the discount rate, with
which the fair value from the in particular
at the end of the expected services
calculated, and which is dependent on the capital market situation

Brits sat on clues
of the actuaries

Engeländer7 (Actuary) also writes
and authorized signatory at KPMG) at the time value:
“The introduction of this term
is based on an initiative of actuaries,
which hereby foreign, in particular
Anglo-Saxon methods
on the determination of termination indemnities
…to prevent it. While
the fair value is based on market values
based, in the United Kingdom, the
Termination benefits on the basis of
the insurer’s investments
determined. This can therefore be at the risk
of the customer, because he
only has to be a predefined
Meet performance. Through the German
Obligation to pay at least the
market-dependent fair value as termination payment
to perform, the
Insurer to a pension product
reasonable caution
and reliable capital investment

Commandment: Customer stands
Minimum remuneration at

Even if the British did not take this to heart…
should have – on the legal
Minimum surrender value – i.e.
full time value – do they come after
the mid-1994 to 2007
German insurance contract law
not over. The fair value determines
based solely on the claims
and obligations of the policyholder
over the
Insurers, no matter what internal
in the insurer. Thereby the
total effect also of the future
profit participation incl. Maturity Bonus,
the guarantees on expiry
and any other promised
Performance to be taken into account8.
Engeländer (op. cit.) points out,
that to determine the fair value
a qualified actuary must always be involved.
is. Because the time value is not
value, which the insurer has determined from its own
law, but a statutory
justified, external value.

Customers are provided with a complete
and traceable
Settlement at

Customers who have been
Insurers charged
Surrender values, also in the case of partial terminations, if applicable
or partial disbursements
or withdrawals are treated unfairly
should therefore contact the insurer
first of all to a legally compliant
Recalculation of the benefit as the present value
…to ask… In case of doubt or if
the recalculation is denied,
the current value can of course
also by an actuarial
Expert determined
will be.
Justifications from UK insurers,
that the value of the investments
and therefore market price adjustments had to be made.
to be carried out,
are completely beside German law
and are therefore irrelevant if
this results in lower benefits than the
legal fair value.

No effective help from the
State or interest groups
on a case-by-case basis

Only when the customer or ex-customer
of the insurer knows that the settlement
is still incorrect, and
how much money is missing, a lawyer can
really help. The hope, “the
State” or “the insurance regulator”
would solve such problems, proves
proved to be deceptive and practically risky,
because the demands of the customers
could become time-barred in a timely manner. Accordingly
every affected person must
…to try to make “his case” himself,
because associations and communities of interest
offer no protection against
the loss of one’s own claims.

1 In individual cases also since 29.07.1994. As of 2008, this regulation was changed | 2 Engeländer, VersR 2005, 103
3 Legal Explanatory Memorandum to the Third Implementing Act/EEC to the ISA, BT-Dr. 12/6959, S. 103
4 Legal Explanatory Memorandum to the Third Implementing Act/EEC to the ISA, BT-Dr. 12/6959, S. 103
5 Jaeger, VersR 2002, 133 | 6 Engeländer, NVersZ 2002, 436
7 Engeländer, NVersZ 2002, 436
8 Engeländer, NVersZ 2002, 436

(expert report 2 2008, 70)


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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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