Prohibition of payments; reduction of benefits

(1) Where the examination of the management and financial position of an undertaking shows that it is permanently no longer able to fulfil its obligations, but avoiding insolvency proceedings appears necessary for the best interests of the insured, the supervisory authority may order what is necessary for this, and may also call upon the representatives of the undertaking to bring about a change in the business fundamentals, or otherwise to remedy the deficiencies, within specified time limits. All types of payment, in particular insurance benefits, distributions of profits, and, for life insurance, the surrender or the pledging of the insurance policy, and advance payments on it, may be temporarily prohibited. The provisions of the Insolvency Code for the protection of payment settlement systems, securities delivery systems, and securities settlement systems, and of security interests of central banks and financial collateral, apply correspondingly.
(2) Under the condition of subsection (1), first sentence, the supervisory authority may, if necessary, reduce the obligations of a life insurance undertaking arising from its insurance contracts in accordance with its financial position. In doing so, the supervisory authority may proceed unevenly where special circumstances justify this, in particular where, among several groups of insurance, the undertaking's distress is due more to one group than another. In the reduction, insofar as premium reserves exist for the individual insurance contracts, the premium reserves are first reduced and the sums insured are then newly determined; where this is not possible, the sums insured are reduced directly. The obligation of policyholders to continue paying the insurance premiums at the previous amount is not affected by the reduction.
(3) The measures under subsections (1) and (2) may be limited to a separate division of the tied assets (section 125(6)).