Definitions

For the purposes of this Act, the following definitions apply: 1. Supervisory authority: the authority or authorities responsible, under sections 320 to 322 of this Act or other legal or administrative provisions, for supervising the undertakings named in section 1(1). 2. Outsourcing: an arrangement of any form between an insurance undertaking and a service provider, under which the service provider performs, directly or through further outsourcing, a process, a service, or an activity that would otherwise be performed by the insurance undertaking itself; the service provider may be a supervised or a non-supervised undertaking. 3. Qualifying holding: the direct or indirect holding of at least 10 percent of the capital or of the voting rights of an undertaking, or any other means of exercising a significant influence over the management of that undertaking; for the purposes of calculating the proportion of voting rights, section 33(1), in conjunction with a statutory instrument under subsection (5), section 34(1) and (2), section 35(1) to (3), in conjunction with a statutory instrument under subsection (6), and section 36 of the Securities Trading Act apply correspondingly; voting rights or capital interests held by credit institutions or securities institutions in connection with the underwriting business under section 1(1), second sentence, point 10, of the Banking Act or under section 2(2), point 2, of the Securities Institutions Act are disregarded, provided that these rights are not exercised or otherwise used to intervene in the management of the issuer, and are disposed of within one year of the date of acquisition. 4. Participating undertaking: a parent undertaking or another undertaking that holds a participation, or that is connected with another undertaking through a relationship of the kind described in section 271(1) of the Commercial Code; a participation means the direct or indirect holding of at least 20 percent of the voting rights or of the capital of an undertaking; for the purposes of supervision under sections 245 to 287, a participation also means the direct or indirect holding of voting rights or capital in an undertaking over which, in the view of the supervisory authorities, a significant influence is actually exercised; for the purposes of supervision under sections 245 to 287, a participating undertaking also means an undertaking that forms part of a horizontal group within the meaning of point 15. 5. Diversification effects: a reduction in the risk exposure of insurance undertakings and groups through the diversification of their business, arising from the fact that the negative outcome of one risk can be offset by the more favourable outcome of another risk, where those risks are not fully correlated. 6. Third country: any state that is not a member state or contracting state within the meaning of point 22; a state-like administrative unit with independent supervisory powers is also deemed to be a third country, insofar as the provisions of European Union law on freedom of movement, the right of establishment, and the freedom to provide services do not apply. 7. Close links: a situation in which at least two natural or legal persons are linked by control or by a participation, or a situation in which at least two natural or legal persons are permanently linked to the same person by a relationship of control. 8. External rating agency: a rating agency that is registered or certified in accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies (OJ L 302, 17.11.2009, p. 1), as last amended by Regulation (EU) No 462/2013 (OJ L 146, 31.5.2013, p. 1), or a central bank that issues ratings and is exempt from the application of that Regulation. 9. Function: an internal capacity within the business organisation to undertake practical tasks; the key functions are: a) the independent risk management function, b) the compliance function, c) the internal audit function, d) the actuarial function. 10. Mixed financial holding company: a parent undertaking that is not a supervised undertaking of a financial conglomerate within the meaning of section 2(1) of the Financial Conglomerates Supervision Act, and that, together with its subsidiary undertakings, at least one of which is a supervised undertaking of a financial conglomerate with its registered office in Germany or in another member state or contracting state, and together with other undertakings, forms a financial conglomerate. 11. Mixed insurance holding company: a parent undertaking a) that is neither an insurance undertaking, nor a third-country insurance undertaking, nor an insurance holding company within the meaning of point 31, nor a mixed financial holding company within the meaning of point 10, and b) whose subsidiary undertakings include at least one insurance undertaking. 12. Fundamental spread: the spread determined and published at least quarterly by the European Insurance and Occupational Pensions Authority for each relevant maturity, credit quality, and asset category, for the purpose of calculating the matching adjustment under Article 77e(1)(b) of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1), as last amended by Directive 2014/51/EU (OJ L 153, 22.5.2014, p. 1). 13. Group: an association of undertakings that a) consists of a participating undertaking, its subsidiary undertakings, and the undertakings in which the participating undertaking or its subsidiary undertakings hold a participation, together with undertakings that form part of a horizontal group within the meaning of point 15, or b) is based on the establishment of contractual or other strong and sustainable financial relationships between all these undertakings, and to which mutual insurance associations or similar associations may belong, provided that aa) one of these undertakings exercises, through central coordination, a dominant influence over the decisions of all the undertakings belonging to the group, including financial decisions, and bb) the establishment and dissolution of these relationships requires, for the purposes of this Title, the prior approval of the group supervisory authority; the undertaking that exercises the central coordination is regarded as the parent undertaking, and the other undertakings are regarded as subsidiary undertakings. 14. Intra-group transactions: transactions in which an insurance undertaking relies, directly or indirectly, for the discharge of a liability, on other undertakings within the same group or on natural or legal persons linked to the undertakings of the group by close links, regardless of whether this occurs on a contractual or non-contractual basis, or on a remunerated or unremunerated basis. 15. Horizontal group: a group in which an undertaking is connected with one or more other undertakings in such a way that a) they are jointly under unified management by virtue of a provision in the articles of association or a contract, or b) their administrative, management, or supervisory bodies consist, in the majority, of the same persons who hold office during the financial year and until the expiry of the periods respectively specified in section 290(1) of the Commercial Code, regardless of whether they are required to draw up consolidated financial statements or not. 16. Control: the exercise of a dominant influence within the meaning of section 290 of the Commercial Code. 17. Concentration risk: all risk exposures with a potential for loss that is large enough to jeopardise the solvency or the financial position of insurance undertakings. 18. Credit risk: the risk of loss or of adverse changes in the financial situation resulting from fluctuations in the credit standing of issuers of securities, counterparties, and other debtors to which insurance undertakings are exposed, which takes the form of counterparty default risk, spread risk, or market risk concentrations. 19. Liquidity risk: the risk that insurance undertakings are unable to realise investments and other assets in order to settle their financial obligations when they fall due. 20. Market risk: the risk of loss or of adverse changes in the financial situation resulting, directly or indirectly, from fluctuations in the level and in the volatility of market prices of assets, liabilities, and financial instruments. 21. Relevant risk-free interest rate term structure: the interest rate term structure determined and published at least quarterly by the European Insurance and Occupational Pensions Authority under Article 77e(1)(a) of Directive 2009/138/EC. 22. Member state or contracting state: a member state of the European Union or another contracting state of the Agreement on the European Economic Area. 23. Parent undertaking: a parent undertaking within the meaning of Article 1 of Directive 83/349/EEC; for the purposes of supervision under sections 245 to 287, a parent undertaking also means any undertaking that, in the view of the supervisory authorities, actually exercises a dominant influence. 24. Operational risk: the risk of loss arising from inadequate or failed internal processes, personnel, or systems, or from external events. 25. Qualifying central counterparty: a central counterparty that has either been authorised under Article 14 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1), or recognised under Article 25 of that Regulation. 26. Risk concentrations: all exposures with a risk of default carried by the undertakings of a group or of a financial conglomerate within the meaning of section 1(2) of the Financial Conglomerates Supervision Act that are large enough to jeopardise the solvency or the general financial position of one or more of the supervised financial conglomerate undertakings or supervised group undertakings, where the risk of default is or may be based on counterparty risk, credit risk, investment risk, insurance risk, market risk, other risk, a combination of these risks, or interactions between these risks. 27. Risk measure: a mathematical function that determines a monetary amount under a given probability distribution forecast and that increases monotonically with the risk potential underlying that probability distribution forecast. 28. Risk-mitigation techniques: all techniques that enable insurance undertakings to transfer part or the whole of their risks to another party. 29. Subsidiary undertaking: a subsidiary undertaking within the meaning of section 290 of the Commercial Code, including its own subsidiary undertakings; for the purposes of supervision under sections 245 to 287, a subsidiary undertaking also means any undertaking over which a parent undertaking, in the view of the supervisory authorities concerned, actually exercises a dominant influence. 30. Related undertaking: a subsidiary undertaking or another undertaking in which a participation is held, or an undertaking that forms part of a horizontal group within the meaning of point 15. 31. Insurance holding companies: parent undertakings that are not a mixed financial holding company within the meaning of point 10 and whose main activity is the acquisition and holding of participations in subsidiary undertakings; those subsidiary undertakings are exclusively or mainly insurance undertakings or third-country insurance undertakings; at least one of these subsidiary undertakings is an insurance undertaking. 32. Underwriting risk: the risk of loss or of an adverse change in the value of insurance liabilities, resulting from inadequate pricing and inadequate provisioning assumptions. 33. Insurance undertaking: a direct insurance or reinsurance undertaking whose object is the conduct of insurance business and which is not a social insurance institution, whereby the object of a reinsurance undertaking is exclusively reinsurance. 34. Third-country insurance undertaking: a direct insurance or reinsurance undertaking with its registered office in a third country that would require authorisation under Article 14(1) of Directive 2009/138/EC if it had its registered office in a state within the European Economic Area. 34a. Insurance distribution: insurance distribution activities and reinsurance distribution activities within the meaning of Article 2(1), points 1 and 2, of Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (recast) (OJ L 26, 2.2.2016, p. 19). 34b. Distribution remuneration: all types of commissions, fees, charges, or other payments, including economic benefits of any kind, or financial or non-financial advantages or incentives, offered or granted in respect of insurance distribution activities, excluding those arising from reinsurance distribution activities. 34c. Payment protection insurance: insurance that serves to protect a consumer under a contract for a deferral of payment for consideration or other financing assistance for consideration, or under a contract for an instalment transaction, or to protect a borrower or lessee or his or her surviving dependants in the event of death, illness, unemployment, incapacity for work, or other circumstances that may lead to a default in performance by the consumer or the borrower or lessee, and under which the insurance benefit is intended, in whole or in part, to satisfy the claims arising from the respective contractual relationship. 35. Volatility adjustment: an adjustment to the relevant risk-free interest rate term structure, determined and published at least quarterly by the European Insurance and Occupational Pensions Authority under Article 77e(1)(c) of Directive 2009/138/EC. 36. Probability distribution forecast: a mathematical function that assigns a probability of occurrence to a sufficient set of mutually exclusive future events. 37. Home member state: the member state or contracting state in which a) an insurance undertaking to which Directive 2009/138/EC applies has its registered office, or b) an institution for occupational retirement provision is authorised or registered in a national register under Article 9(1) of Directive (EU) 2016/2341 of the European Parliament and of the Council of 14 December 2016 on the activities and supervision of institutions for occupational retirement provision (IORPs) (recast) (OJ L 354, 23.12.2016, p. 37).