Germany's Federal Financial Supervisory Authority published a supervisory notice setting out its initial interpretation and supervisory practice for changes arising from the Solvency II review. The main focus is the new proportionality framework that will apply from Jan. 30, 2027. Insurers and insurance groups classified as small and non-complex undertakings or groups can, after a notification, use up to 10 proportionality measures without further action by BaFin, while firms outside that category can apply for up to seven measures subject to prior approval. To bridge the period before the new rules take effect, BaFin will accept pre-notifications and pre-applications from Aug. 1, 2026, but statutory decision periods will start no earlier than Jan. 30, 2027 and the measures cannot be used before that date or before the formal notice or decision is received. For classification as a small and non-complex undertaking or group, BaFin will initially assess the 2024 and 2025 financial years and require confirmation that no strategic change is planned that would cause the criteria to be missed in 2026 or over the following three years. Its approach follows EIOPA technical specifications, including treating health insurance written on a life basis as life business and health insurance written on a non-life basis as non-life business, and applying the criteria on a risk-based basis where formulas are not directly workable or figures fluctuate around thresholds. In the regular notification process, filings received before July 31, 2027 carry a four-month decision period and later filings a two-month period. Approvals for firms outside the small and non-complex category are indefinite, but firms must report adverse changes in risk profile or eligibility conditions and approvals can be withdrawn. The notice also clarifies that BaFin does not currently expect a separate document for sustainability risk plans. Instead, insurers should integrate those requirements into existing risk management, written policies and reporting, including ORSA, the Regular Supervisory Report and the Solvency and Financial Condition Report. It also says new rules on deductions for foreseeable dividends, distributions and charges from own funds will apply from Jan. 30, 2027, when BaFin's 2017 interpretative decision on foreseeable dividends will be deleted, while 2026 QRT reporting exemptions are expected to be rolled over and then reviewed in 2027.

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