AUSTRIA Law and Practice Contributed by: Philipp Scheuba, BLS Rechtsanwälte GmbH
Prohibition of Intended Acquisition The FMA may prohibit the intended acquisition if, fol- lowing the assessment of the acquiring party, there are justified reasons to do so. The assessment criteria are set out in Section 26 of the VAG and include: • the reputation of the proposed acquirer; • the reputation and experience of the officers and directors responsible for the management of the insurance company; • the financial soundness of the proposed acquirer, in particular in relation to the type of business pur- sued and envisaged in the insurance or reinsurance undertaking in which the acquisition is proposed; • whether the insurance or reinsurance undertaking will be able to comply and continue to comply with the requirements pertaining to contractual insur- ance activities and with the provisions of the Finan- cial Conglomerates Act and, in particular, whether the group of which the insurance or reinsurance undertaking will become part has a structure that makes it possible to exercise effective supervision, effectively exchange information among the com- petent supervisory authorities and determine the allocation of responsibilities among the competent supervisory authorities; and • whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the pro- posed acquisition could increase the risk thereof. Corresponding notification duties exist where a share- holder intends to sell their shares, or to decrease their shares below 20%, 30% or 50%. In the event that the whole insurance business is merged, the concession automatically transfers and no approval of the FMA is needed. The acquisition or sale is generally con- sidered approved if the FMA does not prohibit such within 60 days following the notification. 5. Distribution 5.1 Distribution of Insurance and Reinsurance Products The Austrian legal system recognises three forms of insurance intermediation, which differ in very impor-
tion for companies with their seat in the USA, as the operation of reinsurance in Austria undertaken by a company with its headquarters in the USA does not need a concession. However, this only applies if the conditions of a bilateral agreement with the EU are met and the reinsurance business is not conducted through a domestic Austrian branch. 3.2 Fronting According to the FMA, fronting is only partly permit- ted. The complete transfer of risk from an insurance company signing business in Austria to one or more reinsurers (“fronting”) is prohibited as it runs counter to the fundamental principles of insurance business. However, there are circumstances under which the complete transfer of risk for a specific segment of the cedent’s insurance portfolio is permissible, subject to certain justifiable reasons, provided that such a front- ing arrangement is temporary. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies Due to the existing market structure, major merger and acquisition activities in Austria were rather scarce in the last few years. In general, Austrian law does not provide for a specific legal regime when it comes to merger and acquisition activities relating to insurance companies. Therefore, acquisition of an interest in insurance companies may, in principle, be conducted on the basis of a regular share purchase agreement. Permit for Intended Acquisition Austrian supervisory law defines a number of precon- ditions that a buyer of an insurance company has to meet in order to gain a permit for the intended acquisi- tion by the FMA. Any acquisition of a qualifying hold- ing (eg, a direct or indirect holding in an undertaking that represents 10% or more of the voting rights or capital, or any other possibility of exercising a signifi- cant influence over the management of that undertak- ing) in an insurance or reinsurance company has to be notified to the FMA in advance. The same applies to acquisitions of shares by persons already being shareholders in the event they intend to increase their participation to 20%, 30% or 50%.
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