AUSTRIA Law and Practice Contributed by: Philipp Scheuba, BLS Rechtsanwälte GmbH
evant provisions in insurance law equally apply to entrepreneurs and consumers. If the policyholder is a consumer, the Consumer Protection Act, which pro- vides for special protection requirements, applies to the insurance contract. According to the Consumer Protection Act, general conditions must be clear and unambiguous otherwise they are void. In addition, the Austrian Insurance Contract Act itself draws explicit distinctions in certain areas, for example in relation to the policyholder’s commitment period. If an insured person is a consumer, they are allowed to terminate the contract annually if at least three years have elapsed since the commencement of the insur- ance. The Austrian legislature obviously assumes that an entrepreneur can assess the consequences of their decision with regard to the commitment period better than an average consumer can. 7. Alternative Risk Transfer (ART) 7.1 ART Transactions Austrian law distinguishes between classical forms of reinsurance and concepts of alternative risk transfer. Austrian supervisory law explicitly addresses finite reinsurance activities as well as activities by special purpose vehicles pursuant to Directive 2005/68/EC. Finite reinsurance is defined as reinsurance under which the maximum economic risk transferred, aris- ing both from a significant underwriting risk and timing risk transfer, exceeds the premium over the lifetime of the contract by a limited but significant amount. Further, a finite reinsurance contract must provide for either combined consideration of the time value of money or contractual provisions to moderate the balance of economic experience between the parties over time to achieve the target risk transfer. According to Austrian supervisory law, insurance and reinsurance companies that pursue finite reinsurance activities shall ensure that they are able to proper- ly identify, measure, monitor, manage, control and report the risks arising from those contracts or activi- ties. Whereas finite reinsurance contracts are widely considered genuine (re)insurance contracts, business conducted by special purpose vehicles when sign-
ing alternative risk transfer transactions is usually not classified as insurance business. Special purpose vehicles are defined as companies other than an existing insurance or reinsurance com- pany that assume risks from an insurance or reinsur- ance company and which fully fund their exposure to such risks through the proceeds of a debt issuance or any other financing mechanism where the repay- ment rights of the providers of such debt or financing mechanism are subordinated to the reinsurance obli- gations of such a company. Special purpose vehicles with head offices in Aus- tria require a licence pursuant to Section 105 of the VAG 2016 granted by the FMA in accordance with the provisions set forth in Implementing Regulation (EU) 2015/462. Special purpose vehicles pursuant to Section 105 of the VAG 2016 signing alternative risk transfer transactions do not as yet play a major role As outlined in 7.1 ART Transactions , alternative risk transfer transactions are generally not treated as insurance or reinsurance contracts under Austrian law. Therefore, foreign ART transactions are also not considered reinsurance contracts. However, Austrian supervisory law does provide for the possibility of con- sidering both the recoverable from reinsurance con- tracts and special purpose vehicles pursuant to Direc- tive 2005/68/EC when calculating the total amounts recoverable. Detailed provisions may be found in the EIOPA guidelines on the valuation of technical provi- sions (EIOPA-BoS-14/166). in the Austrian insurance market. 7.2 Foreign ART Transactions 8. Interpreting an Insurance Contract 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence Insurance contracts are generally – besides a few special exceptions in the Insurance Contract Act – interpreted like any other civil contract. Therefore, it is the will of the contracting parties that shall be deci- sive for interpretation. Of course, the peculiarities of insurance law imply a number of other circumstances relevant in the context of interpretation. For example,
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