Erste Bank JPMorgan Merrill Lynch International

an ongoing basis. Insurance companies must provide for sufficient technical reserves, cover them with
suitable assets and have a defined minimum of capital reserves at all times. In order to ensure that
claims arising from insurance contracts can be met on an ongoing basis, an insurance company’s
assets, financial position and results of operations are analyzed at regular intervals by the FMA on the
basis of documents that must be submitted. The documents include annual financial statements, the
annual auditor’s report together with supplementary information, and a variety of information and data
describing the economic position and development of the insurance company. Additionally, the FMA
inspects the conduct of insurance companies business on-site. The insurance supervision authorities
are able to intervene in the business operations of insurance companies to enforce their objectives by
means of enforcement measures and issuing orders. Administrative penalties can also be imposed.
Auditor, Trustee (Deckungsstocktreuhänder) and Actuary
In addition to supervision by the FMA, supervision is also carried out by the auditor, the trustee
(Deckungsstocktreuhänder) and the appointed actuary. Apart from auditing obligations under the
general commercial and company laws, the auditor is required to meet special auditing and reporting
obligations under supervisory law.
The trustee primarily has to ensure that the cover fund complies with the cover requirements and
to confirm investment of the cover assets in accordance with regulations. The trustees are appointed
by the supervisory authority for companies active in the area of life or health insurance. The cover
fund constitutes a group of assets to which the policyholders alone are entitled in the event of
bankruptcy.
Insurance companies dealing in life insurance, or health or accident insurance with the characteristics
of life insurance must appoint a responsible actuary and his deputy. The actuary must ensure
that rates and technical reserves are calculated in accordance with applicable provisions and must
verify that the obligations under the insurance contracts can be fulfilled on an ongoing basis.
If the actuary determines that the preparation of premium rates and the calculation of the
technical reserves are not in accordance with applicable regulations and with actuarial principles or
that the continued performance of obligations under the insurance contracts is at risk, he must inform
the management board immediately. The actuary is obliged to submit to the management board an
annual report containing his observations in the course of his activities and place an audit certificate
on the report. The audit certificate has to confirm that certain criteria for the actuarial reserve are met
and that the premiums agreed in new policies are likely sufficient to cover obligations from the
policies; such report must be submitted to the FMA. If the management does not take the concerns of
the actuary into account then the actuary must report this to the FMA without delay. Additionally,
certain evaluations by the actuary must be submitted to the FMA.
Information, Submission, Reporting, Notification and Approval Requirements under the
Insurance Supervision Act (VAG)
The FMA supervises the business conduct of Austrian insurance companies, including Wiener
Städtische AG. The VAG contains the supervisory instruments available to the FMA. These include,
inter alia, the information, submission, reporting, notification and approval requirements as well as
on-site inspections. Mainly with respect to information and notification duties, the FMA also supervises
companies to which business operations have been outsourced. The FMA may demand all necessary
disclosure about subsidiaries, the acquisition of which was subject to approval or notification of the
FMA, in particular the disclosure of the annual balance sheets and other business documentation.
In general, insurance companies have to notify the FMA immediately of all facts which could
compromise the continuing performance of obligations under the insurance contracts. Furthermore,
the FMA can demand at any time that an insurance company provide information with respect to
matters of its business conduct and to submit pertinent documents. In addition, the VAG contains
extensive notification and approval requirements with respect to insurance companies. The most
important duties are briefly described below:
Outsourcing agreements under which a significant part of the operations are transferred wholly
or to a significant extent to another company must be notified promptly to the FMA. The
outsourcing agreement is subject to approval by the FMA, if the assuming entity is not an
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