Solvency
Solvency – Corporate Provision Companies
Corporate provision companies must hold sufficient own funds to cover commitments to entitled beneficiaries as well as to guarantee the corporate provision company’s ability to function. If an interest guarantee (that exceeds the legally prescribed capital guarantee) is granted, the corporate provision company is required to form an additional reserve. A holistic view is necessary for assessing under supervisory law whether the minimum requirement is duly met.
0.1% of the severance entitlement is required to be allocated to the reserve every year for ensuring the capital guarantee until a level of 1% of the severance entitlement is reached. As of 31.12.2024 the reserve for meeting the capital guarantee stands at around EUR 190 mn, which is around 0.9% of the severance entitlement.
As of the end of 2024, only one corporate provision company offers an additional interest guarantee. To do so, the corporate provision company is required to establish a provision for an amount that is equivalent to half of the interest guarantee multiplied by the total amount of the severance entitlement.
The contributions transferred to the corporate provision companies are around 2.5 times higher than the severance payments paid out.
