At the end of his tenure as Germany's top insurance regulator, Frank Grund was very clear in his statements. His comments towards financial investors involved in run-off platforms are particularly noteworthy. "Thanks to them, practices we had not seen before emerged here in Germany," Grund stated, alluding to the excessive exploitation of regulatory leeway. To put it colloquially, there is too much trickery going on.

It can be observed that since Mark Branson took office and expressed a desire for bolder financial supervision in Germany, BaFin has become more outspoken. This is welcome because the often overly consensus-oriented tone in the past seemed to have little effect on some customer-unfriendly business practices and those responsible for them. Additionally, BaFin's displeasure with the behavior of private equity in the German insurance sector is likely substantial. Last year, Grund strongly criticized the significant IT problems of the run-off platform Viridium during the migration of the former Generali Leben portfolio. Viridium is majority-owned by the financial investor Cinven. Cinven made headlines in Italy this year for clashing with the local regulator over its support for the troubled life insurer Eurovita.

Now, in Germany, follows another reprimand for private equity-financed run-off providers that creatively inflate their solvency ratios. The message is clear: BaFin does not want to be outmaneuvered, even though it had approved all previous deals with external run-off platforms. The question about the ongoing approval processes remains. Zurich Deutschland plans to sell a life insurance portfolio to Viridium, and German Axa intends to transfer a large portfolio to competitor Athora. Grund emphasized that the current approval procedures were not related to his comments.

However, the increased pressure is having an impact on the runoff providers. In May, the usually reserved Viridium adopted a more proactive approach. CEO Thilo Dresig pledged improvement in the company's first press conference. Athora, on the other hand, appointed renowned insurance manager Immo Querner as CEO on Tuesday. Nevertheless, it may not be sufficient to regain the damaged trust just yet.