Zillmerisation

The zillmerisation (also Zillmer method Zillmerungs process, or technically accurate gezillmertes net contribution method) is a mathematical formula of traditional actuarial mathematics for the approximate determination of the value of a life insurance contract. It is a historically-based simplification of the exact method, as it is among other things determined by law. The formula is named after the mathematician August Zillmer (1831-1893), who in 1863 introduced her as a significant improvement of the unsatisfactory method used at that time. Mainly found zillmerising application in the measurement of insurance contracts for financial statement purposes. Often zillmerising is also associated with the initially low level of surrender values ​​. But between the use of specific zillmerisation in the financial statements and the amount of the surrender value of any contractual or legal context.

Derivation from other processes

Due to the current legal situation, which prescribes in § 341f HGB to calculate the provision for the full contractually agreed contribution, ie the gross premium method, zillmerising is now derive mathematically different than at the time Zillmers. The most economically and mathematically correct gross premium method could not yet be implemented technically Zillmers times. The Zillmer method arises in which one the imputed price taken into account in administrative costs per subtracting from both the present value of obligation as well as from the contribution of the present value of the same amount in the statutory gross premium method. This so-called " implicit" taking into account the administrative costs ( implicit method ) is permissible under European law regulations. Since the result here is about the same, but not lower than the score after the procedures prescribed by law, commercial law zillmerising is generally permitted. This is also confirmed by § 25 para 1 RechVersV.

In the historical development, before the advent of computers led to her at that time in particular, technically referred to as gezillmertes net contribution method Zillmerungs process from the net contribution method. The latter added to the unneeded for future contribution obligations parts added ( Zillmer surcharge ). The net contribution method is a very simple, originating from the early days of actuarial calculation method, the actual debt position ( and arrears ) of the insurer by limiting only to the services and the needed requirements Contributions ( net premiums ) not economically meaningful maps and therefore today for the determining the actuarial provision is no longer allowed. Through the Zillmer surcharge would from this a method that results in virtually equal to the economically and legally required procedures today, but makes do with far less computational steps. The aim of traditional actuarial mathematics has always been to get along in a world without computers with as little processing steps. Therefore, even today the traditional Zillmer instead of the gross premium method in use. The thinking at the net contribution method starting aroused in recent years, the impression would unreasonably reduce the provision for the Zillmer. In fact, the incomplete from an economic perspective formula is permitted by zillmerising only to a.

The proposal Zillmers aimed at an improvement of three methods used at that time:

Because of Zillmers proposal future contributions in the actuarial provision were considered on the net contribution issues but - for reasons of caution - the premium reserve at the end of the first policy year was not less than zero. Zillmer proposed a flat rate of 10-12.5 ‰ of the sum insured. This package is called Zillmer and was later determined prudential. Over time, this Zillmer was continually increased, so that the provision for often longer than a year remains negative (today is the high - Zillmer 40 ‰ of the sum of the contributions according to § 4 para 1 sentence 2 DeckRV ). In 1960, the Federal Fiscal Court (BFH ) has stated in a report the offsetting negative values ​​in the calculation of the provision for future policy with positive inadmissible. Thus, although a Zillmer can be used by the falls, the insurance provision in individual cases below zero. But it must then be replaced by zero.

The zillmerised net contribution method is primarily used to correctly reflect the insurer's liability under the contract in the balance sheet. Historically, no intent to determine when notice is given to paying cash surrender value, even though had to be the same over the decades both prudential require approval values ​​. However, this was purely a regulatory decision, but not necessarily factual. Since 1994, surrender values ​​must be contractually agreed between the parties, the rules of contract law are taken into account. The premium reserve is determined solely from handelsrechtichen or approved by the trade legislation in the given figure contract item.

The International Accounting Standards Board (IASB ) is currently discussed appropriate procedure for a new International Financial Reporting Standard for insurance contracts that would be binding in the whole European Union then. Here, the Zillmer is mathematically similar to the intended form of the IASB as well as a time value.

Trade Legal Significance

According to § 341f of the German Commercial Code (HGB ), the gross premium method is used for the calculation of the actuarial provisions. In traditional design contracts a calculated with the zillmerized net contribution method actuarial provision is not lower than that calculated according to § 341f HGB insurance provision; they differ only by the margin of safety in the contribution surcharges for the current expenses for the insurance business. Therefore, European law allows the use of the implicit method, and thus the zillmerised net contribution method, instead of the actually applied the gross premium method. The admissibility of the implicit method is not explicitly implemented into German law, but shall in any case due to general commercial law rules for approximations. However, permits § 25 para 1 RechVersV explicitly prohibit the use of zillmerized net contribution the process and therefore the application of a method according to the implicit method. Such explicit permission is missing in the corresponding regulation for pension funds ( RechPensV ); but it is not needed, since the method can in principle be used as a suitable approximation method instead of in § 341f HGB legally specified procedure.

As a result, today the zillmerised net contribution method for determining the balance - insurance provision used almost exclusively because of the still existing dominance of the traditionally designed life insurance contracts, except for unit-linked life insurance. Therefore, the legal, regulatory requirements, in particular dealing with the insurance provision relate, often directly to the zillmerised net contribution method, although the rules would also apply if the equivalent, in fact, legally prescribed gross premium method would be applied. This concerns, for example, the provisions in the regulatory regime for Höchstzillmer Set, for consideration in the determination of own funds or in the determination of the restricted assets.

§ 4 para 1 sentence 2 DeckRV limits the explicit approach of initial acquisition costs in the form of their imputed into account in the form of contribution surcharges in determining the actuarial provision under § 341f HGB or an approximation method with explicit recognition of these expenses to 4% of the sum of the contractual posts. This precaution the anticipation of future contributions to an acceptable under the commercial and regulatory prudence measure is limited. In a prospective method as the gross premium method cause future premium components, which are not offset by expenses in the future, an imputed initially negative amount in the calculation of the actuarial provisions.

Especially in this limit for reasons of prudence was the main work from August Zillmer. He modified the already known, later named after him method such that the anticipation of future contributions was limited to trade legally defensible measure. The limitation introduced by him in anticipating future contributions has been changed in the meantime and over again. The current value is applicable for contracts that have been concluded since 1994.

Importance of zillmerisation for the policyholder

The zillmerisation traditionally stands for many of the problems of a low redemption value for endowment insurance after the start. It is assumed that the most important practical consequence of the application of zillmerized net contribution method in the commercial law balance was offset against the acquisition and distribution costs with the first contributions paid in determining the cash surrender values ​​. Therefore, the use of zillmerized net contribution method leads in the commercial law to balance that, particularly in capital-forming life insurance in the first years of insurance very low or even no surrender values ​​in the contracts are agreed. The zillmerised net contribution method of commercial law is therefore particularly criticized by consumer advocates. A legal or factual connection between the application of zillmerized net contribution method in the commercial law and the balance of the agreement of surrender values ​​in a table in the contract (usually a few months earlier ) can not be inferred, however, from the present legal situation. The commercial law obligations exist independently of the surrender values ​​agreed in the contract and the parties under the insurance contract law free to arrange surrender values ​​, without regard to the commercial regulations for subsequent mapping of the contracts in the balance sheet. There is no legal ripple effect of commercial law, contract law.

Nevertheless, the notions of " gezillmerter contract ", " gezillmerter tariff" or " gezillmerter surrender value " are used when reference is made ​​to initially agreed very low cash surrender values ​​. The historical reason for this is that until 1994 the Parties were obliged by law to arrange the surrender values ​​identical to the provision for future policy after the zillmerized net contribution method. After elimination of the relevant legal basis in 1994 is no more connection between the redemption value and zillmerisation the actuarial provision. The redemption values ​​have since determined according to the contract and it is not known that it is agreed that it be determined according to the zillmerized net contribution method, but the agreement is carried out by contractual provision in the form of a table. Therefore, the problem no longer zillmerisation, but in the contractual agreement, the cash surrender value table, even if in the published opinion, even in the judgments of the highest courts, still falsely zillmerising is mentioned in this context.

Contractual importance

The zillmerised net contribution method has by law or by contract, any significance to the legal relationship between policyholder and insurer, since normally all mutual rights and obligations are determined in the insurance contract by specifying explicit numbers. The references to the zillmerised net contribution method in German law relate exclusively to accounting or building on the balance sheet regulatory issues. Contractual positions are not affected by these regulations. To the extent that contractual quantities are referred in the context of surplus sharing on accounting issues, causes the use of zillmerized net contribution method for the calculation of the provision for future policy as an approximation for the otherwise legally to use the gross premium method, no significant effect.

An whatsoever agreement between policyholder and insurer about the application or non - application of zillmerized net contribution method for the calculation of assurance provision prohibits, as the accounting shall be solely in accordance with the provisions of commercial law. The accounting forms from the contract, as it is, without being a part of the contractual arrangements.

The surrender values ​​to the respective termination points in time be explicitly agreed by most concrete indication of the individual values ​​in the " surrender value table" in the contract. An whatsoever agreement on the method of determination of these values ​​therefore prohibits. However, surrender values ​​must by law be at least as high as the value of the insurance, or be for contracts from 2008 as the policy reserve with accounting principles of premium calculation. Also, the value or the policy reserve shall be determined by the gross premium method, but here the requirements of commercial law for the details of the technical design fundamentals do not apply. Therefore, the value is rather lower than would result from the application of commercial law of the gross premium method. Also, no approximation methods may be used. Unless agreed by individual specification contractual surrender values ​​are higher than the statutory minimum, they are so authentic.

It is known that the insurer contributions to policyholders offered today still calculate for traditional-style contracts of life insurance with the methods of traditional actuarial and thereby also the surrender value tables to then agree with policyholders, calculated with the zillmerized net contribution method. However, the agreement is not the use of the zillmerized net contribution method. Be agreed upon the contributions and surrender values ​​in absolute height, the latter as concrete surrender value table, as seen by the insurer to the policyholder submits the draft contract.

For contracts from 2008 concluded contracts, the otherwise mathematically negative actuarial reserves in the first 5 years covering capital must be built up from zero to the then resulting (positive). But this does not alter the obligation to calculate the actuarial provision by the method prescribed in § 341f HGB method, ie similar to or even with the zillmerized net contribution method. The regulatory and tax regulations on the certification of the products set inasmuch as the commercial law is not repealed. However, compared with the corresponding calculated actuarial reserve higher surrender value by maximizing the coverage provision 2 RechVersV must be taken into account pursuant to § 25 para. To make the effect the insurance provision is indeed determined by the zillmerized net contribution method, however, offset by the maximization of insurance provision to the repurchase value.

Contractual reference to zillmerising

The usual mention of zillmerisation in life insurance contracts does not constitute agreement but an explanation of why another agreement on the use of contributions to cover final expenses is made. This agreement, in turn, is intended solely for the purpose of pre- activation of parts of contribution under the accounting of a partially filled firm commitment - an accounting measure that is only favorable to the policyholder by the profit participation. Without this activation intend this agreement would not be needed because the contributions shall become the property of the insurer and therefore can be used by this at any desired cover expenses. Just to contribute parts to enable payment for a pending transaction as part of fulfilling a contractual specification on the use of contributions is required.

The misconception to understand the relevant clause in the insurance contract as an agreement of zillmerized net contribution method, arose from the fact that in insurance contracts is not always clear what is and what agreement explaining it. The zillmerized net contribution method would have to be mentioned in the contract, nor is special this process is a prerequisite for activation. Would the insurers ' statutory procedure under § 341f HGB use instead of " zillmern ", otherwise would result.

However, the wording in the contracts were so misleading that the Bundesgerichtshof ( BGH) explained this clause and the clause at cash surrender value in 2001 for ineffective. Basis for the judgment of 2001 was the demand of the Supreme Court, that in contracts where actual or - due to unclear Conditions - supposedly surrender values ​​not by agreement of specific values, but the calculation method, so for example the zillmerized net contribution process, in the terms be determined in these Terms and Conditions must be evidence of the Nachteiligkeit the agreed calculation method. Otherwise, these Terms and Conditions are invalid. The Stuttgart Higher Regional Court has clarified in a judgment in 2007 ( 7 U 64/ 07) that according to agreed surrender values ​​are not themselves illegal but their agreement is invalid only when non-transparent configuration. To the extent the terms and conditions are transparent or, as in the case at hand in another way, namely by a separate customer information on the insurance history, policy transparency is created, the contractual surrender values ​​are effective.

Similarly, the Austrian Supreme Court in two decisions of 17 January 2007 decided (7 Whether 140/06y and 7 Whether 173/06a, largely verbatim ) that in the relevant policy conditions "for the average policyholder savvy " surrender values ​​must be regulated clearly understandable and must be referenced disadvantages of termination. In particular, must, if the actual agreement will be carried by concrete indication of surrender values ​​by a table, be made ​​aware of this. For a simply refer to the " tariff Basics", for example, a calculation based on the " zillmerized net contribution method " or any other method that would lead to an initial consideration of all future premiums, not because these tariff bases the policyholders are not known are. This is the offending clauses constitutes a violation of the principle of transparency and the vague clause is invalid.

But that is not the application of zillmerized net contribution method in the legal sense, ie in the trade balance, become impossible, because these accounting rules exist independently of the contractual provisions of the Federal Court or Supreme Court. Rather, now on the contractual basis to activate entitlements to future posts is missing. In addition, the judgments is also interpreted as meaning that the surrender value table or the reference to the fair value is ineffective and thus there is no effective contractual agreement to the surrender values ​​.

According to the judgment of the Supreme Court of 2005, the surrender value may replacing not after legal procedures are determined the fair value pursuant to § 176 para 3 of the Insurance Contract Act ( VVG), but must compensate for the lack of transparency of the clause for one for policyholders depending on termination date possibly cheaper method to be determined. The cash surrender value must be at least half of the " ungezillmerten " actuarial reserve, but is still higher if the specific contract in the cash surrender value to pay. This half / half scheme has provided since zillmerising, as the Supreme Court pointed out, is not always detrimental to policyholders, but thanks to higher maturity benefits also offers advantages of BGH. Therefore, it was not excluded that the zillmerisation corresponded to the interests of the insured in the contract. However, since the use of ineffective clauses to the detriment of the user goes, some improvement was shown in favor of policyholders. This ruling applies only to cases where the agreement of surrender values ​​was indeed ineffective for lack of transparency.

The Federal Labour Court (BAG ) has in its judgment of 15 September 2009 - AZR 17/ 09 3 - deals with the admissibility of a Zillmer adjustment in the context of occupational pensions (in this case direct insurance on the basis of the employee's salary ). The BAG has stated in its judgment that the agreement of a zillmerized insurance tariff, although not always result in the invalidity of a salary sacrifice agreement, but it can lead to an increase in the supply of power by the employer at an unreasonable disadvantage of the employee. The deferred compensation agreement is not only enshrined in the Betriebsrentengesetz value of equality (§ 1, paragraph 2 No. 3 BetrAVG ), but also on the basis of § § 305 ff BGB to check. An unreasonable disadvantage according to § 307 BGB is present when at a based on salary occupational pensions (in this case, implemented in direct insurance) a gezillmerter insurance tariff is used and can the prematurely retiring from employment worker suffers significant disadvantages for this reason. Especially an unreasonable disadvantage is deemed to when in an early retirement and a resulting contribution exemption ( here: the direct insurance) is retained no longer a power supply of sufficient economic value. Without proper consideration, the vesting would be undermined after the company pension law and thus complicates the mobility of the worker and the fundamental right to free choice of employment underrated. In addition, the supply interests of the employee comes to a considerable importance. The precipitated with a vested pension workers must therefore receive a valuable supply ( value of equality ). If this is not available because of inappropriate discrimination, the employer shall, if necessary, increase the benefit entitlement accordingly. This increase of occupational pensions equivalent to the statutory objective to both enable the construction of an occupational pension scheme and to protect the workers against insufficient, not the value of equality of § 1 paragraph 2 No. 3 BetrAVG sufficient supply commitments according to the findings of the BAG.

The BAG also notes that - as far as zillmerising a legal control by, inter alia, above criteria not withstanding - is to examine how the unique financial statements - is to proceed and distribution costs. It holds at least for one direct insurance, the distribution of costs over 5 years to be appropriate (as in the law on certification of pension contracts). Is a 5-year distribution given therefore is usually no unreasonable disadvantage.