On 6 February 2025, the Eighth Regulation amending regulations under the German Insurance Supervision Act ^[1] was published in the Federal Law Gazette and has been in effect since 7 February 2025. With this regulation, the amendments to the German Investment Regulation were implemented without any changes, which had originally been included in the failed bill for a second law to strengthen company pensions (Bundesrat document 488/24)^[2] (the “Bill”). The changes to the ratios of guarantee assets and the less stringent application of the opening clause are of key importance.

Background: The German Investment Regulation governs the investment of the guarantee assets of pension funds, small insurance companies and burial funds, as well as certain pension schemes (“Investors under the Investment Regulation”). It defines the assets in which these investors may invest and the ratios that must be adhered to.

This includes in particular:

The new Section 3(7) of the German Investment Regulation introduced a separate ratio of 5% of the guarantee assets for direct and indirect investments to finance infrastructure investments and infrastructure companies.

Neither the German Investment Regulation nor the explanatory memorandum to the Bill contains a definition of the term “infrastructure”.

According to the explanatory memorandum to the Bill, the new ratio is intended to facilitate infrastructure investments by ensuring that the corresponding investments are not included in the existing mixed ratios of the German Investment Regulation pursuant to Section 3(1) to (6) and therefore do not compete with other investments.^[3] Until now, the corresponding investments had to be included in the ratio for risk
capital investments pursuant to Section 3(3), Sentence 1 of the German Investment Regulation, in the shareholding ratio pursuant to Section 3(3), Sentence 3 of the German Investment Regulation or in real estate investments pursuant to Section 3(5) of the German Investment Regulation. As a result of this inclusion, these ratios were quickly exhausted due to the increased allocation of guarantee assets to alternative investments.

However, according to the explanatory memorandum to the government bill, it is not mandatory for infrastructure investments to be included in the new 5% ratio. Investments in infrastructure can continue to be included in the other mixed ratios in accordance with their investment form pursuant to Section 2(1) of the German Investment Regulation. In addition, investments for the financing of infrastructure as
defined in the new Section 3(7) of the German Investment Regulation, which are included in an open-ended specialized AIF, can be added to the infrastructure ratio.^[4]

It should be noted that the infrastructure ratio is not a separate form of investment but a new mixed ratio. Pursuant to Section 3(7), Sentence 1 of the German Investment Regulation, infrastructure investments must be permitted under Section 2 of the German Investment Regulation and therefore fall into one of the investment categories listed in Section 2 of the German Investment Regulation. If the infrastructure investment is made indirectly via an alternative investment fund, it must be ensured that the requirements pursuant to Section 2 of the German Investment Regulation, such as those applicable to private equity funds pursuant to Section 2(1)(13b) of the German Investment Regulation or alternative investment funds pursuant to Section 2(1)(17) of the German Investment Regulation, are met.

2. Increase of the Risk Capital Investment Ratio from 35% to 40%

The new version of Section 3(3), Sentence 1 of the German Investment Regulation has raised the risk capital ratio from 35% to 40% of the guarantee assets in order to increase the scope for this capital investment. This ratio applies, in particular, to investments in equity investments and private equity funds. However, the government bill states that, despite the extension of the ratio, the respective Investors under the Investment Regulation must continue to observe the principles of Section 1(3) and (4) of the German Investment Regulation. The extent to which the extended risk capital ratio can be used is therefore dependent on the investment and risk management as well as the risk-bearing capacity of the respective Investor under the Investment Regulation. ^[5]

3. Less Stringent Opening Clause for Exceeding the Spread Limits Pursuant to Section 4(1) to (4) of the German Investment Regulation

According to the so-called opening clause of Section 2(2) of the German Investment Regulation, the guarantee assets can also be invested in investments that are generally not permitted under Section 2(1) of the German Investment Regulation as long as the investment does not violate an absolute investment prohibition pursuant to Section 2(4) of the German Investment Regulation. These investments are subject to a mixed ratio of 5% of the guarantee assets, which can be increased to up to 10%
with the approval of BaFin. In the past, the various limits on the investment diversification of the guarantee assets pursuant to Section 4(1) to (4) of the German Investment Regulation also had to be complied with.

Now, under the terms of this opening clause, investments can also be acquired that do not meet the requirements for the diversification of investment assets pursuant to Section 4(1) to (4) of the German Investment Regulation. This also creates more flexibility with regard to investments with individual debtors or in individual assets and expands the options for investing in assets with higher returns.^[6]

4. Expansion of Eligible Assets for Private Equity Funds Through the Inclusion of PPP Project Companies and Infrastructure Project Companies

In addition, the amendment to the German Investment Regulation extended the eligible investment assets for private equity funds pursuant to Section 2(1)(13b) of the German Investment Regulation to include the shares in PPP project companies and infrastructure project companies listed in Section 261(1)(2) of the German Investment Code (Kapitalanlagegesetzbuch – KAGB). This codifies the existing
supervisory administrative practice.^[7]

We look forward to hearing from you:
Legal-team@aiqunited.com
+352 26202332 30 (office)
https://aiqunited.com/

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[1] https://www.recht.bund.de/bgbl/1/2025/31/VO.html (German version)

[2] https://dserver.bundestag.de/brd/2024/0488-24.pdf (German version)

[3] Government bill for a second law to strengthen company pensions (Bundesrat document 488/24), p.40.

[4] Government bill for a second law to strengthen company pensions (Bundesrat document 488/24), p.40.

[5] Government bill for a second law to strengthen company pensions (Bundesrat document 488/24), p.40.

[6] Government bill for a second law to strengthen company pensions (Bundesrat document 488/24), p.40.

[7] Government bill for a second law to strengthen company pensions (Bundesrat document 488/24), p.40.

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