The Frankfurt Regional Court issued a groundbreaking judgment (Az. 3-14 OR 11/20) and dismissed an action by the subordinate creditors of Deutsche Steuerberater-Versicherung, represented by the law firm MEYER-KÖRING, for the payment of current interest . The reason given by the regional court was that the subordinated creditors could not be better off than the policyholders of Deutsche Steuerberater-Versicherung, who had to accept benefit cuts to restructure the pension fund.
In 2014, the defendant pension fund issued bearer bonds totaling €10 million at 4.375 percent annual interest with a term until 2024. In 2019, Deutsche Steuerberater-Versicherung had to balance a balance sheet deficit of €140 million euros in the 2018 annual financial statements and applied a restructuring clause anchored in its bylaws. In order to involve not only the policyholders but also the subordinated creditors in the restructuring, he refused to pay them current interest. In doing so, he referred to the bail conditions, which provide for a “procedure to avoid insolvency” as a subordinate case. One of these procedures is the restructuring initiated by the pension fund in accordance with its statutes. The Frankfurt Regional Court shared this opinion.
As a general rule, claims can only be brought against subordinated creditors if the debtor (the insurance company or the pension fund) becomes insolvent. On the other hand, the Insurance Supervision Act (in Section 314 (2)) and the statutes of many pension funds provide for the possibility of reducing benefits to policyholders before the onset of insolvency. Since such privileges for subordinated creditors contradict the basic idea of a subordinated loan, the Federal Financial Supervisory Authority (BaFin) announced in July 2019 that it intended to work on corresponding changes to the subordinated clauses.
According to figures from the federal government, a total of 25 pension funds issued subordinated loans and profit-sharing rights for a total of 455 million euros between 2008 and 2017. “According to this ruling, life insurers and pension funds that have taken out subordinated loans should now review their contracts to see if their existing clauses can be interpreted in such a way that subordinated creditors no longer have to be served,” Alexander recommends. Knauss, a lawyer specializing in banking and capital markets law at the Bonn office of MEYER-KÖRING Rechtsanwälte Steuerberater Partnergesellschaft mbB, which represented the defendant pension fund in this case.