What happens to my policy if my insurer goes bust in Germany?
In short
If your insurer goes bust in Germany, what happens to a life or pension policy is usually simple: the statutory protection fund (Sicherungsfonds) takes it over and keeps it running. Guaranteed benefits may be cut by 5 percent at most. Pension funds (Pensionskassen) are only covered if they joined voluntarily. Keep paying and do not cancel in a hurry.
Worked examples of the statutory maximum cut when the protection fund takes over German life and pension policies. These are not market prices.
Example
Typical range
Guaranteed pension of EUR 400 a month
cut of EUR 20 at most, at least EUR 380 remains
Guaranteed maturity benefit of EUR 50,000
EUR 2,500 less at most, at least EUR 47,500
Guaranteed capital of EUR 120,000
EUR 6,000 less at most
Annual contributions of all life insurers to the fund
0.2 per mille of their net technical provisions
Calculated from section 222(5) and section 226(5) VAG, October 2026.
The 5 percent cap only applies to guaranteed benefits and only when the protection fund takes over.
Worked example
Pension policy with a guarantee, insurer in difficulty
How the maximum cut works if the protection fund takes over your policy and its money is not enough.
Guaranteed monthly pension per annual statement
EUR 600
Projected bonus pension so far
EUR 90, not guaranteed
Maximum cut, 5 percent of the guarantee
EUR 30
Premiums until retirement
keep paying as before
At least EUR 570 a month remains guaranteed. The bonus share can shrink because it was never guaranteed.
What the protection fund does with your policy
If the German supervisor (BaFin) finds that a life insurer can no longer meet its obligations, it orders the whole portfolio to be transferred to the protection fund. Your rights and duties under the policy move with it, and you do not have to agree.
The protection fund continues the life and pension policies it takes over and may later pass them on to another insurer. Terms may only be adjusted if an independent trustee confirms that policyholders' interests are respected.
This has happened before: in 2003 the life insurers' rescue company took over the portfolio of a struggling German life insurer, restructured it and transferred it to another company in 2017.
How far guaranteed benefits may fall
If the money in the protection fund plus special levies is not enough, BaFin reduces the guaranteed benefits of the life policies, by 5 percent at most. It may also restrict early surrenders so that not everybody leaves at once.
If BaFin steps in before an insolvency, that cap does not apply. It can then temporarily ban payments and surrenders and cut benefits in line with the insurer's assets. In both cases you keep paying premiums at the same level.
Insurer's situation
Effect on your policy
Portfolio moves to the fund, money is sufficient
policy continues unchanged
Portfolio moves to the fund, money is short
guarantees cut by 5 percent at most
BaFin intervenes before insolvency
temporary payment ban, cut in line with assets possible
Insolvency proceedings
your claim ranks first on the earmarked assets (Sicherungsvermögen)
Company pensions and health insurance
Compulsory members of the protection fund are life insurers. A company pension paid through a Direktversicherung is a life insurance policy and is therefore covered. A Pensionskasse may only join voluntarily, so if your workplace pension runs through one, ask whether it is a member.
Private health insurers have a separate protection fund. Property and liability insurance such as contents or car cover has no such fund; there, insurance claims simply rank ahead of other creditors in an insolvency.
Unit-linked policies and bonuses
In a unit-linked pension policy the insurer holds the fund units for you. If the fund company fails, the fund assets are protected because they are kept separate from its own money. If the insurer fails, the units form part of its earmarked assets, from which policyholders are paid first.
When an insurer goes bust, what is protected are the guaranteed values. Bonuses that have not yet been allocated to your policy are not a guarantee and may turn out lower.
Why cancelling is usually the worse choice
If you cancel because of rumours that your insurer could go bust, you only receive the surrender value and often lose guarantees you cannot buy again. On top of that, BaFin can temporarily ban surrenders, so cancelling may not even work.
It is better to keep the annual statement (Standmitteilung), note the guaranteed benefit and read any letter from BaFin or the protection fund carefully.
Step by step
Check your policy schedule: is the provider a life insurer or a Pensionskasse?
If it is a Pensionskasse, ask whether it has joined the protection fund.
Note the guaranteed benefit from your latest annual statement.
Keep paying premiums even if the press reports problems.
Keep any letters from BaFin or the protection fund and note the deadlines.
Checklist
Type of provider clarified
Guaranteed benefit and bonus noted separately
Latest annual statement filed
Direct debit for premiums still active
No cancellation out of panic
Common mistakes
Cancelling out of fear and giving away guarantees
Stopping premiums because the insurer is in the news
Treating projected bonuses as guaranteed
Assuming a Pensionskasse is protected without asking
Questions and answers
Frequently asked
What happens to my policy if my insurer goes bust?
For a life insurer, the statutory protection fund takes over the portfolio and continues your
policy.
Guarantees may be cut there by 5 percent at most.
Do I have to keep paying premiums?
Yes.
The policy continues,
and the law states that a reduction of benefits does not change your duty to pay premiums.
Who runs the protection fund?
It is set up by law as a special federal fund at the KfW development bank and financed by the life
insurers.
It is managed by the industry's rescue company.
Is my company pension protected?
A Direktversicherung is, because it sits with a life insurer.
A Pensionskasse only if it joined the fund voluntarily.
Can I still cancel when the insurer is in trouble?
Not always.
BaFin can temporarily ban surrenders and restrict cancellations.
Even if you can, you usually get less than the guarantee.
