Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 Notes_Notes to the consolidated balance sheet – Equity and liabilities
Gross provisions by type
Reinsurance Primary insurance Total
All figures in €m * 31.12.2006 Prev. year 31.12.2006 Prev. year 31.12.2006 Prev. year
Life and health segment
– Disability claims provision 2,309 3,071 793 751 3,102 3,822
– Provision for other benefit cases 2,061 2,300 1,451 1,242 3,512 3,542
Property-casualty segment (claims reserve)
– Case reserve 19,618 20,833 3,747 3,453 23,365 24,286
– IBNR reserve 16,110 16,420 987 1,310 17,097 17,730
Total 40,098 42,624 6,978 6,756 47,076 49,380
* After elimination of intra-Group transactions across segments.
In the life and health segment, the provision for outstanding claims
consists of a provision for disability cases and a provision for other
benefit cases. The disability claims provision involves periodic payments
and is usually due long term. It is calculated as the present
value of the expected future payments. Discount rates are disclosed
in Note (36) “Risks from insurance contracts in the life and health
segment”. The biometric actuarial assumptions are selected using
appropriate actuarial principles. The provision for other benefit cases
is largely measured at face value and is usually due short term. This
provision includes an IBNR reserve, whose amounts are estimated
with actuarial methods.
In the property-casualty segment, the claims reserve consists of
the case reserve and the IBNR reserve. The case reserve reflects the
amount which is expected to be needed to settle claims which are
known and reported at the balance sheet date. The major part of this
provision is measured at face value. A smaller part refers to provisions
for annuities in personal accident, liability and workers’ compensation
insurance. These are calculated as the present value of the
expected future payments. The respective discount rates are disclosed
in Note (37) “Risks in the property-casualty segment”. The
biometric actuarial assumptions are selected using appropriate
actuarial principles. The IBNR reserve is calculated using actuarial
methods on the basis of current run-off triangles for payments made
and reported losses.
The expected timing of payments from the provision for outstanding
claims naturally involves considerable uncertainty. In reinsurance,
we expect some 35% of the provisions to be paid out within
a year, about 40% within a period of between one and five years, and
a further 15% within a period of between five and ten years. In primary
insurance, we expect around 40% of the provisions to be paid
out within a year, roughly 35% within a period of between one and
five years, and a further 15% within a period of between five and ten
years. For about 10% of the provisions in reinsurance and primary
insurance, we expect a settlement period over ten years.
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