Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 General information_Glossary
Glossary A – C
Accumulation
The situation where a number of risks insured or reinsured with the
same company may be affected simultaneously by a loss event.
Actuary
Qualified expert who analyses problems from the area of insurance,
home loans, investments and pensions using methods of probability
theory and financial mathematics, and develops solutions with due
regard to legal and economic parameters.
Affiliated company
In the consolidated financial statements of Munich Reinsurance
Company (the parent) all companies are deemed affiliated companies
in which Munich Reinsurance Company holds the majority
of the voting rights either directly or indirectly.
Alternative risk financing
Utilising the capacity of the capital markets to cover insurance risks.
An example is the securitisation of natural catastrophe risks that can
no longer be borne in full by the insurance and reinsurance industry.
Amortised cost
The amount at which a financial asset or financial liability is measured
at initial recognition minus principal repayments, plus or minus
the cumulative amortisation using the effective interest method or
any differences between the initial amount and the maturity amount,
and minus any write-down for impairment or uncollectibility.
Asset-liability management
Management of a business in a way that coordinates decisions on
assets and liabilities. Specifically, it is the ongoing process of formulating,
implementing, monitoring, and revising strategies related to
assets and liabilities in an attempt to achieve financial objectives for
a given set of risk tolerances and constraints.
Asset management
Management of an investment portfolio on the basis of risk and
return considerations. It covers both the preparation and implementation
of investment decisions regarding assets and the management
of special funds.
Assistance
Range of services going beyond the traditional scope of insurance
and cost reimbursement. The idea of assistance services is to help
claimants quickly and unbureaucratically in the event of a loss occurrence,
taking care of the necessary arrangements to remedy the
situation.
Associate
Companies on whose financial and operating decisions a significant
(but not a controlling) influence can be exercised, regardless of
whether this influence is actually exercised or not. A significant influence
is presumed if the proportion of voting rights lies between 20%
and 50%. Investments in associates are valued according to the
equity method.
Balanced scorecard
Strategy-implementation tool in which strategic objectives and initiatives
(financial and non-financial) are set out in a table and linked
with one another. Short-term milestones help in monitoring the
achievement of objectives.
Bornhuetter-Ferguson method
Standard actuarial method used to estimate the reserves needed for
future claims expenditure resulting from losses that have already
occurred but are not yet sufficiently specific. With this method, the
overall loss expected is determined on the basis of historical data on
the run-off of losses in the portfolio and an independent assessment
by the insurer. These parameters are given different weightings,
depending on the information available on the status of the losses.
Capital Asset Pricing Model (CAPM)
Capital market model based on the portfolio theory, used to evaluate
securities. The CAPM expands the portfolio theory to include the
question of which part of a security’s overall risk cannot be eliminated
by means of risk diversification and explains how investment
opportunities entailing risk are assessed in the capital markets.
Accordingly, in efficient markets where prices already incorporate all
the information, a greater return can only be achieved by assuming
more risk.
Captive
An insurance company established as a subsidiary of one or more
industrial/trading companies or groups mainly for the purpose of
insuring the risks of these companies and their affiliates.
Cash flow statement
Statement disclosing the origin and utilisation of cash during the
financial year. It shows the change in liquid funds separately according
to cash flows from operating activities, cash flows from investing
activities and cash flows from financing activities.
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