Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 General information_Glossary
C – D
Cash-generating unit
The smallest identifiable group of assets that generates cash inflows
largely independent of the cash inflows from other assets or groups
of assets. If the recoverable amount of an asset cannot be determined
individually in the impairment test for assets under IAS 36, the
recoverable amount of a cash-generating unit to which the relevant
asset belongs must be determined.
Catastrophe bond
Also referred to as “cat bonds” and “act of God bonds”, catastrophe
bonds are used to transfer natural catastrophe risks to the capital
markets. The buyers of such bonds profit from a comparatively high
coupon rate, but assume all or part of the (re)insurer’s risk with
regard to a natural catastrophe. If a catastrophe exceeds the predefined
parametric trigger, some or all of the capital and interest is
used to pay the (re)insurer’s financial loss from the natural catastrophe
instead of being repaid/credited to the buyers.
Cedant
Client of a reinsurance company (see also primary insurers).
Chain ladder method
Standard (multiplicative) actuarial method used to estimate the
reserves needed for future claims expenditure on the assumption
that the cumulative loss will rise by the same factor in all accident
years. With this method, the overall loss expected is determined
exclusively on the basis of historical data on the run-off of losses in
the insurer’s portfolio.
Claims equalisation provision
Provisions required by national regulations to smooth fluctuations in
loss experience in future years. In IFRS accounting, they are recognised
in equity.
Combined ratio
Percentage ratio of the sum of net claims expenses plus net operating
expenses to net earned premiums. It corresponds to the sum of
the loss ratio and the expense ratio.
Compliance guidelines
Rules for handling inside information. As a general principle, inside
information may not be used for a person’s own investment transactions,
for transactions conducted by a bank or for recommendations
to others. Therefore, as part of the compliance procedure, business
transactions are checked to make sure they are not based on inside
information.
Composite insurer
Insurer that writes both life and non-life business.
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Consolidation
Combining the items from the individual financial statements of the
companies belonging to the Group into one consolidated financial
statement, in which items involving intra-Group transactions are
eliminated.
Contingent liabilities
Possible obligations whose existence will be confirmed by the occurrence
or non-occurrence of an uncertain future event and which are
therefore not shown as liabilities in the balance sheet. They must,
however, be included in the notes to the financial statements (e.g.
guarantee obligations).
Corporate governance
The legal and factual framework for managing and monitoring companies.
Corporate governance rules serve to provide transparency
and thus strengthen confidence in responsible management and
control geared to the creation of value.
Customised Portfolio Solutions (CPS)
CPS is Munich Re’s centre of competence for retrospective reinsurance
cover in non-life classes of business. Frequently also referred to
as run-off cover, this protects the cedant against the risk of loss portfolios
producing worse run-off results than expected.
Debt leverage
The percentage ratio of strategic debt to the sum of Group equity and
strategic debt.
Deferred acquisition costs
Costs incurred for the acquisition or the renewal of insurance policies
(e.g. commission, cost of processing applications) which are
capitalised and amortised over the term of the contracts.
Deferred tax assets/liabilities
Deferred taxes derive from temporary differences between accounting
on the basis of IASs/IFRSs and national tax law. If in the consolidated
financial statements asset items are valued lower, or liabilities
higher, than in the tax accounts of the Group company concerned,
the resulting future tax relief must be recognised as a deferred tax
asset. Also included are tax assets deriving from tax loss carry-forwards.
If the accounting differences between the consolidated financial
statements and tax accounts will lead to future tax burdens,
these must be recognised as deferred tax liabilities. Deferred tax
assets are reversed if a realisation of the receivable is not probable.
Delcredere
Delcredere insurance provides suppliers of goods or services with
insurance against the risk of default due to insolvency of the customer.