Munich Re Group Annual Report 2006 (PDF, 1.8

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Munich Re Group Annual Report 2006 General information_Glossary F – L Facultative reinsurance The reinsurer assumes a share of selected individual risks. The primary insurer can offer an individual risk in reinsurance, which the reinsurer for its part can either accept or decline (cf. obligatory reinsurance). Fair value The amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s-length transaction. Where there is an active market, the fair value of an asset is its current market value. Alternatively, the fair value may be determined on the basis of recognised valuation methods. Fast close The sum of organisational and technical improvements in business processes that serve to accelerate publication of a company’s quarterly and annual financial statements within the legal deadlines. Financial Accounting Standards (FASs) US accounting regulations that give detailed rulings on individual accounting questions and which must be complied with by listed companies that prepare accounts in accordance with US GAAP. Financial institutions Banks and other financial services providers. Forward Contract to trade at a specified price on a specified future date. In contrast to futures, forwards tend to be individually designed derivative financial instruments. Future Standardised contract to trade a financial instrument on a money market, capital market, precious-metals market or currency market at a specific price and on a specific future date. Frequently, rather than actually delivering the underlying financial instrument on that date, the difference between closing market value and the exercise price is settled in cash. Goodwill Any excess of the purchase price of a subsidiary over the acquirer’s interest in the fair value of the net assets as at the acquisition date. Goodwill is not amortised but subjected to an impairment test. A writedown is made for any impairment loss. Gross/net The terms gross and net mean before and after deduction of the portion attributable to business ceded in reinsurance. Instead of “net”, the term “for own account” is sometimes used. 222 Hedging Protecting against undesirable developments in prices by means of special financial contracts, especially derivative financial instruments. Depending on the risk to be hedged, a distinction is made between two basic types: “fair value hedges” safeguard assets or liabilities against the risk of changes in value; “cash flow hedges” reduce the risk of fluctuations in future cash flows. IBNR reserve Provision for claims that are not yet known to the insurer (IBNYR = incurred but not yet reported) but also for claims whose case reserves are not sufficient (IBNER = incurred but not enough reserved). Integrated risk management (IRM) Holistic management of insurance risks in life and non-life business and of investment risks. IRM essentially rests on four pillars: assetliability management, active capital management, accumulation control, and operational risks. International Accounting Standards Board (IASB) An international body of 14 accounting experts responsible for issuing IASs/IFRSs. The IASB’s objective is to achieve uniformity in the accounting principles that are used by businesses and other organisations for financial reporting around the world. International Accounting Standards (IASs)/ International Financial Reporting Standards (IFRSs) Standards formulated by the IASB with the intention of achieving internationally comparable preparation and presentation of financial statements. Since 2002 the standards adopted by the IASB have been referred to as International Financial Reporting Standards (IFRSs). Until existing standards are renamed, they continue to be referred to as International Accounting Standards (IASs). Investments for the benefit of life insurance policyholders who bear the investment risk Investments for policyholders under unit-linked life insurances. They also include investments under index-linked life insurance policies whose performance depends on share or currency indices. Obligations arising from this type of contract are mainly recognised under the balance sheet item “technical provisions for life insurance policies where the investment risk is borne by the policyholders”. Layer Term used in excess-of-loss reinsurance to denote a stratum of cover. Its point of attachment and extent is defined in terms of the sum insured. Example: €5,000 in excess of €1,000 refers to the layer €1,000 to €6,000.
Munich Re Group Annual Report 2006 General information_Glossary L – O Life and health One of the segments in our segment reporting, containing the classes life (re)insurance and health (re)insurance. Loss ratio Percentage ratio of claims expenses to earned premiums. Marine The insurance of ships and their cargoes. Market value The publicly listed market price obtainable for an asset in an active market (especially stock market price). Medicator Medicator AG is the German private health insurers’ fund for the protection of policyholders. It guarantees that a health insurance company’s contractual obligations will be fulfilled in the event that the company encounters financial difficulties. Minority interests in equity and earnings That part of the equity and earnings of subsidiaries that is attributable to shareholders outside the Group. Mortality table Table developed using methods of probability theory for estimating the expected mortality of policyholders in a portfolio of life or health insurance contracts. It shows the probability of future mortality on a differentiated basis according to age and other factors, often taking into account demographic trends. Mortality tables with provision for adverse deviation are generally used for measuring technical provisions. Net Gross/net Net asset value Measurement of the fair value of companies. The starting point is the proportional equity capital of the company to be valued, plus the valuation reserves. Net expenses for claims and benefits These include the expenses for claims (claims payments and the change in the provision for outstanding claims), expenses for premium refunds and the change in the remaining technical provisions (provision for future policy benefits and other), in each case after deduction of the ceded share. Net operating expenses Commission, personnel costs and general expenses for the acquisition and ongoing administration of insurance contracts, less any commission reimbursed by reinsurers, including profit commission, plus expenses from amortisation of PVFP. Net premium Amount relevant for determining the provision for future policy benefits as per FAS 120. The net premium derives from the gross premium less the premium portions used to amortise the acquisition costs. Non-proportional reinsurance Under this form of reinsurance, the reinsurer assumes payment of the primary insurer’s loss above a defined amount. The calculation of the reinsurance premium is based on claims experience with the type of business concerned. Obligatory reinsurance Although obligatory reinsurance agreements contain agreed periods of notice, they are generally concluded for an unlimited duration. These treaties between insurers and reinsurers may therefore run for long periods (cf. facultative reinsurance). Offshore energy insurance Umbrella term for the insurance of risks such as oil platforms and production facilities at sea, plus the related technical equipment. Operating result before taxes on income Consolidated result from ordinary activities, before finance costs and taxes on income. Option Derivative financial instrument where the holder is entitled – but not obliged – to buy (in the case of a call option) or sell (in the case of a put option) the underlying asset at a predetermined price within a certain period. The writer of the option is obliged to transfer or buy the asset and receives a premium for granting the option to the purchaser. OTC derivative Derivative financial instrument which is not standardised and is traded not on an exchange but directly between two counterparties via over-the-counter (OTC) transactions. 223
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Munich Re Group Annual Report 2006
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The Munich Re Group Our operations
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Munich Re Group in 2006 Tireless an
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