Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006 General information_Glossary
S – U
Securities lending
The transfer (assignment) of fixed-interest securities or shares from
the portfolio of a lender to a borrower for a given period of time. The
borrower undertakes to retransfer securities with the same reference
number and in the same amount to the lender after expiry of the
lending period. In return, the lender is paid a lending fee.
Security
Ability (and willingness) of a reinsurer to meet its financial obligations
from reinsurance agreements in full and at all times. Security
depends on such factors as earnings capacity, quality of investments,
capitalisation and liquidity.
Segment reporting
Presentation of the items in the annual financial statements according
to classes of business and regions.
Solvency
An insurance company’s capitalisation.
Solvency II
Project of the European Commission to revise European insurance
supervisory regulations to protect policyholders against loss. The
project’s main objectives are further harmonisation of the financial
services sector, creation of a level playing field, risk-based determination
of capital-adequacy requirements, inclusion of qualitative
factors in the supervisory process, promotion of active internal risk
management, and enhancement of risk transparency for supervisory
authorities and the public. Solvency II follows the three-pillar
approach used in Basel II: minimum capital requirements (quantitative),
supervisory review process (qualitative) and market discipline
(disclosure).
Special fund
Investment fund with a maximum of 30 unit-holders that are not
natural persons. As the fund owners pursue specific objectives with
their investments, investment policy is geared to individual requirements.
Statutory surplus
Surplus recorded in the balance sheet of US insurance companies on
the basis of the statutory accounting regulations used by US state
supervisory authorities.
Stress test
A special form of scenario analysis. The aim is to make a quantitative
statement on the loss potential of portfolios in the event of
extreme market fluctuations.
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Structured product
In the case of structured products, a derivative financial instrument
(e.g. an option) is combined with a non-derivative instrument
(e.g. a bond). Structured products are also referred to as hybrid
products.
Sublimit
Specific upper limit of liability, e.g. for certain risk classes or geographical
scopes of cover under a (re)insurance contract.
Subordinated bond
In the event of liquidation, dissolution or insolvency of the loan
debtor or in the event of debt composition proceedings or other
processes to avoid insolvency being taken against the loan debtor,
the claims of holders of subordinated bonds are satisfied after the
claims of all other non-subordinated creditors. In other words, payments
on subordinated bonds are not made until claims of third parties
against the bond debtor arising from non-subordinated liabilities
have been fully satisfied.
Swap
Agreement between two counterparties to exchange payment flows
over a specified period in order to profit from relative cost benefits
that one party enjoys on a particular financial market. In the case of
an interest-rate swap, payment obligations in the same currency but
with different interest rate conditions (e.g. fixed/variable) are
exchanged. In the case of currency swaps, the payment obligations
exchanged are in different currencies.
Technical provisions
Uncertain liabilities directly connected with insurance business.
These provisions are made to ensure that obligations under insurance
contracts can always be met.
Termination rate
Basis for measuring technical provisions in life and health insurance
and pension obligations. It measures the probability of a policy being
terminated because of death, lapse or other circumstances, leading
to the payment of policy benefits or the cessation of annuity payments.
Ultimate loss
As calculated at the end of the calendar year under consideration, the
ultimate loss for an accident year indicates the estimated aggregate
claims expenditure that will have to be paid to finally settle the
claim(s). It comprises the claims payments already made for the accident
year in question and the remaining claims reserve posted for
payments in future years. Since claims reserves are based on estimates,
the ultimate loss changes from one calendar year to the next.
Reference may therefore also be made to the ultimate loss position
or the ultimate loss estimate.