Munich Re Group Annual Report 2006 (PDF, 1.8

Munich Re Group Annual Report 2006
retirement provision) amounted to only 1.2%. Premium
volume in Poland’s life insurance market recorded very
strong growth of 41.4% in the first three quarters, whilst
growth in non-life insurance was considerably more modest
at 4.8%.
Against a backdrop of high overall economic growth,
the emerging markets recorded the largest increases in
premium income. In China, premium growth totalled
around 23% in property-casualty insurance and 12% in life
business. Premiums also climbed strongly in the Indian
market, with non-life premium rising by around 24% in the
first three quarters of the fiscal year 2006/2007.
Legal parameters
The German insurance industry is affected by several
items of proposed legislation that will impact its business
in terms of pricing and product design, client relations, and
the overall business processes of companies in the sector.
Various European and global initiatives in the field of
supervisory law have altered the parameters and will continue
to provide for a restructuring of the regulatory landscape
in future
In our home market of Germany, the German Federal
Government intends to extensively reform German insurance
contract law (”Versicherungsvertragsgesetz” – VVG)
to bring it into line with supreme court decisions and the
requirements of what is considered modern consumer protection.
The proposed reform emphasises, for example,
the obligations of insurance companies to provide information
and consultancy prior to and on concluding contracts.
By contrast, the insured’s duties of disclosure prior
to the conclusion of a contract are to be relaxed and sanctions
eliminated, even in the case of gross negligence.
Furthermore, the maximum term of policies in the property-casualty
lines is to be reduced from five to three years
and injured parties are to be granted direct recourse to
insurers under compulsory insurances. Finally, the bill also
proposes to abolish the so-called “policy model” whereby
the policyholder receives the statutory consumer information
together with the policy. In future, clients are to
receive all information concerning policies prior to confirming
their agreement with the terms.
In life insurance, the VVG reform is intended to ensure
the implementation of requirements with which the German
Federal Constitutional Court charged the legislators in its
judgements of 26 July 2005. These concerned policyholder
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bonuses in endowment insurance and portfolio transfers
between insurance companies. The Federal Constitutional
Court called for hidden reserves to be taken into account in
policyholders’ bonuses, and demanded greater transparency
and competition amongst life insurers.
In its present form, the proposed legislation envisages
that, upon contract termination, 50% of the hidden reserves
apportionable to the individual policyholders will be allocated
to them on a binding basis. Legislators are no longer
pursuing the more far-reaching considerations from spring
2006 that would have substantially threatened the life
insurance business model. These provided for the binding
allocation of hidden reserves every two years based on
their respective fair value.
A further focus of the reform in life insurance is the
topic of early lapse. To date, surrender values have been
either low or non-existent in the first few years of a policy’s
development due to the offsetting of acquisition and marketing
costs under the “zillmerisation” method. These
costs are to be spread equally over the first five years of a
policy. However, a problematical aspect is that, according
to the current draft of the reform, these regulations are
also to apply to existing insurance portfolios as of
1 January 2008. The bases of insurers’ calculations would
thus be interfered with retroactively. It remains to be seen
whether this will be corrected in the further course of the
legislative process.
In private health insurance, the VVG reform is intended
to create a framework for case and healthcare management
and to open up opportunities for insurers to offer
other services.
The Act is due to come into force on 1 January 2008
and is to be applicable to all existing insurance contracts
effective 1 January 2009. The new regulations for private
health insurance can be introduced for existing policies as
early as 1 January 2008.
The German private health insurance industry will be
impacted directly and intensively by the “Act to promote
competition among statutory health insurance institutions”
(health reform). In particular, private health insurers
will be required to offer a basic policy providing benefits
equivalent in type, scope and amount to the compulsory
provision under statutory health insurance. There will be
an obligation to contract, and benefit exclusions and risk
loadings will not be possible. The premium for this basic
cover is not to exceed the maximum statutory health insurance
premium. It is envisaged that insureds moving from
one private health insurance company to another will be