Munich Re Group Annual Report 2006 (PDF, 1.8

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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 64 Management report_Parameters 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
Munich Re Group Annual Report 2006 Management report_Parameters credited with part of their ageing reserves. It is not yet possible to judge the effect the new regulations will have on the premiums paid by other insureds. This will be determined largely by client behaviour. Moreover, the introduction on 2 February 2007 of a three-year waiting period for switching to private insurance will have an impact on new business. Employees will only be exempt from compulsory insurance when they have exceeded the earnings ceiling for compulsory public health insurance – currently €47,700 – for three consecutive calendar years. The part of the Act relevant to private health insurance relevant is expected to come into force on 1 January 2009. It is anticipated that the German Insurance Mediation Act will enter into force on 1 April 2007 (this is the German Federal Government’s implementation of the EU directive on insurance mediation of 2002). The new Act will result in major changes for insurance marketing. In future, insurance agents will require authorisation under commercial law which will depend, among other things, upon their being sufficiently qualified. Insurance intermediaries operating exclusively on behalf of one or more insurance companies will require no authorisation if the relevant insurance products are not in competition with each other. In addition, insurance companies must accept unlimited liability for the actions of intermediaries in that capacity. Further key aspects of the new Act are the expanded consultancy and documentation obligations. Insurance agents are to advise clients according to their specific needs and circumstances, and give grounds for any specific policy recommendations made. Clients are to be provided with clear and comprehensible documentation for this purpose. Furthermore, insurance companies may work only with intermediaries who are entered in a central, publicly accessible register of insurance agents. The German General Equal Treatment Act has been in force since 18 August 2006 and is based partially on four EU discrimination-prevention directives adopted between 2000 and 2004. It aims to prevent or eliminate unfair discrimination on grounds of race, ethnic origin, sex, religion, ideology, disability, age or sexual identity. The Act affects the insurance industry as an employer in particular, but also as an insurer and risk carrier. Employers have new obligations that can result in liability risks and potential claims for indemnity. The new provisions of the General Equal Treatment Act that are of importance for the insurance industry are valid from 22 December 2007. After that date, premiums and benefits for men and women may vary only when gender is a risk-determining factor and the risk evaluation is based on relevant and exact actuarial statistical data. Under no circumstances are costs connected with pregnancy and maternity to lead to variations in premiums or benefits. Differences in insurance companies’ handling of individuals on the basis of religion, ideology, disability, age or sexual identity are only admissible when founded on recognised principles for calculating prices commensurate with risk. The European Commission’s Solvency II project will have the greatest effect on the insurance industry. This is scheduled to involve a comprehensive reorganisation of insurance supervisory law within the EU, taking a riskbased approach, one of the core ideas of which is to consider individual risk exposure. Preparations for this are increasingly picking up steam. The Commission plans to publish a draft framework directive in July 2007. In the USA, there have been discussions for quite some time on the introduction of an integrated federal supervisory authority for reinsurance companies. At present, the insurance industry is supervised by 50 insurance commissioners in the individual US federal states. There is now virtual unanimity that this system is inefficient and costly, weakening the competitiveness of the US market overall. In 2006, bills to revise the supervision of primary insurers and reinsurers were introduced in both the Senate and the House of Representatives. Each of these bills envisages federal supervision for insurance companies. For international reinsurers in particular, this would have the advantage that legally binding international agreements on the supervision of insurance companies could be concluded. 65
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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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Quarterly figures Balance sheet 31.
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© 2007 Münchener Rückversicherun
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