Annual Report 1997/1998 - Munich Re

Munich Re Report of the Board of Management
Economic development in
Italy (in %)
21
18
15
12
9
6
3
0
1994 1995 1996 1997
Economic growth
Inflation rate
Unemployment rate
Growth in insurance
Italy
Despite higher growth, the economic upswing in Italy was only
moderate. The fight against inflation showed further signs of success,
but the high unemployment rate again increased slightly. Direct insurers’
premium income grew considerably.
We were able to expand the premium volume of our Italian business
substantially, but the result was less favourable than in the previous
year.
Our subsidiary Münchener Rück Italia (MRI), Milan, increased its
premium income to Lit 527bn (381bn). Its underwriting result
deteriorated, owing mainly to the large deficit recorded in hail
insurance. Consequently the company was able to show only a small
profit for the year.
MRI significantly improved its position in the Italian market last year.
In December 1997 it acquired an initial stake of 20% in the share capital
of Reale Riassicurazione in Turin, the second largest reinsurer in Italy;
the remaining 80% passed into MRI’s ownership in July 1998. The
portfolio of this company, which has meanwhile been renamed Torino
Riassicurazioni, has a very strong local orientation which ideally
complements MRI’s business.
The Italian market was also characterized by growing competition,
large international reinsurance capacities and the trend among direct
insurers to increase their retentions and switch to non-proportional
reinsurance programmes. Despite the difficult business environment,
there is still great potential for development in the Italian market. In
particular, the reduction in state social benefits means there is a
pronounced demand for private provision through insurances of the
person. To master the problem of coverage for natural catastrophes, a
bill is currently being debated that assigns an important role to both
direct insurers and international reinsurers. And the parliamentary
debate on the law regulating public construction orders has been
resumed: a positive outcome should provide the building industry with
the long hoped-for impulses for growth and thus open up additional
business opportunities for the insurance industry.
For 1998 we therefore expect a further increase in premium income
in our Italian business; the result should be about the same as last
year.
23