Annual Report 2003 - Hannover Re

Glossary
Surplus reinsurance: form of proportional reinsurance under which the risk is not spread between the
insurer and reinsurer on the basis of a previously agreed, set quota share. Instead, the insurer determines
a maximum sum insured per risk up to which it is prepared to be liable. Risks that exceed the ceding company's
retention (surpluses) are borne by the reinsurer. The reinsurer's lines thus vary according to the
level of the retention and the sum insured of the reinsured contract. The reinsurer's liability is generally
limited to a multiple of the ceding company's retention.
Survival ratio: this reflects the ratio of loss reserves to paid losses under a specific contract or several
contracts in a balance sheet year.
Technical result: the balance of income and expenditure allocated to the insurance business and
shown in the technical statement of income (after additional allowance is made for the allocation to /
withdrawal from the equalisation reserve: net technical result).
Treaty reinsurance: cf. ➞ obligatory reinsurance.
Unearned premiums: premiums written in a financial year which are to be allocated to the following
period on an accrual basis. This item is used to defer written premiums.
US GAAP (United States Generally Accepted Accounting Principles): internationally recognised US
accounting principles. Not all the provisions which together constitute US GAAP have been codified.
US GAAP comprises not only defined written statements but also, for example, standard accounting
practices in specific industries.
Value of in-force business: Present value of expected future profit flows from the portfolio of in-force
retained business, discounted by a currency-specific risk discount rate. It is determined in accordance
with local accounting principles.
Variable Interest Entity: legal entity not bound to a particular form of organisation for which the traditional
consolidation concept based on voting interests does not suffice to determine who exercises
control or in which the equity providers do not participate in the economic risks and profits. The definition
is broader than the originally used term ➞ Special Purpose Entity (SPE).
Volatility: measure of the variability of stock prices, interest rates and exchange rates. Standard practice
is to measure the volatility of a stock price by calculating the standard deviations of relative price
differences.
139