Gothaer Allgemeine Versicherung AG Group Annual Report for ...

Management Report
Factors that cannot be adequately assessed by the models used to calculate reserves are
taken into account separately as follows:
• individual major loss analysis: where necessary, individual major loss reserves are
included in the reserve calculation results
• detailed analysis of accumulation loss events, taking account of time of occurrence
and previous run-off and comparing them with such events in the past
• detailed analysis of sub-lines in areas where portfolio shifts have occurred.
• Natural catastrophe, accumulation loss and major loss risk
The effects of natural disasters, accumulation losses and major losses are largely mitigated
by the structure of Gothaer reinsurance. Apart from this, other measures are taken
to keep the impacts on the gross side as low as possible. Rates are thus set as far as
possible on the basis of actuarial methods. In addition, underwriting policy provides for
targeted use of instruments such as self-insurance, sublimit and coverage limitation
agreements.
• Reinsurance risk
Even a balanced reinsurance structure designed to mitigate the effects of extreme events
entails risk – the risk of possible default by reinsurers. At Gothaer, this risk is taken into
account in the selection of reinsurers (A rating) and is quantified by DFA modelling. The
risk is thus covered by risk management.
• Discounted reserve risk
If reserves are discounted, the choice of discount rate and the underlying payment
schedule are critical parameters. As loss reserves are not currently discounted – with
the exception of annuity reserves, which are of minor importance – this risk is irrelevant
in the Property/casualty segment.
Against this backdrop, reserving policy can be described as adequate and appropriate.
Gothaer Allgemeine Group Annual Report 2011 27