01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...


01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Management Report

Low frequency loss events involving major losses

This loss category reports major losses in the area of automotive liability insurance

because a percentage of the policies in force were written on the basis of unlimited

coverage or, in the case of policies written after April 2005, with a limited but very high

cover sum of €100 million. This potential liability is taken into account in our reinsurance

treaties. Major losses could also conceivably result from a terrorist attack. In the case of

high-coverage policies (insured sums in excess of €25 million), terrorism is originally

excluded and the risk assumed by Extremus if the customer requires insurance against

terrorism. For risks where coverage is below the critical limit, our reinsurance treaties

provide limited but adequate reinsurance protection.

Cross-segment loss events

This loss category primarily relates to natural hazard events that would cut across

Gothaer segments. These include, in descending order, flood, storm, earthquake and –

of significantly less importance (mostly automotive own damage) – hail risks. Decisions

on the scope of reinsurance protection acquired are based on extensive analyses of our

entire portfolio. Those analyses are conducted by leading international reinsurance

brokers and carriers and are performed on the basis of renowned methods of modelling

exposure to natural catastrophes. The models in question include estimates of probability

of occurrence and assessments of recurrence intervals. The combined use of

RMS, EQECAT and AIR tools as well as reinsurers' internal models provides us with a

secure basis for findings.

Geographic or line-based concentration risks

Owing to the good geographic distribution of the Gothaer portfolio, geographic concentration

risk is negligible. Line-based concentration is perceptible only in engineering

insurance for wind power facilities. Here too, precautions have been taken against

both accumulation and major losses through a combination of proportional and nonproportional

reinsurance protection.

Risk dependency

Major loss events, in particular those which have a massive financial impact on the

reinsurance market, can lead to insolvencies on the part of reinsurers and thus result in

default. We seek to minimize the possible impacts on the Gothaer net account by

selecting our reinsurers with care (see under loss of receivables) and spreading our

placements. In the case of natural hazard events in particular, it has been observed that

high losses translate into high claim payments fairly rapidly and therefore result in an

outflow of funds. By keeping the cash loss limits for our proportional treaties relatively

low and agreeing adequate reinstatements for non-proportional cessions, we have made

sure that Gothaer is not affected in such events by liquidity or reinsurance capacity


Gothaer Group Annual Report 2009 67

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