01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Life segment
General risk situation
Adequacy of applied
mortality tables
(biometric risks)
Management Report
Natural catastrophe, accumulation loss and major loss risk
The effects of natural disasters, accumulation losses and major losses on the net side
for Gothaer are largely mitigated by the structure of reinsurance. To keep the impacts on
the gross side as low as possible, information delivered by the ZÜRS zoning classification
system and other models is taken into account in the determination of premiums
and underwriting policy.
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. It 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 currently not discounted, this risk
does not apply to Gothaer.
The general risk situation for life insurers continues to be defined by the current financial
market crisis and the concomitant risk of recession or stagnation of the real
economy. For one thing, the crisis plays a dominant role in shaping the investment risks
described below, for another, changes in demand behaviour may result in growth risks.
The general risk situation is also determined by current and future changes in the legal
environment for life insurers. Gothaer is not affected by the recent court rulings on the
validity of instalment surcharges or clauses on surrender values or acquisition costs.
However, there is a risk that leading supreme court rulings will be delivered on these
issues in the future.
To minimize environmental uncertainty and any negative impacts it may have on the
business model and growth of our life insurers, it is our general policy to scrutinize
changes in the law before they take effect, analyze their implications and identify
possible alternative courses of action.
Policy reserves are calculated on the basis of decrement tables deemed adequate by
the supervisory authority and the German Association of Actuaries (DAV). Particular
importance here is attached to assessing longevity risk. In the estimation of the
Responsible Actuary, the current policy reserves provide sufficient safety margins for the
companies.
Gothaer Group Annual Report 2009 69