01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Management Report
Adequacy of
assumptions on
cancellation probability
(cancellation risk)
Interest rate
guarantee risk
With regard to the (supplementary) occupational disability policy portfolio, the reviews
focus particularly on verifying that policy reserves are at least equal to the reference
reserve mandated by the Federal Financial Supervisory Authority (BaFin). Because of the
higher subjective risk, the (supplementary) occupational disability policy portfolio is
analyzed on a regular basis. This shows that the bases for calculation currently applied
at Gothaer Lebensversicherung AG provide an adequate margin for safety. At ASSTEL
Lebensversicherung AG, there was a moderate need for reinstatement in policy reserves
and an additional allocation was made accordingly. In response to the new precontractual
duty of disclosure rules introduced with the VVG reform, we rendered
questions in application forms more precisely and modified risk assessment for occupational
disability policies accordingly.
New bases for the calculation of reserves for (supplementary) long-term care annuity
policies were published by the DAV at the end of 2008. We have analyzed the portfolios
of Gothaer Lebensversicherung AG accordingly and see no risks at present. However,
we will monitor the portfolios continuously. If necessary, the policy reserves will be
increased.
Cancellation probability is not taken into account in the calculation of premiums or
underwriting reserves. In recent years, cancellation behaviour at Gothaer Lebensversicherung
AG has tended to be unremarkable, mostly producing a lapse rate lower
than the market average. In 2009, however, a moderate rise was observed in the lapse
rate. We have therefore taken cancellation prevention measures. At ASSTEL Lebensversicherung
AG, the lapse rate has invariably been significantly lower than the market
average in recent years. After the lapse rate rose in 2008 due to reductions in “Riester”
premiums by customers responding to the automatic increase in premiums in the final
Riester stage, the lapse rate remained at that level in 2009 because of the financial
crisis. If there is a medium-term rise in unemployment, those developments in lapse
rates might continue. We will remain vigilant for any sign of sustained change in
cancellation behaviour. For Gothaer Lebensversicherung AG, there is also a risk of
increased liquidity being required for the cancellation of major contracts, which could
force us to realize hidden liabilities in the current capital market situation. We counter
this risk with selective key account management for major clients.
Because of the low interest rate phase for government bonds due to the financial market
crisis, coupled with the volatility and risky state of the stock and corporate bond
markets, the German life insurance industry and therefore the Gothaer Group may be
exposed to risks inherent in high interest rate guarantees, which generally extend over
several decades in the case of life insurance products.
70 Gothaer Group Annual Report 2009