01 Gothaer Konzern_E_09_Umschl - Gothaer Allgemeine ...

Risk management
methods in the
Health segment
Management Report
In view of the composition of our portfolios, attention is particularly focused on the
introduction of the basic tariff and the anticipated increase in switches from one private
insurer to another as a result of the prorata portability of ageing reserves. To keep the
reserve for premium refunds at an acceptable level despite adverse conditions, it was
necessary to modify the premium refund for claim-free clients, which will result in a
significantly reduced financial requirement. The adjustment was made in such a way
that no rise in benefit claims behaviour is anticipated.
Premiums from new business are based on mortality rates that include a safety margin
which is at least equal to that of the latest private health insurance mortality table. The
cancellation probability factors applied are based on our own duration-dependent
hospitalization studies as well as association experience. Extensive scenario computations
have been used to estimate the prorata portability of existing portfolio reserves
and reserves for new customers switching from other private health insurers and to factor
the findings into the calculation of premiums. Particular attention needs to be paid at
present to the changed procedure by which a comprehensively insured client switches
to another private health insurer. The obligation to be insured results in extensive
requirements to furnish proof, which slows down processing and thus delays balance
sheet impact.
The actuarial interest rate, one of the most important bases for calculation in private
health insurance, is dependent upon developments in the capital markets. This fact is
taken into account through the use of professional tools for analyzing investments and
harnessing the findings for a more focused investment strategy as well as by the
regular performance of stress tests and extrapolations. In view of developments in the
capital markets, however, the chance that the net target yield will not be achieved is still
elevated. Investment strategy is therefore focused on a reasonable risk-return ratio
coupled with a high probability of guaranteed actuarial interest being achieved. From
the present vantage, there is no reason to expect a reduction in actuarial interest in 2011.
Financial risks in the area of health insurance can result from the occurrence of major and
accumulation losses. These risks are taken into account by a comprehensive reinsurance
policy.
Portfolio composition, premiums not commensurate with risks, allocations to reserves
for premium refunds, recurrent financing of premium limits granted annually
We address this area of risk with professional underwriting, professional benefit and
healthcare management and other controlling instruments. With regard to portfolio
composition, special consideration is also given to the new basic tariff.
Extensive sensitivity analyses are carried out in connection with annual financial
projections in order to examine the impact on the reserve for premium refunds and the
financing of premium limits granted annually. The alternative scenarios include, among
other things, modified assumptions about benefit claims and new business.
Gothaer Group Annual Report 2009 73