Erste Bank JPMorgan Merrill Lynch International

Reinsurance
The Wiener Städtische Group has limited its liability arising from the insurance business by
passing on — to the extent required — some of the assumed risks to the international reinsurance
market. Within the Wiener Städtische Group only some of the risks of smaller foreign Group
companies are reinsured; these risks are in turn passed on at the Group level to reinsurers.
Reinsurance guidelines
The Wiener Städtische Group’s reinsurance guidelines are jointly determined each year by the
central reinsurance department and the member of the management board responsible for reinsurance
during the development of the reinsurance strategy for the next fiscal year.
The reinsurance guidelines require each Group company to provide, in conjunction with the
central reinsurance department, reinsurance coverage that is appropriate for its local company. The
reinsurance guidelines govern the following issues:
Reinsurance is a prerequisite for the provision of insurance coverage. Departments may only
make a binding commitment to insure a risk if sufficient reinsurance coverage has already
been assured by external reinsurers.
Retention. It is a Group-wide policy that no more than EUR 11 million per natural catastrophe
can be placed in risk on a PML (probable maximum loss) basis. The maximum Group-wide
retention per individual loss is less than EUR 3 million.
Selection of reinsurers — diversification. Wiener Städtische AG and its Group companies
divide their reinsurance coverage among many different international reinsurance companies
having appropriate creditworthiness so as to minimize the growing risk of a reinsurer being
unable to pay. In the history of the Wiener Städtische Group, no reinsurer has ever
significantly fallen short.
Selection of reinsurers — rating. For business segments where claims take a long time to be
settled, especially for auto liability and general liability, Wiener Städtische uses as reinsurers
companies with outstanding ratings (at least Standard & Poor’s “A” rating, preferably a rating
of “AA” or higher), which in all likelihood will continue to exist over the long term. Even for
business segments with claims that are settled quickly (for example, natural catastrophes, fire,
technology, transportation, storm, burglary, household, piped water, auto collision), where the
number of reinsurers is greater, the preferred rating is Standard & Poor’s “A” or higher. Only in
a few cases — and for limited periods of time — are reinsurers with lower ratings accepted.
Design of the reinsurance program. If economically justified, any Group company can
purchase reinsurance coverage individually from external reinsurers. If individual reinsurance
contracts can only be purchased by a Group company at uneconomical terms, the Wiener
Städtische Group will try to jointly place, as far as is possible, reinsurance contracts to cover
risks from covering natural catastrophes, property lines, accident, aviation and auto liability
pursuant to the Green Card [international motor insurance certificate] agreement. Reinsurance
contracts of smaller Group companies, which contain less risk, can be purchased at
unfavourable terms in the reinsurance market only if the Wiener Städtische Group itself acts
as the reinsurance company. If necessary, these intragroup reinsurance contracts are passed
on as retrocession in the reinsurance market for safety reasons. The guidelines for Wiener
Städtische AG reinsurance cover are presented below. Retentions for all other Group companies
lie below those of Wiener Städtische AG.
Reinsurance cover
Wiener Städtische AG covers damages caused by natural disasters such as storms, hail,
floods and earthquakes. Its reinsurance coverage limits its retention for payments for losses
caused by natural disasters to EUR 4.4 million.
Corporate customer business. In the corporate customer business, predominantly proportional
reinsurance contributions are limited to a maximum net loss for Wiener Städtische AG of
EUR 1.5 million. This reinsurance structure can insure both the effects of certain major losses,
for example as a result of fire, and an increased frequency of claims.
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