By Richard Miller

FRANKFURT, GERMANY—Euro-pean captive managers seeking toensure that captive insurers arehandled differently under Solven-cy II requirements made theircase last week to representativesof the Committee of European In-surance and Occupational Pen-sions Supervisors.

In its first major meeting withCEIOPS, the European CaptiveInsurance & Reinsurance Owners’Assn., based in Luxembourg, presented its views on the appli-cation of the so-called propor-tionality principle to captiveinsurers under Solvency II, thenew European risk-based capitalregime that is slated for imple-mentation at the end of 2012.

“There was a good exchange ofvarious opinions and positions,and there were to a certain extentsome diverging opinions,” be-tween captive managers andCEIOPS, said ECIROA ChairmanGünter Dröse. “We fully agreewith Solvency II as a principle,”added Mr. Dröse, global head ofcorporate insurance at DeutscheBank A.G. in Frankfurt.

“We’re now discussing howthis proportionality principlemay be used within this captiveenvironment.”

Captive owners want to ensurethat the implementation meas-

©2009. Entire contents copyright by Crain Communications Inc. All rights reserved.

By Richard Miller

MUNICH, GERMANY—Nearly ayear since the global financial crisis began to shake confi-dence in some of the biggestnames in insurance, risk man-agers now recognize that theymust conduct due diligence on in-surers like never before, says thepresident of Germany’s commer-cial insurance buyers’ association.

In remarks to open the 2009Deutscher Versicherungs-Schutz-verband e.V. Symposium today in

Munich, Stefan Sigulla, presidentof DVS and chief executive officerof insurance at Siemens A.G., willoutline some of the lessons of thefinancial crisis. In particular, hewill assert that risk managers facea form of counterparty risk whenit comes to their insurance carri-ers—a risk they may have previ-ously underestimated.

“Risk managers were not awarethat counterparty risk is a real riskif you talk about insurance,”

Lessons of financialcrisis vital: Sigulla

Captives lobbyon Solvency IIexemptions

DVS has received many requests for advice on insurer securitythis year but risk managers must do their own homework.

See SOLVENCY II page 10

OUTLOOK STABLEFROM MONTE CARLORENDEZ-VOUS PAGE 3

NEW PRODUCTSDEVELOPED TO COPEWITH D&O LAW PAGE 4

GÜNTER DRÖSE OF DEUTSCHE BANK& ECIROA PAGE 6

DVS delegate numbers up 10%despite recessionDelegate numbers for this year’sDeutscher Versicherungs-Schutzverbad e.V. Symposium thatopens today in Munich reachedover 500 despite the recenteconomic difficulties faced by mostcompanies.Gunter Schlicht, managing directorof the DVS, told Business Insurancethat he is delighted that theregistrations for this year’s eventare up 10% and said that it shows

how strong thesupport for theassociation iswithin theGerman market.“We are reallyhappy aboutthe number ofdelegates for

this year’s symposium. There havebeen some tight restrictions onbudgets in Germany and I do thinkthat people are having to choosethose events that they really regardas critical,” said Mr. Schlicht.Other recent national associationconferences such as AMRAE inFrance, AGERS in Spain andAIRMIC in the U.K. also enjoyedhigh attendance levels despite thegloomy economic situation.Mr. Schlicht agreed that it isprobable that many people havedecided that tricky economicconditions actually make it evenmore important than ever toattend key events to meet anddiscuss market issues with peersand service providers.Registrations are also up for the

NEWSINBRIEF[ AT PRESS TIME ]

BI/RICHARD COOKE

INSIDE[ WEDNESDAY]

DV S SY M P O S I U M S H OW DA I LY [ M U N I C H ] W E D N E S DAY S E P T E M B E R 9, 2 0 0 9

See SIGULLA page 8

DVS

Günter Schlicht

RBusiness Insurance

See NEWS IN BRIEF page 10

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By Regis Coccia

MONTE CARLO—Ceding insurerscan expect a relatively flat reinsur-ance renewal season across mostlines if heavy losses before year-end do not slash capital in thereinsurance industry, according toreinsurance market experts.

The recent recovery in global fi-nancial markets during the latterpart of this year has helped boostreinsurers’ balance sheets. Com-bined with light catastrophe lossexperience so far, there is littlepressure to raise reinsurance rates,market sources said this week atthe Rendez-Vous de Septembrereinsurance gathering in MonteCarlo, Monaco.

“Absent another major shock, allsigns point to a flat renewal,” saidRichard Booth, vice chairman ofbrokerage Guy Carpenter & Co.“If there is no market-changingevent, reinsurance pricing will bebased on available capital.”

Rival brokerage Aon Benfieldalso forecasts a stable renewal sea-son for most lines of reinsurance.

A heavy catastrophe season, re-sulting in a 10% to 20% of the in-dustry’s capital, would be required

to trigger significant rate hikes,said Bryon Ehrhart, chief execu-tive officer of Aon Benfield Ana-lytics. Under lighter lossconditions, the pricing environ-ment would be stable overall, hesaid. But Mr. Ehrhart cautionedthat “it’s too early to tell what willhappen in the hurricane season.”

Leading global reinsurancecompanies, however, predict fir-mer conditions than the brokers.

Ulrich Wallin, chief executiveofficer of Hannover ReinsuranceCo., said that reinsurance pricesare rising in capital-intensive class-es as buyers recognize the value ofthe coverage after the financialdownturn. Those classes includecredit, surety and aviation.

Other areas of the reinsurancemarket also may see hardeningrates, said Mr. Wallin. Amongthem, casualty lines in the UnitedStates remain soft and need mean-ingful rate increases, he said.

“As far as property catastrophebusiness is concerned, while ingeneral we saw a hardening in2009 in that market, the accelera-tion (of pricing) throughout theyear, which some observers hadhoped for, did not take place,”said Mr. Wallin. “The reason for

that is largely that there was suffi-cient capacity available, so thepricing trends that started at thebeginning of the year pretty muchprevailed throughout the entireyear.” Hannover Re’s position isthat property catastrophe rates,absent a major event or furtherturmoil in the capital markets, willremain stable.

Overall, Mr. Wallin said Hannover Re expects “stable to in-creasing” reinsurance rates in thecoming year.

SCOR S.E. expects reinsurancemarket conditions to be favorableinto 2010, CEO Denis Kessler said.“We believe the positive reinsur-ance outlook will continue,” he

said. “The January, April and July2009 renewals confirm that ratesare firming. We look at 2010 witha positive view.”

Jamie Veghte, CEO of XL Re,said that reinsurance rates forshort-tail lines and catastrophe-ex-posed risks “are in a good place.We’re fairly comfortable withshort-tail markets, but I’m veryconcerned about the long-tailmarkets.” He said rates have been“creeping down” over the pastfew years on casualty risks, a trendhe believes cannot continue with-out hurting reinsurers’ balancesheets.

—Michael Bradford and Colleen McCarthy

contributed to this report.

Flat reinsurance rates predicted in Monaco

By Michael Bradford

German buyers in the market forpractically everything except fi-nancial institutions’ directors andofficers liability insurance proba-bly will find prices to their likingfor the rest of this year, marketsources say.

“We have expected a hardeningof the market for some time,” saidSven Erichsen, managing directorand chief broking officer of AonJauch & Hübener GmbH. Howev-er, “we don’t see it.”

He and other experts say theGerman market for property/casu-alty insurance has plenty of capac-ity for nearly all risks and pricesare expected to remain steady or,in some cases, decrease slightly.

“Property rates will probablybecome stable, but there mightstill be opportunities in the mar-ket for some industries with highstandards in loss control,” Mr.Erichsen said. “For marine and ca-

sualty, we may see a downwardtrend” in rates, he said.

Large buyers probably will notsee big swings in their propertyprices anytime soon, said aspokesman for Allianz Global Cor-porate & Specialty A.G. In fact,some small insurers are chasingbusiness by offering significant re-ductions, he said.

If the P/C market does begin tofirm, it probably will begin withautomobile coverage, Mr. Erich-sen said. “That is 40% of the mar-ket in Germany and it is alwaysthe first to turn,” he said. Autoclaims have been heavy recentlyand could prompt a hardening inthe commercial and personal linesauto market by the end of theyear, he said.

As a whole, there is plenty ofcapacity in the German marketfor commercial P/C risks, Mr.Erichsen said. “The only excep-tion might be for high-limit D&Ocoverage.”

“Capacity in continental Eu-rope is not an issue,” saidLeberecht Funk, chairman at FunkGruppe GmbH, a Hamburg, Ger-many-based brokerage. “I wouldsay that it is still abundant.”

The Allianz spokesman said,though, that some natural catas-trophe risks are seeing prices firmwith scarcer capacity.

In addition, underwriters willscrutinize aviation risks moreclosely in light of a number of re-cent losses, he noted.

The one coverage line wherethere is agreement about the pric-ing trend is D&O liability.

Small- and medium-size D&Obuyers can find the coverage atreasonable rates, but that is notthe case for financial services com-panies, Mr. Erichsen said.

“For financial institutions, ithas become a hard market,” hesaid.

Christian Hinsch, chairman ofHDI-Gerling International Hold-

ing A.G., said: “Not everyone real-izes that 2010 will be very diffi-cult,” said, particularly forGerman insurers writing lines,such as some marine and liabilitycoverages, that are rated with re-gard to policyholders’ revenues.Premiums that were calculatedbased on estimated revenues for2009 are going to be too highwhen actual revenues are totaled,he said.

“At the end of the year, it’s ad-justed according to actual rev-enues,” Mr. Hinsch said ofcoverage costs. “It will have an im-pact on insurers in 2010. We willhave to give back money becauserevenues went down in 2009.”

Because advance payments arecalculated on prior-year revenues,the advance premium for 2010will be lower than 2009, he said.

“I expect in 2010 the entire in-dustry will see a decrease in premi-ums due to the downturn in theeconomy,” Mr. Hinsch said.

Stable rates forecast for the German P/C market

Under construction: Preparation in the exhibition hall aheadof the DVS Symposium in Munich, Sept. 9-10.

DV S SY M P O S I U M S H OW DA I LY [ M U N I C H ] 3W E D N E S DAY S E P T E M B E R 9, 2 0 0 9

By Michael Bradford

MUNICH, GERMANY—Uneasy ec-onomic times and financial serv-ices companies, no longer con-sidered unshakeable, now meansrisk managers must closely watchtheir insurers’ financial security,German market experts say.

“This world has shown that in-conceivable things can happen,”said Leberecht Funk, chairman ofbrokerage Funk Gruppe GmbH inHamburg, Germany. He referredto American International GroupInc.’s financial troubles as an ex-ample.

“This will continue as a concern,”Mr. Funk said of insurer security in advance of the Sept. 9-10Deutscher Versicherungs Shutz-verband e.V. Symposium 2009.

“Ten years ago, nobody askedfor ratings” of insurers when pur-chasing coverage, said Hans-OttoGeiger, chairman of the Bun-desverband firmenverbundenerVersicherungsvermittler und-

gesellschaften e.V., the Franken-thal, Germany-based associationof in-house brokers also known asBfV. “Not only are they now ask-ing for ratings, but for informa-tion on the financial situation” ofinsurers, he said.

“Risk managers and chief finan-cial officers simply cannot payenough attention to the financialstrength of their insurers,” aspokesman for insurer AllianzGlobal Corporate & Specialty A.G.in Munich said. It is a topic thatwill demand “absolute priority in2010 and beyond,” he said.

Market sources say diligence inexamining insurers’ financialwherewithal and risk spread amo-ng underwriters are practices thatcan be used to lessen the chanceof being hit by an ailing insurer.

Careful analysis of insurer fi-nancial security has become animportant part of the daily workof brokers, said Sven Erichsen,managing director and chiefbroking officer at Aon Jauch &Hübener GmbH in Mulheim, Ger-

many. “We have our own marketsecurity team that screens all in-surer balance sheets,” he said inexplaining that the screeningsconsider solvency, liquidity, capi-tal, claims ratios, exposures andother criteria.

“We use rating agency reportsand put that on top of our inter-nal data, our expertise and inter-pretation of the balance sheet,”Mr. Erichsen said. “It has becomea much more complicated issuethan before.”

Mr. Funk said insurer difficultieshave eroded trust in the agenciesthat rate them. “Also, we’re seeingratings of conglomerates wherethe insurance part is not the evilpart,” but insurance operationsare nonetheless tainted by a ratingaffected by poor performance ofthe non-insurance side of thebusiness, he said.

“There was a conviction thatwhen you follow a rating pattern,that you are on the safe side,” saidGünter Schlicht, chief executive of

the DVS. “This belief is shattered,”he said. “Risk managers are tryingto dig a little deeper.”

“Ratings remain an importantsource but you have to see to whatextent there is additional informa-tion to confirm your analysis,”Mr. Schlicht said. “Don’t look justat the rating, read what’s behindit,” he advised. Mr. Geiger saidmany German buyers are makingsure insurance contracts containclauses allowing them to cancelcoverage if the insurer’s financial-strength rating drops below A.

Aon Jauch & Hübener recom-mends that its clients, especiallylarger ones, diversify their risksamong insurers to guard againstproblems that could occur if aninsurer encounters financial diffi-culties. “That is an approach thatsophisticated buyers take,” Mr.Erichsen said.

“Many large German buyers dodiversify,” Mr. Schlicht said. “Theyhave consortiums with quite anumber of coinsurers. This is asound tradition in Germany.”

By Michael Bradford

A recently enacted German lawthat requires buyers of directorsand officers liability insurance toimpose deductibles on covered in-dividuals is prompting insurers todevelop products for the exposureand policyholders are wonderingif their coverage costs will fall.

The Act on the Adequacy ofManagerial Salaries, which Ger-many’s Bundesrat ratified in July,went into effect Aug. 5. The lawrequires companies that buy D&Oliability insurance to impose a per-loss deductible of 10% on covereddirectors or officers. The amountis capped at 1.5 times the individ-ual’s fixed annual compensation.

All new D&O liability coverageis required to include the de-ductible; policies already in forcemust be amended by July 2010 toinclude it.

While the law requires directorsand officers to pay a deductible, itdoes not prohibit them from pur-chasing a policy to cover the de-ductible and insurers areresponding.

Zurich Gruppe Deutschland, aunit of Zurich Financial ServicesGroup, is planning to launch aproduct to cover the deductible.

Allianz Global Corporate & Spe-cialty A.G. in Munich, Germany,says it has already developed cov-erage for individual directors andofficers.

Some D&O lia-bility policyhold-ers are expectingtheir coveragecosts to go downas a result of thenew law, saidSven Erichsen,managing direc-tor and chiefbroking officer atAon Jauch &Hübener GmbHin Mulheim, Ger-many. “That willbe negotiated in the next fewmonths.”

Lower D&O liability costsshould result from a deductibleadded to policies, but it is not clearif that will be the case, said GünterSchlicht, chief executive of theDeutscher Versicherungs-Schutzverband e.V., the Germancommercial insurance buyers association in Bonn. “Logically,you would think so,” he said.“Certainly insurance buyers willnegotiate with their insurers.”

“Normally you would say that

if you have a higher deductible,rates should be lower,” said Hans-Otto Geiger, chairman of the Bun-desverband firmenverbundener

Versicherungs-vermittler und-ge-sellschaften e.V.,the German asso-ciation of in-house brokersbased in Franken-thal, Germany.“But this is brandnew and we can’tsay if it will havethe effect ofchanging rates.”

“I think, first ofall, if you arrangedeductibles with-

in policies, you always expect a re-duction of premium,” said StefanSigulla, DVS president and chiefexecutive officer of insurance atSiemens A.G. in Munich. “Themarket will try to get this.”

Risk managers will start negoti-ations by pointing out to insurersthat the deductible changes therisk, Mr. Sigulla said, and contendthat, “if the risk is lower, then youget a reduction of the premium.”

Insurers have indicated thatthey are not likely to grant pricebreaks because D&O liability

claims are infrequent but severe, apattern that the new deductibleon directors and officers will notchange.

The new exposure couldtempt newcomers, particularlymid-size insurers, to the GermanD&O liability marketplace, saidLeberecht Funk, chairman ofHamburg, Germany-based bro-kerage Funk Gruppe GmbH. Ifinsurers can limit their D&O lia-bility to the individual de-ductible, that is an exposure theycould get enthusiastic about cov-ering, he said.

D&O liability rates in Germany,meanwhile, have remained steadyfor all large non-financial commercial policyholders, sourcessaid. For small- to mid-size enter-prises, the D&O liability market remains soft, Mr. Erichsen of Aonsaid.

“The middle market still hascompetition,” Mr. Schlicht said.“There are lots of insurers still offering options.”

However, “for financial institu-tions, it has turned into a hardmarket,” Mr. Erichsen said. “The premium upswing has beensubstantial.”

—Richard Miller contributed to this report.

German legal change spurs new products

Vigilence needed for continued financial uncertainty

Leberecht Funk, chairman of Funk Gruppe GmbH.

DV S SY M P O S I U M S H OW DA I LY [ M U N I C H ] W E D N E S DAY S E P T E M B E R 9, 2 0 0 94

It’s important to know who can handle the challenge.

At Allianz Global Corporate & Specialty, we consider risk management one of our core competencies. We offer a comprehensive range of risk management solutions and work in partnership with our clients to develop the tailored cover they need – whatever the challenge.

Find out why we are the choice of so many Fortune Global 500® companies, and discover a partnership you can rely on. Visit us at our DVS stand number 2.

www.agcs.allianz.com

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Q: How did you become a risk and insurance manager?

A:I studied nationaleconomy at university

and then was fortunate togain a very extensive andhigh-level training in indus-trial insurance with AllianzS.E. After training, I becamea senior account managerworking on areas like cap-tives and with the big bro-kers. Subsequently, under-writing was added to my responsibilities. I specializedreally in corporate risk man-agement and captives, link-ages to international pro-grams—all the things thatwere regarded as exotic atthe time.

Q: How did you arrive atDeutsche Bank and what was the goal?

A:In 1994 DeutscheBank asked me to

establish its in-house captivebroker, Deukona Versich-erungs-Vermittlungs GmbH.I worked with my colleagueWilly Schreiber and, at theend of 1995, set up the firstcaptive in Luxembourg. Wenow have two in Luxem-bourg and one in Bermuda.

Q: What is your risk andinsurance managementphilosophy—how do you believe risk and insurancemanagement is mosteffectively carried out?

A:Management is riskmanagement. Insur-

ance management is a sub-function of risk manage-ment. But remember thatthe chief risk managementofficer is the chief executiveofficer. In my experience,though, the insurance de-partment is at the center ofthings, because it deals withlosses, claims and generaldevelopment of the businessand provides an informationsystem that communicatesbetween all people in the organization. This is particu-larly true in Germany because of the in-house brokerage system, where often the staff know moreabout the company thanmany others and can provide consulting and advi-sory services, too.

Q: What are the biggestchallenges and opportunitiesthat European risk andinsurance managers currently face?

A:If you read companyannual reports and ac-

counts, it is often hard tofind the real targets of thebusiness. Therefore, thechallenge is to develop abusiness in an entrepreneur-ial manner and ensure thatindividuals in the companyunderstand the targets andare able to make the correctdecisions. This is more im-portant today than ever, be-

cause we have seen so manymanagers adopt mathemati-cal approaches to decision-making and it is too easy toforget that the scenarios cal-culated are just scenarios.People can forget about thereal world and how complexit really is.

Q: Why was ECIROA formed,what is the goal and why was it needed?

A:It was clear we neededa body to lobby (the

Committee of European In-surance and OccupationalPensions Supervisors) oncaptives. Captives are a rea-sonable tool and not a taxdodge. Some companies douse captives for fiscal reasonsand there is nothing intrinsi-cally wrong with that, butthey are based offshore. Thisis not the case for captivesbased onshore (in the Euro-pean Union) and so weneeded an organization toprotect their interests.

Q: What are the mainchallenges that lie ahead for ECIROA? What is on the agenda for the next 12 months?

A:Currently we areworking hard to dis-

cuss the potential impact ofthe Pillar 1 capital require-ments on captives withCEIOPS and to make surethey fully understand therole of captives. There arethree core goals. First, tohelp CEIOPS and others tounderstand more about thedetails—this is an education-al role. Second, we have tocommunicate with all the

interested parties. We cur-rently talk regularly withabout five leading supervi-sors and we need to expandthis. Third, clarification. Youwill have seen that the Assn.of British Insurers has writ-ten to the European Com-mission to point out thatinsurers may need up to anextra £50 billion ( 57.34billion) to cover Solvency II.The capital requirements forall insurers are potentiallymuch higher than Basel II.We need to achieve propor-tionality.

Q: How can ECIROA work with other associations, suchas the DVS and Federation ofEuropean Risk ManagementAssns., to achieve maximumbenefit for risk managers inthis process?

A:We need to includeall interested parties.

ECIROA currently has 45members that operate over100 captives, and a lot morecompanies want to join.Most of them are also mem-bers of (FERMA) throughnational associations likethe DVS. We also are nowworking with the CaptiveInsurance Cos. Assn. in theUnited States. Most impor-tantly we are working withFERMA currently on a jointpaper to clarify our respec-tive roles. Hopefully we canagree that ECIROA can represent the captive owners’ view and FERMAwill represent the wider in-surance buyers’ view. I think that would makesense and help the cause ofall risk and insurance man-agers in Europe.

Günter Dröse, global head of corporate insurance at Deutsche Bank A.G., is a longtime member of the DeutscherVersicherungs-Schutzverband e.V. and the foundingchairman of the European Captive Insurance & ReinsuranceOwners’ Assn. BUSINESS INSURANCE International Editor AdrianLadbury asked him about his background, risk managementphilosophy and the goals and strategy of ECIROA.

DV S SY M P O S I U M S H OW DA I LY [ M U N I C H ] W E D N E S DAY S E P T E M B E R 9, 2 0 0 96

QUESTIONS & ANSWERS

GÜNTER DRÖSE,DEUTSCHE BANK & ECIROA

‘Proportionality forcaptives in Europe’

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Mr. Sigulla said in an interview before the conference. “And theyhave since learned that there canbe problems.”

Traditionally, risk managers con-centrated on getting the rightterms and conditions and makingsure they have adequate coveragefor their risks. Few, he said, seri-ously considered the risk thattheir insurer might not be aroundin the long term to pay a claim.

Risk managers now need to askmore questions—and change thefocus of their questioning, Mr.Sigulla explained

“They have to look at theturnover, to look at what are the(financial) results. Where are theinsurers invested, and where arethey located? A lot of questionsthey normally did not have inmind,” he said.

“I think it is necessary to adaptmore questions the treasurerwould normally ask in his rela-tionship to other counterparties,”Mr. Sigulla said.

Although no German or majorinternational insurer has failed

due to the global economic crisis,“there were insurance companiesin trouble, and they might be introuble, so I think it is necessary tofocus on the financial reliability ofthe company you are dealingwith,” he added.

The expanded role of risk man-agers comes as a result of a turbu-lent year in the financial servicesand insurance sector. Last Septem-ber, the United States’ financialsystem began to quickly unravel,with events including the failureof New York investment bankLehman Bros. and the near-bank-ruptcy of giant insurer AmericanInternational Group Inc. After rat-ing agencies downgraded AIG’scredit over losses related to itscredit default swaps and mort-gage-backed securities, the U.S.Federal Reserve intervened onSept. 17, lending AIG tens of bil-lions of dollars in rescue funds.

As the curtain opens on the 2009DVS Symposium, the impact ofthe financial crisis on insurers andrisk management will be the focusof most speeches and workshops.Sessions will cover the effects ofthe crisis on the credit insurance

market, financial lines coveragesuch as directors and officers, andthe use of credit ratings to analyzeinsurers.

“My personal advice to all therisk managers is, you cannot relyon a good rating as a guarantee,”Mr. Sigulla said.

Mr. Sigulla said DVS will not discuss the situations regardingspecific insurance companies.However, over the past year, theassociation has received numer-ous inquiries from members ask-ing for guidance about thelong-term viability of various in-surers. In that case, DVS recom-mends risk managers implement atransparent due diligence process,so it can be verified that they’vechecked the financial health oftheir insurers.

“I think the worst case is tostand in front of your (chief finan-cial officer) and say, ‘There is aloss, we have organized indemni-fication, if we look at our contractwe are entitled to get the wholeindemnification, but unfortunate-ly the (insurance) company is notin the position to pay out,” saidMr. Sigulla.

Trends in the German marketwill also be discussed at the sym-posium.

In his opening remarks in 2008,Mr. Sigulla urged global insurers tooffer more innovative solutions tohelp buyers manage newer risks,namely for nonphysical damage.He said then that insurers had notfulfilled past promises to developalternative risk transfer productsto meet the needs of risk man-agers in areas such as informationtechnology and cyber risks.

Although the topic of conversa-tion changed quickly with theworsening financial crisis, Mr.Sigulla said that he has seenprogress on the service front. Insurers, he said, are offeringmultinationals more “intelligentproducts.”

“My impression is that theleading insurance companieshave tried to develop more part-nerships (with their industrialclients) and are integrating differ-ent perils with less exclusions,”Mr. Sigulla said. “In this way,(clients) get a more reliable struc-ture….I think it is a new businessmodel.”

CONTINUED FROM PAGE 1

SIGULLA: Buyers must conduct due diligence on insurers

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ures that CEIOPS is currently con-sulting on uphold the proportion-ality principle, which amongother things ensures that the newrules will treat captive insurers inaccordance with their size andcomplexity.

Mr. Dröse will be a panelist today at the Solvency II discussionat the Deutscher Versicherungs-Schutzverband e.V. Symposium inMunich, at which he said hewould go into further details onthe CEIOPS meeting.

The panel discussion, moderat-ed by Peter den Dekker, presidentof the Federation of European RiskManagement Assn., also will in-clude Werner Horsch, who is amember of Munich ReinsuranceCo.’s solvency consulting team,and Kurt-Georg Hummel, pro-ject leader on Solvency II at Germany’s financial regulator, Bundesanstalt für Finanzdienst-leistungsaufsicht, or BaFin.

Mr. Dröse said he is fairly surethere will be some simplificationsunder certain requirements forcaptives. “The question is, howmuch of these basic ideas to sim-plify things will lead to real reduc-tions in costs and workload. Wedon’t know that today.”

Others present at last week’s

meeting with CEIOPS includedMr. den Dekker of FERMA, as wellas representatives of The Malta In-surance Management Assn. andThe Dublin International Insur-ance & Management Assn.

ECIROA and FERMA are nowcooperating in their dealings withCEIOPS and other authorities onthe treatment of captives, said Mr.Dröse. Among the possibilities be-ing considered is a jointspokesperson to represent both as-sociations on the issue, he said (SEE

INTERVIEW ON PAGE 6).“We are working more closely

together on the captive issue—FERMA and ECIROA—which is apositive news item in and of it-self,” said Mr. Den Dekker.

“The general issue that FERMAis also working on is, basically, thepotential negative impact [of Sol-vency II] on the insurance marketand its impact on professional in-surance buyers,” such as the possi-bility of reduced capacity andhigher premiums, Mr. Den Dekkersaid.

FERMA, he said, is concernedabout the potential loss of risk appetite by insurers and the problems that can occur in situ-ations where smaller insurersand mutuals are in a less advan-tageous position then the large,multinational insurers.

“What we will do in the com-

ing period is publicly express ourconcerns, especially about the im-pact on the general insurancemarket, the availability of capitaland the potential increase in pric-ing,” Mr. den Dekker said.

Consolidation could occur assome regional insurers without asignificant spread of risk in theirportfolios run into difficultiesmeeting Solvency II’s capital re-quirements, said Leberecht Funk,chairman of brokerage FunkGruppe GmbH in Hamburg, Ger-many. The proposed frameworkcalls for less onerous requirementson insurers that have significantdiversification.

And if the market shrinks, “thelikelihood of being confrontedwith higher prices is realistic,” Mr.Funk said.

“On one hand, we appreciatethat Solvency II could be a betterguarantee on insurer solvencybut, on the other hand, there isthe concern that if the rules aretoo strict or not appropriate, itmight lead to rising prices, dimin-ishing competition, and to capaci-ty problems,” said GünterSchlicht, managing director of theDVS in Bonn. “We would ask regulators to watch that, to notoverdo it.”

—Michael Bradford contributed to this article.

See NEWS IN BRIEF page 10

Federation of Risk ManagementAssociations Forum in Prague nextmonth (October 5-7). Peter denDekker, President of FERMA saidyesterday before the federation’scommittee meeting in Munich, thathe is also delighted with thehealthy registration level at thisstage. Registrations are still beingtaken.

FERMA, ECIROA agree to cooperate over Solvency IIMUNICH, Germany—The board ofdirectors of the Federation ofEuropean Risk Management Assn.formally agreed Tuesday to worktogether with the EuropeanCaptive Insurance & ReinsuranceOwners’ Assn. to address thetreatment of captives underSolvency II, Europe’s new risk-based capital regime. At its boardmeeting yesterday in Munich priorto the opening of the DVSSymposium, FERMA’s boarddecided to form two workinggroups on Solvency II, said FERMAPresident Peter den Dekker. Onegroup, chaired by Martina Hacq ofGDF Suez, a Paris-based energycompany, will focus on thetreatment of captives and workclosely with ECIROA, Mr. DenDekker said. The other workinggroup will work on the impact ofSolvency II on the generalinsurance market, with achairperson still to be named.

NEWSINBRIEF[ AT PRESS TIME ]

By Michael Bradford

MONTE CARLO—Munich Reinsur-ance Co. is re-branding its opera-tions to differentiate its businessfrom other reinsurers that it saysare simply providers of low-costcapacity or a conduit for the trans-fer of risk to capital markets.

It will also use the new identityto further expand its operationsinto primary insurance markets,said the company.

In a presentation at the Rendez-Vous de Septembre inMonte Carlo, Torsten Jeworrek, amember of Munich Re’s manage-ment board, said the reinsurer hasso far steered a safe coursethrough the financial crisis and isnow positioned to redefine itslong-term goals.

“There is a clear ambition andinternal understanding that wewant to achieve a completely newlevel of service in our reinsuranceactivities,” said Mr. Jeworrek. Mu-

nich Re will not try to be all thingsto all customers, he said, but “willbe the reinsurer that bases its busi-ness model on risk and underwrit-ing expertise.”

All reinsurance units will nowappear under the Munich Rebrand. Munich Re’s primary insur-ance units and managing generalagencies will operate under thebrand Munich Re Risk Solutions.

Companies under those brandswill retain their legal names but

will not use them, Mr. Jeworreksaid.

Munich Re unit Hartford SteamBoiler Group Inc. is an exceptionbecause of an earlier agreementabout the use of its name, he said.Its transformation to Munich ReRisk Solutions will be completedwithin the next two years. Mu-nich Re’s ERGO Group units arenot affected by the re-branding,he said.

M u n i c h R e ’ s t r a d i t i o n a lreinsurance will remain its corebusiness, but it will attempt tobroaden its client base by expand-ing into insurance pools, public-private partnerships and specialistprimary insurance niches that callfor specific risk expertise, Mr. Jew-orrek said.

The reinsurer also plans to expand its consulting services inareas including balance-sheetmanagement, risk modeling andasset-liability management, hesaid.

VICE PRESIDENT/PUBLISHERMARTIN J. ROSS III

ASSOCIATE PUBLISHER/EDITORIAL DIRECTOR

PAUL D. WINSTON

EDITORREGIS J. COCCIA

INTERNATIONAL EDITORADRIAN LADBURY

ASSISTANT MANAGINGEDITOR—NEWS

MATT SCROGGINS

SENIOR EDITORMICHAEL BRADFORD

SENIOR REPORTERRICHARD MILLER

ART DIRECTORALAN BOOTH

PHOTOGRAPHERRICHARD COOKE

Business Insurance

Munich Re seeks to reposition its business

DV S SY M P O S I U M S H OW DA I LY [ M U N I C H ] W E D N E S DAY S E P T E M B E R 9, 2 0 0 91 0

CONTINUED FROM PAGE 1

SOLVENCY II: ECIROA takes captives lead

Torsten Jeworrek

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