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2002 Yearbook The German Insurance Industry


Friedrichstrasse 191, 10117 BerlinPostfach 08 02 64, 10002 Berlin

Phone +49 (0) 30 20 20 51 17/18/19Fax +49 (0) 30 20 20 66 04/[email protected]

ISSN

-072

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Published by:Gesamtverband der Deutschen Versicherungswirtschaft e.V. (GDV)Press and Public Relations DepartmentFriedrichstrasse 191, 10117 BerlinPhone +49 (0) 30 20 20 51 17/18/19Fax +49 (0) 30 20 20 66 04/05www.gdv.de

Distributed by:Verlag Versicherungswirtschaft GmbHKlosestrasse 22–2476137 KarlsruhePhone +49 (0) 721 35 09 0Fax +49 (0) 721 31 83 3

Photo credits:Frieder Blickle, Hamburg

ISSN-0722-1118

Editorial deadline: 24October 2002

2002 YearbookThe German Insurance Industry


Insurance industry in 2002 at a glance

Insurance industry in 2002 at a glance

Figures for 2002 estimated; previous year in brackets, some figures provisional

Premium income1) of GDV members 140.8 (135.4) billion Euro

Increase in premium income 4.0 (2.7) per cent

Premium1) per inhabitant 1 712 (1 647) Euro

Premiums of private households 105.6 (101.5) billion Euro

premiums paid per household 2 771 (2 665) Euro

premiums paid per inhabitant 1 284 (1 235) Euro

Expenditure and provisions for policyholders’benefit (GDV members) 158.1 (149.5) billion Euro

life insurance 85.7 (82.2) billion Euro

private health insurance 27.5 (25.7) billion Euro

motor insurance 21.1 (20.1) billion Euro

Claims approx. 50 million

Insurance contracts and risks approx. 480 million

Persons employed2) including trainees 299 400

in insurance companies 245 500

in insurance agencies3) 54 000

Independent field service 407 000

independent full-time agents 79 000

part-time agents 320 000

Insurance brokers 8 000

Investments4) 950 (871) billion Euro

Largest insurance classes according to gross premiums written (GDV member companies)

life insurance 65.2 (62.36) billion Euro

private health insurance 22.9 (21.72) billion Euro

motor insurance 21.9 (21.34) billion Euro

general liability insurance 6.0 (5.92) billion Euro

private accident insurance 5.5 (5.49) billion Euro

comprehensive insurance on buildings 3.6 (3.53) billion Euro

legal expenses insurance 2.7 (2.71) billion Euro

comprehensive insurance on contents 2.4 (2.42) billion Euro

industrial fire insurance5) 2.1 (1.76) billion Euro

marine insurance 1.8 (1.75) billion Euro

1) gross premiums written by GDV members (without foreign and reinsurance business, but including commercial risks, without singlepremiums resulting from bonus and rebate provisions in life insurance and health insurance), represents 97 per cent of the totalmarket, 2) 2000, 3) estimated, 4) including reinsurers (previous year’s figures) and pension and funeral expenses funds, 5) includingfire/loss of profit, extended coverage, all risks.

2

Contents

7

9

40

60

61

71

76

76

89

90

91

93

93

99

101

105

109

112

114

118

132

142

A word in advance

Viewpoints

Business trends, results and environment of private insurance

Insurance classes

Life assurance

Private health insurance

Casualty, property and accident insurance

Motor insurance

General liability insurance

Private accident insurance

Legal expenses insurance

Tourist assistance insurance

Property insurance classes

Marine insurance

Credit insurance

Aviation and aerospace insurance

Nuclear insurance

Insolvency insurance

Reinsurance

Investments and capital markets

The insurance industry as job provider

GDV and its members

Tables and graphics (cf. list on pp. 4 and 5)

3

Insurance industry overallInsurance industry in 2002 at a glanceInsurance in the national economyPremium income in private insurance Insurance benefits and claims paid Formation of monetary wealth of private households by type of investmentHousehold insurance protection: 2001/2002 (graphic)Monetary wealth of private households by type of investmentNumber of insurance companies by class of businessInsurance portfolios at year-end

Life insuranceBenefits paid by life insurersHow people insure their lives (graphic)Premium income in life insurance, savings and savings ratio of private householdsNumber of new life insurance contracts with 1st premium paidBreakdown of premium income in life insuranceIncreasing life insurance amounts (graphic)Insured value of new life insurance contracts with 1st premium paidDevelopment of direct insuranceBreakdown of benefits paid in life insuranceLoss ratio in life insurance

Private health insuranceNumber of persons with private health insuranceRelief in old age (graphic)Switching health insurance providerBreakdown of total expenditure in private health insurancePremium income in private health insurance

Non-life insurance Claims in non-life insurance

Motor insurancePremium income and claims expenditure in motor insuranceLoss ratio in motor insuranceAverage costs of car accidents (graphic)Motor liability insurance in figuresRoad accidents in GermanyHow long without an accident?Full vehicle own damage cover in figuresPartial vehicle own damage cover in figuresTheft of insured motor vehicles by number and claims expenditureTheft of insured motor cars by auto manufacturerTheft of insured motor cars by federal stateDevelopment of the number of vehicles on the road

24243445051525456

626364

65666768697071

7273747475

76

777879808182838384848586

List of tables and graphics 4

Liability, legal expenses and tourist assistance assurancePremium income and claims paid in general liability insurancePremium income and claims paid in private accident insurancePremium income, risks and claims in legal expenses insurancePremium income, contracts and claims in tourist assistance insurance

Property insurance classesPremium income in the property insurance classesClaims expenditure and loss ratio in the property insurance classesRange of loss ratios (graphic)Large-size claims in fire insuranceInsured risks in comprehensive insurance on contents and buildings

Marine insuranceMarine insurance in figures

Credit, aviation and nuclear insuranceCredit insurance and insolvency in figuresAviation insurance in figuresNuclear insurance in figuresPension Guarantee Association in figures

ReinsuranceClaims and operating expenses in reinsuranceThe largest reinsurance classes

Investments and capital marketsCapital market dataCurrent income from investmentsInvestment portfolio by type of investmentInvestment portfolio by insurance classGross new investments by type of investment

The insurance industry as job provider Employment in insurance companies by field of activityIn the service of security (graphic)

GDV and its members Organisational chart of GDV (graphic)

89919293

9496 979899

100

102107109113

115116

120120121123124

135137

148

5

With the floods this year, Germany suffered a national disaster of almost unimaginable proportions.The images of destroyed cities and flooded land were a drastic reminder of the capacity of naturalforces to cause unbelievable personal suffering within a short period of time and to obliterate theexistence of individuals and whole enterprises. Such disasters demonstrate the importance ofinsurance cover, but also give rise to fears that the insurability of risks has its limits when the scopeand frequency of natural events can no longer be calculated.

More than 14 months after the terrorist attacks in the USA on 11 September 2001, the requiredvolume of material damage compensation has still not been precisely determined. Insurance com-panies will ultimately pay tens of billions of dollars. Our sector has thus demonstrated its capacityeven in light of the unequalled claim amount. As the attacks in Tunisia and Bali have shown, suchterrorist violence cannot be discounted in the future as well. If one believes politicians and recentstatements by security officials, such attacks are even probable. This is also the case, maybe evenmore so, for us in Germany. As such incalculable damage events would overburden any privatelyorganised group, a combination of government and private-sector capacity is necessary to absorbthe financial impact of the extremely high claims that could result from terrorist attacks. With theformation of a special insurer for terrorism risks, EXTREMUS AG, effective protection has beenestablished with the state's participation against the consequences of terrorist violence, stabilisingthe financial situation of properties and enterprises which are subjected to attack, thus making jobs more secure and Germany less vulnerable as a target. It is now up to industry to take advantageof this safety net. Individual companies now have the responsibility for protecting the assetsentrusted to them.

However, 11 September 2001 has also had an enduring effect on the global economy and inter-national financial markets. The drastic declines in the major indices, comparable to scenarios fromthe twenties, have affected insurers as well, as the largest institutional investors in Germany. How-ever, the freefall in prices has demonstrated the important function of the safety net, especially forlife assurers: by mixing and diversifying investments with a cautious equities position, the assets of each client were successfully protected from loss. Not only have guaranteed benefits beenprotected, our clients may expect positive long-term returns in the future. And should a life assurerrun into difficulties in these uncertain times, the sector has created PROTEKTOR AG as an absorptionsystem to assume the obligations of life assurers towards their clients. Although no such cases areimminent, this precautionary measure on the part of the insurance industry creates the necessaryconditions for maintaining client confidence in the security of their funded old-age provisionthrough life assurers.

The recently elected German government has been treading a dangerous path in some key policyareas. Raising the compulsory insurance limit for health insurance forces even more people to re-main in statutory health insurance, which is plagued by chronic deficits and threatened by benefitreductions. This will exacerbate the financing problems experienced by the statutory system in themedium term as a result of demographic trends and permanently weaken private health insurance,which has long become the backbone of clinics and private practices. Announcements that theassessed contribution limit in statutory pension insurance will be raised also shows that the Germangovernment intends to abandon its method of protecting the social security system from collapseby setting up funded provision systems – a method which has been recognised as the correct one.One can only hope for the sake of future generations that these plans will not be the final word inthe new legislative period.

Dr. Bernd Michaels Dr. Frank von Fürstenwerth

President Executive Chairman

A word in advance 7

8 Viewpoints Business trends, results and environment

Insurance classes Investments and capital markets


GDV and its members

Viewpoints

One year after the terrorist attacks of 11 Sep-

tember 2001, political and economic conditions

in Germany and around the world are domi-

nated by uncertainty to a considerable degree.

The global political situation remains tense,

accented by the confrontation between the USA

and Iraq. The conflict could involve the entire

Middle East, and, by extension, the oil supply of

the western world. The danger of international

terrorism has yet to be quelled.

At the same time, the end of the global bull

market which began in the mid-nineties has

further darkened the economic outlook. The

accounting problems experienced by large com-

panies which have come to light in recent

months, especially in the USA, have further

shaken the confidence of many people in the

efficiency of the capital markets. The possibility

can no longer be ruled out that the global

economic downturn, which was thought to be

over as early as the beginning of 2002, will be

longer and sharper than originally assumed.

Even beyond the current situation, however,

economic and political decision-makers in all

industrialised counties face major challenges.

The economic and social implications of demo-

graphic change and migration for the markets,

for the state and the social security systems and

for all other social and political institutions are

still underestimated. Financial burdens due to

the high public debt and the high expenditure

for social security, but also the structural

problems of the labour market, which remain

pressing, will test the flexibility of our democ-

racy and its political institutions in the new

legislative period just begun.

9

Nor can it be discounted that natural disasters

like the recent record floods on the Elbe River and

its tributaries will occur more frequently in

coming years than in the past. Even if the growth

course of the economy can be revived in the

course of the year, enormous economic and

political burdens are indicated.

In light of this uncertainty, the insurance

industry presents itself as a stabilising

factor in Germany and around the

world. In a time when social bounds are

being broken, the insurance principle represents

an example of carefully-practiced subsidiarity

with respect to everyday risks. Amidst the crisis

of the social welfare state, a forward-looking

concept is emerging which combines the notion

of social equilibrium with efficient incentive

mechanisms and private-sector financing. How-

ever, the discussion on the division of labour

between the state and the free market in the

insurance of terrorism risks which was held in

Germany and other countries after 11 Septem-

ber 2001 has clearly shown how fundamental

the quality “insurance”is for the private sector as

well, and thus for innovation, investment,

growth and overall economic productivity.

With respect to the demographic challenge, it

is indispensable that funding for old-age pro-

visions be increased. Germany has taken the first

steps towards this goal with its Riester pension

reform. In private annuity insurance, the insur-

ance industry is offering a “traditional” product

which, not coincidentally, has gained an over-

whelming market share in the new “Riester

market”. In a time when other methods of

capital accumulation for old age have proven

highly risky in the context of the recent capital

market trend, life assurance emerges consider-

ably stronger.

The capital market and life assurance

The dramatic price drop on the international

capital markets in the wake of 11 September

2001 has placed insurers in Germany as well

under considerable pressure to sell large quanti-

ties of stocks prior to the balance sheet date in

order to avert further losses in value. That no

large-scale selloffs occurred at this stage, which

would have led to more destabilising price drops

on the German capital market, was in no small

part a result of the timely announcement and

rapid implementation of the modification of

the Commercial Code by the German Federal

Assembly [Bundestag].

In accordance with §341b of the Commercial

Code, insurers are no longer obligated to per-

form depreciation on the balance sheet date if

the asset impairment is of temporary nature.

This adjustment allows companies to pursue

more long-term-oriented investment policies

in the future. Of course, depreciation must still

be performed for securities with permanent

impairment.

Viewpoints10 Business trends, results and environment



GDV and its members

Insurance industry

remains anchor

of stability

Naturally, life assurers were and are

particularly affected by the continuing

turbulence on the capital market. The

accelerated price drop and the persistently low

interest rates have had the inevitable result of

reducing corporate income. However, especially

in times when capital markets are volatile, the

long-term-oriented investment policy pursued

by life assurers, which is based on the principles

of security, mixture and diversification, has

proven to be a guarantee for steady returns.

The policy of life assurers of avoiding a one-sided

fixation on stocks, but to instead regard stocks as

only a single asset class within a broadly diversi-

fied portfolio has paid off. Moreover, companies

are constantly adapting their degree of invest-

ment in stocks to their individual company risk

tolerance using state-of-the-art risk manage-

ment tools. In mid-2002, life assurers had nearly

15 per cent of their assets invested in stocks.

In addition, insurance companies are making

increased use of derivative financial instruments

in order to hedge against market risks.

The combination of a generally cautious invest-

ment policy and state-of-the-art portfolio man-

agement has softened the effect of the massive

capital market slump on the portfolios of life as-

surance companies, so that policyholders do not

have to fear for their capital. On the contrary:

clients will in any case receive their guaranteed

return, including profit shares already granted.

Even after the reduction in profit shares, life as-

surance clients are thus much better off than

stockholders, who suffered considerable losses

in recent years from the capital they had previ-

ously accumulated. In the medium term, life as-

surers will increase their income on the capital

market, which they will be able to pass on to

insured persons, so that clients will receive good

long-term returns on their policies in the future

as well.

There can be no talk of a “life assurance

crisis”. The fears of an approaching “in-

solvency wave”in the insurance industry

which have surface in the media from time to

time lack any basis in fact: long before an insur-

ance company can no longer meet its future

obligations to clients, special safety mechanisms

are triggered in a number of preliminary stages

to ensure the continuation of existing contracts.

The Insurance Supervision Act gives the Federal

Supervisory Authority for Financial Services a

number of tools in this regard. The measures

range from requiring the company to draft a

solvency or financing plan through the dispatch

of a special representative to exploration of the

possibility of a takeover and portfolio sale.

11

Cautious investment

policy pays off

No life assurance

crisis

However, since life assurers are aware that their

market potential in old-age provision is ex-

tremely dependent on the confidence of their

clients, the sector, in coordination with the

Federal Supervisory Authority for Financial

Services, will form a rescue company to assume

and continue endangered contracts as an ab-

sorption network in order to account for even

the least probable case, the imminent insol-

vency of an insurance company. This measure is

also a product of the realisation that, in times

when the capital market is difficult, even un-

substantiated speculation about supposed

slumps of individual companies can shake

clients’confidence in the entire sector.

Even though the rescue company should ulti-

mately never be put into motion in view of the

existing safety mechanisms in supervisory law,

the mere existence of this institution gives clients

double security: that their company will assume

part of the capital market risks through guaran-

tees and that the sector will honour these com-

mitments in the event of a worst-case scenario.

The new pension

With the introduction of the new funded sup-

plementary provision at the beginning of 2002,

the reorientation of the old-age assurance sys-

tem was set in motion. Now it remains to be

seen whether private and occupational retire-

ment provision will prove to be the supporting

pillars which, together with statutory pension

insurance, could place our old-age provision on a

solid footing long-term. The basic features of the

legal reform, also known as the “Riester reform”,

are promising. Although the law is not perfect, it

has already become clear that the foundation

which has been laid can be built on.

The insurance industry welcomes the efforts

of certification offices for Riester contracts to

eliminate existing bureaucratic obstacles in

the procedure. For example, contract amend-

ments which are merely editorial in nature no

longer trigger a renewed certification obligation.

Whether or not renewed certification is neces-

sary is only examined in individual cases where

substantive changes have been made. This

practical method of procedure takes into ac-

count that certification makes no statement in

and of itself as to the effectiveness and quality of

the products.

After a long period of agony, occupa-

tional retirement provision is at the start

of a promising trend in view of new in-

centives in tax and social security law

and the changed framework conditions in labour

law. Although conditions were favourable early

due to the conclusion of numerous collective

agreements, pension funds and inter-company

superannuated funds were only permitted as

new implementation options over the course of

2002.

12

Renaissance

of occupational

retirement provision

Viewpoints Business trends, results and environment



GDV and its members

One reason for the temporal delay was that

the federal government regulations on detailed

questions with respect to pension funds did

not pass the Federal Council [Bundesrat] until

December 2001. Another reason was that the

Federal Supervisory Office for Financial Services

could only issue the requested business permits

for the pension funds in the course of 2002 due

to personnel and material bottlenecks. In the

meantime, GDV, which has been working

throughout to accelerate the permit process, has

been able to accept a number of inter-company

pension funds as new members.

Further stimuli for occupational retirement

provision should come from EU efforts to create

a European single market for old-age provision

as well. The acceptance by the European Council

of a compromise text for the proposed Directive

on the activities of institutions for occupational

retirement provision in June 2002 was doubt-

lessly an important step in this direction. The EU

Directive is to set minimum standards for insti-

tutions administering occupational retirement

provision. The issuance of the Directive is to be

expected in early 2003 at the earliest.

In addition, the EU Commission has decided to

initiate a procedure for consulting European em-

ployers and labour in order to remove obstacles

for occupational retirement provision systems.

The purpose of the measure is to develop a com-

mon initiative for the acquisition, preservation

and transfer of occupational pension claims in

the EU.

The tax exemption provision of §3

No. 63 of the Income Tax Act which

was introduced with the pension reform

is now being scrutinised by the Federal Constitu-

tional Court. In accordance with this provision,

employers’ contributions to superannuation

schemes and pension funds from the first

employment relation are tax-exempt beginning

in 2002, provided these contributions do not

exceed 4 per cent of the assessed contribution

limit of statutory pension insurance for workers

and employees.

19 insurance companies have objected to the

legislation on the grounds that direct insurance,

one of the most significant methods for admin-

istering occupational retirement provision, was

excluded without any material justification. The

appellants regard the exclusion of direct insur-

ance from the tax exemption as a violation of

the constitutional principle of equal treatment.

Unless the proceedings are overtaken by re-

newed legislative action, a duration of at least

two to three years is to be expected.

13

No discrimination

of direct insurance

On 6 March 2002, the Federal Constitu-

tional Court made its long-awaited

ruling on the taxation of pensions. In a

far-reaching judgment, the supreme

German court found that the unequal taxation

of social security pensions and civil service pen-

sions beginning in 1996 is incompatible with the

principle of equal treatment set forth in the

Basic Law. The court concluded that it was

unconstitutional to tax civil service pensions in

the full amount while only the income portion of

social security pensions is taxed with no con-

sideration as to what percentage of the untaxed

contributions made prior to the receipt of the

benefits was made by employers and what per-

centage was made with federal funds. Conse-

quently, the legislature was given the task of

enacting a new constitutional regulation prior

to 1 January 2005 which would, in particular,

comply with the prohibition on double taxation.

It is to be explicitly welcomed that the Federal

Constitutional Court has clung strictly to its con-

stitutional duty to interpret the law. The court

limited itself entirely to remedying the unequal

treatment without prescribing to the legislature

how the taxation of pensions is to be regulated

in the future. The court’s ruling neither prefers

a specific system of taxation nor makes any

statements on the taxation of private or occu-

pational retirement provision.

Before this backdrop, it is surprising that

the federal government has made state-

ments announcing its intent to reform

all of the tax regulations in connection

with old-age provision in response to

this pension ruling. Such a reform is not

constitutionally required. It remains to be seen

to what extent the ruling will induce the legis-

lature to reform not only the social security

pension, but also the fiscal treatment of all

other old-age provision expenditures and in-

come in old age. It is hoped that the state will

continue to provide financial incentives for the

provision of supplementary old-age provision

instead of making radical cutbacks.

An additional hedge is still necessary. Statutory

old-age provision benefits are barely sufficient

today and will drop even further in the coming

years. The fiscal assistance models introduced by

the Retirement Savings Act serve the sole pur-

pose of closing the pension gaps which have

been created recently. Before this backdrop, any

worsening of the fiscal situation compared to

the current status quo would be a step in the

wrong direction.

14

Constitutional Court:

equal treatment

of pensions

Pension ruling

provides no basis

for across-the-board

reform of old-age

provision




GDV and its members

Health reform and private health insurance

The health care system continues to have seri-

ous problems. The increase in costs for nearly all

service areas far exceeds the general increase in

cost of living expenses. For medicinal products

alone, the rate of increase is in double digits

for both statutory health insurance (SHI) and

private health insurance (PHI). Physicians have

been attempting to compensate for the shrink-

ing SHI funds by increasing prices for private

patients. Statutory health insurance premiums

are expected to increase by up to 0.5 per cent

for 2003.

The well-known deficit in SHI will be the focus of

the impeding health care reform. As of the be-

ginning of the new legislative period, 38 per cent

of the population still trusts the SPD/Green Party

coalition to successfully enact health care re-

form. Only 32 per cent consider the opposition

more capable of enacting these reforms, accord-

ing to the results of an Emnid study conducted

in September 2002.

How pay-as-you-go statutory health

insurance funds intend to deal with

demographic change in the coming

decades remains unresolved. While pen-

sion insurance has found at least a modicum of

demographic security with the Riester pension

scheme, the health care system is still largely

unaware of the problem.

For example, the SPD proposed in its election

campaign that the annual remuneration limit

for new insureds should be raised on demo-

graphic grounds. The opposite is true. If the

objective is to increase demographic security,

it is necessary to strengthen funded systems.

Raising the annual remuneration limit to

strengthen statutory health insurance, which is

dependent on demographic factors, is incom-

prehensible, especially as private health insur-

ance, which is more resistant to demographic

trends, is being weakened at the same time.

Private health insurers will redouble

their efforts to maintain the current

compulsory insurance limit between

SHI and PHI in the current legislative

period. They will also make clear that weakening

private health insurance is out of the question

on demographic grounds alone. However,

demographic grounds are not the only decisive

factor in favour of maintaining the compulsory

insurance limit. Recent image analyses have

demonstrated that many persons insured with

statutory health insurance are dissatisfied with

their coverage.

15

Demographic security

for the health care

system as well

SHI/PHI compulsory

insurance limit

must be maintained

In the Emnid study cited, nearly 40 per cent of

respondents had a negative view of SHI’s limited

benefits, a four per cent increase over the pre-

vious year. 74 per cent of private insurance

customers are satisfied with PHI benefits. An

image analysis commissioned by the PHI As-

sociation makes the distinction clear: while

78.6 per cent of all persons insured with PHI

consider their company secure, only 59.6 per

cent of persons insured with SHI feel the same

way about their company. On the question of

efficiency, 74 per cent of private customers

attribute this quality to PHI, while only 31.6 per

cent of voluntarily insured employees attribute

this quality to SHI.

The catchword “solidarity” is also very

telling: while only a third of voluntarily

insured employees still consider SHI

solidary – this figure was 60 per cent

two years ago –, 32 per cent per cent of persons

insured in PHI feel this way about their company.

All of the image analyses point in the same

direction: PHI is perceived across-the-board as

more efficient and more secure. In light of these

facts as well, a shift in the compulsory insurance

limit at the expense of PHI is entirely incompati-

ble with the current political landscape.

In view of the worsening financial situation in

statutory health insurance, the current benefit

level cannot be maintained without increasing

prices. By the same token, a marked premium

increase can only be avoided by limiting the SHI

benefit catalogue while increasing the respon-

sibilities of insured persons. Future prospects

appear bright for PHI in this regard. The central

question as the new legislative period begins is

whether political leaders will actually follow the

societal trend and the social policy requirement

of increased responsibility for insured persons in

the health care system as well.

The flood of the century and insurance

As a consequence of the horrible floods in the

summer of 2002, the demand for the introduc-

tion of compulsory insurance against flood

damage became stronger. The topic was under

intensive consideration at the beginning of the

nineties, when politicians and the insurance

industry consistently rejected such a compulsory

insurance policy. This rejection was in part due

to constitutional concerns that the introduction

of such a policy would represent an excessive

restriction on the freedom of contract guaran-

teed in the Basic Law. However, the actuarial

objections to the duty to obtain this insurance

appeared even more serious, for example the

issue of requiring the formation of groups for

compulsory insurance against flood damage.

However, it may be necessary to re-examine the

results of that discussion in light of the claims

scenarios arising due to the recent flood and the

potential political repositioning. One particular

question which must be considered is whether

the weather scenarios which were responsible

for the disastrous floods this year could occur

with greater frequency in the future and result

in larger claims scenarios than previously as-

sumed. The insurance industry is prepared to

contribute its experience and know-how so that

an acceptable solution can be found.

16

Customers consider

PHI more efficient and

more secure




GDV and its members

On the question of liability for environ-

mental damage, the EU Commission

has specified its ideas in presenting a

proposal for a new Directive. At variance

with the original White Paper, liability

in civil law for bodily injury and material damage

due to harmful effects on the environment is

excluded from the regulatory scope of the

proposed Directive. Such liability remains exclu-

sively subject to national law (the Environmental

Liability Act).

The draft Directive only deals with the public-

law duty of those causing environmental dam-

age to bear the costs of preventing and removing

of soil contamination, water pollution, and dam-

age to biological diversity. The operator respon-

sible for the damage must bear the costs of

preventing and removing contamination, which

is to be ensured through the introduction of an

obligation to create a provision for coverage.

However, existing environmental and soil com-

prehensive cover insurance policies only cover

such removal costs to a very limited extent. In

general, damage to biological diversity, such as

natural habitats in conservation areas or pro-

tected species, is uninsurable in Europe.

Since there is no established market

for pure environmental risks, the intro-

duction of the compulsory insurance

discussed by the EU Council would

cause irresolvable difficulties. The required in-

surance cover cannot be provided based on the

current draft of the proposed Directive. The type

and scope of the disposal required by the

authorities are not specified to a sufficient

extent. Since there are no accepted and practical

methods for assessing damage to biological

diversity, such damage cannot even be calcu-

lated. Although the EU Commission was aware

in advance of these concerns on the part of the

insurance industry, they were not reflected in

the proposed Directive.

Coverage for terrorism damage

As is widely known, the attacks of 11 September

2001 have dealt a massive blow to the global

economy. In addition to airlines and interna-

tional trade, insurance companies were particu-

larly hard-hit, of course. The challenge facing the

insurance industry is by no means limited to the

provision of several billion Euros for the resulting

damage. Instead, acceptable new solutions

must be developed immediately for the future

coverage of terrorism risks.

Despite the global slump in coverage capacity,

German insurers have been able to maintain

their original coverage in the private and trade

insurance classes. In industrial liability insurance

as well, insurance cover is, in principle, un-

changed, as far as terms are concerned.

17

EU Commission

specifies its ideas

in connection with

environmental liability

No insurance cover

for pure

environmental risks

Only in the high-sum property insurance busi-

ness did a provision have to be introduced ex-

cluding damage as a result of terrorist attacks in

the 2001/2002 contract renewals due to the

large-size claim potential, the conceivable accu-

mulation risks, and in view of the unknown

potential for damage. However, this coverage

emergency and the resulting local disadvan-

tages for the German industry were contained

with the founding of Extremus Versicherungs-

AG. This special insurer, which commenced

operations in September 2002, offers coverage

for terrorist attacks for risks located in Germany

with an insurance sum of over 25 million EUR.

An overall capacity of 13 billion EUR is

available for property claims for damage

to buildings and operational facilities as

well as the resulting business interrup-

tion claims. Of this amount, 1.5 billion EUR is

provided by German insurance companies and

an additional 1.5 billion EUR is provided by the

international reinsurance market. The remain-

ing 10 billion EUR stems from the government

guarantee which is triggered when claims ex-

ceed the 3 billion EUR provided by the insurance

industry.

The intensive efforts on the part of the German

insurance industry to contribute, together with

the state, to the creation of a provision for terror-

ism risks, have thus come to a successful conclu-

sion, even though the current coverage solution

is temporary due to the temporal limitation of

the state guarantee. Now it comes to down to

how industrial policyholders will assess the

threat and whether they will take this offer.

German insurers are in agreement with the

German government that a permanent govern-

ment engagement in the insurance industry

should be avoided. In the medium term, both

sides aim to successively build up private cover-

age capacity.

Questions of financial supervision

For about five years, international organisations

like the Financial Stability Forum, the Interna-

tional Association of Insurance Supervisors (IAIS)

and the EU Commission have been expressing

increased interest in the role of reinsurance on

the financial markets. This interest has resulted

in numerous initiatives to reform the super-

vision of reinsurance companies. While the

efforts of the EU Commission are characterised

by the principle of creating a European Single

Market for reinsurance companies, the objective

of the insurance supervisors is the protection of

direct insurers and their customers.

All projects for direct supervision of

insurance would result in stricter super-

visory laws for German reinsurance

companies, if the proposals are to be

implemented. However, the decisive

fundamental question of whether and to what

extent new supervisory regulations are required

has not been answered by any of the aforemen-

tioned organisations as they began their work.

For example, the potential negative effects of an

EU Directive on the competitive situation of Eu-

ropean reinsurance companies have not been

examined. Five of the “top ten”reinsurance com-

panies in the world are located in Germany. GDV

expects the institutions involved to give due con-

sideration to the economic environment in

which international reinsurance companies find

themselves.

18

No stricter

supervisory laws for

German reinsurance

companies

13 billion EUR

for property and

interruption claims




GDV and its members

The new investment ordinance for in-

surance companies took effect on 1 Jan-

uary 2002, replacing the former §54a

of the Insurance Supervisory Act. The

ordinance provides for a moderate liber-

alisation of the previous investment regulations,

taking into account the changing investment

policies of insurance companies, which are be-

coming increasingly international in scope.

An important core element of the new invest-

ment ordinance is its anchoring of qualitative

criteria in supervisory law. For example, insur-

ance companies are now legally obligated to

ensure the observation of general and specific

investment principles through qualified invest-

ment management, in addition to suitable

internal investment principles and control

procedures and a forward-looking investment

policy. In this context, “stress tests” will gain in

importance for the assessment of credit risks, in

addition to ratings.

Stress tests represent an important toll for

analysing the effects of adverse capital market

trends on the risk tolerance of insurance

companies. Many companies have been using

stress tests for years as part of their internal risk

management systems. For example, GDV

developed a stress test model specifically for life

assurance companies in 1999. It is important

that the stress tests take into account not only

capitalised valuation reserves, but also reserves

on the liability side of the balance sheet, such as

unused bonus and rebate provisions, as buffers.

The new investment ordinance is a first step

towards a supervisory system based, in general,

on qualitative criteria. The German insurance

industry is positively disposed towards this

development since a qualitative supervisory

system is the only way to ensure risk-sensitive

supervision and the maintenance of harmony

with internal company risk management sys-

tems. Moreover, the consideration of risk man-

agement systems in supervisory law allows

insurance companies to use their manoeuvring

space efficiently within the framework of

their investment policy while safeguarding the

interests of insured persons. Specific insurance

features must be taken into account, however,

when incorporating risk management systems

into supervisory law. The mere indiscriminate

transfer of models recognised in banking super-

vision law is therefore inappropriate.

19

New investment

ordinance establishes

qualitative supervisory

criteria

The adoption of an EU Directive on

supplementary supervision of financial

conglomerates is expected in 2002. The

EU Commission defines financial con-

glomerates as a group of companies

offering primarily financial services in

various sectors (insurance companies,

banks, investment firms). From the start, the

German insurance industry has welcomed the

EU Commission’s aim of adapting the structure

of supervisory law and the function of the

supervisory authorities to a financial system

which is increasingly characterised by inter-

national connections. This is an important and

necessary contribution to the stability of the

international capital markets. However, the

insurance industry has also pointed out from

the start that a Directive must take into account

that the risk situation of banks and insurance

companies varies widely in many areas.

GDV is therefore pleased that, while providing

for an inter-sector approach to the supervision

of financial conglomerates, the current draft of

the proposed Directive takes into account the

specific situations of the various individual

sectors by leaving the sector-wide supervisory

systems in place. The result will be a system for

supervising financial conglomerates which will

not result in unreasonably high additional

capital requirements in most cases.

However, in the view of the German insurance

industry, it must also be ensured that the im-

plementation of the Directive in national law,

which is expected in 2003, does not result in

competitive disadvantages for German compa-

nies due to the structuring of the manoeuvring

space for implementation. A close dialogue is

needed in this regard between the supervisory

authorities, the Federal Ministry of Finance, and

the insurance and credit industry.

Insurance companies within the Euro-

pean Union are essentially subject to a

three-tier financial supervision system:

first, they are required to make sufficient actuar-

ial provisions; second, they are required to meet

investment criteria set down in supervisory law;

third, insurers are required to possess sufficient

capital adequacy (solvency). This method corre-

sponds to the “last resort” concept (equity as a

final risk reserve).

If equity is to properly perform its function as a

buffer against risk, it is essential that the com-

pany and the supervisory authorities be familiar

with the risk which the equity is to reflect. Like

other companies, insurance companies are

vulnerable to inter-sector, sector-specific, and

individual company risks. The risk profile of

the company to be supervised is of the greatest

interest for adequate supervision.

Since the deregulation of the insurance market

as a consequence of the advancing globalisation

and internationalisation, insurance companies

have faced more intense competition. Equity

plays a significant role in this regard. Conse-

20

Three levels of EU

financial supervision

EU Directive

on supplementary

supervision of

financial

conglomerates

adopted




GDV and its members

quently, insurers are subject to capital adequacy

regulations which make them distinct from

other sectors.

The solo solvency regulations currently

in effect are based on EU Directives

from 1973 (for casualty and property

insurance) and 1979 (for life assurance). The

structure of the system, which has changed little

since its introduction, is relatively easy to under-

stand. Although some significant risks are not

taken into account in the supervisory system,

the authors of the 1997 “Müller Report” came

to the conclusion that the existing system for

solvency supervision had proven itself. This

report served as the basis for the further quan-

titative and qualitative adjustment of the

Directives, although the basic structure would

be preserved.

With this adjustment of the Solo Solvency Direc-

tives, which is to be implemented in national law

next year and applied in 2004, the “Solvency I”

project came to an end for the European Com-

mission. Certain proposed changes, such as the

controversial provision index, which had yielded

adverse results in the test calculations, were

defeated. Other proposals of the insurance

industry, on the other hand, such as automatic

recognition of hidden reserves, were not even

considered.

The implementation and application in 2001

of the 1998 Insurance Groups Directive gave a

new quality to insurance supervision. Although

specific direct insurance companies belonging

to insurance groups are already subject to sup-

plementary supervision, the new Directive

brings a group-wide view into the supervision

of insurance companies for the first time. The

central aspect of this supplementary supervision

is the calculation of adjusted solvency. This

calculation supplements the existing solvency

requirements for the individual direct insurance

companies with a solvency analysis for the

insurance group as a whole (adjusted solvency).

The implementation in German law of

the Insurance Groups Directive was not

without problems. The regulation,

which was in any case very difficult to

understand, left open many questions

which had to be resolved during imple-

mentation. Since the responsibilities of

individual supervisory authorities were not re-

solved, an internationally harmonised imple-

mentation was unfortunately not possible. In

addition, the Federal Supervisory Authority for

Financial Services must involve itself for the first

time with figures from consolidated annual

financial statements which may have been

compiled on the basis of internationally ac-

cepted accounting principles.

In assessing the capital adequacy of insurance

companies, it must be ensured that multiple

gearing and intra-group creation of capital are

eliminated. The regulations on the calculation

of adjusted solvency will result in a not insigni-

ficant administrative expense for insurance

21

“Solvency I” project

concluded

Unresolved

responsibilities

of individual

supervisory authorities

hinder

implementation

companies, as well as for the Federal Supervisory

Office for Financial Services. It remains to be

seen whether the calculation models will prove

themselves. Far better solutions may result from

practice.

Since 1998, GDV has been intensively

involved in the conception of a new

supervisory system. The objective is a

system for solvency supervision capable

of managing risks more effectively than

before. Since 1999, the European Commission

has also taken up the reform of the existing

supervisory system with its “Solvency II”project.

The Commission has set the framework for the

future supervisory system in a catalogue of

criteria, which included the requirement that

systems for solvency supervision operate in a

more risk-sensitive fashion.

This capital adequacy requirement, trivial in and

of itself, proves upon closer examination to be

extremely significant, since “risk-sensitive” in

this case does not mean “more”capital. This fact

deserves particular attention in view of the func-

tion of capital as a competitive factor. According

to the Commission’s catalogue of criteria, capital

requirements are instead based on the risk situ-

ation of the individual insurance company. This

results in three problem areas for GDV:

■ Since the supervisory system for credit insti-

tutions has reached an advanced stage of

reform, the proposal may be made without

reflection that Basle II be applied to the in-

surance sector as well. However, such a

method would not take into consideration the

significant differences between insurance

companies and banks, both with respect to

their areas of operation and products and

with respect to their risk situation. All publica-

tions on this topic underscore this assess-

ment. A KPMG study commissioned by the

European Commission reaches the conclusion

that actuarial risks are more complex and

diverse than banking risks. Therefore, the

simple application of banking regulations

to insurance companies would not satisfy

the requirement of a risk-sensitive supervisory

system.

■ GDV is in favour of a future solvency system

which would give due consideration to the

actual risk situation of insurance companies

and translate these risks into risk-sensitive

capital adequacy requirements. The system

should also be as transparent and easily

comprehensible as the existing calculation

models. In other words: a risk-sensitive sol-

vency system should satisfy the requirement

for risk-sensitive and competitive capital

adequacy. Such a risk-sensitive capital ade-

quacy system would benefit all, not least

policyholders.

22

“Solvency II”:

conception

of a new supervisory

system




GDV and its members

■ GDV is also in favour of consideration of inter-

nal risk management models so that super-

visors can take advantage of the know-how of

the companies themselves. According to the

proposal, if insurers have advanced internal

risk management models, supervisors would

examine these models and recognise them as

an alternative to the prescribed model.

The objective of the insurance industry is to

make clear the significance of these three points

to the European Commission and all partici-

pants in the supervisory reform, both with re-

spect to safeguarding the interests of insured

persons and with a view to an appropriate

treatment of the role of capital in a competitive

context.

EU Accounting Regulation

In March 2002, the European Parliament ap-

proved a proposed European Commission Reg-

ulation on the introduction of international

accounting principles. The object of the Regula-

tion is to make annual financial statements

more transparent and more readily comparable.

The Regulation requires that publicly traded

companies in Europe base their consolidated

financial statements on the International Ac-

counting Standards (IAS) beginning in 2005. It

is left to the discretion of the Member States

whether the applicability of the Regulation is

to be extended to the consolidated financial

statements of non-publicly traded companies

and the financial statements of individual

companies.

The International Accounting Standards Board

(IASB) and the EU are united in the object of

making the IAS the true internationally accepted

global accounting standard. These regulations

would apply for all sectors, and thus for insur-

ance companies as well. The German insurance

industry supports this object.

In Germany, no decisions have yet been made on

the Member State options included in the Reg-

ulation. The Federal Ministry of Justice rightly

intends to conduct a thorough dialogue in ad-

vance with all involved parties, in order to obtain

a solid and secure basis for its decision. To this

end, the Ministry has already requested inter-

ested parties to submit opinions on matters in

connection with the decision and invited those

parties to a meeting held in autumn of 2002.

However, according to our current information,

the Ministry is not expected to submit proposals

before early 2003.

GDV welcomes the distinction made be-

tween publicly traded and non-publicly

traded companies. The differentiation

with respect to the application of

international accounting standards will

prove expedient, at least in the initial

application of these principles. There are many

advantages to Member States passing on their

options to individual companies. If non-publicly

traded companies are at least given an option

with respect to the preparation of their consoli-

dated financial statements and individual finan-

cial statements, the market should develop a

dynamism of its own, and insurance companies

of all sizes and legal forms, regardless of region,

will adopt the IAS accounting principles in the

foreseeable future.

23

GDV welcomes

the differentiation

of publicly traded from

non-publicly traded

companies

Until now, the principle has applied that the

commercial balance sheet serves as the basis of

the tax balance sheet (the “relevancy principle”).

At the same time, there are provisions in tax law

which are binding for commercial accounting

(the “reverse relevancy principle”). As a result,

the decision on whether to exercise the options

included in the EU Regulation in Germany can

only be made upon the clarification of issues

regarding taxation. The basis of taxation (Com-

mercial Code, IAS or mixed variants; annual

financial statements, consolidated financial

statements or other sets of accounts) has to be

discussed and decided on.

The complete separation of commercial and tax

accounts and the creation of independent self-

contained tax accounting laws may be very

expedient under certain conditions since the

two sets of accounts pursue different objects.

The legislature has already weakened the rele-

vancy principle considerably in recent years in

practice, not least due to the desires of the fiscal

authorities. However, the concern exists that if

the tax balance sheet is independent, there

would be no limit to the access available to

the fiscal authorities. Since the regulations on

dividend assessment, financial supervision and

premium refunds are based on the commercial

accounts, there remains considerable need for

clarification in this regard.

In addition to the Accounting Regula-

tion, the EU Commission has proposed

that the Accounting Directives be re-

vised. This proposal is based on the calculation

that companies will continue to base their

accounting on EU Accounting Directives in the

future. This is particularly true for cases in which

the Member States do not exercise the options

provided for in the Regulation, so that the

Accounting Directive, the Group Accounting

Directive, and the Insurance Accounting Direc-

tive are directly applicable for the companies. By

amending the Directives, deviations from IAS are

to be eliminated, allowing an adjustment to IAS.

Since insurance-specific transactions

cannot be sufficiently accounted for

with the IAS as they currently exist, in-

surance companies are obliged to fill existing

regulatory gaps in the IAS by applying the rele-

vant regulations of the US GAAP. For this reason,

the IASB is pursuing the goal of drafting an

IAS for insurance contracts. GDV supports this

object, in principle. However, the concepts

proposed so far by the IASB and its predecessor,

the IASC, have encountered international

criticism.

GDV maintains close contact with representa-

tives of the US and Japanese insurance indus-

tries (American Council of Life Insurers [ACLI] and

the Life Insurance Association of Japan [LIAJ]).

Based on these contacts, it has been revealed

that the criticism of “fair value” as a basic valua-

tion criterion is shared by all three insurance

markets. This opinion was made clear in a joint

letter to the IASB. All three associations are

concerned that the IASB will fix basic premises

without thorough analysis and debate. These

associations, at least, see the necessity of a

thorough discussion of the premiums, which

were conceived by a small number of IASB

24

IASB “insurance

contracts” project

Modernisation of EU

Accounting Directives




GDV and its members

employees and never subjected to a thorough

analysis by the Board, and testing their imple-

mentation in practice. Only such a procedure can

ensure that a future standard for “insurance con-

tracts” is feasible in practice.

The proposals made by the IASB as part of this

project also include the abolition of provisions

for large-size claims and equalization provisions,

since these do not meet the criteria of liabilities

based on the IAS rules, in the opinion of the IASB.

GDV, on the other hand, is in favour of retaining

provisions for large-size claims and equalization

provisions. In a further joint letter, the three

associations also pointed out that the insurance

industry needs sufficient time to create the

proper conditions for the implementation of an

insurance-specific standard in the companies.

The European Commission has rejected

an exceptional regulation for the insur-

ance industry in the application of the

IAS beginning in 2005. However, since at

least no final insurance-specific IAS is to

be expected in 2005, the insurance industry is

pleading for an interim standard which would

apply beginning in 2005. The IASB is also now

proceeding from the assumption that such an

interim standard is necessary, at first encom-

passing only certain problem areas of the overall

project. Potentially, this interim standard will

include statements on the following topics:

requirements for the preparation and presenta-

tion of financial statements and the application

of IAS 39 “Financial instruments: recognition

and measurement” for contracts which do not

qualify as insurance contracts for accounting

purposes. Parallel to the application of this in-

terim standard, work should continue on a com-

prehensive standard for insurance contracts.

However, no decisions have yet been made.

The IASB is cooperating more and more with the

US Financial Accounting Standards Board (FASB)

and other national standard-setters (particularly

with liaisons like the German Accounting

Standards Committee [Deutsches Rechnungs-

legungs Standards Committee – DRSC]) within

the framework of specific projects. The purpose

of this cooperation is to harmonise the IAS and

national accounting standards, obtain opinions

on selected questions, and, in some cases, to

delegate the development of draft standards to

national standard-setters. The founders of DRSC

included two representatives of the insurance

industry.

The insurance industry continues to support

DRSC, since insurance companies are convinced

that a private-sector accounting body is more

capable of developing accounting standards

which satisfy the information requirements of

all involved than a government agency. If the

insurance industry and the other industries

involved had not made the decision to found

DRSC, the IASB would have no German liaison

today and Germany would not have played a

part in setting the international standard.

25

Insurance industry

in favour

of IAS interim

standard

Lines of development in investment policy

The global discussion regarding “sustainability”

has intensified in recent years. The insurance

industry supports the goal of sustainable de-

velopment, in principle, and accepts the re-

sponsibility of promoting the preservation of

resources for the benefit of future generations.

Insurance companies regard “sustainable man-

agement” as an integrated corporate concept

of which investment policy represents only a

single pillar.

Notwithstanding this positive basic

attitude, a general consideration of

ethical, social, and economic interests in

setting investment policy would be

problematic. The main problem is the

lack of generally applicable standards and crite-

ria with respect to the “sustainability” of invest-

ments, so that differing approaches (negative

screening; best-in-class) would yield entirely

different results with respect to the evaluation

of companies.

However, a narrow definition would place sub-

stantial restrictions on the possibilities for di-

versification on the world market, especially in

Europe, and certainly in Germany. The inevitable

result would be increased risk and lower returns.

As a result, insurance companies would be in

conflict with the Insurance Supervisory Act,

which explicitly requires secure and profitable

investments. Therefore, insurance companies

are attempting to take into account “sustainabil-

ity” in their stock investments to the extent

possible while satisfying the requirements of

efficient portfolio management and allowing

insurance companies to meet their existing

obligations vis-à-vis policyholders.

The further development of sustainable invest-

ments is dependent on the setting of standard-

ised and comprehensible international criteria,

in the view of the insurance industry. It must

be clear whether or not an investment meets

the criterion of “sustainability”, since otherwise

companies are vulnerable to incalculable liability

risks if they agree to pursue a policy of sustain-

able investment, e.g. as a provider of “Riester

products”.

The transfer of credit risks from banks to

insurance companies through invest-

ment products such as asset-backed

securities (ABS) and credit-linked notes

(CLN) is gaining in importance. In addition to the

potential for improved portfolio diversification,

investments in the asset class “credit” give in-

surance companies additional profit opportuni-

ties. Supervisory authorities have specified the

framework conditions in supervisory law for the

assumption of credit risks in greater detail in a

recent memorandum. According to this memo-

randum, insurance companies may, in principle,

only assume credit risks for investment grade

products. Moreover, ABS and CLN may only be

acquired for the purpose of portfolio mixing.

26

Transfer of credit risks

from banks to

insurance companies

No generally

applicable standards

for sustainable

investments




GDV and its members

In the view of the insurance industry, these

products, especially ABS, represent an important

asset class of increasing importance. Responsi-

ble investment in these financial instruments

will enable the optimisation of companies’ re-

turn/risk profile. Nevertheless, the investment

principle of security must remain in the forefront

for the investment of insurance companies in

ABS. It is therefore appropriate for investments

in ABS, but also investments in CLN and

corporate bonds, to be based on ratings as a

qualitative supervisory criterion. Ratings repre-

sent an objective, comprehensible tool for as-

sessing the security of investments with respect

to credit risks. Moreover, especially in light of the

increasing importance of the “credit”asset class,

the establishment of a responsible risk manage-

ment system is indispensable. The insurance

industry considers itself in agreement with

supervisory authorities in this regard.

After enacting the Corporate Super-

vision and Transparency Act in 1998,

the legislature continued its efforts to

improve the corporate governance of

German companies with the passage of the

Transparency and Disclosure Act. The regulation

included in this Act requiring companies to

declare whether they comply with recommen-

dations of the German Corporate Governance

Code is to be welcomed in the view of GDV. The

result is increased transparency, particularly for

investors, with respect to the corporate gov-

ernance practised in the individual companies.

The government Corporate Governance Com-

mission (the Baums Commission), created in

2001, made additional proposals for amend-

ments and held discussions on the text of

various provisions. These proposals are to be

discussed by the legislative bodies beginning

in 2003. It should be noted in this regard

that these proposals include the updating of

existing provisions and the introduction of new

restrictions solely for the purpose of preventing

abuse.

The understandable outrage which is currently

evoked by the repeated corporate scandals,

mostly in the USA but also here in Germany,

should not serve as a basis for the future action

of the German legislature. The criminal practices

which have been revealed in some cases are not

symptomatic, of course, for the mass of law-

abiding companies, so that overblown provi-

sions of corporate and commercial law would

not be beneficial. Instead, the freedom of

companies to set their own rules should be

preserved. It is sufficient for investors for individ-

ual companies to clarify individual matters by

declaring their compliance with the German

Corporate Governance Code.

27

Corporate governance:

more transparency for

investors

Issues of insurance distribution

In September 2002, the EU adopted the Directive

on insurance mediation, setting the conditions

for the commencement and exercise of the func-

tion of intermediary. The core provision of the

Directive is the requirement that all insurance

intermediaries be entered in a register. GDV

welcomes the requirement that insurance inter-

mediaries possess standardised qualifications

as a condition for entry. In the absence of legal

qualifications for the German market, the insur-

ance industry created the insurance salesman/

saleswoman training course for insurance

intermediaries eleven years ago. Since then, all

insurance companies require insurance repre-

sentatives to successfully complete this training

course. In February of this year, the Vocational

Training Institution of the German insurance

industry administered its one hundred thou-

sandth examination. Thus, the training material

and testing criteria of the insurance salesman/

saleswoman training course are best-situated

for consideration in the implementation of the

Directive.

However, significant concerns exist with respect

to the requirement that intermediaries set

down in writing the desires and needs of their

customers as well as the reasons for their con-

sultation. Not only does such a documentation

obligation conflict with the principle of the re-

sponsible policyholder, in the opinion of GDV,

such a document can be used as evidence

against the policyholder. What such documenta-

tion cannot guarantee is the protection of the

consumer from bad advice.

GDV regards with scepticism the efforts

of the EU Commission to introduce a

new category of employee which, al-

though financially dependent, cannot

be classified using the traditional

categories of employment and self-em-

ployment. This category would include single-

company insurance representatives, which are

considered financially dependent due to their

commitment to a single customer. This discus-

sion is strongly reminiscent of the 1998 “pro-

forma self-employment”legislation in Germany,

which was later amended. Under no circum-

stances should the legal uncertainty which

occurred as a result be allowed to paralyse

entire sectors, this time through European law.

In the opinion of GDV, the criterion of personal

dependence set by the Federal Labour Court

should remain the decisive criterion for deter-

mining the legal status of insurance representa-

tives. Now that the social security authorities

have adopted this opinion, the necessary legal

certainty in business dealings between insur-

ance companies and insurance representatives

has been restored. The introduction of a new

category of financially dependent employees

would destroy this certainty and should there-

fore be rejected. In addition, the proposals of the

EU Commission do not correspond with the

evaluation of the Directive on insurance media-

tion on the issue of financially dependent

insurance intermediaries. The Directive clearly

considers this group self-employed. The EU

Commission should maintain this position in the

interests of avoiding a conflict.

28

EU study on financial

dependence is

reminiscent of the

debate on proforma

self-employment




GDV and its members

On the question of the taxation of

commission claims for the mediation of

pension contracts, GDV reached an

agreement with the fiscal authorities

that commissions paid on a pro rata basis over

time will be taxed upon payment only on a pro

rata basis over time as well. This could remove a

significant obstacle to the mediation of Riester

products. However, under the new arrangement

for taxation on a pro rata basis over time, the

commission cannot be pre-financed.

By law, contracting and marketing costs accruing

in connection with the mediation of pension

contracts are to be equally distributed over a

period of at least ten years, in principle. This

resulted in a serious liquidity problem for inde-

pendent intermediaries whose commission con-

tracts are directly subject to this provision: if the

fiscal authorities applied a 1971 supreme court

ruling directly to such cases, intermediaries

would have to pay taxes in the first year on

income which they would only have received on

a pro rata basis over the course of the next ten or

more years.

Consumer issues and insurance

The internet and the opportunity it created for

rapid, global, and cost-efficient communication

have permanently changed society and the

economy. The exchange of information and serv-

ices over the World Wide Web has long been

indispensable for modern economies. The sober-

ing realisations with respect to the growth

prospects of the New Economy and e-commerce

cannot change this fact.

In order for the New Economy to become

a stable economic factor, its develop-

ment must be supplemented by the

creation of a framework for successful

financial transactions. The legal frame-

work conditions above all must take into

account the specific nature of e-commerce, its

cross-border character, but also the consumer’s

need for security.

The failure of the internet to attain significance

as a distribution channel despite ideal circum-

stances for the distribution of insurance prod-

ucts can be attributed primarily to the lack of

consumer acceptance. Large groups of people

continue to have their concerns with a medium

which they feel somewhat threatened by since

they often do not understand the technology.

This circumstance, together with the security

problems on the internet, has resulted in a con-

fidence problem.

29

Positive arrangement

for taxation of

commission claims

The internet still finds

little acceptance

from customers as

a mode of distribution

This situation has been recognised on

the EU level and a legal framework for

e-commerce has been created with the

general Directive on distance contracts,

the Directive on electronic commerce, the

Signature Directive, the telecommunications

directives, particularly the ISDN Directive, and

the general Data Protection Directive.

With the exception of the Directive on distance

marketing of financial services, which only took

effect in summer of 2002, the German legis-

lature has now implemented all EU e-commerce

Directives, also laying the foundation for suc-

cessful trading on the internet. Of importance

for the insurance industry in particular was

a clarifying letter from the EU Commission

permitting insurance companies to provide

customers with the comprehensive consumer

information required by the three insurance

Directive by electronic means. This removed a

major obstacle for the conclusion of contracts

over the internet, especially in Germany.

Another factor in the success of e-com-

merce is the confidence of the user in

the security of the technology. The soft-

ware and hardware necessary for secure

communication exists and is being constantly

improved. However, its use is often complicated

and costly. This is especially true for the discus-

sion about chipcards with a qualified electronic

signature. On this issue, the German govern-

ment is urgently requested to follow the exam-

ple of some neighbouring countries, such as

Austria and Belgium, by providing consumers

with a qualified electronic signature e.g. through

a personal ID card or driving licence. In this way,

anyone can communicate on the internet with

companies or public authorities in a simple,

secure, and cost-efficient manner. Without such

an option, no growth in the internet business is

to be expected.

Just as important for the economic success of

cross-border e-commerce is the free exchange

of data, for which the EU created a European

single market (for data protection law) as early

as 1995 with its Data Protection Directive. This

Directive was recently implemented in German

law at considerable expense, together with the

amendment of the Federal Data Protection Act.

Although this Directive has proven itself overall

and no need for change is apparent at the

moment, the Directive is once again being

scrutinised in Brussels. This is no place for pure

actionism. Above all, such action must not have

the effect of increasing expenditures and sad-

30

EU creates legal

framework

for e-commerce

ID or driving licence

as chipcard for

electronic signature




GDV and its members

dling companies with additional costs through

the introduction of new regulations and the

modification of existing ones. Instead, it is

decisive that additional experience is gathered

with respect to past implementations.

This applies for the amendment of the Federal

Data Protection Act as well. Although GDV

supports the German government in its effort

to thoroughly update, simplify, and streamline

data protection law, in principle, companies

cannot be expected to once again implement

new regulations on short notice.

In May 2002, the EU Commission

adopted its new consumer policy strat-

egy for 2002–2006, which is based on

three main objectives: a high common

level of protection within the EU, effective

enforcement of consumer regulations, and

better inclusion of consumer groups in EU poli-

cies. The Commission launched a short-term

rolling programme subject to periodic review

in order to implement these three objectives

through a series of additional actions.

Giving more consideration to consumer inter-

ests in all political areas should allow consumers

to derive maximum benefit from the Single Mar-

ket. At the same time, an important contribution

is made to EU expansion. GDV supports this

strategy and is also in favour of a consumer

policy which aims to create a coherent and

uniform environment throughout the EU so

that everyone can purchase goods and services

without fear, even outside of his or her home

country.

As market participants, consumers should

have the ability to act independently. In

order to act independently, each market

participant requires a large amount of

information as orientation and in order to make

decisions. However, the number and complexity

of products and services make it increasingly

difficult for the individual consumer to view

and evaluate the necessary information. The

Consumer Information Act presented by the

German government is an attempt to take into

account the increasing information require-

ment. The law gives consumers access to official

information relating to their interests while also

giving the authorities the right to notify con-

sumers about specific circumstances on their

own initiative.

However, GDV sees no reason for the insurance

industry to be included in this law. There is no

information shortage in connection with the

insurance product. On the contrary: insurers

already have comprehensive duties to provide

information to the consumer under the specific

contract. These duties were actually extended

for distance marketing by the new Distance

Marketing Directive on Financial Services.

31

EU consumer policy

strategy

2002–2006

Insurance not to be

included in Consumer

Information Act

In the first half of 2002, a German gov-

ernment bill for an Anti-Discrimination

Act was under discussion. After massive

protests from the industrial sector, the

project has been postponed to the 15th electoral

period. The bill prohibited discrimination based

on sex, race, ethnic origin, disability, or sexual

orientation.

With this scope, the bill goes far beyond the EU’s

requirements in its Directive 2000/43 “imple-

menting the principle of equal treatment be-

tween persons irrespective of racial or ethnic

origin”. This Directive, which must be imple-

mented in German law by the end of 2003, only

prohibits discrimination on the basis of the two

criteria specified in its title.

Although the bill presented by the Federal Min-

istry of Justice has the trappings of a supposed

anti-discrimination law, it is in fact a highly-

explosive piece of legislation which threatens to

tear apart our economic system. The intention of

establishing the right to equal treatment

granted by the Basic Law as a civil law consti-

tutes a blatant infringement on the freedom to

contract. The latter freedom is constitutionally

protected under German law.

If the Anti-Discrimination Act had actually taken

effect as intended, there would have been

far-reaching consequences for the insurance

industry. There would have been fears that

previously permissible criteria for the determi-

nation of rates, such as sex, could no longer be

used. The result would have been a change in

direction from the funded cover method to the

pay-as-you-go method, from risk-sensitive pre-

miums to single premiums.

In view of the intention to introduce a

right to take collective action for specific

groups, the danger existed that the

insurance industry would have been

overburdened with lengthy proceedings

for the clarification of basic issues. Rates would

have been decided not by market competition,

but by judges and experts. The discussion as to

unisex rates as part of the legislative process for

the Retirement Savings Act has already shown

that the principle of risk-sensitivity in private in-

surance is by no means considered untouchable.

The leading economic associations, including

GDV, vehemently objected to the discussion

draft on these grounds, asserting that clarifica-

tions were necessary, if not in the text of the law

itself, then at least in the grounds. Insurers must

retain the ability to calculate premiums within

the limits in supervisory law permitted by the

Insurance Supervision Act and the associated

regulations, based on statistical methods, or

otherwise based on confirmed historical figures.

32

Industry opposed to

arbitrariness in Anti-

Discrimination Act

Right to take collective

action would

have hollowed out

competition




GDV and its members

One can only hope that the German legislature

will ultimately decide to limit the law to an

implementation of the EU Directive. In that case,

the insurance industry would not have any

changes to expect. §81e of the Insurance

Supervision Act has prohibited making distinc-

tions on the basis of the nationality or ethnicity

of the insured person in the determination of

rates or the calculation of premiums since

1994.

The discussion on the reform of the law

on insurance contracts has intensified.

For a fairly long time, an expert commis-

sion established by the Federal Ministry

of Justice has deliberated on an updat-

ing of the current law. Even though

this commission has yet to present an interim

report, the discussion has gone on in print.

The insurance industry has been receptive to

cautiously updating the current law. Specifically,

it is advisable on the grounds of legal certainty

alone that supreme court rulings contributing to

the extension of the law be incorporated into the

law. In addition, attention must be paid to the

practicability of new or modified provisions. In

this regard, the principle of proper consumer

protection requires that due consideration be

given not only to the interests of insured per-

sons, but to those of insurers as well.

The trend in liability insurance is charac-

terised by increasingly stricter liability in

consumer law. Product liability in partic-

ular threatens to become engulfed by this trend.

The EU Commission is currently reviewing the

application in practice of the 1985 Directive on

liability for defective products. To this end, the

insurance industry was asked in a 1999 Green

Paper whether the goals pursued by the Direc-

tive had been met, particularly with respect to

the protection of injured parties and improving

product safety.

After evaluating the opinions submitted by the

groups affected by the Directive, the Commis-

sion came to the conclusion that experiences

with the application of the Directive were still

insufficient and information about possible

difficulties in application was too scanty. The

insurance industry was once again involved in

the continuation of the expert opinion process.

In the course of this process, the insurance in-

dustry adopted the opinion that the application

of the Product Liability Directive has been appro-

priate thus far: no change is needed, not even an

exclusion of developmental risks. Comprehen-

sive coverage is currently available for product

liability risks. This situation should not be put

in jeopardy.

The Act to Modernise the Law of Obli-

gations, which took effect on 1 January

2002, was also influenced by European

law. The law implemented into national

law three EU Directives, including the EU Direc-

tive on the sale of consumer goods.

33

Reform of the law on

insurance contracts:

taking the interests of

consumers and insur-

ers into account

Stricter liability

in consumer law

Reversal of burden

of proof in law

of obligations

The amended law of obligations also includes

considerably stricter liability provisions. Exam-

ples are the complete reversal of the burden of

proof with respect to the culpability require-

ment in the new damage compensation provi-

sion in §280 of the Civil Code and the consider-

ably longer limitation periods, in some cases

twice or even three times as long. It is to be

feared that this will further increase the claims

expenditure of liability insurers, and thus

indirectly increase the financial burden of

consumers.

The “Second Law Amending Provisions in Dam-

age Compensation Law”, taking effect 1 August

2002, should also increase the expenditures of

liability and motor insurers. Liability laws are

now much stricter in this area as well. Damages

for pain and suffering may now be claimed

regardless of fault, and can also be based on

strict or contractual liability. Since, contrary to

the original intent, no claims threshold was in-

troduced in this regard, the broadened elements

for claiming damages for pain and suffering also

include minor injuries. The result will be a major

increase in the claims burden, especially for

damage events with many injured persons.

The changes in medicinal product liability

law are of particular importance for liabil-

ity insurers. Previously, damages for pain

and suffering could usually not be

claimed in connection with liability for

developmental risks, unless the damage was

caused culpably. Now, the pharmaceutical in-

dustry is confronted with a substantial reduction

in the burden of proof for injured persons. Based

on the new legal situation, an assumption of

causality applies in favour of the injured party if

the medicinal product is capable of causing the

damage under the conditions existing in the

individual case.

At the same time, the possibilities for pharma-

ceutical companies to disprove this assumption

are very limited. For example, the ability of com-

panies to point out that the injured person took

other medicinal products at the same time is

limited. Above all, however, pharmaceutical

companies are not given any opportunity to ob-

tain information on attendant circumstances,

such as the patient’s medical history, beyond

what the injured person volunteers. While the

injured person is given a right to request infor-

mation from the pharmaceutical company, no

such right is given to the company vis-à-vis the

injured patient, so that “equality of arms”can no

longer be claimed in this regard.

Other important changes brought by

the amendment of damage compensa-

tion law involve improvement in the

protection of road accident victims.

Motor insurers welcome the new pro-

visions, in principle. The specification of

damage compensation law for notional settle-

ment is regarded as especially positive. The most

significant changes are:

34

Amendment of

damage compensation

law improves

protection of accident

victims

Medicinal product

liability: easing

of burden of proof

for injured persons




GDV and its members

■ The increasing of the age of responsibility for

children in traffic from seven to ten years

takes into account the determination of

developmental psychologists that children

are often overburdened by the unique

demands of traffic. The exclusion of claims

that the accident was unavoidable in ac-

cidents involving children and other “weak

traffic participants” also improves their posi-

tion. However, the defence that the accident

was unavoidable remains available for acci-

dents involving vehicles.

■ The extension of damage compensation

claims to no-fault liability and the increase in

maximum liability amounts will mean added

expenditures for the insurance industry.

Previously, damages for pain and suffering

were only due if the damaging party was

culpable for the damage. Now that no-fault

liability has been extended to passengers

(including non-paying passengers), members

of a car pool, for example, who had previously

gone home empty-handed from accidents in

which the driver was not culpable, will be able

to assert damage compensation claims in the

future based on no-fault liability.

■ The provision that turnover tax only be re-

funded if it actually accrues is appropriate in

view of the principle that injured persons only

receive as damage compensation what they

actually require to remedy the damage. In a

number of cases, this provision will induce in-

jured persons to have their damaged vehicles

repaired in official workshops. As a result, no

reduction in the claims burden can be ex-

pected. However, the new provision makes a

real contribution towards improving traffic

safety.

■ The introduction of no-fault liability for trail-

ers, accompanied by joint and several liability

for keepers of trailers and tow vehicles has the

effect of improving the position of the injured

party. Injured persons may now assert dam-

age compensation claims against the keeper

of the trailer or that of the tow vehicle at their

discretion. It is expected that this will result in

an increased claim requirement for trailers,

especially among commercial vehicles.

The “Law Amending the Compulsory

Insurance Act and Other Provisions in

Insurance Law” pronounced on 10 July

2002, the “4th Motor Insurance Directive”,

has since been implemented in national law and

will take effect on 1 January 2003. The goal of

the Directive is to improve the protection of road

accident victims who endure their accidents

abroad.

Motor vehicle liability insurers in each EU

Member State are required to appoint a claims

representative to settle the claims so that road

accident victims will not be required to assert

their claims abroad by themselves. In addition,

each Member State is required to establish a

compensation body with the authority and

obligation to settle claims at the expense of

the foreign insurer if that insurer fails to appoint

a claims representative or if that representative

fails to react correctly within three months. In

Germany, the responsibilities of the compensa-

tion body were transferred to the Association for

the Assistance of Road Accident Victims.

35

Better protection for

road accident victims

abroad as well

The compensation body is also responsible for

settling claims when the vehicle of the party

causing the damage or the responsible insurer

cannot be identified within two months after

the accident. In order to ease the position of road

accident victims, all Member States are required

to set up national information centres to which

road accident victims can turn to learn the

identity of the opposing insurer. In Germany,

the responsibilities of the information centre

were transferred to the “Motor Insurers’ Tele-

phone Exchange”, which is integrated into GDV

Dienstleistungs-GmbH & Co. KG.

Competition policy

The current Block Exemption Regulation for the

insurance industry expires in March 2003; a

successor Regulation is now being drafted. The

Block Exemption Regulation represents the legal

permit for cooperation among insurance com-

panies, including within GDV, in matters relating

to anti-trust law. In the impending revision of

the Regulation, it is important for GDV that the

Regulation be structured in line with practice in

insurance companies while taking into account

the protection of customers. Unfortunately, the

draft presented by the Commission does not

satisfy all aspects of these requirements. Im-

provements are urgently needed on individual

issues, in the opinion of GDV.

The joint compilation of statistics and

studies about past and future claims

must remain permissible. This work gives

companies more security in assessing

risks and premiums. The joint drafting of stand-

ard policy conditions should also remain per-

missible in the interests of insurance customers.

The standard policy conditions take into account

the experiences of the entire sector, guarantee-

ing accuracy and legal certainty. It therefore

makes no sense to allow such conditions in the

future only as a requirement for joint compila-

tion of statistics.

The option of forming a co-insurance group or

co-reinsurance group for risks which cannot be

borne by individual insurance companies must

be maintained and expanded. Finally, national

insurers must retain the possibility of drafting

common guidelines on security devices and

to test safety-related products (such as fire

alarms and burglary safeguards) accordingly.

Such national standards should not be made

hollow by making them equivalent to guidelines

and tests of other European insurance associ-

ations. Such a regulation would result in an

approximation at the lowest level, harming not

only the insurance companies, but consumers

as well.

In autumn of 2001, the European Coun-

cil adopted the Regulation on the

Statute of the European Company (SE)

and the accompanying Directive on

worker involvement. The publication of the reso-

lution in the Official Journal in November 2001

brought to an end a legislative process running

since the late sixties which often seemed on the

verge of failure. The problem of the long-running

project was not as much the regulations in

corporate law as questions of worker involve-

ment, which were the subject of much political

controversy. Ultimately, the final obstacle was

36

European Company

Statute has character

of pilot project

Updating the Block

Exemption Regulation

in line with practice




GDV and its members

the complaint considered by the European

Parliament of insufficient participation in the

legislative proceedings before the European

Court of Justice. To the general relief, the Euro-

pean Parliament finally decided to refrain from

filing this complaint.

The Regulation will take effect on 8 October

2004. Provided the necessary accompanying

provisions in national law have been enacted,

European companies have the option of select-

ing a legal form resulting from the merger of

companies in various Member States, the forma-

tion of a holding company, the formation of a

joint subsidiary, or the conversion of an existing

company set up under national law. The statute

sets up a uniform basis at European level in cor-

porate law which will simplify cross-border

transactions involving companies considerably.

The European Company Statute has the charac-

ter of a pilot project for other European legal

forms whose legal bases were not considered by

the Council as long as a solution for the Euro-

pean Company Statute was not found. These

include the Statute for a European Mutual Soci-

ety (ME), which would allow a mutual insurance

association to take on European legal form, and

thus be equivalent to companies in this regard.

Nevertheless, a considerable amount of legis-

lative ground must be made up in this regard

so that it appears by no means certain that

the Council will be able to process the draft

Statute for a Mutual Society rapidly enough to

guarantee that this statute will take effect at the

same time as the European Company Statute.

It is indispensable that the statute take

effect immediately if distortions in com-

petition at the expense of mutual soci-

eties are to be avoided. We therefore call

on the EU to continue its work on the draft

Statute for a Mutual Society with the utmost

urgency in order to remedy the shortcomings

of the draft under discussion since the early

nineties by October 2004. The principal de-

mands of mutual societies which have yet to

be met include

■ that transactions be permitted with non-

members as well,

■ that the founding of mutual societies through

cross-border mergers be permitted as for

European companies,

■ that the regulations for general meetings

allow the establishment of a co-opted mem-

ber assembly, a system which has been intro-

duced and proven in Germany and

■ that the number of founding members be

subject to reasonable restrictions (no social

security institutions in a private-sector legal

form).

37

No distortions

in competition

at the expense

of mutual societies

GDV and the Mutual Insurance Society Working

Group have lobbied the Commission to give

due consideration in its deliberations to the

proposals of German mutual societies with re-

spect to the Statute for a Mutual Society, giving

particular emphasis to the importance of a time

frame. We can only hope that the Commission

and the Council will be able to satisfy their par-

ticular responsibility for this legal form in the

time remaining.

Europe / rest of world /

international organisations

The countries of Central and Eastern Europe are

becoming increasingly important for German

economic relations. Moreover, the 2004 target

date for eastward expansion of the EU is ap-

proaching. Since the insurance markets in most

countries in the region are undergoing a rapid

and lasting expansion parallel to this develop-

ment, these markets are becoming increasingly

attractive for German insurance companies

and their foreign competitors. In its cooperation

with partner associations and supervisory au-

thorities in the region, GDV is contributing to the

continued improvement of conditions for its

member companies in these markets. This ex-

change of information focuses not only on

fundamental questions of German and Euro-

pean insurance law and the role of insurance

associations in supporting their member com-

panies (e.g. in the compilation of statistics),

discussions also involve specific lines such as

motor liability insurance or life assurance, as well

as their role in the social security system.

In its consultations in the past ten years with the

Central and Eastern European countries and

other transition countries, GDV has worked very

intensively and successfully with the former

Federal Supervisory Office for Insurance, which

has now been integrated into the Federal Super-

visory Office for Financial Services. Other im-

portant German partners include the German

government Transform Programme, a number

of important foundations, and, of course, the

Vocational Training Institute of the German

Insurance Industry.

On an international level, the GDV commitment

in transition countries receives support and

financial assistance primarily from the European

Union PHARE and TACIS programmes. GDV also

cooperates in this area with other international

institutions and organisations, like the Insurance

Committee of the OECD and the International

Association of Insurance Supervisors (IAIS). In

view of the increasing importance of Central

and Eastern Europe and the continued growth

of the insurance markets in those regions, GDV

is continuing its efforts to improve legal frame-

work conditions, strengthen the work of the in-

surance associations in their role as service

providers for companies operating in those re-

gions, and in the further training of employees.

As a result, GDV is adapting regional conditions

to the changing needs of its partners.




GDV and its members

GDV is also active in transition countries in Asia,

especially China. That country is also a large mar-

ket with high potential, but a high information

and training requirement as well. In September,

GDV signed a partnership agreement with the

recently founded Chinese insurance association

(IAC), which places the cooperation and ex-

change of information with our Chinese coun-

terparts on a solid footing. The exchange of

information has also intensified with other

Asian countries, especially Japan, through mar-

ket developments or the conception and evalua-

tion of legal amendments.

Marketworthy legal framework condi-

tions assuring fair competition are in-

dispensable for the foreign operations

of direct insurers and reinsurers. Free

market access must be allowed in every country

through foreign branches under conditions

equivalent to those applicable for domestic com-

panies. In additional, international reinsurers

and marine insurers in particular are dependent

on direct cross-border operations. However, a

variety of regulations continue to exist in

numerous countries which prevent or place

excessive restrictions on market entry for foreign

insurers, despite the fact that the member states

of the World Trade Organisation (WTO) agreed

in 1997 to remove barriers to market entry for

insurers under the General Agreement on Trade

in Services (GATS).

GDV therefore warmly welcomes the represen-

tation by the competent national Ministries

of EU Member States and the EU Commission,

as the lead negotiator in trade matters, of the

concrete proposals of insurers for the removal of

barriers to operations abroad both in the ongo-

ing WTO negotiations and in further consulta-

tions. The government agencies responsible for

liberalising trade should open a dialogue with

the authorities and Ministries responsible for

insurance supervision, with the object of intro-

ducing a system for mutual recognition of

supervisory measures on an international level

in the medium term so that the additional

supervision of foreign insurance operations can

be dispensed with. The legal standards for the

promotion of an appropriate supervisory system

being developed by the International Associa-

tion of Insurance Supervisors (IAIS) must not

counteract free market access either.

39

Marketworthy

framework conditions

for foreign operations




GDV and its members

Business trends, results

and environment of private insurance

The world, one year after 11 September: the

global war against terrorism, which still claims

victims all over the world, continues. After its

campaign in Afghanistan, the US is now prepar-

ing for a war against Iraq. No one knows what

the region, what the world, will look like,

if the powder keg of the Middle East were to

ignite in a war. Economic prospects are as dis-

couraging as the international political situa-

tion: the current prospects for growth and

jobs, income and pensions, leave little room for

optimism. The dramatic price decline on the

capital markets is increasingly fraying the nerves

of the public. The end of the global economic

downturn, which was once announced for the

beginning of 2002, has once again receded into

the distance. And as if all this weren’t enough,

people all around the globe are being visited

by devastating natural disasters at increasingly

smaller intervals.

The economic and political climate became a

great deal harsher within a brief period and the

insurance industry is increasingly feeling the

storm. Still, despite all of the adversity and

dangers in its environment, and despite the

continued weakness of the economy, the sector

was able to continue on its course of growth

in 2002: the member companies of the German

Insurance Association (Gesamtverband der

Deutschen Versicherungswirtschaft – GDV),

representing a market volume of over 97 per

cent, expect a premium growth of 4.0 per cent

(previous year: 2.7 per cent), to 140.8 billion EUR

(previous year: 135.4).

41

Crucial for this welcome growth has been the

trend in life assurance, where the “Riester effect”

above all will ensure a 4.5 per cent growth in

turnover. Private health insurers have also made

a decisive contribution towards this result, with

growth expected to be 5.7 per cent. However,

motor insurance, which only a year ago was still

a growth engine for the sector, should fall back

somewhat this year, with an increase of only

2.9 per cent. The total income from all insurance

forms and classes of almost 141 billion EUR is

offset by expected benefits and claims expendi-

ture of 158.1 billion EUR (previous year: 149.5);

this would be 5.7 per cent more than in the

previous year.

In detail, the following trends and prospects are

emerging in the main insurance classes:

The business trend in life assurance is domi-

nated by the German government’s reform of

pension structure. The new subsidised old-age

provision, Minister of Employment Riester’s

pension scheme, has officially been on the

market since early 2002. The demand for life

assurance products as a true old-age provision

will increase accordingly. In times of weakening

capital markets, when many a method of

accumulating capital for old age suddenly

generates losses, life assurance proves itself as

a guarantee of steady returns due to its long-

term security-oriented investment policy.

A strong growth in new business, solid premium

growth, a clear increase in total contracts and

increasing benefits characterise the 2002 busi-

ness trend. According to initial estimates, the

number of newly concluded life assurance

contracts is around 11.8 million. In annuity and

pension insurance alone, the number of newly

concluded contracts increased by 251.5 per cent

in the first six months of 2002, to around 2.2 mil-

lion. This extraordinary growth can be ascribed

to the Riester contracts, of which more than

1.6 million were concluded until 30 June 2002

as individual annuity insurance contracts, 85 per

cent of the 1.9 million total Riester contracts

newly concluded in the first six months of 2002.




GDV and its members

1980 621 5.09 7.801985 874 5.71 8.901990 1 161 5.97 9.471991 1 043 5.58 8.641992 1 130 5.66 8.801993 1 232 6.06 9.301994 1 334 6.28 9.861995 1 414 6.41 10.121996 1 452 6.49 10.201997 1 485 6.50 10.241998 1 513 6.41 10.131999 1 593 6.59 10.442000 1 657 6.70 10.492001 1 740 6.74 10.29

Year density of insurance privateinsurance penetration provision ratio

in EUR1) as %2) as %3)

Insurance in the national economyDomestic insurance premiums per inhabitant and as a proportion of grossnational product and income; from 1991 including the new federal states

1) Gross premiums in direct business of direct insurers including pension and funeral expenses funds in proportion to inhabitants, 2) gross premiums in direct business of direct insurers including pensionand funeral expenses funds in proportion to gross domestic product (as %), 3) gross premiums in directbusiness of direct insurers including pension and funeral expenses funds in proportion to disposableincome of private households (as %) – Source: Federal Bureau of Statistics, own calculations.

43

A positive trend was also reported in life assur-

ance gross premiums, with an expected increase

of 4.5 per cent (previous year: 1.9), to 65.2 billion

EUR. This premium increase was countered by a

4.2 per cent increase in total benefits, to 85.7 bil-

lion EUR, of which 55.1 billion EUR was paid out

directly to clients and 30.6 billion EUR was added

to provisions for benefits in favour of clients.

Private health insurers expect premium growth

of 5.7 per cent (previous year: 4.9) in 2002, to

22.9 billion EUR, well above the sector average.

20.9 billion EUR of this amount is from health

insurance (up 6.0 per cent) and 2.0 billion EUR

from compulsory long-term care insurance (up

2.9 per cent). However, insurance benefits paid

out to clients in health and compulsory long-

term care insurance should increase faster than

premiums, with benefits increasing by 6.6 per

cent (previous year: 5.9), to 15.4 billion EUR. Total

expenditure for insureds, including expenditure

for claims plus the allocation to the provision for

increasing age as well as to bonus and rebate

provisions, is expected to be 27.5 billion EUR in

2002.

Life insurance1)

Private health insurance2)

full and supplementary coverprivate long-term care insurance

Non-life insurance3)

motor insurance5)

general liability insuranceaccident insurancelegal expenses insuranceproperty insurance

industrial property insurancecommercial property insuranceagricultural property insuranceprivate property insurance

thereof comprehensive insurance on buildingsthereof comprehensive insurance on contents

marine insuranceCredit, aviation, nuclear insurance4)

Total of GDV members

65.2 4.5 62.36 1.9 61.2322.9 5.7 21.72 4.9 20.7120.9 6.0 19.76 5.7 18.70

2.0 2.9 1.96 – 2.7 2.0151.0 2.6 49.74 2.7 48.4121.9 2.9 21.34 4.8 20.36

6.0 1.0 5.92 0.8 5.885.5 1.0 5.49 1.5 5.402.7 1.0 2.71 0.6 2.69

12.8 3.4 12.38 0.7 12.303.4 11.2 3.07 1.4 3.032.4 0.0 2.36 – 0.7 2.380.5 0.0 0.52 3.1 0.506.5 1.0 6.43 0.7 6.393.6 1.0 3.53 0.7 3.512.4 0.5 2.42 1.3 2.391.8 3.0 1.75 6.7 1.641.7 5.4 1.58 7.5 1.47

140.8 4.0 135.39 2.7 131.82

2002*) 2001 2000

EUR bn change as % EUR bn change as % EUR bn

Insurance classes

Premium income in private insuranceGross premiums written, German direct business

*) Forecast as per 6 September 2002, 1) GDV member companies, without premiums resulting from bonus and rebate provisions, 2) including additional charges, but withoutpremiums resulting from rebate provisions, 3) without credit, aviation and nuclear, aircraft and spacecraft liability insurance and property damage liability insurance, includingtourist assistance insurance, 4) credit insurance without auditing fees; direct and reinsurance business including fidelity insurance, 5) motor TPL full vehicle own damagecover, partial vehicle own damage cover, passenger accident insurance – Source: GDV; Association of Private Health Insurers.

Casualty, property and accident insurers will be

able to deliver a premium increase in 2002 for

the third consecutive year: gross premium in-

come is expected to increase by 2.6 per cent

(previous year: 2.7), to 51.0 billion EUR. This

growth will once again be borne by motor insur-

ance, even though the rate of increase (2.9 per

cent) has slowed considerably compared to that

of the previous year (4.8 per cent). However,

there continues to be strong pressure on profit

margins in casualty and property insurance,

which is demonstrated in no small part by a

claims/cost ratio (combined ratio) of 100 per

cent. Stricter liability laws, numerous natural

disasters and frequent large-size losses have in-

creased claims expenditures for the financial

year by 8.2 per cent (previous year: 0.9 per cent),

to 43.5 billion EUR. The tough competition does

the rest, preventing insurance companies from

compensating for the losses with increased

premium income.




GDV and its members

Life insurance1)

benefits paidincrease in liabilities to policyholders

Private health insurance2)

benefits paidmedical expensescompulsory long-term care


motor insurancethird-party liability insuranceaccident insurancelegal expenses insuranceproperty insurance

industrial property insurancecommercial property insuranceagricultural property insuranceprivate property insurance

thereof comprehensive insurance on buildingsthereof comprehensive insurance on contents

marine insuranceCredit, aviation, nuclear insurance4)

Total of GDV members

85.7 4.2 82.2 – 6.6 88.155.1 5.3 52.3 5.9 49.430.6 2.3 29.9 – 22.7 38.727.5 6.8 25.7 6.9 24.115.4 6.6 14.4 5.9 13.614.9 6.6 13.9 6.0 13.1

0.5 4.3 0.5 3.2 0.543.5 8.2 40.2 0.9 39.921.1 4.8 20.2 – 1.0 20.4

5.1 0.4 5.1 8.2 4.72.5 0.5 2.5 – 0.4 2.52.0 1.5 2.0 2.3 1.9

11.1 24.4 8.9 – 0.4 9.03.9 25.7 3.1 4.7 3.02.0 23.0 1.6 1.0 1.60.4 18.0 0.3 – 18.7 0.44.8 23.0 3.9 – 3.0 4.0– – 2.4 – 3.0 2.5– – 1.2 – 3.3 1.31.7 4.0 1.6 11.3 1.51.4 7.5 1.3 11.0 1.1

158.1 5.7 149.5 – 2.4 153.1

2002*) 2001 2000

EUR bn change as % EUR bn change as % EUR bn

Insurance classes

Insurance benefits and claims paidExpenditure and provisions for the policyholders’benefit made by direct insurers within GDV

*) Forecast as per 6 September 2002, 1) annual total of benefits paid and amounts allocated to the provision for claims and the life insurance provision, 2) gross expenditurefor claims, allocations to bonus and rebate provisions and to the provision for increasing age, 3) German direct business; without credit, aviation and nuclear, aircraft andspacecraft liability insurance and property damage liability insurance, including tourist assistance insurance; total of third-party liability, accident, motor and legal expensesinsurance and property insurance, 4) direct and reinsurance business including fidelity insurance; some figures estimated, including claim settlement expenditure – Source:GDV; Association of Private Health Insurers.

After the 2001 financial year gave motor insurers

reason to hope for a turn for the better, with

the actuarial loss cut down to 551 million

EUR, 2002 has brought another clear decline in

earnings. The numerous storms in the first six

months of 2002, and, of course, the disastrous

floods along the Elbe River and its tributaries,

have permanently affected earnings in the com-

prehensive cover classes. On the whole, motor

insurers expect an actuarial loss of just over one

billion EUR. Full comprehensive insurance has

borne the brunt of this trend. In that class, losses

have increased from 330 million to 460 million

EUR. An earnings decline of around 240 million

EUR is expected in semi-comprehensive cover, to

–70 million EUR (previous year: 168 million EUR).

Only in the liability insurance class, are actuarial

losses expected to decline by around 150 million

EUR, though still totalling 476 million EUR.

According to the September 2002 forecast and

an initial estimate of the flood damage, pre-

mium income has only increased slightly in the

general property insurance class, by 0.7 per cent

(previous year: 0.4 per cent), to 9.4 billion EUR.

Claims expenditure, on the other hand, should

increase by 22.9 per cent, to over 7.1 billion EUR.

Thus, the market is deep in the red despite the

gratifying trend in comprehensive insurance on

building contents and plate glass insurance. This

is especially true for the commercial business

and comprehensive insurance on buildings.

After a premium slump of many years in indus-

trial property insurance was finally stopped in

2001 with an increase of 1.4 per cent, double-

digit premium growth is expected in 2002 (11.2

per cent), to around 3.4 billion EUR. However, the

effects of the floods along the Elbe River will

increase claims expenditure by at least 25 per

cent, based on initial conservative estimates,

so that industrial property insurance is still deep

in the red.

In general liability insurance, slight growth in

premium income is expected once again, with

the increase totalling about 1.0 per cent

(previous year: 0.8), to about 6.0 billion EUR. This

estimate takes into account that an indepen-

dent trustee has determined that, for the second

consecutive year, premium adjustments will no

longer be permissible as per 1 July 2001. The

claims expenditure for the financial year should

experience a slight 0.4 per cent increase (pre-

vious year: 8.2), to around 5.1 billion EUR.

Slight premium growth of 1.0 per cent (previous

year: 1.5 per cent), to 5.5 billion EUR, is becoming

evident for private accident insurance as well.

A slight 0.5 per cent increase, to 2.5 billion EUR,

is also expected for claims expenditure for the

financial year, so that the loss ratio should

remain unchanged at 54 per cent. The number

of contracts, which increased slightly in the past

year, to 29.1 million, will probably remain un-

changed this year.

Legal expenses insurers reckon with an increase

in premiums of at best 1.0 per cent (previous

year: 0.6 per cent) for 2002, to 2.7 billion EUR.

This increase can be ascribed exclusively to the

premium adjustments permitted in accordance

45

with the trustee’s report. The number of con-

tracts will increase by only 0.5 per cent (previous

year: 0.6) over 2001, to 19.5 million. Claims

expenditure for the financial year should in-

crease by 1.5 per cent (previous year: 2.3) to

around 2 billion EUR.

The situation in marine insurance remained

extremely tense in 2002: the market has be-

come tougher due to the continuing losses.

Numerous insurers have initiated rehabilitation

measures. The massive changes on the market

make a growth projection for the current year

difficult, although a premium increase of about

3 per cent (previous year: 6.7), to 1.8 billion EUR

appears realistic. Claims expenditure should be

at the previous year’s level, with about 1.6 billion

EUR.

The remarks on the business trend as well as the

figures specified in the text and in the tables

refer to the member companies of the German

Insurance Association and the Association of

Private Health Insurers, which represent a mar-

ket volume of around 97 per cent. Their market

share is even over 98 per cent if pension and

funeral expenses funds are excluded which are

not members of the German Insurance Associa-

tion. Moreover, GDV statistics also include the

business of foreign branch offices in Germany.

Insurance as part of the overall economy

As a risk bearer for companies and households

alike, the insurance industry is tightly inter-

woven with the economy as a whole. Accord-

ingly, the general economic environment deter-

mines the basic conditions of the industry. For

this reason, the current business trend of the

sector must always be viewed against the back-

drop of the general economic trend:

■ Into the last six months of 2002, the recovery

of the German economy which has been

hoped for is nascent at best. The increase in

real gross domestic product for 2002 as a

whole will not be much more than one half

of a per cent, after Germany registered the

lowest economic growth of all EU states last

year, with 0.6 per cent.

■ The unemployment level will average about

4 million in 2001. This rise in unemployment

represents a departure from previous years.

On an average, 3.85 million people were out of

work in 2001. The labour market continues to

be particularly difficult in Eastern Germany,

where the unemployment level is still about

twice as high as in the old federal states.

■ The upward trend of prices has let up in 2002.

As a result, the increase in cost of living should

be 1.5 per cent, down from 2.5 per cent in

2001. However, sharper price increases have

resulted in 2002, at least in certain economic

subsectors, as a result of the introduction of

the Euro as cash currency.




GDV and its members

The decline in the growth trend of German in-

surance in recent years—which despite rising

demand for private provision can still be ob-

served—is not least due to the fact that the

material ability and preparedness of people to

make provisions has remained visibly behind

their need to make provisions. Ultimately, the

only prospective remedies in this regard will

be basic regulatory reforms to reinforce the

strength of the German market. The sense of

responsibility of citizens and companies must be

strengthened.

In addition, in recent years, the growth rate in

insurance has often been slowed down by inten-

sified premium-based competition, which even

amidst rising claims expenditure only allowed

hesitant premium increases, to the point of

putting up with losses in technical insurance

business. However, this may change in view of

the current situation on the capital markets.

Level of private provision in Germany

Although the insurance industry is part of the

services sector of the national economy, which

on the whole is expanding at an above-average

rate, its scope for growth has obviously become

smaller recently. While, in the past, the sector

has almost always had a lead in growth on the

whole economy, this is no longer a certainty.

This is expressed in the fact that the relation

between premium income and the gross do-

mestic product, known as “insurance penetra-

tion”, has not increased steadily in recent years.

Insurance penetration amounted to 6.6 per cent

in 2001, whereas at the start of the sixties pre-

mium income only made up 3 per cent of the

gross national product (1990: 6.0 per cent, 1995:

6.4 per cent).

If premium income is put into proportion to

the disposable income of private households,

the so-called “private provision ratio”is obtained,

another indicator of the position of private in-

surance in the national economy. Like insurance

penetration, the private provision ratio has in-

creased only slightly in the past few years and

even declined slightly in 2001, to 10.1 per cent

(1960: 5.0 per cent, 1990: 9.9 per cent, 1995:

10.1 per cent).

On an international comparison, insurance pen-

etration in Germany can be characterised as

average at best. In Switzerland, the United

Kingdom and Japan, insurance penetration is

over 10 per cent, in the Netherlands, France and

the USA it is between 9 and 10 per cent (all

47

figures for 2000). The higher insurance penetra-

tion in other countries is in part the result of the

much greater importance which is attached to

life assurance in the context of old-age provision

and financial property accumulation.

With regard to the so-called “density of insur-

ance”, i.e. premium per inhabitant, Germany

does not rank very highly either (currently al-

most 1 500 USD per year). The Swiss, for exam-

ple, spend two and a half times as much per

capita on private insurance as the Germans. In

many other neighbouring European countries –

such as France, the Netherlands and the United

Kingdom – as well as the USA and Japan, the

density of insurance is higher than in Germany,

reflecting the lesser importance of the social

security systems in those countries.

Even though the growth momentum of the

German insurance industry has clearly dimin-

ished over the decades, the prospects for the

future appear favourable. Private insurance

cover will undoubtedly continue to be among

the products which tend to be subject to dis-

proportionately high demand as the level of

prosperity rises, whether for a single household

or for the economy as a whole. Moreover, in view

of current economic and social challenges, more

and more citizens and companies are becoming

more conscious of the value of being insured

against financial risks. Demand for insurance

should increase due in no small part to demo-

graphic problems and the foreseeable difficul-

ties with social security systems.

Private cover and social security

In a socially-oriented, free-market economy, the

task of provision for the risks of life are shared

between state institutions and private insur-

ance. In Germany, the welfare state has been

expanded more and more over the decades

despite increasing prosperity and increasing

possibilities of individual provision. Even today,

collective provision continues to clearly domi-

nate over individual provision. Contributions to

the various forms of social security alone are

more than three times as high as the premium

income of private insurance. Furthermore, wel-

fare state benefits are financed to a considerable

extent by general taxpayers’money.




GDV and its members

In 2002, 41.3 per cent of income was spent on

social security contributions (statutory pension

insurance: 19.1 per cent, statutory health insur-

ance: 14.0 per cent, statutory long-term care in-

surance: 1.7 per cent, unemployment insurance:

6.5 per cent). Maximum contributions to the

various forms of social security totalled almost

1 500 EUR per month in the old federal states.

Thus, Germany is still far from achieving the

goal of making the social security system

“affordable” once again for both employees and

employers.

Moreover, in view of the weak economic situa-

tion, rising unemployment, and growing social

security expenditures, it is to be feared that

social security contribution rates will increase

markedly once again as early as 2003. Social

security contributions threaten to increase to

19.5 per cent in statutory pension insurance and

14.5 per cent in statutory health insurance.

Moreover, rate increases are expected in long-

term care insurance as well. As a result, overall

social security contributions may total at least

42.2 per cent of employee income in the coming

year.

On the expenditure and benefits side as well, the

predominance of the state is only too apparent.

Total social security expenditure still represents

no less than a solid third of the gross domestic

product, even when a rather narrow definition

of social security benefits is taken as a basis. By

contrast, benefits provided by private insurance

(amounts paid out to clients and provisions for

claims made and for future claims as well as

bonus and rebate provisions) only account for

around 7.5 per cent of the gross domestic

product.

The growing burden of social security contribu-

tions can be attributed to the fact that social

security systems have deviated more and more

from their original function of providing pro-

tection for those in social need. Fundamental

reform of the welfare state has appeared to be

overdue for a long time, not least due to the

foreseeable demographic trend. While the first

steps have already been taken, clearer steps in

this direction are necessary in the new legislative

period.

Despite the current predominance of social se-

curity, private insurance is already considered to

be a supporting pillar of the provision system as

a whole. In this context, it should also be taken

into consideration that social insurance, in-

cluding statutory pension, health, accident,

unemployment and long-term care insurance

comprises only a few, albeit important areas of

provision, while private insurance covers a wide

spectrum of very different risks.

49

Capital accumulation of private households

Private insurance is of considerable significance

for the capital accumulation of private house-

holds as well. Particularly in the case of life

assurance, self-incurred risk prevention goes

hand in hand with the process of capital

accumulation and investment.

In 2001, the acquired assets of private house-

holds (not including home financing) amounted

to 120.9 billion EUR, according to calculations by

the Bundesbank, the central bank of Germany.

This is 3.7 billion EUR more than in 2000. How-

ever, despite this slightly positive trend, capital

accumulation was still well below the average

in the nineties.

The investments of private households in in-

surance companies – the Bundesbank included

pension funds in this category – increased by

over 60 billion EUR in 2001. About three quarters

of this amount was invested in life assurance.

Total investments in insurance companies there-

fore make up over 50 per cent of overall private

investments. This is further confirmation of the

importance which investments in insurance

companies have for private households.

Asset accumulation in insurance has developed

in a rather varied fashion over the past two

decades. In the early eighties, the share of insur-

ance in total asset accumulation for the first

time exceeded the 20 per cent mark, rising to

30 per cent as early as 1985. At the start of

the nineties, this share fell back to 20 per cent

before once again rising appreciably. These

fluctuations can be explained primarily by

fluctuation in overall capital accumulation,

while average premium income of insurance

itself shows a high level of stability due to the

fact that (life assurance) contracts are generally

long term.




GDV and its members

In banksin savings deposits

In insurances1)

In securitiesin bondsin shares

Claims against company pension fondsTotal

34.5 28.6 45.8 10.7 – 31.1 26.754.8 24.1 16.2 – 4.3 – 39.7 2.553.0 60.4 62.9 68.2 57.9 62.537.2 33.8 29.2 61.0 85.0 26.323.8 6.0 – 11.5 1.5 9.5 1.6– 1.7 4.1 4.1 13.8 18.4 – 28.7

7.9 4.2 5.3 5.4 5.4 5.3132.6 127.0 143.2 145.3 117.2 120.9

1995 1997 1998 1999 2000 2001

Formation of monetary wealth of private households by type of investmentin Euro bn

1) including pension and funeral expenses funds, provident schemes provided by professional associations and supplementary provident institutions – Source: GermanBundesbank.

Insurance cover of households 2001/2002

1) figures not collected in a comparable way; new figures in Yearbook 2003.

Source: Allensbacher Werbeträger-Analyse 2002

© GDV-Jahrbuch 2002

Figures in per cent of a representative sample

of those surveyed on the existence

of individual insurances in the household

Private health insurance only12.3

total forGermany

14.2

West

4.9

East

Motor vehicle full own damage insurance 33.8

33.933.5

Private accident insurance40.9

39.546.0

Legal expenses insurance43.3

45.634.4

Life insurance(not including funeral expenses)1)

1)

1)

1)

54.6

55.849.8

Private liability insurance66.0

65.368.8

Comprehensive insurance on contents 77.2

75.783.3

Motor TPL insurance81.1

82.177.4

0 10 20 30 40 50 60 70 80 90 100

51

The relatively high importance which has been

attached to insurance companies in the past

year within the framework of capital accumula-

tion must accordingly be seen in light of the de-

velopment of cash flows in the overall economy.

An important factor in this development is

that the trend towards stock accumulation was

broken off suddenly in 2001. While stock pur-

chases in 1999 and 2000 combined totalled

30 billion EUR, 2001 brought net sales of nearly

this amount. Such a one-sided tendency to

spurn stocks has not been seen previously. Even

indirect stock purchases through investment

funds suffered sharp declines in 2001.

As compared with the considerable fluctuations

to which capital accumulation is subject over the

course of time, the development of the total

asset base offers a clearer picture. In addition

to inflows and outflows, total asset base is also

affected by valuation changes. The weak stock

market trend in 2001 left its mark on the finan-

cial assets of private households. Combining

figures for 2000 and 2001 demonstrates that,

while a total of 240 billion EUR was accumulated

in this period, the total asset base increased

by only about 80 billion EUR. In other words, the

total asset base declined by around 160 billion

EUR during this period as a result of a valuation

decline.

At year-end 2001, the total financial assets of

private households amounted to 3 653 billion

EUR. Investment in insurance accounted for

930 billion EUR, or 25.5 per cent of this. By way

of comparison, the share of financial assets in

banks was 34.5 per cent at the end of 2001,

and the share of securities in the financial assets

of private households was 34.7 per cent. On a

purely arithmetical basis, every household had

financial assets of nearly 100 000 EUR at year-

end 2001. This figure does not include property

assets and the durable goods of private house-

holds.




GDV and its members

In banksIn insurances1)

In securitiesin bondsin shares

Claims against company pension fondsTotal

1 089 1 128 1 210 1 256 1 266 1 235 1 262479 573 684 741 805 868 930714 849 1 020 1 107 1 316 1 350 1 266307 365 361 356 364 370 358172 187 294 339 461 433 337138 152 168 176 184 190 195

2 420 2 701 3 082 3 281 3 571 3 642 3 653

1993 1995 1997 1998 1999 2000 2001

Monetary wealth of private households by type of investment – as per end of yearin Euro bn

1) including pension and funeral expenses funds, provident schemes provided by professional associations and supplementary provident institutions – Source: GermanBundesbank.

The financial assets of private households also

produce more and more investment income,

making the accumulation of capital from finan-

cial assets a self-sustaining process to an ever-

increasing extent. Households are therefore less

and less compelled to fall back on other types of

income to maintain their financial assets at a

high level.

From a more long-term perspective, the trend of

financial assets and the income derived from

these assets not least reflects the fact that for

the first time in a long time, we have a genera-

tion that has been able to accumulate savings

over decades and that has not been affected by

war, inflation or currency reform, as in earlier

times. One consequence of this will be that in

the coming years, wide segments of the popula-

tion in Germany will inherit financial assets to an

extent unknown as yet.

Insurance and companies

As a consequence of technological progress, as

well as economic and corporate changes, com-

panies are confronted with ever-greater risks, even

more so than individual citizens. However, the

ability to deal with new risks is a prerequisite for

entrepreneurial activity. The greater the compa-

nies’ risk exposure, the greater their risk re-

duction requirement. Adequate insurance cover

plays a key role in covering this requirement.

In that insurance cover enables companies to

assume corporate risks (such as the introduction

of new, untested technologies), the insurance

industry contributes in no small part to increas-

ing overall economic production. Individual

companies would quickly reach the limits of

their capacity to bear risks alone. With insurance

cover, these limits are pushed farther out.

The Munich economist Werner Sinn once de-

scribed how the world would look without

insurance companies: “Instead of daring entre-

preneurs ready to exploit risky but profitable

investment opportunities, we would have only

security fanatics with bureaucratic mentalities,

who refrain from making any experiments and

limit themselves to managing and preserving

existing structures… nobody would dare search

for oil or other natural resources... of course,

America would not have been discovered and

no man would have been sent into space… no

structural change would occur. It would be a

dreadful world, a world living in poverty and

misery, deprived of the blessings of our indus-

trialised civilisation”.

For their part, insurers are constantly endeavour-

ing to develop new coverage concepts for the

economy. In addition to improved risk models

and perfected calculation techniques, this in-

cludes the use of the whole range of state-of-

the-art risk management methods. Although

events such as those of 11 September 2001 are

constantly demonstrating the limits of quantita-

tive scenarios and purely probabilistic thinking,

the insurance industry, especially the inter-

national reinsurance industry, has provided

proof of its ability to cover even the largest and

most complex risks, even in light of such events,

and even though insurance against terrorist

attacks tests the limits of private insurance

capacity.

53

Consolidation in the insurance industry

The environment of market operations in the

German insurance industry changed signifi-

cantly in the nineties. The European Single mar-

ket for insurance has become a reality, insurance

markets in Germany have been deregulated and

the relationship between insurers and other

financial service providers is changing.

Moreover, a narrowed scope for growth and in-

creasing pressure on profit margins have caused

many insurers to redefine their positioning in

the market. In doing so, they often reached an

altered assessment of their optimum company

size. This has resulted in the creation of numer-

ous new and reorganised groups and an increase

in the number of company take-overs, mergers

and co-operation agreements.

Even so, the level of concentration in the German

insurance industry is still not particularly high.

Compared with other European insurance mar-

kets and with other commodity and services

markets, the degree of consolidation established

for the German insurance industry is by no

means out of the ordinary. Even the biennial

report of the Monopolies Commission, which

was presented in the summer of 2002, saw no

reason to draw negative conclusions as to the

competition situation in the German insurance

industry based on the degree of concentration

in that industry.

Along with a relatively low degree of market

concentration in light of the relatively high

number of suppliers, the intensity of competi-

tion is also underscored by the fact that the

market share of individual insurers is subject

to considerable change. While some suppliers

have gained market shares to a greater or lesser

extent, others have suffered losses in market

shares, some significantly. The dynamics of this

market supplies further evidence of the fact that

competition on the German insurance market

is functioning and by all means intense.

International interdependence

of the insurance industry

The globalisation of commodity, financial and

services markets, the European Single Market

and the introduction of the euro as well as

the proliferation of modern information and

communications technologies in the insurance

industry have led to a growing international

orientation for no small number of companies.

In fact, German insurers are be coming in-

creasingly interested in business opportunities




GDV and its members

1990 785 122 229 57 346 31 2 6591995 718 132 207 59 281 39 2 1571996 719 135 203 60 280 41 2 1351997 715 131 203 59 281 41 2 0851998 719 132 202 60 275 50 2 0371999 725 138 201 59 280 47 1 9832000 706 134 197 56 271 48 1 88220012) 690 133 190 56 265 46 1 825

End of year

Number of insurance companies by class of business

Companies1)

total life pension health non-life re-number insurance and insurance insurance insurance

of com- funeral com- com- com-companies expenses panies panies panies

panies funds

total ofinsurancecompanies

underfederal

and statesuper-vision

1) insurance companies under federal supervision with and without new business, 2) thereof 40 insurance companies without new business – Source: Federal Supervisory Office.

abroad, while on the other hand, the presence

of foreign insurers in the German market is

increasing.

The European Single Market in particular pro-

vides new opportunities for foreign business.

Co-operations, branch offices, holdings and

subsidiaries remain the primary forms of foreign

commitment. By contrast, the freedom to pro-

vide services, i.e. the cross-border supply of a

market from the country of origin, which has

also been created by the Single Market, contin-

ues to be of only marginal significance, espe-

cially for mass business.

Foreign insurers have been operating in the

German market to a considerable extent for

decades. The Single Market has given these

activities new impetus. According to figures

provided by the Federal Supervisory Office for

Financial Services, several hundred insurers are

active in Germany (registered for this free serv-

ices sector) from Member States of the Euro-

pean Union (EU) and the European Economic

Area (EEA). In order to fully ascertain the market

position of foreign insurance companies, the

business of German insurers which is majority-

owned by foreign companies must also be taken

into account along with business via branch

offices and based on the freedom to provide

services.

According to a study of the Institute for Insur-

ance Sciences of the University of Cologne which

was presented in early 2002, the total “foreigner

share” (i.e. the percentage of companies which

are majority-owned by foreign companies and

foreign branch offices) in the German insurance

market was 19.55 per cent in 2000, after to-

talling only 16.90 per cent in 1993. The “for-

eigner share” in life assurance was above the

sector average in 2000, with 22.56 per cent

(1993: 13.97), while this figure was below aver-

age in casualty, property and accident insurance,

with 17.85 per cent (1993: 17.65) and in private

health insurance, with 13.91 per cent (1993:

23.11). Among individual countries, Italian,

French and Swiss insurance companies are

particularly well-represented on the German

direct insurance market.

It appears worthy of note that the cited study

contains the statement that no truly significant

connection is apparent in the period between

1993 and 2000 between the “foreigner shares”

which were determined and the completion of

the European Single Market. Most foreign in-

surers operating on the German market were

present in this country long before 1994.

The major insurance groups in Europe increas-

ingly seem to consider the European market

their actual “home market”. The major European

groups currently rank among the market leaders

in nearly all national markets. However, these

groups have generally gained their market

shares more by buying up companies than

through internal growth.

55

Even beyond the EU, the insurance industry is

increasingly characterised by globalisation. In

the nineties, direct insurers operating on an

international basis massively expanded their

commitments in the emerging markets of

Central and Eastern Europe, Latin America and

Southeast Asia. In spite of setbacks such as the

financial crisis at the end of the nineties, the

emerging markets continue to offer foreign in-

surers high growth potential. For the emerging

markets themselves, the commitment of global

insurers involves a transfer of capital and know-

how which can only facilitate the development

of efficient insurance markets and thus addi-

tionally advance the process of catching up to

more growth and prosperity.

A look back at 2001

Despite the crisis on the capital markets, the

weak economy and the continued risk of reces-

sion in the aftermath of 11 September 2001

the German direct insurance market was able

to assert itself well in 2001 on the whole. The

premium income of GDV member companies

increased by 2.7 per cent (2000: 3.2), to 135.4 bil-

lion EUR. Meanwhile, insurance benefits paid

out by GDV members, including allocation to

bonus and rebate provisions, decreased by 2.4

per cent (2000: up 2.7 per cent), to 149.5 billion

EUR, due to the declining benefit trend in life

assurance.

Life assurance

Premium income in life assurance increased by

1.9 per cent in 2001, to 62.4 billion EUR, com-

pared to 82.2 billion EUR (2000: 88.1 billion) in

total policyholder benefits. This figure includes

both direct payments and provisions for future




GDV and its members

Life insurancePrivate health insurance1)


motor insurance3)

property insurance classes4), 5)

general liability insurancelegal expenses insuranceprivate accident insurance6)

Total

65.75 72.38 81.13 87.82 87.62 88.75 1.3 %24.10 32.74 51.97 45.40 47.75 49.85 4.4 %

164.61 207.31 250.83 257.70 261.97 265.61 1.4 %63.00 75.54 92.13 96.11 97.21 97.59 0.4 %47.71 57.84 66.15 66.84 67.11 67.31 0.3 %21.90 27.99 34.95 37.30 37.81 38.55 2.0 %17.20 24.46 29.44 28.58 28.94 29.01 0.2 %14.80 21.48 28.16 28.87 29.06 29.21 0.5 %

238.86 291.49 383.93 390.92 395.25 404.21 1.1 %

1980 1990 1995 1999 2000 2001 2001/2000

Insurance portfolios as at year-endInsurance contracts or risks in millions (as per end of year); private and commercial business of GDV members

1) until 1994 number of insureds under each policy section (estimated); from 1995 risks including compulsory long-term care, tourist health insurance, etc., from 1996 newcounting (modified delimitation); not comparable with previous year, 2) without marine, credit, aviation, nuclear and other property insurances (a.o. livestock), 3) includesmotor TPL, full vehicle own damage cover, partial vehicle own damage cover and passenger accident insurance; from 1990 including the new federal states, 4) comprehensiveinsurance on contents and buildings, fire, burglary/theft, water damage, plate glass, windstorm insurance, engineering insurances, etc; coinsurance included, 5) from 1996business written alone and as the leading insurer only, without coinsurance, 6) contracts, not identical with number of insureds.

payments. Total benefits decreased by 6.6 per

cent vis-à-vis the previous year, which is attribut-

able to the reduction in provisions for future

benefits. New business increased sharply: the

number of contracts increased by 16. 2 per cent

and the insured sum by 14.3 per cent, with

8.5 million newly concluded life assurance

contracts for an insured sum of 243.9 billion

EUR. Total premium income from new business

increased by 9.5 per cent, to 13.5 billion EUR,

with new contracts with periodic premiums

increasing by 17.6 per cent and contracts with

single premiums increasing by 2.5 per cent.


With premium income of 21.7 billion EUR,

private health insurers attained an increase of

4.9 per cent in 2001 (2000: 4.0 per cent). While

income increased by 5.7 per cent, to 19.8 billion

EUR in health insurance, income declined by

2.7 per cent in compulsory long-term care insur-

ance, to almost 2 billion EUR. Benefit payments

made by health insurers increased by 5.9 per

cent, to 14.4 billion EUR, of which around 13.9

billion EUR were in health insurance (up 6.0 per

cent) and 0.5 billion EUR in long-term care insur-

ance (up 3.2 per cent). Total private health insur-

ance benefits, including expenditure for claims

plus the allocation to the provision for increasing

age as well as to bonus and rebate provisions,

increased by 6.9 per cent (2000: 0.8), to 25.7 bil-

lion EUR. The number of fully insured persons

in private health insurance increased by about

216 400 (2000: 166 000), to just over 7.7 million.


Casualty property and accident insurance once

again registered an increase in premiums in

2001. Gross premium income rose by 2.7 (2000:

1.4) per cent, to 49.7 billion EUR (2000: 48.4).

Expenditure on claims of the financial year

increased slightly by a total of 0.9 per cent

(2000: minus 2.9 per cent), to a volume of 40.2

(2000: 39.9) billion EUR. Premium income,

claims expenditure and the number of contracts

developed as follows in the individual classes

of casualty, property and accident insurance:

Motor insurance, with a premium volume of

almost 21.3 billion EUR the largest casualty

and property insurance class, achieved a sharp

4.8 per cent increase (2000: 2.9), showing itself

to be the growth engine of the sector in addition

to health insurance. Income from motor TPL

insurance increased by 4.7 per cent (2000: 3.8),

to 13.2 billion EUR, and in full comprehensive

cover, income actually increased by 7.4 per cent

(2000: 3.3), to 6.2 billion EUR. On the other hand,

income from semi-comprehensive cover de-

creased slightly by 0.9 per cent (2000: down

2.4 per cent), to 1.7 billion EUR.

57

The claims expenditure of motor insurers de-

clined slightly by a total of 1.0 per cent (2000:

down 2.0 per cent), to 20.1 billion EUR; expendi-

tures in motor TPL insurance and semi-compre-

hensive cover decreased by 1.2 and 6.7 per cent,

respectively, to 13.6 and 1.1 billion EUR, re-

spectively, while the expenditure in full compre-

hensive cover experienced a slight 0.8 per cent

increase, to 5.4 billion EUR. Motor insurers also

registered a slight increase in the number of

contracts: the number of insured risks increased

by 0.4 per cent (2000: 1.1), to about 97.6 million

In motor TPL insurance and full comprehensive

cover, the increase was 1.2 and 3.1 per cent

respectively, to about 52.4 and 20.6 million con-

tracts respectively. In semi-comprehensive cover,

the decline in the number of contracts contin-

ued, with a decrease of 2.2 per cent, to about

18.6 million insured risks.

Property insurers registered a turnover increase

in 2001 after years of dwindling income: for the

first time since 1994, there was premium

growth of 1.4 per cent (2000: down 1.9 per cent)

in industrial property insurance, to 3.1 billion

EUR. General property insurance registered a

slight, 0.4 per cent increase, to 9.3 billion EUR.

In commercial property insurance, turnover

decreased by 0.7 per cent (2000: down 1.6 per

cent), to 2.4 billion EUR. Agricultural property

insurance, on the other hand, registered pre-

mium growth of 3.1 per cent (2000: down

2.2 per cent), to 0.5 billion EUR. In the private

customer business as well, property insurers

achieved a slight, 0.7 per cent (2000: 1.4 per cent)

and 1.3 per cent increase (2000: down 0.6 per

cent) in comprehensive insurance on buildings

and contents, respectively, to 3.5 and 2.4 billion

EUR respectively.

After a clear 6.8 per cent reduction in expendi-

ture in general property insurance in 2000, an

additional 2.9 per cent increase followed in

2001, to 5.8 billion EUR. In industrial property

insurance, on the other hand, expenditure

actually increased by 4.7 per cent (2000: down

11.6 per cent), to 3.1 billion EUR. While the

number of insured risks in industrial property

insurance once again decreased by 2.4 per cent

(2000: up 16.6 per cent), to 2.9 million, general

property insurance showed a slight, 0.4 per cent

increase (2000: down 0.2 per cent), to 64.4 mil-

lion contracts.

Gross premium income in general liability insur-

ance increased by only 0.8 per cent in 2001

(2000: down 0.2 per cent), to 5.9 billion EUR.

Although the number of claims reported under-

went a slight, 0.1 per cent decrease from the

2000 figure, claims expenditure experienced a

very clear, 8.2 per cent increase (2000: down

4.5 per cent), to almost 5.1 billion EUR. The

number of contracts increased by 2.0 per cent

(2000: 1.3), to 38.6 million.

In private accident insurance, premium growth

continued to flatten, with a 1.5 per cent increase

(2000: 2.0 per cent), to 5.5 billion EUR. The

increase in the number of contracts was only

0.5 per cent (2000: 0.6), to 29.2 million. On the

benefits side, the number of claims reported

remained almost constant at around 800 000.

At the same time, claims expenditure fell slightly

by 0.4 per cent (2000: down 2.0 per cent), to

nearly 2.5 billion EUR, resulting in an improve-

ment in the loss ratio to 54.4 per cent (2000:

55.2).




GDV and its members

For legal expenses insurance, income once again

declined by 0.6 per cent in 2001 (2000: down 2.1

per cent), to 2.7 billion EUR. Meanwhile, the

number of contracts increased by 0.6 per cent

(2000: 0.3 per cent), to 19.4 million. With the

number of claims remaining almost unchanged,

at 3.4 million, the claims expenditure for the

financial year increased by 2.3 per cent (2000:

down 0.8 per cent), to almost 2 billion EUR. The

loss ratio for the financial year also increased

slightly, from 71.5 to 72.4 per cent.

After a rather modest 1.6 per cent premium

increase in 2000, marine insurers once again

registered strong, 6.7 per cent growth in 2001,

to 1.75 billion EUR. The greatest share in this

positive turnover trend fell to the traditional

marine classes, goods, transport liability and

comprehensive cover, with 6.5 per cent. On the

claims side, however, the annual claims expendi-

ture registered a sharp 11.3 per cent increase,

to 1.6 billion EUR, after a clear 30.4 per cent

increase in 2000. The loss ratio for the financial

year worsened by almost four points, to 93.0 per

cent.

59




GDV and its members

Insurance classes

The following chapter illustrates business de-

velopment in the individual insurance classes

and the trends registered in 2002. Reports with

the final figures for 2001 appear after the cur-

rent pictures of the various lines. The classes will

be considered one after another in the following

order: life assurance, private health insurance

(PHI) and casualty, property and accident insur-

ance (motor, general liability insurance, acci-

dent, legal expenses, property, marine, etc.) and

credit insurance as well as insurance classes

for which no special groups exist within GDV

(aviation and aerospace insurance, nuclear

insurance, insolvency insurance through the

Pension Assurance Association and reinsurance).

Life assurance

As was the previous year, 2002 was charac-

terised by the structural pension reform of the

Federal Government. The new subsidised old-

age provision, the Riester pension scheme, has

officially been on the market since the beginning

of the year. By the end of the year, many people

will have reoriented both their private and

company old-age provision. Demand for life

assurance as a true old-age provision will

increase accordingly. However, 2002 was also

characterised by the continuing weakness of

the stock markets and interest rates which are

low in a long-term comparison.

Life assurance trends in 2002 can be sum-

marised as follows:

■ strong growth in new business, with single

premiums increasing at a faster rate than

periodical premiums,

61

■ growth in written premiums,

■ a clear gain in the contracts portfolio,

■ increasing benefit payouts.

Rise in new business

According to initial estimates, about 11.8 million

life assurance contracts were concluded in 2002.

In the first half of 2002, 5.46 million contracts

were concluded for an insured amount of 115.10

billion EUR. This signifies a gain in the contracts

of 38.8 per cent and in the insurance amount

of 0.9 per cent compared to the corresponding

values from the first half of 2001.

Single premiums increased in the first half of

2002 by 21.6 per cent, to 3.56 billion EUR. These

stemmed largely from private pension insurance

contracts. At 3.39 billion EUR, periodical pre-

miums, in contrast, were 5.1 per cent above the

value from the first half of 2001. Total premiums

from new business thus increased by 13.0 per

cent over the first half of 2001.

The structure of new business shows clear

differences between the insurance classes. From

January to June 2002, the number of new private

pension and annuity insurance contracts con-

cluded increased by 251.5 per cent, to around

2.16 million contracts. Measured in terms of

the capitalised annuity, these contracts in-

creased to 19.36 billion EUR (+50.3 per cent).

This extraordinary growth can be attributed

to the Riester contracts: more than 1.6 million

Riester contracts were concluded as private

annuity insurance contracts. As a result, around

85 per cent of 1.9 million total Riester contracts

concluded in the first half of the year were of this

type.

Private endowment insurance sank to 638 000

new contracts (down 6.9 per cent), with the

insured amount rising by 4.4 per cent, to 18.26

billion EUR. The share of private endowment

insurance in total new business amounted to

11.7 per cent in terms of contracts or to 15.9 per

cent in terms of the insurance amount.

Occupational disability insurance was not able

to take part in the extraordinarily strong new

business of the previous year: with almost

147 500 new contracts, the number of contracts

declined by 39.7 per cent and the insured

amount sank to 17.53 billion EUR (down 27.1

per cent).




GDV and its members

1980 5.788 22.3 9.369 15.157 –1985 11.295 43.4 13.887 25.182 9.91990 17.888 68.8 17.021 34.909 2.91995 30.817 118.5 30.926 61.743 12.21996 33.269 128.0 32.594 65.863 6.71997*) 36.960 142.2 34.174 71.134 *)

1998 40.226 154.7 36.609 76.835 8.01999 44.442 170.9 39.608 84.050 9.42000 49.405 190.0 38.651 88.056 4.82001 52.344 201.3 29.894 82.238 – 6.62002p) 55.100 211.9 30.600 85.700 4.2

Year

Benefits paid by life assurersMember companies

total payments for the benefit

of policyholders

increase in

liabilities1)

benefits paid

per changeworking against

day2) previousEUR bn EUR m EUR bn EUR bn year as %

*) on 1 January 1998, a major portfolio transfer occurred from a non-member company to a membercompany. The reference figures for 1997 were adjusted accordingly; a comparison with the previousyear’s figures is therefore not meaningful, 1) provisions and profit shares for future payments for thebenefit of policyholders, 2) average of 260 days, p) estimated.

Average insurance amount for new contracts

in Euro by insurance class;

member companies

0 25 000 50 000 75 000 100 000 125 000

Private capital1) 14 100

20 100

28 050

27 400

25 450

1980

1990

1995

2000

2001

Private pension2) 21 950

31 050

29 400

30 500

19 800

Private risks3) 7 800

16 250

52 350

69 200

61 100

Private occupational disability insurance

61 500

76 050

92 350

119 350

104 950

1) including unit-linked life insurance2) pension, annuities and long-term care insurance

contracts3) as of 1995 not including residual debt insurance


How people insure their life 63

In unit-linked life assurance, almost 820 000

contracts were concluded in the first half of

2002, corresponding to an increase of 11 per

cent over the previous year. Of this total, 327 000

contracts were for unit-linked endowment

insurance and 493 000 contracts were for unit-

linked annuity insurance.

Growing premium income and portfolio

Gross premiums written also developed posi-

tively. In the first half of 2002, there was a gain

in premiums of 5.3 per cent according to GDV

statistics. For the year as a whole, German

residents will foreseeably render premiums of

65.2 billion EUR (up 4.5 per cent) for their life

assurance protection.

Due to the strong new business, 93.0 million

main contracts will foreseeably be held in insur-

ance portfolios at year-end 2002, a 4.7 per cent

increase over the previous year.

Pay-outs and provisions for benefits

As in previous years, amounts paid out to life

assurance policyholders increased in 2002, rising

in the first half by 3.5 per cent, to 25.53 (first

half of 2001: 24.66) billion EUR. For the year as

a whole, GDV anticipates aggregate pay-outs

to policyholders or their surviving dependants

of approx. 55.1 billion EUR (up 5.3 per cent).

This represents around 212 million EUR per

working day.

In contrast to pay-as-you-go statutory pension

insurance, life assurance implements the funded

cover method, investing available funds in a

secure fashion to obtain high income. Life as-

surance investments and the income accruing

therefrom form the financial basis for existing

and future benefit claims of policyholders.

Thanks to these provisions and profit shares, life

assurers are able to meet obligations well into

the future.

In addition to pay-outs, one key indicator of the

benefit power of life assurers is therefore the

provisions for benefits set up year-for-year in

favour of policyholders. These provisions and

profit shares for future benefit pay-outs will

increase in 2002 to approximately 30.6 billion

EUR (previous year: 29.89 billion EUR).




GDV and its members

1980 13.215 8.8 70.6 14.21985 18.385 6.1 77.5 12.81990 27.403 9.5 116.4 14.71995 45.201 6.6 142.6 12.41996 47.494 5.1 150.0 12.61997*) 50.500 *) 147.0 12.11998 52.505 4.0 148.0 11.81999 58.749 11.9 126.4 10.02000 61.225 4.2 128.0 9.82001 62.364 1.9 138.2 10.22002p) 65.180 4.5 **) **)

Year

Premium income in life insurance, savings and savings ratio of private householdsFrom 1991 for Eastern and Western Germany

private savings2)

EUR bn

savings ratio of private

households3)

as %

premium income1)

increaseEUR bn as %

*) on 1 January 1998, a major portfolio transfer occurred from a non-member company to a membercompany. The reference figures for 1997 were adjusted accordingly; a comparison with the 1996 figuresis therefore not meaningful, **) the figures of the German Bundesbank have been adjusted to reflect thenew system of the European Central Bank. Estimates for 2001 will first be available at the end of the year.The figure will differ in content from the previous year's figures, 1) gross premiums written by membercompanies, without profit shares used as insurance premiums, 2) including claims against companypension funds, 3) savings as a per cent of disposable income, Integrated Economic Accounts, p) ownestimate – Source: GDV, German Bundesbank.

The total benefits of German life assurers, which

are defined as benefits paid out and transferred

to provisions, would therefore reach a volume of

about 85.7 billion EUR in 2002.

Provision share of 29.0 per cent

The significance of life assurance as part of

assurance for old-age, disability and surviving

dependants has been increasing for many years.

A comparison of the life assurance benefits paid

out with the expenditure for workers’ and

employees’ pension insurance for Germany as

a whole makes this clear.

While the pay-outs of all life assurers amounted

to 18.5 per cent of pension expenditure in 1992,

a ratio of 29.0 per cent is expected in 2002. It

is estimated that expenditure for workers’ and

employees’ pension insurance will increase to

nearly 190 billion EUR.

2001 in retrospect

The increase in life assurance premium income

in 2001 was less than expected: as an aggregate,

German residents expended 62.36 (2000: 61.23)

billion EUR in life assurance premiums, 1.9 per

cent more than in the previous year.

New business increasing

At 8.49 (2000: 7.30) million contracts, new busi-

ness in 2001 increased sharply over the previous

year (up 16.2 per cent). Private endowment in-

surance declined to 1.44 million contracts (2000:

1.49). Private pension and annuity insurance

reached around 1.46 million contracts, 51.5 per

cent more than in 2000. The share of private

pension insurance contracts in new business

thus amounted to 17.1 per cent compared

to 2.1 per cent in 1990. Nearly 740 000 new

contracts (up 13.5 per cent) were attributable to

private term assurance.

65

Individual endowment1)

Asset formationIndividual term2)

Individual pension3)

Group/collective insurance4)

Total number of contracts

2.935 56.4 4.864 62.5 2.721 40.2 2.661 36.4 2.893 34.00.161 3.1 0.227 2.9 0.274 4.1 0.114 1.6 0.098 1.21.271 24.5 1.456 18.8 0.604 8.9 0.649 8.9 0.737 8.70.065 1.3 0.193 2.5 0.771 11.5 1.146 15.7 1.930 22.70.765 14.7 1.033 13.3 2.384 35.3 2.732 37.4 2.830 33.45.197 100.0 7.773 100.0 6.754 100.0 7.302 100.0 8.488 100.0

1980 1990 1995 2000 2001

in millions % in millions % in millions % in millions % in millions %of contracts of contracts of contracts of contracts of contracts

Number of new life insurance contracts with 1st premium paidMember company

1) including unit-linked life insurances, from 1995 including other individual contracts, though without individual contracts subject to a rebate, 2) until 1994 including residualdebt insurance, 3) including individual occupational disability insurance (for self-employed persons), pension insurance and – from 1987 – including long-term care insurance,4) includes endowment, builder’s risk, other risk, pension and long-term care insurance and, since 1995, residual debt insurance and individual contracts subject to a rebate.

The number of collective insurance contracts in-

creased by 3.6 per cent to 2.83 million contracts.

This involved endowment, builder’s risk, residual

debt and other term and pension insurance

contracts.

The insured amount of total new business

increased by 14.3 per cent, to 243.95 (2000:

213.46) billion EUR, of which 16.1 (2000: 19.3)

per cent was attributable to private endowment

insurance, 18.4 (2000: 21.0) per cent to private

term insurance, and 11.8 (2000: 13.7) per cent to

private pension and annuity insurance.

In terms of premiums, new business increased

by 9.5 per cent, to 13.47 (2000: 12.30) billion

EUR, of which 6.73 billion EUR (up 17.6 per cent)

stemmed from life assurance contracts with

periodic premium payments and 6.74 billion

EUR (up 2.5 per cent) from life assurance con-

tracts with single premiums.

The periodic premium payments for new con-

tracts in the amount of 6.73 billion EUR broke

down by redeemed insurance certificates of

5.84 billion EUR and increased insurance

amounts of 0.89 billion EUR, whereby 0.77 bil-

lion EUR of the latter amount in turn resulted

from adjusted increases.

Periodic premiums from redeemed insurance

certificates break down as follows by insurance

class: private pension and annuity insurance

with 30.3 per cent, followed by unit-linked life

assurance with 24.1 per cent, and private en-

dowment insurance with 23.2 per cent.

88.75 million main contracts

Life assurance possesses extraordinary impor-

tance as an instrument for old age and for sur-

viving dependants. This is underscored by the

number of existing life assurance contracts

(88.75 [2000: 87.62] million): There were main

contracts with an insured amount of 1 976.68

(2000: 1 875.06) billion EUR.

Nearly half of all main contracts (44.0 per cent)

were complemented in 2001 by supplementary

insurance contracts, which numbered 39.07 mil-

lion for an insured amount or capitalised annuity

of 1 223.01 (2000: 1 143.05) billion EUR. Of

these additional contracts, 19.95 million were

supplementary accidental death insurance con-

tracts and 13.79 million were supplementary

occupational and general disability insurance

contracts.




GDV and its members

Year

Breakdown of premium income in life insuranceMember company

premiums1) from

principal insurance2) supplementary insurance3)

EUR bn EUR bn

*) on 1 January 1998, a major portfolio transfer occurred from a non-member company to a membercompany. The reference figures for 1997 were adjusted accordingly, 1) without profit shares used asinsurance premiums, 2) individual endowment insurance including term and unit-linked life insurance,asset formation assurance; individual pension insurance; group insurance at special rates, 3) supple-mentary accident insurance, supplementary occupational disability insurance, other supplementaryinsurance.

1980 12.617 0.5981985 17.413 0.9721990 25.914 1.4891995 42.829 2.3721996 44.993 2.5011997*) 47.779 2.7211998 49.615 2.8901999 55.560 3.1892000 57.839 3.3862001 58.570 3.794

129Increasing life insurance amounts

Total portfolio figures per resident

for life insurance and

capital-accumulation contracts;

as per 1990 for Germany as a whole

0 5000 10 000 15 000 20 000 25 000

67

19805 310

Total life insurance contracts1)

Total portfolio figures in Euro

6 520

Capital accumulation insurance2)

1985 9 350

7 520

1990 11 290

10 150

1995 16 600

11 130

2000 22 790

12 180

2001 24 030

11 970

1) capital, risk, private pension, self-employedoccupational disability insurance, etc.

2) not including pension and supplementary insurancecontracts; prior to 1990, including unit-linked life insurance and prior to 1995, including groupinsurance at special rates.


In relation to the portfolio structure and meas-

ured in terms of periodic premiums, private

endowment insurance remained far ahead in

2001 as well with a share of 58.2 (2000: 61.7) per

cent of the total portfolio, followed by private

pension insurance with 18.1 (2000: 17.3) per

cent, which was ahead of collective insurance

with 9.5 (2000: 8.3) per cent and unit-linked life

assurance with 9.4 (2000: 7.6) per cent.

The cancellation rate increased slightly, to 4.61

(2000: 4.51) per cent. This rate is measured in

relation to periodic premiums.

5.90 million direct insurance contracts and

1.50 million reinsurance contracts

Life assurance still plays a decisive role in occu-

pational retirement provision. And one should

not only think of direct insurance in this regard.

Life assurers also take up exposures in occupa-

tional retirement provision via reinsurance of

pension commitments and benevolent funds.

Since the Act for the Improvement of Occupa-

tional Retirement Provision came into force in

1974, the portfolio of direct insurance contracts

has more than quadrupled, increasing from

1.34 to 5.90 million contracts at the end of 2001.

Even more impressive is the growth in the in-

sured amount, which rose from 7.13 to 151.50

billion EUR during the same period.




GDV and its members

1980 64.400 41.425 64.3 1.208 1.9 9.927 15.4 1.794 2.8 10.045 15.61985 77.062 46.181 60.0 3.841 5.0 14.585 18.9 2.784 3.6 9.672 12.51990 144.408 97.711 67.7 2.355 1.6 23.674 16.4 6.991 4.9 13.678 9.41991 181.780 118.452 65.2 2.719 1.5 31.266 17.2 13.285 7.3 16.059 8.81992 173.721 101.025 58.1 2.530 1.5 35.907 20.7 16.635 9.6 17.624 10.11993 179.568 97.660 54.4 2.434 1.4 39.978 22.2 22.519 12.6 16.978 9.41994 190.170 100.986 53.2 2.431 1.3 44.349 23.3 26.659 14.0 15.744 8.21995 168.477 76.283 45.3 2.649 1.6 31.607 18.8 25.084 14.8 32.853 19.51996 183.049 80.454 44.0 2.280 1.2 34.953 19.1 27.870 15.2 37.491 20.51997*) 190.468 79.700 41.8 2.234 1.2 37.780 19.8 32.671 17.2 38.083 20.01998 202.662 76.571 37.9 1.920 0.9 41.741 20.6 40.257 19.8 42.172 20.81999 295.117 125.076 42.4 1.871 0.6 45.432 15.4 72.897 24.7 49.842 16.92000 213.465 72.841 34.2 1.022 0.5 44.946 21.0 51.365 24.0 43.291 20.32001 243.945 73.569 30.2 0.829 0.3 45.028 18.4 78.517 32.2 46.002 18.9

thereof

individual share asset share individual share individual share group/ shareendowment formation term pension3) collective4)

assurance1) assurance assurance2)

EUR bn as % EUR bn as % EUR bn as % EUR bn as % EUR bn as %

Year

Insured value of new life insurance contracts with 1st premium paidMember company

*) on 1 January 1998, a major portfolio transfer occurred from a non-member company to a member company. The reference figures for 1997 were adjusted accordingly, 1) including unit-linked life insurance, from 1995 including other individual contracts, though without individual contracts subject to a rebate, 2) until 1994 including residualdebt insurance, 3) including individual occupational disability insurance (for self-employed persons), pension insurance and long-term care insurance, 4) includes endowment,builder’s risk, other risk, pension and long-term care insurance and, since 1995, residual debt insurance and individual contracts subject to a rebate.

total insured

value

EUR bn

As of year-end 2001, nearly 1.50 million reinsur-

ance contracts existed with an insured amount

or capitalised annuity of 77.20 billion EUR. These

figures contrast with an overall trend towards

less dissemination of occupational retirement

provision. The Retirement Savings Act, which

took effect at the beginning of 2002, will provide

new impetus to occupational retirement provi-

sion, however. Occupational retirement provi-

sion will provide more relief for statutory pen-

sion insurance in the future than in the past.

The risk of accident and occupational disability

was insured by 2.22 (2000: 2.16) million supple-

mentary direct insurance contracts with an in-

surance amount or capitalised annuity of 23.96

(2000: 23.22) billion EUR.

Around 82 billion EUR in insurance benefits

Life assurers in 2001 paid total benefits of

82.24 (2000: 88.06) billion EUR in favour of

policyholders. This relates both to direct pay-

outs and to amounts set aside for future

pay-outs. Total benefits declined by 6.6 per cent

from the previous year, which can be ascribed to

a reduction in amounts set aside for future ben-

efits.

Benefits paid out to policyholders and surviving

dependants for claims and repurchases

amounted to 52.34 (2000: 49.41) billion EUR,

which corresponded to a gain of 5.9 per cent.

Thus, an average of 201 (2000: 190) million EUR

per working day were paid out from main and

supplementary insurance contracts to insured

persons and surviving dependants.

For most policyholders, life assurance represents

“endowment assurance”. Though benefits for

surviving dependants in the event of death

amounted to 3.52 billion EUR in 2001, thus

remaining the same as the previous year, their

share in pay-outs of nearly 52.34 billion EUR

only amounted to 6.7 (2000: 7.2) per cent,

whereby supplementary insurance contracts

were not counted.

Among the endowment benefits of 31.12 (2000:

28.96) billion EUR, benefits upon expiration or

endowment dominated at 27.49 (2000: 25.32)

billion EUR. The pay-outs for disability, marriage

and other causes amounted to 0.11 (2000: 0.12)

billion EUR.

Pension benefits from main and supplementary

insurance contracts again grew more strongly

than endowment benefits. The volume of

pay-outs reached 4.06 (2000: 3.62) billion EUR

The pension amounts from main contracts

thereby increased by 11.3 per cent to 2.73 billion

EUR and those from supplementary insurance

69

19741) 1.34 7.11980 2.41 27.91990 3.83 67.91995 4.68 104.61996 5.12 117.71997 5.26 122.61998 5.39 129.71999 5.73 143.32000 5.80 148.02001 5.90 151.5

End of year

Development of direct insurancePortfolio at year-end

number of contracts insured sum

in millions EUR bn

1) entry into force of the law to improve occupational retirement provision schemes.

contracts by 14.1 per cent to 1.33 billion EUR.

Paid-out profit shares – e.g. from interest-bear-

ing accumulation, maturity bonuses – gained

7.9 per cent to 8.23 billion EUR. “Early benefits”

of 8.68 billion EUR were due in 2001, compared

to 8.97 billion EUR (down 3.3 per cent) in 2000.

At 29.89 (2000: 38.65) billion EUR, the annual

growth in liabilities to policyholders (cover provi-

sions, provisions for premium refunds, profit

shares) decreased by 22.7 per cent compared to

2000. The growth in cover provisions thereby

reached 30.35 (2000: 31.88) billion EUR, that of

bonus and rebate provisions –2.44 (2000: 4.70)

billion EUR and that of profit shares 1.98 (2000:

2.07) billion EUR. The capital market trend has

had an effect in this regard: many life assurers

adapted their profit shares to the capital market

trend in 2001.

Administrative cost share remains

at 3.5 per cent

At 2.19 billion EUR, administrative costs in 2001

were slightly above those from the previous year

of 2.14 billion EUR. Measured in terms of the

gross premiums written, administrative costs

remained at 3.5 per cent. In 1980, the cost share

amounted to nearly 7 per cent.

Contracting expenditure increased from 6.70 bil-

lion EUR in 2000 to 7.79 billion EUR (up 16.3 per

cent). At 5.5 (2000: 5.6 per cent), the contracting

cost rate, i.e. the total contracting costs as a

percentage of the total premiums from new

business, was below the previous year’s level.




GDV and its members

Total benefits paid thereof:capital benefits from principal insurances

thereof due bydeath disability, marriage or other causesmaturity

pension benefits from principal insurancescapital benefits from supplementary insurances pension benefits from supplementary insurances other benefits

Benefits paid prior to maturityProfit shares distributed1)

Total benefits paid to policyholders

32 803.7 66.4 35 429.3 67.7 8.0

28 959.9 58.6 31 120.1 59.5 7.53 519.1 7.1 3 519.4 6.7 0.0

124.2 0.3 111.4 0.2 – 10.325 316.6 51.2 27 489.3 52.6 8.6

2 457.3 5.0 2 735.0 5.2 11.3181.5 0.4 197.2 0.4 8.6

1 164.8 2.3 1 328.5 2.5 14.140.2 0.1 48.5 0.1 21.1

8 974.7 18.2 8 682.7 16.6 – 3.37 627.0 15.4 8 232.4 15.7 7.9

49 405.4 100.0 52 344.4 100.0 5.9

2000 2001 Change against

previous year as %

share share

EUR m as % EUR m as %

Breakdown of benefits

Benefits paid to policyholders

1) profit shares distributed, maturity bonuses, supplementary death benefits and similar elements of benefits, unless already included in the headings mentioned above, forinstance, when using profit shares to increase the insured amount – Source: GDV.

Increasing investments

The investment portfolio of life assurers in-

creased in 2001 in accordance with GDV’s sta-

tistics by 5.1 per cent to 564.48 (2000: 537.24)

billion EUR (not including deposit claims,

overnight money, time deposits and savings

deposits with credit institutes). These invest-

ments of the life assurance companies are the

guarantor for present and future benefit claims

of policyholders. Their volume is primarily de-

termined through the investment of funds

stemming from premium income. Year for year,

life assurance thus provides funds to the capital

market which are needed long term for invest-

ment by industry and the state (for details, see

the chapter “Investments and capital markets”).


As per 30 June 2002, private health insurance

companies registered net new business of

107 500 persons for the first half. Over 7.8 mil-

lion persons had thus taken out full health

insurance. According to a projection of the

values from a micro-census, the number of

supplementary insured persons will be 7.6 mil-

lion at year-end 2002.

Private health insurers anticipate premium

income for 2002 totalling 22.9 (thereof, health

insurance 20.9 and compulsory long-term care

insurance 2.0) billion EUR. Compared to the

previous year, this represents an increase of

5.7 (health insurance +6.0 and compulsory long-

term care insurance +2.9) per cent.

Premium income including additional charges

amounted in the first half of 2002 to nearly

11.45 billion EUR, of which 7.9 billion EUR was

attributable to full health insurance and over

980 million EUR to private compulsory long-

term care insurance. The premium volume

for daily benefits insurance for self-employed

persons amounted to 380 million EUR, that

for other partial insurance for self-employed

persons (supplementary hospitalisation insur-

ance, supplementary rates, health care insur-

ance, supplementary long-term care insurance

and others) to 1.5 billion EUR.

Prior to year-end 2002, the industry anticipates

payable insurance benefits (including claims

settlement costs) of nearly 15.4 (thereof, health

insurance 14.9 and compulsory long-term care

insurance 0.5) billion EUR. At 6.6 per cent (health

and compulsory long-term care insurance), the

71

1980 0.918 7.01985 1.115 6.11990 1.479 5.41995 1.875 4.21996 1.889 4.01997*) 1.918 3.81998 1.941 3.71999 2.017 3.42000 2.143 3.52001 2.193 3.5

Year current expenses as % of grosspremiums

EUR bn written

*) on 1 January 1998, a major portfolio transfer occurred from anon-member company to a member company. The referencefigures for 1997 were adjusted accordingly.

Loss ratio in life insuranceCurrent expenses of life assurers

panded further at the expense of supplemen-

tary insurance, to which only 13.4 (2000: 13.8)

per cent was attributable. The increase of pre-

mium income from health insurance to 19.76

billion EUR (including additional charges, but not

including single premiums from the provision

for premium refunds) was attributable to the

increase of insured persons in full insurance and

to premium adjustments. Income from compul-

sory long-term care insurance sank by 2.66 per

cent to 1.96 billion EUR.

The number of fully insured persons increased to

7.710 million, whereby new business, at 216 400

persons, was above the previous year’s level

(166 000 persons). Regarding elective benefits,

6 747 (2000: 6 516) million fully insured persons

took out insurance for a one- or two-bed hospi-

tal room and treatment from the hospital chief

of staff. 8 567 (2000: 8 365) million persons were

insured with compulsory long-term care insur-

ance as per 31 December 2001 (the figure for the

previous year which was given in the last year’s

report had to be corrected since subsequent

reports indicated changes).

Around 7.6 million statutorily insured persons

possessed supplementary private insurance. In

this regard, however, it must be taken into

account that this group of persons cannot be

determined exactly, given that even those in-

sured persons are counted who have taken out

their basic protection with PHI with another

company or by way of group insurance.

The contracts portfolio in supplementary long-

term care insurance increased by 50 600, to

655 700 persons. The number of statutorily

insured persons who have insured themselves




GDV and its members

Persons with full coverwith optional hospital benefitswith daily disability benefits

Supplementary coverDaily benefits during hospitalisationSupplementary long-term care insuranceOptional hospital benefits2)

Out-patient and dental benefits2)

Daily sickness benefits2)

Single premium insurancesForeign travel health insuranceResidual debt insuranceCompulsory long-term care insurance

1999 2000 2001

Number of persons with private health insuranceNumber of persons (double counts possible), as per the end of the respective year1)

7 356 400 7 493 800 7 710 2006 416 700 6 516 300 6 746 7001 608 600 1 702 700 1 792 900

13 775 000 13 892 000 14 073 0008 988 700 8 935 600 8 888 200

570 300 605 100 655 7004 361 900 4 394 400 4 452 7004 359 400 4 416 100 4 608 100

928 900 920 300 988 60023 627 200 25 656 100 27 371 20023 352 400 25 424 600 27 145 500

274 800 231 500 225 7008 226 000 8 364 5003) 8 567 000

1) from 1996 new counting (modified delimitation); not comparable with previous year; 1995 numberof persons or risks, 2) persons with statutory health insurance only, 3) corrected figure due to subsequentreports.

increase will foreseeably lie above the increase

in premium income. The total expenditure for

insured persons, i.e. the expenditure for claims

plus allocations to the provision for increasing

age as well as to the provision for premium

refunds, will foreseeably amount to 27.5 billion

EUR in 2002.

In the first half of 2002, insured persons received

around 7.7 billion EUR in insurance benefits

(including claim settlement expenditure); not in-

cluding compulsory long-term care insurance, the

figure would have been almost 7.5 billion EUR.

2001 in retrospect

Premium income in private health and long-

term care insurance increased in 2001 by 4.9

(2000: 4.0) per cent to 21.72 billion EUR. In this

regard, the share of full insurance (67.6 [2000:

66.3] per cent) in total premium income ex-

Relief in old age

Development of the number of fully insured

persons in private health insurance in millions

as well as provision for increasing age

in billions of Euro

0 10 20 30 40 50 60 70 billions of Euro

73

1990

Fully insured persons

6.6 15.3

Provision for increasing age

1991 6.4 17.2

1992 6.7 19.2

1993 6.9 21.6

1994 7.0 24.6

1995 7.0 28.4

1996 7.0 33.3

1997 7.1 38.7

1998 7.2 44.6

1999 7.4 52.1

2000 7.5 59.6

2001 7.7 68.2

0 10 millions© GDV-Jahrbuch 2002

with PHI for the elective benefits of a one- or

two-bed hospital room and treatment from the

hospital chief of staff likewise increased: At

4.453 million in 2001, 58 300 more persons

opted for these benefits than in the previous

year. 4.608 million persons had supplementary

out-patient insurance, which corresponds to

a portfolio gain of 192 000 persons over 2000.

The number of persons who have opted in

favour of foreign travel health insurance in-

creased to 27.146 million (+1.721 million). At

158 500 persons, the portfolio of daily benefits

insurance contracts also augmented to 2.782

million.

Accelerated rise in expenditure

In 2001, the rise in expenditure in private health

insurance (4.5 per cent per insured person) was

much higher than the previous year (2.9 per

cent). Total benefits increased by 5.9 per cent to

around 14.4 billion EUR. This increase was based

above all on cost increases and less on portfolio

growth. The increase per insured person was as

follows in the individual benefits areas:

Physician costs (out-patient) + 6.2 per cent

Dental treatment and

orthodontics + 6.9 per cent

Hospitals + 0.03 per cent

thereof,

standard benefits + 0.6 per cent

elective benefit:

accommodation – 2.9 per cent

elective benefit:

chief of staff + 0.4 per cent

Medications and dressings + 8.7 per cent

Remedies and aids + 6.8 per cent




GDV and its members

1980 3.681 0.277 0.608 4.5671985 4.835 0.846 1.025 6.7061990 7.324 0.584 1.595 9.5031994 10.231 1.574 2.910 14.7151995 10.981 2.038 3.785 16.8041996 11.309 2.888 4.906 19.1031997 12.098 2.847 5.407 20.3521998 12.546 3.236 5.932 21.7141999 13.075 3.296 7.525 23.8952000 13.815 2.861 7.410 24.0872001 14.770 2.305 8.669 25.744

Year expenditure expenditure allocations to totalon claims1) on bonus the provision expenditure3)

and rebate for increasingprovisions2) age

EUR bn EUR bn EUR bn EUR bn

1) including claim settlement expenditure and allocations to the provision for claims, 2) allocations tobonus and rebate provisions, 3) German direct business; values delimited by periods.

Breakdown of total expenditure in private health insuranceFrom 1995 including compulsory long-term care (gross amount)

1970 130 226 – 961975 170 152 181980 217 109 1081985 243 98 1451988 352 112 2401989 664 149 5151990 310 112 1981991 356 125 2311992 483 154 3291993 307 175 1321994 195 103 921995 271 186 851996 247 181 661997 316 144 1721998 328 155 1731999 325 149 1762000 325 149 1762001 361 148 213

Year defections to private number returning differencehealth insurers to statutory health

insurance1000 1000 1000

Switching health insurance providerNumber of persons switching between private health insurance and statutory health insurance

Source: Association of Private Health Insurers.

Conspicuous above all are the cost increases in

medications and dressings, as in previous years.

However, the rise in expenditure for out-patient

care, dental treatment and orthodontics was

also sharper than in the previous year. The only

positive development is the reduced increase in

hospital costs, and particularly the cost reduc-

tion for the accommodation benefit.

Benefit expenditure in compulsory long-term

care insurance increased by nearly 3.2 per cent in

2001, to 486 million EUR.

Premium refunds and total expenditure

In addition to insurance benefits, insured per-

sons received premium refunds, which at 728

(2000: 653) million EUR, were 11.47 per cent

above those of the previous year. The sums

mitigating premium adjustments in health

insurance amounted to 2.07 (2000: 1.41) billion

EUR.

Total expenditure for insured persons increased

in long-term care and health insurance by

almost 1.7 billion EUR, to around 25.7 billion

EUR. Total expenditure encompasses the insur-

ance benefits paid out, including the claim

settlement expenditure, the changes in claims

provisions, the allocation to the provision for

premium refunds and the allocation to the

provision for increasing age.

75

Medical expenses insurance1)

Independent hospital cash schemes2)

Other independent partial insurance3)

Daily benefits insurance4)

Compulsory long-term care insuranceSpecial types of insurance5)

Total for private health insurance

3.161 62.8 6.435 67.4 13.008 65.3 13.722 66.2 14.682 67.60.534 10.6 0.767 8.0 0.795 4.0 0.779 3.8 0.768 3.60.932 18.5 1.619 17.0 2.843 14.3 2.858 13.8 2.914 13.40.406 8.1 0.725 7.6 0.881 4.4 0.896 4.3 0.936 4.3– – – – 1.975 9.9 2.009 9.7 1.955 9.0– – – – 0.408 2.1 0.449 2.2 0.463 2.14.830 100.0 9.546 100.0 19.910 100.0 20.712 100.0 21.718 100.0

1980 1990 1999 2000 2001Type of insurance

EUR bn % EUR bn % EUR bn % EUR bn % EUR bn %

Premium income in private health insurancePremium income by type of investment in EUR bn and shares as %; from 1995 including new federal states

1) full cover, 2) daily benefits insurance in the event of hospitalisation, 3) supplementary hospitalisation insurance, supplementary rates, supplementary long-term careinsurance, etc., 4) loss of earnings insurance, 5) residual debt/salary continuation insurance.


Casualty, property and accident insurers will be

able to register a positive premiums trend in

2002 as well: gross premium income is expected

to increase by 2.7 per cent. This growth is borne

primarily by motor insurance, even though the

rate of increase in that class (2.9 per cent) has

clearly flattened out compared to the previous

year (4.8 per cent). However, the efforts to

improve income are obliterated by the clear

increase in claims expenditure for the financial

year, by 8.2 per cent (previous year: 0.9 per cent).

Consequently, the overall combined ratio for

casualty, property and accident insurance is over

100 per cent.

Motor insurance

After the 2001 financial year gave rise to hopes

of a changing trend and a way out of the

disastrous losses of the previous years with

an actuarial loss of only 554 million EUR, a clear

decline in profits was reported for 2002.

Although light new business (0.4 per cent) and

premium growth of 2.9 (previous year: 4.8) per

cent signal a growth in gross premium income

to nearly 21.9 billion EUR, the storms in the first

half of the year and the disastrous floods in

Saxony and the other affected federal states will

drive down profits so decisively that, according

to conservative estimates, motor insurance

should suffer an actuarial loss of 1 billion EUR.

Claims expenditure is expected to increase by

nearly 5 per cent and the number of claims by

6 per cent. With such a trend, the loss ratio

should increase from 94.4 per cent in 2001 to

96 per cent.

Motor TPL insurance

However, this very poor result is not attributable

to the trend in motor TPL insurance. In that class,

a clear reduction in losses of around 150 million

EUR can be observed, to 476 million EUR in 2002.

Decisive for this trend is the gross premium

increase of 3 per cent, to 13.6 billion EUR, and

the claims trend, which has been moderate thus

far. A slight increase in claims expenditure

(1.5 per cent) to 13.8 billion EUR (13.5 billion in

the previous year) is indicated in that class.




GDV and its members

Motor2)

Liability, accident, legal expensesProperty insurances3)

comprehensive insurance on contentscomprehensive insurance on buildingsengineering classes4)

plate glassfire5)

burglary/theft6)

stormTotal1)

6.60 8.50 9.31 9.12 8.855.60 7.10 8.10 8.14 8.124.84 7.16 5.20 5.80 4.85

2.39 1.61 1.43 1.54 1.38

0.62 3.02 1.49 1.87 1.480.52 0.46 0.43 0.62 0.570.27 0.76 0.82 0.71 0.680.18 0.17 0.13 0.10 0.090.14 0.14 0.23 0.13 0.110.03 0.31 0.08 0.09 0.04

17.00 22.80 22.56 23.06 21.82

Insurance classes 1980 1990 1995 2000 2001millions millions millions millions millions

Claims in non-life insurance1)

1) without marine (insurance of goods in transit, hull and baggage insurance, etc.), credit, aviation andnuclear insurance and insurance for economic loss, 2) motor TPL, full vehicle own damage and partialown damage cover, passenger accident; from 1990 for Eastern and Western Germany, 3) co-insuranceuntil 1995; from 1996 only business written by sole or leading insurers, 4) from 1996 without engineer-ing business interruption insurance; not comparable with previous year, 5) from 1996 without businessinterruption insurances; not comparable with previous year, 6) commercial, not private business.

Full comprehensive insurance

In full comprehensive insurance, am increase

in premiums of 4 (previous year: 7.1) per cent

to around 6.4 billion EUR can be expected for

the current year. The number of portfolio risks

should increase by about 3.5 per cent to 21.3

(previous year: 20.6) million. On the claims side

however, where the storms early this year and

the disastrous floods have taken their toll, the

trend is catastrophic. The available figures signal

an increase of over 9 per cent in the number of

claims, signifying a 10 per cent increase in claims

expenditure (if the average claim amount in-

creases moderately). This would result in a clear

decline in actuarial profits of 330 million, to

–460 million EUR.

Semi-comprehensive insurance

In semi-comprehensive cover, the storms have

had a direct effect on claims, resulting in a

decline in earnings of around 240 million EUR,

to –70 million EUR (previous year: +168 million

EUR). With an increase of about 17 per cent

(previous year: 75.3 per mil) in claims frequency,

to 88 per mil, and an increase in claims average,

an increase in claims requirement of about

22 per cent appears realistic. At approx. 1.4 bil-

lion EUR, the claims expenditure should be

20 per cent above the previous year’s level. With

portfolio risks continuing to decline (–2 per cent),

premium income (approx. 1.7 billion EUR) will

foreseeably stagnate at the previous year’s level.

Passenger accident insurance

In passenger accident insurance, the downward

trend evident for years is continuing. While the

portfolio risks should continue to decrease, a

decline of 8 per cent is expected for premium

income. Based on a favourable claims trend, the

actuarial result could nonetheless improve.

77

Premium income totalmotor TPLfull own damage coverpartial own damage coverpassenger accident

Claims expenditure total

14.346 22.555 19.776 – 0.9 20.358 2.9 21.341 4.8 21.9 2.99.371 13.610 12.167 – 0.5 12.628 3.8 13.224 4.7 13.6 3.03.528 6.558 5.562 – 0.1 5.748 3.3 6.171 7.4 6.4 4.01.047 2.021 1.782 – 4.7 1.740 – 2.4 1.725 – 0.9 1.7 – 1.00.399 0.366 0.264 – 8.3 0.242 – 8.3 0.221 – 8.9 0.2 – 8.0

12.847 19.449 20.776 4.0 20.355 – 2.0 20.145 – 1.0 21.1 4.8

1990 1995 1999 2000 2001 2002p)Insurance class

change change change changeEUR bn EUR bn EUR bn as % EUR bn as % EUR bn as % EUR bn as %

Premium income and claims expenditure in motor insuranceGross premiums written and gross expenditure on claims of the financial year; direct business of GDV members in Eastern and Western Germany

p) estimated.

2001 in retrospect

The 2001 financial year brought a tangible

improvement over the previous years for motor

insurance. The actuarial loss sank by around

1.2 billion EUR compared to 2000, to 554 million

EUR. Responsible for this result was premium

growth of 4.6 per cent, to around 21.3 billion EUR

as well as a slight lightening of the claims

burden. Claim expenditure declined by about

1 per cent, the number of claims by around 2 per

cent.

Motor TPL insurance

Motor TPL insurance has the greatest hand in

this positive trend, where premiums increased

by 4.6 per cent, to around 13.2 billion EUR, with

slight portfolio growth (almost 1.5 per cent).

On the claims side, another clear reduction in

claims frequency, to 75 per mil, and only a slight

increase in claim average brought about a 1.2

per cent decline in claims expenditure. Although

this was a considerable improvement over the

previous year, with a loss of 1.44 billion EUR, the

actuarial result in 2001 was still clearly negative,

with a loss of nearly 630 million EUR.

Comprehensive motor insurance /

passenger accident insurance

In full motor insurance, dynamic premium growth

of around 7 per cent can be observed, to nearly

6.2 billion EUR. This positive trend, combined

with the only moderate increase in claims ex-

penditure, resulted in an improvement in earn-

ings of nearly 340 million EUR over the previous

year. However, the remaining loss of 121 million

EUR is still unsatisfactory.

By contrast, partial motor insurance was still

in the black. Despite declining premiums and

portfolio figures, a decline in claims frequency by

around 6 per cent and a reduction in claims

expenditure by around 8 per cent resulted in

actuarial profits of 168 million EUR, signifying

an improvement by 86 million EUR over the

previous year, i.e. over 100 per cent. Since this

trend can be attributed primarily to the occur-

rence of claims (e.g. the lack of major natural

disasters), i.e. factors which are difficult to

control, no permanent trend can be derived.




GDV and its members

1980 99.2 94.2 79.71985 95.0 86.6 80.21988 100.0 84.6 81.11989 93.7 81.5 70.71990 93.5 92.7 90.01991 94.9 98.9 86.41992 98.4 105.6 95.31993 97.9 100.1 100.11994 95.3 82.0 76.51995 96.7 75.6 68.71996 100.6 77.2 65.51997 106.8 77.8 62.31998 112.8 86.0 65.61999 115.8 94.9 72.32000 108.4 93.3 70.02001 102.5 87.7 66.1

Year loss ratio1) as %

motor TPL full vehicle partial vehicleown damage cover own damage cover

Loss ratio in motor insurance

1) share of gross claims expenditure on claims of the financial year in premiums earned.

Average costs of car accidents

Claims expenditure per motor accident

in motor TPL, full and partial vehicle

own damage insurance;

as per 1995 for Germany as a whole

0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000

79

1 747850232

motor TPL

Average loss in Euro

full vehicle own damage insurance

partial vehicle own damage insurance

1 9521 154

525

2 3331 214

656

3 1081 498

690

3 4141 617

721

3 3451 559

725

3 4391 548

728

3 5071 584

718


1980

1985

1990

1995

1998

1999

2000

2001

In motor accident insurance, the continuing

decline of portfolio risks and the 9 per cent

reduction in premiums resulted in a 27 per cent

decline in profits from the previous year, from

38 million EUR in 2000 to 28 million EUR in 2001,

despite the favourable claims trend.

Loss prevention

Traffic safety is a high priority for GDV. The

Association has two institutes with a total of

50 employees who are dedicated to this task:

The Institute for Roadway Traffic in Cologne (ISK)

and the Institute for Vehicle Safety in Munich

(IFM). A few key results from the current work of

these traffic safety institutes will be explained

below.

Child safety in cars

After an observation and interview study was

conducted in 1995 on securing children in

passenger cars, a corresponding study was

concluded in 2001, producing a considerable

amount of new data.




GDV and its members

1980 26.964 19.980 3.331 2.505 5.499 4.377 124 125 1 651 1 7471985 30.013 22.746 3.542 2.737 6.639 5.343 118 120 1 874 1 9521988 32.294 25.143 3.899 3.070 7.983 6.576 121 122 2 048 2 1421989 33.304 26.022 3.749 2.932 7.953 6.499 113 113 2 121 2 2171990 34.368 26.851 3.756 2.903 8.362 6.772 109 108 2 226 2 3331991 35.505 27.692 3.729 2.844 8.789 7.025 105 103 2 357 2 4711992 36.421 28.289 3.739 2.861 9.399 7.502 103 101 2 514 2 6221993 45.246 34.619 4.412 3.432 11.734 9.425 98 99 2 659 2 7461994 45.822 34.915 4.288 3.310 12.347 9.769 94 95 2 879 2 9621995 46.794 35.382 4.256 3.270 12.816 10.162 91 92 3 011 3 1081996 47.422 35.646 4.059 3.119 12.792 10.163 86 88 3 152 3 2581997 48.142 35.895 3.972 3.050 13.045 10.349 83 85 3 285 3 3931998 48.805 36.155 4.054 3.096 13.404 10.572 83 86 3 307 3 4141999 49.683 36.767 4.199 3.177 13.655 10.626 85 86 3 252 3 3452000 50.634 37.372 3.974 3.000 13.261 10.317 78 80 3 337 3 4392001 51.143 37.698 3.819 2.918 13.016 10.232 75 77 3 408 3 507

vehicles1) claims claims expenditure2) loss frequency3) average loss4)

in millions in millions EUR bn in EUR

total5) thereof total thereof total thereof total thereof total thereofmotor cars motor cars motor cars motor cars motor cars

Year of registra-

tion

Motor liability insurance in figuresRisks, number of claims, claims expenditure, loss frequency and average loss, from 1993 for Eastern and Western Germany

1) units per year; contracts of less than one year have been aggregated, 2) insurance benefits, claims reported, 3) number of claims per 1000 vehicles, 4) claims expendituredivided by number of claims, 5) motor cars, lorries, motorcycles, mopeds, etc.

The frequency of errors discovered in the instal-

lation of child seats and securing children in child

seats has remained high, at two thirds, but the

percentage of serious errors in operation has

nearly been halved since 1995. This is a clear

demonstration of improved restraint quality.

Installation errors can be largely avoided with

ISOFIX, a rigid connection between the car and

the child’s seat.

The reason that ISOFIX has only asserted itself

on the market hesitatingly is that the ISOFIX has

yet to be integrated into the European ECE-R 44

inspection standard, thus preventing the univer-

sal approval which is urgently needed for the use

of ISOFIX child seats in all vehicles.

Despite the difficulties in connection with the

approval of ISOFIX child seats, the progress made

since the seats were introduced onto the market

has not been insignificant: approx. two thirds of

vehicle manufacturers represented on the Euro-

pean market offer vehicles with ISOFIX restraint

systems; nearly 90 per cent of newly registered

passenger cars in 2001 were equipped with

ISOFIX. In order to provide parents with compre-

hensive and up-to-date information on ISOFIX,

IFM offers an ISOFIX overview free of charge,

which lists all vehicle types which have ISOFIX

and the corresponding ISOFIX seats.

Quality standards to evaluate car safety

The Safety Rating Advisory Committee (SARAC)

project sponsored by the European Commission

was concluded at the end of 2001. In this project,

existing methods for the analysis of real ac-

cidents were described in detail and their sta-

tistical calculation procedures were examined.

In another stage, the correlations of crash test

results were analysed together with those of real

accidents. Finally, methods were determined to

include the aspects of vehicle compatibility and

aggressiveness in future rating procedures so

that passenger safety could be taken into ac-

count as well.

Accidents with airbag vehicles

The final report for the “Accident-related injuries

in airbag vehicles” research project was com-

pleted at year-end 2001. IFM worked on the

project together with the technology centre of

the German Automobile Club (ADAC).

81

Accidents involving bodily injurySerious accidents involving material damage only

accidents involving alcohol1)

other2)

Other accidents involving material damageTotalTotal number of persons involved

killedinjured

382 949 375 345 – 2.0

133 298 134 823 1.125 716 24 220 – 5.8

107 582 110 603 2.81 833 980 1 863 388 1.62 350 227 2 373 556 1.0

511 577 501 752 – 1.97 503 6 977 – 7.0

504 074 494 775 – 1.8

2000 2001 change as %

Road accidents in Germany

1) all vehicles were drivable, 2) at least one vehicle was not drivable and a criminal offence or trafficoffence (administrative fine) was determined – Source: Federal Bureau of Statistics.

With the aid of the jointly compiled accident

data, it was possible to confirm the high safety

benefit of airbags not only for the driver, but, for

the first time, for the co-driver as well. In serious

head-on collisions, the probability of serious or

fatal injuries for both the driver and the co-driver

is easily 20 per cent lower than in comparable

accident without airbags.

Motorcycle safety and

the “Better braking” campaign

2001 saw the beginning of a unique motorcycle

safety campaign entitled “Better braking”. With

the brakes on the market today, the motorcyclist

is technically and mentally overburdened in

crises and emergencies. Only the introduction

of an anti-lock braking system can provide

assistance in this regard.

It was before this backdrop that the “Better

braking” campaign was initiated and, upon

the acceptance of the campaign sponsorship

by former Federal Minister of Transport Kurt

Bodewig, the opening event was held in May

2001. ADAC, the German Traffic Safety Board,

and the Federal Union of Driving Instructors

Associations are participating in the campaign

as partners.

Lorry safety

The comprehensive evaluation of the approx.

1 000 lorry accidents in Bavaria in 1997 with

serious bodily injury was completed in 2001.

Among the cases analysed were passenger

car/lorry head-on collisions, considered partic-

ularly dangerous, from which half of all car

passenger fatalities result. It was found that

energy-absorbing front clearance protection on

lorries can reduce the probability of serious

injury to car passengers by at least 40 per cent

and of car passenger fatalities by at least 11 per

cent.

In addition, a test of the Electronic Stability

Program (ESP) in commercial vehicles was con-

ducted. This analysis found that up to 9 per cent

of serious lorry accidents could be positively

affected or even avoided.

In view of the increase in lorry accidents, a repre-

sentative poll of lorry drivers was conducted in

2001, coordinated by IFM.




GDV and its members

1 or less 7.1 6.9 7.1 6.62 4.4 4.5 4.4 4.33 4.7 4.5 4.6 4.64 4.8 4.7 4.6 4.65 4.9 4.7 4.7 4.66 4.5 4.7 4.5 4.57 4.3 4.3 4.4 4.38 4.5 4.1 4.0 4.19 4.3 4.1 3.8 3.8

10 4.8 4.6 4.3 3.911 4.2 4.4 4.1 4.012 4.9 3.9 4.0 3.813 3.8 4.5 3.6 3.714 3.4 3.5 4.2 3.415 3.2 3.2 3.3 3.916 3.2 3.0 3.0 3.117 3.5 3.0 2.8 2.818 or more 25.6 27.5 28.8 30.0

Claim-free years 1998 1999 2000 2001

How long without an accident?Share in per cent of motor car drivers in the no-claims classes of motor third-party liability insurance

83

1980 5.276 – 1.307 – 1.184 – 248 – 907 –1985 6.833 – 1.340 – 1.681 – 205 – 1 201 –1988 9.088 – 2.125 – 2.478 – 234 – 1 166 –1989 9.678 – 2.143 – 2.613 – 221 – 1 219 –1990 10.428 – 2.374 – 3.029 – 228 – 1 276 –1991 11.659 – 2.579 – 3.584 – 221 – 1 390 –1992 12.544 – 2.938 – 4.289 – 234 – 1 460 –1993 15.570 – 3.501 – 5.438 – 225 – 1 553 –1994 15.234 13.781 3.259 2.932 5.097 4.409 214 213 1 564 1 5041995 14.834 13.392 2.944 2.632 4.601 3.944 198 197 1 564 1 4981996 15.339 13.874 2.617 2.332 4.471 3.816 171 168 1 708 1 6371997 16.009 14.517 2.504 2.232 4.194 3.562 156 154 1 675 1 5961998 16.947 15.380 2.630 2.342 4.454 3.787 155 151 1 693 1 6171999 18.125 16.416 2.984 2.643 4.918 4.122 165 161 1 648 1 5592000 19.216 17.344 3.086 2.713 5.029 4.199 161 156 1 629 1 5482001 19.831 17.879 3.042 2.668 5.045 4.227 153 149 1 659 1 584




Year of registra-

tion

Full motor vehicle own damage cover in figuresRisks, number of claims, claims expenditure, loss frequency and average loss, from 1993 for Eastern and Western Germany

1) units per year; contracts of less than one year have been aggregated, 2) insurance benefits, claims reported, 3) number of claims per 1000 vehicles,4) claims expendituredivided by number of claims, 5) motor cars, lorries, motorcycles, mopeds, etc.

1980 18.164 – 1.773 – 0.457 – 98 – 258 –1985 18.080 – 1.621 – 0.645 – 90 – 398 –1988 17.791 – 1.836 – 0.741 – 103 – 404 –1989 17.876 – 1.729 – 0.742 – 97 – 429 –1990 18.051 – 1.934 – 0.923 – 107 – 477 –1991 17.884 – 1.738 – 0.873 – 97 – 502 –1992 17.702 – 1.845 – 1.092 – 104 – 592 –1993 19.103 – 1.949 – 1.255 – 102 – 644 –1994 19.710 15.466 1.929 1.725 1.344 1.159 98 111 697 6721995 20.092 15.676 1.812 1.613 1.302 1.114 90 103 722 6901996 20.249 15.651 1.724 1.535 1.296 1.103 85 98 752 7191997 20.079 15.294 1.598 1.408 1.179 0.986 80 92 738 7011998 19.699 14.772 1.545 1.356 1.177 0.977 78 92 762 7211999 19.320 14.338 1.586 1.393 1.228 1.009 82 97 774 7252000 18.979 13.957 1.523 1.333 1.183 0.971 80 95 776 7282001 18.556 13.561 1.397 1.221 1.083 0.877 75 90 775 718




Year of registra-

tion

Partial motor vehicle own damage cover in figuresRisks, number of claims, claims expenditure, loss frequency and average loss, from 1993 for Eastern and Western Germany

1) units per year; contracts of less than one year have been aggregated, 2) insurance benefits, claims reported, 3) number of claims per 1000 vehicles,4) claims expendituredivided by number of claims, 5) motor cars, lorries, motorcycles, mopeds, etc.

The purpose of the poll was to identify possible

causes for the frequency of lorry accidents and

to increase lorry safety through the experiences

and knowledge of lorry drivers while improving

working conditions.

IFM interviewed 1 200 lorry drivers in parking

areas and at rest stops. Additional interviews

were conducted in the first quarter of 2002.

Bus safety

In the area of bus safety, IFM conducted a

general survey of all bus accidents with casual-

ties occurring in Bavaria in 1998.

An initial conclusion was reached at the end of

2001. The data of approx. 800 cases shows that

bus passengers, as a general rule, suffer only

slight injuries; serious injuries occur primarily

in one-car accidents when the bus tips over or

capsizes or in collisions with heavy vehicles.

Whiplash injury

Whiplash is the most frequent cause of injuries

among car passengers with fastened seatbelts.

Reducing this type of injury remains a focus of

IFM’s medical research activities.

The specialist working group founded by IFM

two years ago has since presented the second

draft of a whiplash diagnostic standard for initial

findings. The Swiss Insurance Association has

since adopted substantial elements of this

standard, which are to be introduced in Switzer-

land across-the-board in 2002.




GDV and its members

VolkswagenAudiDaimler-BenzOpelBMWFord EuropaFiatRenaultMazdaNissanHondaToyotaPeugeotMitsubishiSeatChryslerCitroënSkodaSuzukiPorsche

10 953 – 10.0 1.6 6 6515 810 2.5 3.0 12 5915 067 – 9.4 1.9 12 2893 943 – 18.1 0.8 2 8193 415 – 17.5 1.8 9 8951 821 – 23.9 0.6 3 260

818 – 18.9 0.8 4 668718 – 16.3 0.5 5 818510 – 29.7 0.7 4 349597 – 14.6 0.7 4 708382 – 27.4 0.9 4 561441 – 3.7 0.5 12 738334 – 20.9 0.4 4 916291 – 28.3 0.6 7 324279 – 10.9 0.6 6 038268 – 12.4 2.0 11 350172 – 16.9 0.5 3 686158 1.3 0.6 10 947111 – 17.2 0.4 4 084125 – 5.3 1.7 26 910

Make/manufacturer

Theft of insured motor cars by auto manufacturerComparison of total thefts in 2001

number of units per 1000 average vehicles claiminsured

EUR

in change againstabsolute previous yearfigures as %

1985 60 984 34 511 197 1531990 53 705 40 079 312 2611994 128 378 105 248 876 7691995 111 491 89 254 688 5891996 98 464 76 392 596 4971997 88 264 65 861 525 4271998 81 921 58 646 486 3781999 72 682 48 742 698 3332000 65 784 42 560 429 3162001 61 062 37 549 418 308

Year of registration

Theft of insured motor vehicles by number and claims expenditureTotal theft and claims expenditure for motor vehicles of all types (vehicle own damage insurance)1)

number claims expenditure in EUR m

all motor thereof all motor thereofvehicles motor cars vehicles motor cars

1) from 1991 for Eastern and Western Germany.

The results of car seat tests based on the current

dynamic testing standard recommendation

were presented in 2001. Since then, the first

vehicle manufacturers have incorporated im-

proved seats meeting the IFM seating test

standard into their models. Nevertheless, there

is still considerable room for improvement.

In December 2000, the International Insurance

Whiplash Prevention Group (IIWPG) was estab-

lished at the initiative of IFM, which is to bundle

the interests of insurers world-wide in greater

protection of car passengers against whiplash

injuries. The American Insurance Institute for

Highway Safety, the British Thatcham testing

institute, the German Allianzzentrum für Tech-

nik, and IFM are members.

The goal is to induce vehicle manufacturers to

bring better seat and vehicle designs onto the

market through the implementation of a har-

monised global testing standard.

Pedestrian accidents

The analyses of IFM on “passenger safety” have

found that head-on collisions are the central

concern for pedestrian accidents both in view of

frequency and with respect to the potential for

injury.

According to previous studies, the most serious

head injuries occur when pedestrians come into

contact with the windshield, its frame, or the A-

pillar in the course of the collision. Although

these accident types are somewhat rare, they

have the greatest potential for injury in fatal ac-

cidents and are thus the focus of pedestrian

safety.

50 years of ISK

In April 2001, the Institute for Roadway Traffic in

Cologne (ISK), formerly the Advisory Board for

Loss Prevention, turned fifty. On that occasion,

a celebration was held with representatives

from insurance companies, police, roadway

construction authorities, roadway traffic author-

ities, research and implementation institutes,

and college professors. The ceremonial address

was given by Dr. Bruno Gas, member of the GDV

Presiding Committee, on “Traffic safety and

insurance companies: how can they be recon-

ciled”?

85

North Rhine-WestphaliaBerlinLower SaxonyBavariaHesseBaden-WürttembergBrandenburgSaxonyHamburgSchleswig-HolsteinSaxony-AnhaltMecklenburg-West PomeraniaRhineland-PalatinateThuringiaBremenSaarFederal territory1)

8 942 9 127 – 2.0 1.3 1.33 946 4 737 – 16.7 4.6 5.53 601 4 002 – 10.0 1.1 1.22 889 3 193 – 9.5 0.6 0.72 704 3 072 – 12.0 1.1 1.22 553 2 845 – 10.3 0.6 0.71 843 2 350 – 21.6 2.0 2.61 776 2 317 – 23.3 1.2 1.52 138 2 104 1.6 3.9 3.91 579 1 910 – 17.3 1.4 1.61 427 1 901 – 24.9 1.7 2.2

1 330 1 729 – 23.1 2.3 3.01 104 1 369 – 19.4 0.6 0.8

772 942 – 18.1 1.0 1.2420 454 – 7.5 2.0 2.2278 315 – 11.7 0.6 0.7

37 549 42 560 – 11.8 1.2 1.4

Federal state

Theft of insured motor cars by federal state

claims in absolute figures frequency per 1000 motor cars

2001 2000 change 2001 2000as %

1) extrapolated to a market volume of 100% – Source: GDV.

Roadway safety audit

One focus of ISK’s activities was the develop-

ment and pilot application of a roadway safety

audit: this “structural engineering examination”

for new roadways is significantly closer to

introduction in practice: an ad-hoc group

completed the final report and instructions

for the procedure, the roadway plans of the

State of Brandenburg were audited in accord-

ance with the new procedure, and a training

programme for auditors was developed.




GDV and its members

thereof for information

passenger and lorries motor vehicles registrations changeestate cars with of new motor of ownership

insurance plate1) vehicles (used cars)

Year

Development of the number of vehicles on the road*)

*) as registered in the Central Vehicle Register (ZFZR), 1) vehicles exempt from registration, though bearing an insurance plate, 2) for information: territory of the Federal Republic of Germany after 3 October 1990, total number of vehicles: 42.5 million, thereof 35.5 motor cars – Source: Federal Office for Motor Traffic.

total numberof motor vehicles

in 10001950 2 021 540 384 – 513 3371980 26 938 23 192 1 277 2 110 2 791 5 51119902) 35 554 30 685 1 389 954 3 387 7 0341995 47 486 40 404 2 215 1 728 3 820 8 3371996 48 342 40 988 2 274 1 667 4 046 8 4471997 49 019 41 372 2 315 1 634 4 133 8 3421998 49 586 41 674 2 371 1 747 4 350 8 3721999 50 609 42 324 2 466 1 743 4 438 8 6462000 51 365 42 840 2 527 1 743 3 972 8 3632001 52 487 43 772 2 611 1 595 3 892 8 170

change against previous year as %1980 3.2 2.9 3.3 4.8 – 6.1 – 0.41990 3.1 3.1 3.3 0.3 8.1 – 2.31995 2.0 1.6 4.8 3.7 2.9 – 1.21996 1.8 1.4 2.7 – 3.5 5.9 1.31997 1.4 0.9 1.8 – 2.0 2.2 – 1.21998 1.2 0.7 2.4 6.9 5.3 0.41999 2.1 1.6 4.0 – 0.2 2.0 3.32000 1.5 1.2 2.5 0.0 – 10.5 – 3.32001 2.2 2.2 3.3 – 8.5 – 2.0 – 2.3

average annual rate of change as %1951–1960 14.8 24.0 5.9 ° 9.0 16.11961–1970 7.7 12.0 4.2 – 7.2 6.8 8.91971–1980 4.8 5.2 2.2 7.2 1.7 4.61981–1990 2.8 2.8 0.8 – 7.2 2.0 2.51991–2000 4.7 4.0 6.7 – 2.3 – 0.1 – 0.9

In order to determine the scope of the traffic

accidents which can be avoided through audits,

the planning documents of a bypass road which

was already completed were subjected to a

safety audit, in which the auditors were not

informed of the accidents which occurred. By

comparing the results of the audit with the

accidents which actually occurred, an estimate

was made of the economic losses as a result of

traffic accidents on the bypass road which could

have been avoided. The result: 2.4 million EUR

could have been saved through an audit. This

benefit would have come at an annual cost of

approx. 90 000 EUR. The resulting benefit/cost

ratio is 26. In other words, each Euro invested

in the implementation of audit recommenda-

tions produced a benefit of 26 Euros in terms

of traffic safety.

In addition to basic qualifications (college course),

auditors should have extensive knowledge and

experience in both the planning of roadway

traffic installations and the evaluation of their

traffic safety. ISK offers training courses in this

regard in cooperation with college professors.

Auditors receive their qualification in a five-

stage process ending with a final interview and

the awarding of a certificate.

Highway intersections

Another focus of ISK’s work involved the safety of

crossings and junctions on rural highways, since,

in addition to crossing design, the design of

intersections is the most important factor

affecting the traffic safety of a roadway for

roadways with state-of-the-art layouts.

While sufficient opportunities exist to deter-

mine the effect of various standard crossings on

traffic safety in order to evaluate the traffic

safety of route sections, there is currently no

corresponding method of estimating the acci-

dent costs of various intersection types.

Based on the comprehensive accident and traffic

survey conducted by the institute, it will be

possible in the future to describe the traffic

safety of planned intersections in quantitative

fashion and thus to determine the safest inter-

section form for the expected traffic volume. The

survey had the following findings:

■ The accident cost rate of intersections is

dependent on the basic form (the structural

design of the intersection) and the local traffic

regulations.

■ The accident cost rate of intersections is inde-

pendent of traffic volume.

■ Intersections affect the traffic safety of ad-

joining route sections.

■ In general, intersections have a positive effect

on the traffic safety of intersection ap-

proaches.

87

■ The decline in the accident cost rate of

approach roads is dependent on the type

of traffic regulation. The precise stretch length

of the adjoining approach road which is af-

fected positively by the intersection is also

dependent on traffic regulations.

■ The traffic safety improvement in intersection

approaches is primarily the result of a reduc-

tion in the seriousness of accidents in the

affected area.

The findings of the survey were converted into a

practical procedure for “documentation of inter-

section safety”.

Wildlife accidents

200 000 wildlife accidents are reported to in-

surance companies each year. Usually, these

accidents have only minor consequences. Over

96 per cent of wildlife accidents involve only

material damage. Only 1 per cent of such acci-

dents involve serious bodily injury and 2 per cent

involve slight bodily injury. In 1999, over 360

million EUR in claims were settled in this regard.

An increase can be observed both in the number

of such accidents and in the claim settlement

amount. However, there is a significant amount

of ambiguity with respect to the possibilities of

preventing wildlife accidents.

Filling these gaps is the objective of an ISK study

in the Oberbergischer Kreis district. The purpose

of the study is to develop recommendations for

the most effective method of identifying and

preventing wildlife accidents.

Slipping accidents

The object of another study was to review based

on available ISK data on accidents in the rural

road network of the Oberbergischer Kreis district

of North Rhine-Westphalia whether it could

be demonstrated that factors in the roadway

surface and road layout increase the chances

of slipping accidents, in addition to the effect of

insufficient grip.

The analysis determined that the following road

layout features have a statistical effect on the

frequency of accidents when roads are wet:

■ layout discontinuity,

■ failure to comply with minimum curve radius,

■ curve frequency,

■ roadway asperities,

■ cracks, surface damage, or patched-up sec-

tions,

■ grooves between 70 cm to 100 cm wide.

However, since the analysis does not allow for

any conclusions about the effect of grip when

roadway surfaces are wet for the occurrence

of serious accidents, ISK will conduct a com-

prehensive study using data compiled from

measurements.




GDV and its members

General liability insurance

For the current financial year, slight premium

income growth of just over 1 (previous year: 0.8)

per cent can be expected compared to the previ-

ous year in general liability insurance, to around

6.0 billion EUR. This figure already takes into

account that no premium adjustment will be

permissible starting 1 July 2002 for the second

consecutive year in accordance with the de-

terminations of the Independent Trustee. The

number of newly concluded contracts is

expected to increase slightly, by 0.5 (previous

year: 1.0) per cent. With an expected increase of

approx. 0.4 (previous year: 8.2) per cent, claims

expenditure for the financial year should in-

crease slightly, to around 5.1 billion EUR.

The stabilisation of the industrial liability insur-

ance business has had a positive effect on the

premium trend. On the other hand, the decline

in premiums in the commercial mass-market

and private business is continuing. The substan-

tial rebates and the creation of “hybrid products”

in recent years have been a particular cause of

the problematic trend in this segment.

Among the conspicuous sources of the largest-

size claims have been US claims and motor recall

cost insurance claims. This trend makes the

connection quite clear between the increasing

cost pressure on suppliers in the automobile

industry and the increase in claims. Also critical

are pharmaceutical risks, especially since it has

proven difficult to measure the actual exposure.

This area involves a number of new medications

whose long-term effects are still largely un-

known. These concerns are reinforced by the

stricter liability laws enacted by the Second Act

on the Reform of Provisions in Damage Compen-

sation Law, in particular in the Medicinal Product

Act of 1 August of this year, which will further

increase exposure for all pharmaceutical risks.

The introduction of a claim for damages for pain

and suffering in cases of no-fault liability as well

as contractual liability will also result in in-

creased claims expenditure in many areas of

general liability insurance.

89

1980 1.8699 1.4025 6.41985 2.5557 2.0168 11.01988 3.0946 2.3621 3.51989 3.2961 2.5555 8.21990 3.5614 2.7007 5.71991 4.0409 3.0546 13.11992 4.3649 3.3224 8.81993 4.7581 3.5637 7.31994 5.17482) 3.9135 9.81995 5.4502 4.3322 10.71996 5.6287 4.5023 3.91997 5.7661 4.7439 5.41998 5.7780 4.7285 – 0.31999 5.8913 4.8828 3.32000 5.8767 4.6634 – 4.52001 5.9219 5.0461 8.2

Year premiumincome

EUR bn

claims paid1)

increaseEUR bn as %

Premium income and claims paid in general liability insurance

1) gross expenditure on claims of the financial year (direct business), 2) affected by new GDV members.

2001 in retrospect

Gross premium income in general liability in-

surance increased by only 0.8 per cent in 2001,

to 5.92 (2000: 5.88) billion EUR.

The continuing unsatisfactory premium trend

can be ascribed to the high competitive pressure

which continues to dominate the market,

although contrary trends could be observed,

especially in the industrial segment, and, in part,

in the commercial segment as well.

Although the number of reported claims de-

clined in the past year by 0.1 per cent vis-à-vis

2000, a marked 8.2 per cent increase in claims

expenditure was registered in 2001, to 5.05

(2000: 4.66) billion EUR. The most significant

aspect of this substantial increase is the claims

provision which had to be made due to the large-

size claims, especially in the pharmaceutical

segment.

In addition, the steady trend towards stricter

liability regulations in both legislation and legal

rulings have taken their toll, especially with re-

spect to the increasing expenditure for foreign

claims.

Private accident insurance

Accident insurers expect premium growth to let

up further this year: the foreseeable premium

growth at the end of the year is 1.0 per cent, to

5.5 billion EUR, while premium growth in the

previous year was 1.5 per cent. The number of

contracts, which increased slightly last year,

should remain unchanged this year. Little is

expected to change on the claims side. Claims

expenditure for the financial year, which was

practically unchanged in the previous year, is

expected to increase by only 0.5 per cent, to

2.5 billion EUR. The loss ratio for the financial

year will remain unchanged at 54 per cent, and

the combined ratio is also expected to remain at

84 per cent.

2001 in retrospect

The past year was also characterised by slowing

premium growth in accident insurance. While

gross premium income increased by 2 per cent in

2000, an increase of only 1.5 per cent was regis-

tered in 2001, to 5.4 billion EUR. The number

of contracts increased by only 0.5 per cent, to

29.2 million (2000: 0.6 per cent).

The claims trend as a whole was also less

favourable than in the previous year: the num-

ber of claims remained nearly unchanged at

800 000, after declining by 3.5 per cent in 2000.

Although claims payments for the financial year

declined by 4.6 per cent, as in the previous year,

reaching 225 million EUR by year-end 2001, an

increase of 4.4 per cent (2000: 1 per cent) was

registered in claims payments for the previous

year, to nearly 1.6 billion EUR. While total claims

payments remained completely unchanged in

2000, this figure increased by 2.8 per cent in the

past year.




GDV and its members

Legal expenses insurance

In legal expenses insurance, an overall premium

increase of 1.0 per cent is expected as of the

end of the year, to 2.7 billion EUR. The expected

premium growth is thus slightly higher than the

0.6 per cent growth of the previous year. How-

ever, this increase will be exclusively attributable

to the premium adjustments which are permis-

sible in accordance with this year’s Trustee’s

Report. Based on the claims requirement trend

in 2000 and 2001, premium adjustments of be-

tween 5 and 15 per cent are possible for almost

all contract types, with the exception of vehicle-

related legal expenses insurance. The number of

contracts is expected to increase by only 0.5 per

cent over the previous year. In the previous year

as well, an increase of only 0.6 per cent was

registered.

A moderate increase is also expected on the

claims side. The claims expenditure for the

financial year will increase by 1.5 per cent

(previous year: 2.3 per cent), to 2 billion EUR. The

loss ratio should decrease by one percentage

point compared to the previous year, and is

expected to total 73 per cent. The combined

ratio is expected to be 98 per cent, as in the

previous year.

91

premium income1) claims paid2) loss ratio3)

as %

change against change againstprevious year previous year

EUR million as % EUR million as %

Year

Premium income and claims paid in private accident insurance

1) gross premiums written (German direct business), gross expenditure on claims of the financial year (direct business), 3) gross expenditure on claims incurred as a percentageof gross premiums earned (direct business), 4) adjusted – Source: GDV.

numberinsurance

companies

1950 63 29.3 13.7 – – –1960 91 124.2 12.2 62.2 11.7 57.31965 104 242.2 15.9 107.4 12.7 51.21970 99 456.4 16.5 213.9 20.3 54.81975 107 828.1 11.7 392.2 13.3 53.61980 125 1 471.4 12.0 691.4 12.1 53.81985 129 2 260.7 7.7 1 027.6 8.4 52.51990 147 3 139.8 7.3 1 419.8 6.1 52.61991 151 3 767.1 20.0 1 591.8 12.1 50.11992 157 3 993.2 6.0 1 722.5 8.2 50.01993 156 4 165.3 4.3 1 848.6 7.3 51.019944) 161 4 481.2 6.0 1 996.0 8.0 52.21995 165 4 662.5 4.0 2 165.6 6.8 54.11996 161 4 824.8 3.5 2 294.2 5.5 55.519974) 162 4 986.9 3.4 2 406.7 4.5 56.619984) 161 5 134.4 3.0 2 471.9 2.7 57.41999 156 5 300.2 3.2 2 510.0 1.5 57.02000 156 5 403.6 2.0 2 460.4 – 2.0 55.22001 157 5 484.7 1.5 2 451.6 – 0.4 54.4

A continuing overall decline in insurance density

can be observed in legal expenses insurance. The

tense budgetary situation and the increasing

importance of private old-age provisions is ob-

viously causing the necessity of legal expenses

insurance to recede into the background in the

subjective perception of consumers.

2001 in retrospect

The business trend in 2001 was characterised

by a further decline in premium growth from

2.1 per cent in the previous year to 0.6 per cent,

bringing gross premium income to 2.7 billion

EUR. This trend can be ascribed above all to the

Trustee’s Report on premium adjustments in

2001, which required a 5 per cent premium re-

duction in vehicle-related legal expenses insur-

ance as of 1 October 2001. The simultaneous

possibility of a 7.5-per-cent increase in portfolio

premiums in private, occupational and vehicle-

related legal expenses insurance for self-

employed persons without any deductible was

not sufficient to offset this effect, since these

contracts are relatively rare. The number of con-

tracts increased by 0.6 per cent (2000: 0.3 per

cent) in that period, to 19.4 million; the number

of insured risks increased by 0.2 per cent (2000:

0.5 per cent), to just over 29 million.

The claims trend was less favourable than in the

previous year: while the number of claims was

3.4 million, thus remaining nearly unchanged

(–0.2 per cent; 2000: –3.05 per cent), claims

expenditure for the financial year increased by

2.3 per cent (2000: –0.8 per cent), to 1.96 billion

EUR, and claims expenditure for the previous

year increased by 3.5 per cent (2000: 3.3 per cent)

to 3.4 billion EUR. The increase in claims expen-

diture for the financial year can be attributed

to a clear increase in both payments (2.3 per

cent; 2000: –0.8 per cent) and provisions (1.9 per

cent; 2000: 0.04 per cent). The main reasons for

the increase in claims expenditure for the previ-

ous year is the high provisions (5.3 per cent;

2000: nearly 5 per cent), while claims payments

remained nearly unchanged (–0.2 per cent;

2000: 0.1 per cent). The average claim increased

by 2.43 per cent (2000: 2.31 per cent) to 567 EUR,

while the claims requirement declined by 0.9 per

cent (2000: 0.8 per cent).




GDV and its members

1980 0.840 17.204 2.230 0.5321985 1.209 20.562 2.710 0.8291990 1.631 24.457 2.990 1.1181994 2.099 30.0402) 3.499 1.6261995 2.216 29.437 3.534 1.7761996 2.332 29.509 3.555 1.8521997 2.467 29.301 3.601 1.9141998 2.605 28.813 3.573 1.9501999 2.635 28.575 3.584 1.9382000 2.690 28.942 3.475 1.9222001 2.707 29.010 3.469 1.966

Year gross premium number claims1) insuranceincome of risks benefits and

claims paid1)

in EUR bn in millions in millions in EUR bn

Premium income, risks and claims in legal expenses insurance

1) gross expenditure on claims of the financial year (direct business), 2) including new GDV members.

Property insurance classes

Based on a September 2002 forecast and an ini-

tial estimate of flood-related claims, premium

income only increased slightly in the general

property insurance classes, while claims expen-

diture increased by over 20 per cent. As a result,

the market is still clearly in the red in spite of the

continued gratifying trend in comprehensive

insurance on contents and plate glass insurance.

This is especially the case for commercial in-

surance, particularly for the higher-sum busi-

ness in that class and comprehensive insurance

on buildings.

Industry

After the extended decline in premium income

in industrial property insurance (including

extended and all-risk coverage) ended with a

modest premium increase in the previous year,

the positive trend in this class appears to be

Tourist assistance insurance

Business trends in tourist assistance insurance

continued to be influenced in 2002 by product

combinations of tourist assistance and motor

insurance contracts introduced in 1998: While

the number of individual tourist assistance

insurance contracts in portfolio sank, motor

insurers are continuing to expand their portfolio

of combined contracts. As a result of this devel-

opment, the largest segment of tourist assist-

ance insurance relates to the breakdown and

accident cover from motor insurance.

2001 in retrospect

While the number of individual contracts in

2001 continued to decrease by nearly 10 per cent

to around 2 million, the number of combined

contracts increased by nearly 25 per cent to

around 11 million. Correspondingly, premium

income from product combinations increased

to nearly 70 million EUR, while that from individ-

ual contracts decreased by 13.1 per cent to

61 million EUR. On the claims side, the conver-

sion of individual contracts was registered with

a decrease in the claims expenditures for the

financial year of 6 per cent, while product com-

binations experienced a 25-per-cent increase.

93

1980 13.7 513 371 – 34 0791985 35.0 1 284 500 – 74 07019901) 66.9 2 197 785 – 129 1641994 86.7 2 765 874 – 163 4721995 87.1 2 726 054 – 164 2901996 88.2 2 734 408 – 173 74419972) 89.7 2 720 750 – 172 87819983) 107.9 2 679 615 3 551 402 202 0481999 119.6 2 554 850 7 206 614 291 7052000 126.2 2 212 069 9 016 867 305 2282001 130.4 1 976 814 11 263 939 337 845

Year gross premium income

EUR m

number of contracts number of claims

annual policies short term

Premium income, contracts and claims in tourist assistance insurance1)

11) from 1990 without group policies, 2) since 1997 short-term policies are no longer recorded, they aretherefore no longer shown, 3) from 1998 including combined contracts.

continuing, with income increasing by about

11 per cent in 2001 (previous year: 1.4 per cent),

to about 3.4 billion EUR. While the slight increase

in 2001 was primarily borne by extended and

all-risk coverage, there should be clear increases

in the current year in the traditional industrial

fire and fire-related business interruption insur-

ance classes as well.

Based on an initial cautious estimate of flood-

related damage this summer, this damage

should result in a considerable claims burden for

industrial property insurance. An increase in

claims expenditure of over 25 per cent is anti-

cipated, so that the class will be deep in the red

in 2002. However, even without this develop-

ment, if the claims trend had remained at its

previous average, actuarial losses would have

been expected, as in previous years.




GDV and its members

premium income

1980 1985 2000 2001

change change shareEUR bn EUR bn EUR bn as % EUR bn as % as %

Insurance class

Premium income in the property insurance classesGross premiums written

1) including major fire BI in 1980 and 1985, not including fire elements of comprehensive and combined insurances, 2) machinery breakdown, EAR, electronic equipment, CAR,domestic appliances and other engineering, including engineering business interruption insurance in 1980 and 1985, 3) extended coverage, 4) including all risks and combinedcommercial insurances, 5) also including natural forces insurance in the former compulsory and monopoly insurance areas in 1980 and 1985.

Fire insurance (total)1)

industrial fireagricultural firecommercial/other fire

Burglary/theft insuranceWater damage insuranceStorm insurancePlate glass insuranceComprehensive insurance on contentsComprehensive insurance on buildingsEngineering insurances2)

Livestock insuranceHail insuranceMultiple peril insuranceNatural forces/commercialEC insurance3)

Business interruption insurancebusiness interruption insurance/firebusiness interruption insurance/engineering

Other property insurance4) 5)

Total

1.767 2.362 1.759 – 8.4 1.653 – 6.0 13.40.833 1.092 0.702 – 13.8 0.640 – 8.8 5.20.263 0.319 0.337 – 3.1 0.326 – 3.3 2.60.390 0.586 0.720 – 5.1 0.687 – 4.6 5.50.233 0.328 0.417 – 7.6 0.390 – 6.6 3.10.099 0.141 0.260 – 6.6 0.249 – 4.6 2.00.086 0.124 0.245 – 3.9 0.234 – 4.3 1.90.171 0.267 0.567 – 3.6 0.556 – 2.1 4.50.878 1.369 2.390 – 0.6 2.422 1.3 19.60.675 1.164 3.511 1.4 3.534 0.7 28.50.630 0.803 1.254 – 3.7 1.258 0.3 10.20.058 0.047 0.046 1.8 0.070 53.7 0.60.078 0.103 0.118 – 1.2 0.120 1.8 1.00.020 0.022 0.014 – 12.0 0.013 – 6.4 0.1– – 0.003 4.8 0.004 18.0 0.00.006 0.039 0.506 17.6 0.542 7.1 4.4– – 0.396 – 10.9 0.396 0.1 3.2– – 0.306 – 12.4 0.307 0.2 2.5– – 0.059 – 15.4 0.056 – 4.2 0.50.075 0.094 0.813 21.5 0.942 15.9 7.64.776 6.861 12.299 – 0.7 12.382 0.7 100.0

With respect to the trend sketched above, it

cannot be decisively determined whether the

trend in the industrial classes has changed until

it becomes clear whether the premium increase

will be sufficient to offset the persistently high

claims expenditure. While premium income

increased under the pressure of the inter-

national reinsurance and retrocession markets

and due to the dramatic capital market drop,

the trend towards more extensive coverage, a

product of the ruinous competition in previous

years, will continue to drive claims up for some

time.

In engineering insurance classes (machinery,

electronics, assembly, machinery warranty, con-

struction work, and engineering-related busi-

ness interruption insurance), the premium

volume will foreseeably increase by 2 per cent

to around 1.3 billion EUR after the losses of pre-

vious years and the stagnation in 2001. The

slight improvement of the loss ratio which was

registered until the middle of the year will

be obliterated by the floods, which also effect

the engineering insurance classes.

Commercial property insurance

Premium income is stagnating in the commer-

cial insurance classes (fire, theft/burglary, water

damage, storm and plate glass insurance for

businesses and plants as well as combined com-

mercial insurance) while the claims situation has

deteriorated dramatically, with an increase of

over 20 per cent. Premium income is 2.4 billion

EUR and claims expenditure for the financial

year is 2 billion EUR.

Agricultural insurance

A premium increase is also not expected in 2001

for agricultural insurance (agricultural fire, ani-

mal and hail insurance). An increase of 18 per

cent was registered in the claims burden.

Private property insurance

Little impetus for growth is coming from the

private business (comprehensive insurance on

contents, comprehensive insurance on build-

ings, plate glass insurance) in 2002 as well,

which combined nearly stagnant premium

growth with a sharp 23 per cent increase in

expenditure. The claims ratio should total 74

per cent. The problem lies in the sometimes

ruinous competition in comprehensive insur-

ance on buildings.

Natural hazards insurance

The claims burden is extremely high for com-

panies in natural hazards insurance due to the

consequences of the disastrous floods in Saxony

and the other affected federal states. Initial

estimates assume a claims expenditure of over

one billion EUR, with the majority of the expen-

diture accruing to industrial and engineering

insurance (approx. 800 million EUR). Approx.

200 million EUR will accrue to the private

segments and approx. 100 million to the com-

mercial segments.

95

2001 in retrospect

We register a slight 0.7 per cent premium in-

crease in general property insurance for 2001,

with a 2.9 per cent decline in claims (loss ratio:

62.2 per cent). In summary, it must be said with

respect to the 2002 outlook as well, that the

claims burden as a result of natural hazards was

well below average in 2001 for general property

insurance and it was only for this reason that the

loss ratio was tolerable.

An analysis of the main lines reveals a highly

differentiated picture.

Industrial insurance in 2001

Contrary to the trend of the previous years, the

premium income trend in industrial property

insurance was slightly positive in 2001. For the

first time since 1994, this line reported moderate

1.4 per cent growth, to around 3.1 billion EUR.

However, claims expenditure also increased

by about 5 per cent, and was slightly above

premium income. As a result, the loss ratio

increased above the already high level of the




GDV and its members

claims expenditure loss ratio1)

2001 2000 change 2001 2000EUR bn EUR bn as % as % as %

Insurance class

Claims expenditure and loss ratio in the property insurance classesGross claims expenditure, German direct business

1) share of claims expenditure in premiums earned, 2) machinery breakdown, electronic equipment, EAR and CAR insurance, though without engineering business inter-ruption insurance a.o., 3) extended coverage, 4) including all risks and combined commercial insurance.

Fire insurance (total)industrial fireagricultural firecommercial/other fire

Burglary/theft insuranceWater damage insuranceStorm insurancePlate glass insuranceComprehensive insurance on contentsComprehensive insurance on buildingsEngineering insurances2)

Livestock insuranceHail insuranceMultiple peril insuranceNatural forces/commercialEC insurance3)

Business interruption insurancebusiness interruption insurance/firebusiness interruption insurance/engineering

Other property insurance4)

Total

1.439 1.515 – 5.0 85.6 84.00.773 0.809 – 4.4 117.8 109.80.176 0.209 – 15.6 53.4 61.30.490 0.498 – 1.6 70.5 68.60.293 0.295 – 0.6 74.4 69.50.208 0.197 5.5 82.9 74.90.073 0.107 – 31.6 31.1 43.30.272 0.266 2.1 48.4 46.71.243 1.286 – 3.3 51.4 53.42.436 2.510 – 3.0 68.8 71.61.118 1.182 – 5.4 88.8 92.50.045 0.038 18.7 65.7 82.70.080 0.124 – 35.2 66.9 105.10.008 0.008 – 8.5 59.7 61.80.002 0.001 229.9 48.4 17.30.465 0.385 20.7 85.7 77.10.538 0.457 17.8 136.0 110.50.469 0.388 20.9 135.5 119.40.054 0.053 1.7 93.5 87.90.702 0.583 20.3 75.8 72.88.921 8.954 – 0.4 71.9 72.2

Share of claims expenditure

in gross premiums in 2001

by individual insurance class

0 20 40 60 80 100 120 per cent

Plate glass insurance 48.4

Premiums 100%

Windstorm insurance 31.1

Comprehensive insurance on contents 51.4

Accident insurance 54.4

Total fire insurance1) 85.6

Comprehensive insurance on buildings 68.8

Legal expenses insurance 72.4

Burglary/theft insurance 74.4

Motor TPL insurance 102.5

Livestock insurance 65.7

1) industrial fire, agricultural fire, commercial firewithout business interruption insurance/EC,all risks and combined commercial insurance.


Range of the loss ratio 97

previous year, to around 100 per cent. In indus-

trial fire-related business interruption insurance,

the amount expended for “large-size claims”

alone (i.e. claims with a claims expenditure of

over 500 000 EUR) was above the premium in-

come of these classes. In a relative improvement

over previous years, the largest individual fire

claim in 2001 totalled 70 million EUR (explosion

in a chemical plant).

The analysis of the development of the indi-

vidual sub-lines reveals a highly differentiated

picture. For example, as in previous years, sharp

premium growth had already taken place in

extended and all-risk cover – contrary to the

general trend. However, the premium increase in

those classes was exceeded several times over by

the increase in claims expenditure, which can

probably be ultimately attributed to the increas-

ing range of cross-line products. In engineering

insurance, the negative business trend in the

previous year was stopped in 2001. At the same

time, claims expenditure declined by nearly 5 per

cent. However, the business trend remains criti-

cal in the “project business”, construction work

and assembly insurance. Loss ratios continued

to exceed 120 per cent in that class.

Private property insurance in 2001

In comprehensive insurance on contents, pre-

mium volume increased by 1.3 per cent and

claims expenditure declined by 3.3 per cent (loss

ratio: 51.4 per cent). In comprehensive insurance

on buildings, the premium increase was 0.7 per

cent, with a 3.0 per cent decrease in the claims

burden (loss ratio: 68.8 per cent). Very high

competitive pressure is to be registered in this

class, which results in sometimes inadequate

premium concessions. As a result, many compa-

nies are in the red in comprehensive insurance

on buildings.

Commercial insurance in 2001

Premiums declined by 0.7 per cent in commer-

cial property insurance. The overall result in this

area is unsatisfactory, since an increase in claims

expenditure over 2000 could be observed in all

classes other than storm insurance. The trend in

water damage insurance is particularly worri-

some, with a loss ratio of 82.9 per cent.




GDV and its members

1980 0.64 278 2.3141985 0.79 289 2.7391990 0.85 289 2.9451992 1.07 294 3.6371993 1.01 309 3.2721994 1.19 246 4.8251995 1.13 267 4.2441996 0.99 227 4.3601997 0.79 244 3.2571998 1.10 222 4.9701999 1.14 253 4.51720002) 0.88 199 4.4322001 1.02 183 5.566

Year claims number averageexpenditure loss

EUR bn EUR m

Large-size claims in fire insurance1)

Industrial fire and large risks fire BI2)

1) claims of over 1 million EUR each, 2) from 2000 including all risk and EC (extended coverage) fireclaims.

Agricultural insurance in 2001

The premium increase in agricultural fire, animal

and hail insurance amounted to 3.1 per cent,

while claims expenditure declined by 18.7 per

cent. The premium increase can be ascribed

exclusively to the growth in animal insurance

(BSE, foot and mouth disease). One reason for

the decline in claims expenditure is the below-

average claims frequency in hail insurance.

Marine insurance

The situation in marine insurance is extra-

ordinarily tense: the market has become

tougher due to the persistent losses. Numerous

insurers have initiated restructuring measures.

One particular trend that can be observed is

that the marine line is now operated more as an

underwriting business than with cross-selling

objectives. The management of accumulation

risks in inventories and forwarding insurance is

a clear demonstration of a return to actuarial

principles and a trend towards premiums in line

with risks. This trend has been reinforced by

similar trends in foreign markets.

Forecast for 2002

Due to the massive changes on the market,

making a forecast for 2002 is extremely difficult.

Nevertheless, it is assumed that the current year

will also close with satisfactory growth, which

should, however, remain well below the increase

of the previous year. An increase of about 3 per

cent should be realistic.

The claims level in 2002 should remain the same

as the previous year.

99

Comprehensive insurance on contents (total)in EUR bn1)

fire2)

burglary/theft2)

water damage2)

storm2)

plate glass2)

natural forces2)

Comprehensive insurance on buildings (total) in EUR bn1)

fire2)

water damage2)

storm2)

natural forces2)

1 379 1 536 1 481 1.243 1.286 1.287 901 837 86938.8% 43.3 % 40.0 % 37.0% 40.7 % 38.2 % 860 783 83134.4% 30.7 % 33.8 % 42.8% 39.1 % 41.9 % 1 110 1 062 1 08518.3% 15.9 % 16.9 % 16.5% 14.4 % 14.4 % 804 755 746

4.0% 5.9 % 4.6 % 1.8% 2.1 % 2.3 % 399 294 4484.0% 3.8 % 4.3 % 1.0% 0.9 % 1.0 % 220 186 2010.2% 0.2 % 0.2 % 0.5% 0.3 % 0.6 % 1 821 1 594 2 162

1 479 1 867 1 826 2.436 2.510 2.828 1 647 1 345 1 54811.4% 9.1 % 8.7 % 26.2% 25.2 % 25.8 % 3 788 3 518 4 27167.2% 50.7 % 54.9 % 60.6% 49.7 % 49.3 % 1 356 1 260 1 30920.3% 39.3 % 35.8 % 12.6% 19.6 % 22.8 % 937 636 900

0.2% 0.1 % 0.2 % 0.2% 0.2 % 0.6 % 1 966 2 319 4 449

number of claims in 1000 claims expenditure in EUR bn average loss in EUR

2001 2000 1999 2001 2000 1999 2001 2000 1999

Insured risks in comprehensive insurance on contents and buildings

1) all insurance companies, 2) evaluation of insurance companies which report by type of risk, as %.

2001 in retrospect

After a modest 1.6 per cent premium increase

in 2000, to 3.2 billion DM, an increase of 6.7 per

cent was achieved in 2001, to nearly 1.75 billion

EUR. With 6.5 per cent, the largest portion can

be ascribed to the traditional marine lines:

goods, CMR, and comprehensive cover. The

“special classes” achieved growth of only 1.2 per

cent, in contrast to previous years.

With 103.6 per cent, the loss ratio was approx.

1.5 per cent higher than that of the previous year

in the 2001 underwriting year. Particularly dra-

matic was the situation in forwarding insurance,

where companies registered loss ratios of some-

times over 180 per cent.

Expanded service

GDV has expanded its service for all marine

insurance participants, policyholders and in-

surers:

Container handbook: The use of containers for

the global mixed cargo trade has undergone

a rapid development in the last two decades.

Today, well over 70 per cent of mixed cargo is

shipped in containers. The use of containers for

shipping has developed a dynamism of its own

which for years already has been nearly entirely

independent of the general economic trend. The

logistical opportunities and savings potential

through container shipment has resulted in an

increase in global maritime container capacity

from 6 to 8 billion EUR in the past four years

alone. The most highly-regarded logistics insti-

tutes expect container use to double once again




GDV and its members

Calendaryear

total1) thereof

change

EUR bn as %

goods in transit2)

share EUR bn as %

carriers’ ocean hull inland hull specialliability insurance4) insurance5) classes6)

insurance3)

EUR bn EUR bn EUR bn EUR bn

Marine insurance in figuresBreakdown by gross premium income in EUR bn

1970 0.435 15.3 0.186 42.7 0.046 0.074 0.031 0.0631980 0.917 8.2 0.429 46.9 0.123 0.101 0.062 0.1781985 1.107 4.1 0.539 48.6 0.161 0.093 0.073 0.2171990 1.215 5.6 0.550 45.3 0.204 0.062 0.083 0.2981994 1.566 0.6 0.660 42.1 0.274 0.113 0.086 0.4011995 1.570 0.2 0.683 43.5 0.267 0.083 0.087 0.4171996 1.605 2.2 0.716 44.6 0.267 0.082 0.095 0.4321997 1.618 0.8 0.731 45.2 0.260 0.071 0.093 0.4421998 1.636 1.1 0.752 45.9 0.256 0.064 0.106 0.4431999 1.610 – 1.6 0.711 44.2 0.245 0.055 0.110 0.4692000 1.636 1.6 0.739 45.1 0.231 0.047 0.116 0.4852001 1.746 6.7 0.791 45.3 0.242 0.053 0.120 0.491

1) including war premium and lump-sum claims, 2) without war premium, 3) insurance for damage or loss of goods transported by shippers and road hauliers, 4) includingbuilder’s risk business, 5) including water sport hull insurance, from 1998 including other hull insurance, 6) baggage, valuables in transit, exhibition risk, etc.

in the next ten years. Marine insurers are meet-

ing this trend with another online tool called

“the container handbook”. Individual volumes

deal comprehensively with the physical and

climatic burdens on containers and goods,

the problem of refrigeration and freezing, and

legal rulings.

The first version of this work, the first of its kind,

is expected to be completed at the end of 2002,

when it will be available under www.container-

handbuch.de. The first two sections of the hand-

book will be based on the Guidelines for Packing

of Cargo Transport Units of the International

Maritime Organisation. The handbook contains

both theoretical and practical information and is

meant to help guarantee safe transport.

Another resource is a new online reference work,

“Marine insurance from A to Z”, which will

contain approx. 1 200 marine insurance and

engineering terms. The definitions of the terms

should be available via the Transport Informa-

tion Service starting in the beginning of 2003.

The potential offered by internet technology

allows this work to serve as a resource for all

marine insurance participants. Unlike traditional

reference works, this work can be rapidly ad-

justed to new requirements and developments.

Credit insurance

General economic situation

After the economic downturn in 2001, hopes for

a strong recovery in Western Europe were not

fulfilled in the first half of 2002. Overall eco-

nomic production was limited to modest

growth. Investments could not gain the right

momentum and consumer confidence stag-

nated over time. Moderate growth is expected

for Western Europe for 2002 as a whole. The

increase in insolvencies should continue.

In Germany, the economic weakness of the first

half of the year persisted. The real gross domes-

tic product dropped slightly from the previous

year, which can be attributed above all to the

weak domestic demand. On the other hand,

foreign demand provided a strong stimulus. The

economy might slowly pick up in the coming

months, but economic risks have become

greater. The insolvency wave is continuing in

2002: after an increase of just over 14 per cent

in 2001, a new high is expected for the current

year.

This trend has had a negative effect on the credit

insurance industry, which is, after all, extremely

dependent on economic factors, foremost

among them the insolvency trend. In their core

business, trade credit insurance, credit insurers

offer their customers protection from losses in

receivables from delivered goods and services.

Therefore, the insolvency of a recipient of goods

and services means that the policyholder will file

a claim against the insurer.

101

Credit insurers also assume sureties and guar-

antees for their policyholders vis-à-vis domestic

and foreign contracting parties (suretyship

insurance). If a policyholder becomes insolvent,

the beneficiary may file a claim against the

insurer.

Insolvency trend

A particularly unusual aspect of the current

insolvency trend is the increased vulnerability

of older and larger-sized companies. The rate of

increase in insolvency for companies under eight

years old was 13 per cent in 2001, and almost

twice as high for companies over eight years old,

25 per cent. Insolvencies for companies with

over 100 employees increased by a third.

2002 insolvency forecast

Insolvency figures in Western Europe are ex-

pected to increase by nearly 5 per cent in 2002,

to around 180 000. In Germany, the increase

in bankruptcies will continue in 2002. After a

clear increase in 2001, another increase in insol-

vencies of about 8 per cent is expected for the

current year, to approximately 35 000.




GDV and its members

1980 260 249 9 140 9.9 6 3151985 493 460 18 876 12.6 13 6251988 597 530 15 936 – 9.4 10 5621989 619 579 14 643 – 8.1 9 5901990 669 626 13 271 – 9.4 8 7301991 749 698 13 323 0.4 8 837 (392)1992 811 748 15 302 14.9 10 920 (1 092)1993 793 722 20 298 32.6 15 148 (2 327)1994 918 833 24 928 22.8 18 824 (3 911)1995 1 020 935 28 785 15.5 22 344 (5 874)1996 1 101 1 008 31 471 9.3 25 530 (7 419)1997 1 201 1 111 33 398 6.1 27 474 (8 126)1998 1 240 1 153 33 977 1.7 27 828 (8 615)1999s) 1 291 1 198 34 038 – 0.5 26 476 (7 567)2000 1 278 1 184 42 259 24.2 28 235 (8 047)2001p) 1 387 1 276 49 326 16.7 32 278 (8 506)

Year Premium income1) total insolvency business insolvencies

(new federal states)total2) direct number changebusiness

EUR m EUR m as %

Credit insurance and insolvency in figures From 1991 including the new federal states

1) not including auditing fees from 1993, 2) direct and indirect business of special insurers, own risk insurers of savings banks and municipalities, fidelity insurance andcomposite insurance companies, p) estimated, s) insolvency figures: comparability with the previous year’s figures disrupted due to Insolvency Code effective as per 1 January1999 – Source of insolvency figures from 1999: Federal Bureau of Statistics.

A look down the credit insurance lines

The traditional business of credit insurers is

trade credit insurance, which offers large and

medium-sized companies protection against

losses on receivables from delivered goods and

services within Germany and abroad (trade and

export credit insurance). Protection is moreover

granted for risks which result from sales of

machinery and equipment within Germany and

abroad with credit terms of up to five years

(working capital credit insurance). Approxi-

mately 70 per cent of premium income is earned

with trade credit insurance.

In 2002, the volume of premiums in trade credit

insurance will foreseeably reach 900 million EUR

and will therefore be about 20 million EUR mil-

lion above the premium income in 2001. The loss

ratio for the financial year is listed at 107 per cent

in 2002, so that the forecast loss ratio will be

12 percentage points below that of the previous

year. In spite of everything, however, the loss

level remains very high due to the continuing

strained insolvency trend.

Consumer credit insurance covers the risk that

a borrower will not be able to repay instalment

or drawing credit to a lender due to insolvency.

Also covered is the credit institute’s risk of not

receiving from a legitimate check holder, due to

the latter’s insolvency, the redemption amount

of a check after the institute has honoured the

check as guaranteed.

Based on the persistent merger trends in the

savings institution and banking sector, the

volume of premiums in consumer credit insur-

ance also declined in 2002. While income in

2001 was still 40.4 million EUR, it diminished

in 2002 by 18.6 per cent to 32.9 million EUR.

The claims expenditure will foreseeably de-

crease in 2002 by 31.8 million EUR to an ex-

pected 21.3 million EUR. Consequently, the loss

ratio for the financial year is also declining, with

65 per cent, after 78.7 per cent in 2001.

In suretyship insurance, sureties, guarantees or

bonds are assumed at the order of policyholders

in favour of domestic and foreign creditors in

order to secure contractual or legal obligations

for which policyholders are debtors. The letter

of credit business of banks is similar. Suretyship

insurance thus relieves credit volumes with

company banks and creates additional liquidity.

The positive trend registered in suretyship in-

surance in 2001 is continuing in 2002. While

premium income was 180 million EUR in 2001,

an increase of 10.7 per cent is expected for 2002,

to nearly 200 million EUR. A negative trend is

apparent with respect to the loss ratio for the

financial year. The companies expect the loss

ratio double. In 2001, this ratio was 51.1 per cent,

and a ratio of 105.8 per cent is expected for 2002.

Fidelity insurance offers policyholders protection

from financial claims from tortious acts, such as

embezzlement, theft, misappropriation and

fraud, including computer crime. Insured are

claims due to intentional acts of employees,

third-party and temporary staff, managing

directors, management board members and

“hackers”.

103

For 2002, premium income of 177.9 million EUR

is anticipated in fidelity insurance. Premium

volume will thus be only 0.4 per cent higher than

in the previous year. A loss ratio for the financial

year of 73.2 per cent is expected for 2002, re-

presenting a clear improvement over 2001, with

a loss ratio of 105 per cent.

The premium volume in reinsurance will in-

crease by about 21 per cent to 134 million EUR.

The share of the indirect business in the total

credit insurance premium income will thus

amount to 9.3 per cent. As a consequence of the

broad risk diversification in the indirect business

compared to the other lines, a loss ratio of nearly

87 per cent is expected for 2002. In the previous

year, the loss ratio was 62.4 per cent.

2001 in retrospect

Characterised by a weak economy and

high insolvency figures

The insolvency wave in Germany reached a new

high in 2001. The Federal Bureau of Statistics

reported 32 278 insolvencies throughout Ger-

many in the past year. This corresponds to an

increase of 14.3 per cent over 2000 (28 235

insolvencies). In the new federal states, the

number of bankruptcies increased by 5.7 per

cent to 8 506, below the overall German average.

As the sector breakdown demonstrates, the

service sector made the greatest contribution to

the insolvency wave, with 10 080 cases, or 31 per

cent of all bankruptcies. The construction sector

is close behind with 9 026 insolvencies (28 per

cent). 19 per cent of the insolvent companies

belonged to the commercial sector.

The outstanding claims against companies de-

claring insolvency totalled 27 billion EUR, after

amounting to 21 billion EUR in the previous year.

A look down the lines

Premium income for the insurance business

(including additional charges) increased by

8.5 per cent from 2000 to 2001, corresponding

to an increase from 109 million EUR to 1 387.4

million EUR in 2001.

The trend in suretyship insurance was especially

positive. The premium volume in this line in-

creased by 17 per cent over 2000, to an absolute

amount of 179 million EUR in 2001.

The trend in trade credit insurance was similarly

positive, with a 6 per cent, 50 million EUR

increase to a premium volume of 880 million

EUR in 2001.

In consumer credit insurance, premium volume

remained on the same level as in 2000, contrary

to the trend of the previous years.

In fidelity insurance, a 4.8 per cent increase was

reported over the previous year in premium

volume, to 177.2 million EUR.

A clear premium increase was registered in the

indirect business. Premium income increased

from 94.7 million EUR in 2000 to 110.9 million

EUR in 2001.




GDV and its members

Loss ratios for the financial year

After the slight overall deterioration of the

claims situation in 2000, with a total claims

expenditure of 981 million EUR and a loss ratio

of 76.8 per cent, an overall loss ratio of 102.9 per

cent was registered in 2001 for the credit in-

surance business, with a claims expenditure of

1 427.6 million EUR.

In trade credit insurance, there was a very

marked 37 per cent increase in the actual loss

ratio. Claims expenditure for the financial year

reached a record 1 049.1 million EUR in 2001.

Claims expenditure increased by 7 million EUR

in consumer credit insurance. With a claims

expenditure for the financial year of 31.8 million

EUR in 2001, the loss ratio is 78.7 per cent,

0.3 percentage points more than in 2000.

Once again, the trend was very positive in sure-

tyship insurance, where the loss ratio of 51.1 per

cent was 6.7 per cent lower than in the previous

year and claims volume amounted to 91.5 mil-

lion EUR. Claims volume in fidelity insurance

increased from 141.4 million EUR in 2000 to

186 million EUR in 2001, with the loss ratio

increasing from 83.7 per cent to 105 per cent.

Claims expenditure for the financial year in the

indirect business amounted to 69.2 million EUR

in 2001, 21.4 million EUR more than in the pre-

vious year. Although premium income also in-

creased, the loss ratio increased from 50.5 per

cent in 2000 to 62.4 per cent in 2001.

Aviation and aerospace insurance

The overwhelming number of German direct

insurers and reinsurers are organised as a re-

insurance association within Deutscher Luftpool

(DLP). DLP provides considerable capacity for

aviation risks particularly for the German, but

also for the European market. The business areas

of DLP include the liability, comprehensive, acci-

dent, and loss of licence insurance lines. Since

1985, international aerospace risks are addition-

ally insured in a separate pool class.

Beginning in the 2002 underwriting year,

DLP’s underwriting activities will be restricted to

Europe. At the same time, the indirect business

previously underwritten by the pool manage-

ment for the common account of pool members

has been abandoned. This modified underwrit-

ing policy is expected to result in a reduction in

DLP’s future premium income.

After 2001 was characterised by large-size

claims and the disastrous terrorist attacks of

11 September 2001, 2002 will be characterised

by thorough restructuring efforts in order to

guarantee sufficient premium income.

The restructuring-related premium increases

which were agreed upon in the last quarter of

2001 and the war mark-ups which were charged

beginning 11 September 2001 will result in a

significant premium increase in 2002, especially

for airline, but also for industrial risks. However,

even if the potential premium volume in 2002

gives rise to expectations of a positive result in

the airline business, provided the claims trend

remains normal, it is premature to speak of a

lasting rehabilitation of this highly-exposed

105

business segment. This would require e.g. that

war mark-ups which are now being charged be

permanently integrated into airline premiums

so that global premium income will be sufficient

to cover the steadily increasing claims require-

ment in the long term.

Aviation insurance in 2002

Since war mark-ups which were charged in 2001

and restructuring profits brought in relatively

low gains over the last quarter, a considerable

increase in global premiums is expected in 2002,

especially in the original sectors, airlines and

industry. DLP also expects a clear premium

increase for its underwriting business in 2002,

which will be borne by the industrial and airline

segments. General aviation remained a rela-

tively stable and predictable sector in 2002. In

addition, higher premiums are expected in

connection with the introduction of new legal

liability limits for owner and passenger liability

insurance on 1 August 2002.

Aerospace insurance in 2002

Since the beginning of the year, a trend towards

premiums more in line with risks and stricter

terms was registered in the international mar-

ket. Theoretical capacity decreased to approx.

850 million USD in 2002.

Although the initial intensity was relatively high

in 2002, no increase in premium income worth

mentioning is to be reckoned with. The primary

reason for these low expectations is the low

past rates for satellites which are now being

launched. Therefore, it is more likely that DLP’s

premium income will decline in 2002. Making

precise statements is very difficult at this time,

since no reliable launch plans exist for the rest of

the year.

So far, relatively few large-size claims have been

registered for 2002. A partial claim was only filed

for the TDRS-I satellite, launched on 8 March

2002, since a tank for the apogee motor could

not be opened.

The satellite is in a transfer orbit and has been

working normally so far.

Estimates of less than one year have proven

difficult in the market for aerospace risks, where

there are only a couple of dozen risks overall

annually.

2001 in retrospect

The overall premium income of Deutscher Luft-

pool increased by 52.4 per cent in the 2001

financial year. However, the total gross premi-

ums of 274.79 million EUR were insufficient to

offset the claims expenditure.

Claims payments alone increased by 8.8 per cent

over the previous year, to 140.66 million EUR.

Total premium income in the direct business

increased by 30.9 per cent, to 157.4 million EUR

due to the restructuring profits and the mark-

ups for war and terrorism coverage.

The indirect business grew even faster than the

previous year, since the bulk of the underwriting

business was with European airlines. In that

sector alone, premiums increased by 26.7 mil-

lion EUR, of which 10.5 million EUR was a mark-

up premium for liability war risks.




GDV and its members

Aviation

The 2001 financial year was characterised by the

tragic events of 11 September 2001 and the

global economic downturn which came in their

wake. After German commercial airports regis-

tered a below-average trend in passenger traffic

compared to previous years, which was already

affected by economic conditions, the terrorist

attacks in September caused a global slump in

air traffic. As a whole, a decline of 2.6 per cent in

income from airline passengers was registered

in the reporting year at German airports. Even

the upward trend in freight traffic which could

be observed for years did not continue.

As a result, framework conditions for advancing

the restructuring process in the international

aviation insurance market improved consider-

ably over the previous year in the last quarter.

While rate increases for international airline risks

were only approx. 30 per cent in the first three

quarters, the increase was approx. 80 per cent in

the last quarter of the year.

The terrorist acts of 11 September 2001 and

their tragic consequences have resulted in a sub-

stantial toughening of the market with general

premium increases, but also in separate mark-up

premiums for war risks and, in part, a reduction

in coverage.

107

1980 47.37 38.44 13.95 11.84 12.65 22.14 14.151985 112.15 73.27 30.71 26.39 16.17 56.40 37.201990 98.71 63.03 19.04 25.63 18.37 47.70 23.161992 109.33 83.04 26.46 34.23 22.35 61.08 43.111993 134.92 102.13 34.63 43.83 23.66 103.55 82.831994 171.62 117.59 42.95 49.57 25.06 111.37 60.381995 158.04 119.38 45.72 49.18 24.48 53.65 36.761996 187.69 129.58 45.27 57.39 26.92 70.83 46.011997 189.69 119.39 40.27 57.06 22.06 68.51 39.581998 164.40 110.10 35.63 52.19 22.27 111.42 71.781999 172.89 107.99 36.66 49.61 21.43 112.49 60.132000 201.10 120.20 40.50 58.20 21.45 143.90 82.302001 291.51 157.39 47.26 89.96 20.17 150.98 81.26

Financial year gross premium income breakdown of direct aviation business claims payments2)

EUR m EUR m EUR m

total1) direct comprehensive liability accident total1) directaviation aviationbusiness business

Aviation and aerospace insurance in figuresPremium income and claims payments of the German aviation pool

1) direct and indirect aviation business, from 1985 including aerospace insurance, 2) without loss reserves.

The number of fatal accidents on passenger

flights declined from 37 in 2000 to 35 in 2001.

Unfortunately, the number of deaths among

passengers and crews worldwide increased

slightly, to 1 243 (2000: 1 231).

The claims burden of DLP in 2001 originated

from liability insurance and comprehensive in-

surance in almost equal portions, with total

comprehensive insurance payments declining

compared to 2000 (–15 per cent) and liability

insurance payments increasing (+31.8 per cent).

Aerospace

Global premium income declined by more than

40 per cent from the previous year, from approx.

900 million USD to approx. 500 million USD.

The reasons for this decline are problems with

the production of satellites and launch delays.

The claims expenditure of approx. 1.1 billion

USD almost reached the level of the previous

year (1.2 billion USD), of which only approx.

12.5 per cent was from the launch phase. The

principal factors in the poor claims trend for the

various satellites which are already in orbit are

problems with the solar arrays.

The gross premium income of the separate pool

class of DLP declined by 19.7 per cent in 2001,

to 16.72 billion EUR. By far the largest portion of

income continues to stem from launch insur-

ance, which declined by 28.34, to 12.2 million

EUR. On the other hand, income from in-orbit

insurance increased by 11.12 per cent to 4.18

million EUR.

Total claims payments sank by 29.11 per cent

to 10.32 million EUR, with the sharpest declines

registered for in-orbit insurance.

Nuclear insurance

Activities of the nuclear insurance pool

Sixty-one insurance companies licensed in Ger-

many (previous year: 69) currently belong to

the German Nuclear Reactor Insurance Commu-

nity (DKVG), including all significant casualty,

property and accident insurers, as well as re-

insurers. The decline in membership resulted

primarily from takeovers or withdrawal from

the industry.

DKVG underwrites nuclear risks worldwide as

a reinsurer for the account of its member com-

panies. Direct insurance for risks taken within

Germany is primarily provided by member com-

panies in co-insurance consortiums, each of

which brings its entire business share into DKVG.

DKVG receives foreign business directly from the

respective national atom pool.

In general, DKVG offers insurance cover for:

Property claims (primarily from nuclear energy

and fire risks), including the costs of decontami-

nation and clean-up as well as business inter-

ruption claims as a consequence of insured

property claims from nuclear fuel cycle facilities

(especially nuclear power plants) as well as

equipment and inventory belonging to such

facilities, including power material and fuel.

Claims based on statutory liability from the

construction and operation of nuclear fuel cycle

facilities as well as the transport of associated

nuclear fuel and other radioactive waste.




GDV and its members

Premium and capacity trend

DKVG expects a clear decline in premium in-

come in 2002, by 10 million EUR gross, to 25 mil-

lion EUR, and 7.5 million EUR net, to 24 million

EUR. The decline results exclusively from the

property insurance business, of which 5.7 million

EUR gross and 3 million EUR net is from domes-

tic insurance.

The consequences faced by the international

insurance industry as a result of the terrorist

attacks on 11 September 2001 were a decisive

factor in this development. In property insur-

ance, DKVG is no longer prepared to accept

contracts without exclusion of liability for terror-

ist attacks. In addition, DKVG has requested a

25 per cent premium increase in the contract

renewals for 2002. In response, operators termi-

nated their existing policies with DKVG insurers

and placed them with the European captive

EMANI and, in some cases, with the US captive

NEIL as well, which were both willing to cover

terrorism risks with sublimits of 100 million EUR

and were offering prices well below those

offered by DKVG. As a result, DKVG lost its entire

power plant domestic property insurance busi-

ness.

Outside Germany as well, coverage of terrorism

claims is no longer available, or only in limited

fashion. Some pools offer coverage with sub-

limits as part of their policies, for example in

Finland, Holland, Canada, Spain, and Switzer-

land. In those countries, DKVG was obliged to

abandon its share of the property insurance

business. However, most pools have excluded

terrorism claims in their basic coverage. Some

pools offer to repurchase the exclusion in a

special policy with sublimits in return for an

additional premium. In those cases, DKVG was

able to maintain its basic contract commit-

ments.

The domestic liability insurance market remains

without captive holdings. In fact, the enactment

of the new amendment to the Atomic Energy

Act has resulted in longer contractual commit-

ments with German operators until year-end

2004. In order to reach the cover provision of

2 500 million EUR which is now required, DKVG

will assume around 256 million EUR in risks

109

1970 3.4 2.5 40 18 0.11980 30.8 21.0 138 75 11.61985 107.4 78.3 177 94 8.01988 106.5 75.5 222 94 4.51989 111.3 81.6 246 94 12.51990 100.4 75.7 264 94 2.21991 90.3 69.7 283 94 1.61992 89.7 69.1 301 94 6.61993 89.4 70.8 326 94 1.91994 90.1 74.9 344 96 9.71995 70.8 59.5 344 96 2.61996 66.8 56.5 374 96 1.01997 62.8 52.7 374 96 8.11998 59.5 49.4 374 96 21.01999 44.9 38.9 425 119 – 3.92000 46.1 40.2 414 117 0.02001 35.0 31.5 412 116 7.22002p) 25.0 24.0 394 125 0.24)

Year gross netpremium premiumincome1) income2)

EUR m EUR m property liability EUR m

Nuclear insurance in figures

1) exclusively premiums from indirect domestic and foreign business, 2) gross premium income lessretrocessions to foreign reinsurers, 3) domestic capacity, 4) no claims had been reported before going topress, p) estimated – Source: German Nuclear Reactor Insurance Association (DKVG).

net insurance3)

EUR m

net claimstotal

(previously: 102 million EUR) beginning in 2003

together with the international pool commu-

nity. This will increase domestic liability premi-

ums for power plants by 60 per cent, to around

9.5 million EUR. The coverage stretch from 2 244

million EUR by 256 million EUR will be hedged

against by a financial security paid by all German

power plant operators.

The amendment to the Atomic Energy Act also

provided for a general 40 per cent increase in the

cover provision for other nuclear risks in order to

offset its inflationary depreciation since the

cover provision was last set in 1977. For example,

the maximum cover provision for transports was

increased from 25 to 35 million EUR. As a result

of this increase, numerous other nuclear liability

risks which had previously been placed on the

conventional reinsurance market will be rein-

sured with DKVG in the future.

The 2002 capacity trend presents a differenti-

ated picture. Additional capacity requirement

was foreseeable as a result of the German

government’s announcement that the cover

provision would be increased. DKVG domestic

capacity for liability insurance was increased to

125 million EUR (previous year:112 million EUR)

through a corresponding announcement. On

the other hand, domestic property capacity

declined to 394 million EUR (previous year:

412 million EUR) due to the declining number of

member companies.

Developments abroad

The Czech Republic: The second block of the

Temelin power plant commenced pilot opera-

tion on 31 May 2002. DKVG has a 5 and 9 per

cent holding, respectively in the property and

liability insurance of the plant. However, the

various press reports about incidents in this

plant have not yet resulted in insured claims.

Bulgaria: The retooling of the six-block Kosloduj

power plant, which was financed with EU funds,

has been inspected by an international team

of pool engineers and declared insurable. On

25 July 2002, a liability insurance contract was

concluded for 15 million SDR (approx. 20 million

EUR), of which DKVG underwrote 26 per cent.

China: DKVG has had an 11 and 20 per cent hold-

ing, respectively, in the property and liability

insurance of the Quinshan power plant since

24 May 2002. This plant was also previously

inspected by pool engineers and given a positive

evaluation.




GDV and its members

2001 in retrospect

In 2001, DKVG registered gross premium income

of 35.0 million EUR (2000: 46.1 million EUR) and

premium income for its own account of 31.5 mil-

lion EUR (2000: 40.2 million EUR).

The income for its own account included:

■ 3.0 (2000: 7.9 ) million EUR, or 9.5 (2000: 19.7)

per cent, from domestic property insurance,

■ 5.6 (2000: 5.5) million EUR, or 17.8 (2000:

13.7) per cent from domestic liability insur-

ance,

■ 16.1 (2000: 18.3) million, or 51.1 (2000: 45.5)

per cent from foreign property insurance,

■ 6.8 (2000: 8.5) million EUR, or 21.6 (2000:

21.1) per cent from foreign liability insurance.

The premium slump in domestic property in-

surance can be primarily attributed to EnBW

insuring its three facilities (with five blocks)

entirely with the captive EMANI. In addition,

premiums were reduced by 30 per cent.

The decline in foreign business of around 4 mil-

lion EUR is not, to any significant extent, the

product of exchange rate changes, but was

instead caused primarily by the decline in re-

insurance share. In addition to the continuing

increase in the share of the captives and the

pools ceding shares (capacity increases), the dis-

satisfaction of many foreign pools with the pre-

mium reciprocity with DKVG played a decisive

role in this development. DKVG obtained 22.9

million EUR of its premium income in 2001 from

abroad, while it ceded only 3.6 million EUR to

foreign pools.

On the claims side, settlement losses of 4.25

(2000: –0.19) million EUR were registered for the

DKVG’s own account, in addition to a claims

expenditure for the financial year of 2.91 (2000:

0.18) million EUR, yielding a loss ratio of 22.8 per

cent (2000: –0.03 per cent). Without the US

liability business, which brought settlement

losses of 5.6 million EUR, the netted settlement

result would actually have been positive. How-

ever, the settlement losses from the US liability

business were offset by a reduction in bonus and

rebate provisions, so that the actuarial result

remained unchanged.

Expenditure for insurance operations for own

account for 2001 amounted to 3.9 (2000: 4.1)

million EUR. Of this total 2.3 (2000: 2.7) million

EUR went to commissions and 1.5 (2000: 1.4)

million EUR to DKVG administrative costs. The

expense ratio was 12.4 (2000: 10.2) per cent,

with internal administrative costs making up

4.8 (2000: 3.6) per cent. Interest income from

general business (not including interest income

from US liability deposits) remained at the

previous year’s level (0.5 million EUR).

111

Insolvency insurance

The task of the Pension Assurance Association

is to assure the statutory vested claims and

periodic pensions of employees and pension

recipients of companies regarding whose assets

or estates insolvency proceedings have been

initiated. The Pension Assurance Association

commenced business operations on 1 January

1975. The basis of its activity is the Act for the

Improvement of Occupational Retirement Provi-

sion, in accordance with which the Pension

Assurance Association is also endowed with

premium sovereignty under public law.

The insurance commences with the insolvency

of the employer, provided the employees already

receive an occupational pension or have a statu-

tory vested claim to such pension. In the future,

the latter will only exist for employer-financed

provision commitments in the event employees

of the member companies are over 30 years old

and are promised occupational provision at least

five years in advance. Provision commitments

based on defined contributions are legally non-

forfeitable immediately upon issuance of the

commitment. In the case of such commitments,

the Pension Assurance Association commences

insurance immediately upon insolvency, pro-

vided the provision commitment was in exist-

ence two years prior to the insolvency. Note: on

the basis of an amendment enacted on 1 July

2002, even this two-year exclusionary period no

longer applies for defined contribution commit-

ments issued on and later than 1 January 2002,

provided contributions of up to four per cent

of the premium assessment limit are used for

the occupational retirement provision in the

pension insurance of workers and employees.

For provision commitments issued prior to 2001

(both employer-financed and defined contribu-

tion), the earlier non-forfeitability regulations

still apply, in general, although with a transi-

tional regulation providing that the majority of

these vested claims for provision become legally

non-forfeitable, and thus assured against insol-

vency, on 1 January 2006.

The resources for the execution of insolvency

insurance come from premiums from the

employer subject to the insurance contributions

based on obligations under public law. The

premiums must cover the present value of the

claims for payment of insolvency insurance

resulting in the current calendar year as well

as the other insurance costs (pension value allo-

cation procedure).

Premium rate fluctuating

In the previous 27 financial years of the Pension

Assurance Association, the average premium rate

was about 2.1 per mil of the premium assess-

ment bases. In 2001, due to an increase in claims,

it was 2.5, after being 2.1 per mil in the previous

year. Nearly 39 900 employers currently pay pre-

miums to the Pension Assurance Association.

Each month, pensions in the amount of around

36 million EUR are paid out to about 340 000

pension recipients, as individuals entitled to pro-

visions from nearly 8 000 insolvencies since 1975.

In all, there are about 8 million persons entitled

to provision due to insolvency protection, in-

cluding 3.7 million recipients of occupational

pensions, and 4.3 million employees with non-

forfeitable claims (2001). The principal value

of these provision obligations in the form of

the premium calculation principle amounts to

about 218 billion EUR.




GDV and its members

Significance for employees and employers

The insolvency insurance of the occupational

retirement provision is not only extremely signifi-

cant for those entitled to the provision, but also,

from the perspective of financial policy, for

the companies themselves. Only through in-

solvency insurance could the free system of

occupational retirement provision which has

emerged over time in Germany remain intact.

It allows employers to invest in their own com-

panies cover capital accrued to fulfil provision

commitments.

In the last ten years from 1992 up to and includ-

ing 2001, about 400 000 pension recipients and

expectants with vested claims after the insol-

vency of their employers were insured by the

Pension Assurance Association based on over

3 700 assurance claims (insolvencies). The claims

volume reached about 5.1 billion EUR during this

period.

New federal states

Since 1 January 1992, the Pension Assurance

Association has also been responsible for insol-

vency insurance of the occupational retirement

provision in the new federal states. Since the Act

for the Improvement of Occupational Retirement

Provision only took effect in the new federal

states at that time, however, and, since, in ac-

cordance with the wording of the Unification

Agreement, this Act only applies to commit-

ments issued after 31 December 1991, elements

with the necessary reporting and insolvency

insurance premium payment obligations have

only accumulated slowly.

Also responsible for

the Grand Duchy of Luxembourg

Since 1 January 2002, the Pension Assurance

Association also insures the occupational retire-

ment provision in the Grand Duchy of Luxem-

bourg on the basis of an agreement of 22 Sep-

tember 2000 between the Federal Republic of

Germany and the Grand Duchy of Luxembourg

on cooperation for the insolvency insurance of

occupational retirement provision. By way of this

agreement, the German legislature expanded

the scope of the Pension Assurance Association’s

responsibilities.

2001 in retrospect

Claims volume was 614 million EUR in 2001,

after a volume of 548 million EUR in the previous

year (+12.0 per cent). Of 419 (2000: 421) insol-

vencies, 16 323 (2000: 14 832) provision recipi-

ents with an average monthly pension of 139

113

1992 37 758 116 207 217 21 6791993 38 115 467 328 704 62 1791994 38 179 363 348 425 39 9201995 38 573 427 386 489 34 8671996 39 045 481 404 724 71 6221997 39 233 483 406 423 27 8251998 39 737 224 399 388 27 7961999 39 774 530 394 611 46 7312000 39 778 440 421 548 32 7502001 39 893 546 419 614 34 537

1992–2001 – 4 077 3 712 5 143 399 906

Year number of amount number of amount number ofmember paid guarantees of loss persons

companies registered as per with pension

31 December EUR m EUR m entitlement1)

Pension Guarantee Association in figuresBasic data on the Pension Guarantee Association

1) pensioners and applicants with vested rights registered in the respective year whose companypensions must be paid in full or in part by the Pension Guarantee Association as a result of employerinsolvency.

(2000: 146) EUR as well as 18 214 (2000: 17 918)

employees with vested claims were insured.

The overall number of persons entitled to provi-

sion was 34 537 (2000: 32 750).

The premium income of the Pension Assurance

Association increased to 546 (2000: 440) million

EUR (+24.1 per cent) in 2001. The necessary

premiums should be regarded in relation to

the premium assessment basis of about 218

(2000: 209) billion EUR. This results in a premium

rate of 2.5 (2000: 2.1) per mil.

Reinsurance

2002 outlook

The overdue adjustment of reinsurance prices

and terms, which began with the renewal of

contracts for 2001, has continued at an in-

creased pace after the attack on the World Trade

Center. In some major markets, agreements

were reached on substantial price and terms

adjustments for the renewal of reinsurance

contracts for 2002. The premium increases were

the largest since Hurricane Andrew in 1992,

which up to that point had been the largest in-

sured damage event. Direct insurers increasingly

gave top priority to the quality and security of

reinsurance cover. In addition, the reinsurance

capacity offered was reduced after the terrorist

attack, especially in light of the weak capital

market trend. The new capacity created after

11 September 2001, above all that of the

“Bermuda” companies, was insignificant in

comparison.

The development of new and steadily increasing

claims potential has resulted in a continued

growth in demand for insurance and reinsur-

ance cover. It is of the greatest importance in this

regard, especially for international reinsurance

companies, to give particular attention to the

potential accumulation of risks. The increased

exposure to the risk of natural disasters as a

consequence of climate changes, as well as the

risks of population growth and an increasing

concentration of wealth in population centres

has increased the dimensions of claims. New

risks like computer viruses or other comparable

man-made damage have given rise to new

claims scenarios. In light of these developments,

reinsurers must examine their ability to assume




GDV and its members

liability in cases with high exposure to risk and

must reduce their liability to an actuarially and

financially responsible level (such as through

unlimited cover in motor liability insurance).

The development of national solutions for the

coverage of terrorism risks (for example, through

the founding of Extremus AG in Germany) must

induce reinsurers to adjust their bilateral agree-

ments with direct insurers to the changed situa-

tion.

Even if the claims trend improves in 2002 relative

to the previous years, the persistence of the

tough market conditions is to be expected for

several contract terms, in light of the changed

risk situation and the weak capital market trend.

A continued adjustment of prices and terms to

the risk situation and the expected future claims

trend is required for the renewal of contracts in

2003.

In the personal insurance classes, the demo-

graphic trend, in particular rising life expectancy,

and the financial problems faced by government

social security systems have resulted in rising

demand for private old-age provision products,

as well as provisions for invalidity and nursing

care on many markets worldwide. A growth in

business is to be expected for reinsurers as well

in this regard, in addition to new business

potential in newly industrialised countries like

China and India.

2001 in retrospect

In 2001, the international insurance industry,

like the global financial system in general, was

subjected to an extraordinary stress test. The

development of reinsurance markets as well

was more heavily affected by the general eco-

nomic trend in 2001 than in previous years.

After record growth in 2000, the growth trend of

the global economy weakened visibly in 2001.

The terrorist attacks of 11 September 2001

slowed down the global economy, which was

weak in any case, and obliterated hopes of a

rapid economic recovery. The attack on New York

and Washington and its aftermath resulted in

worldwide declines in overall economic growth

rates in 2002; in the large industrialised coun-

tries, these declines made up about 0.5 per cent

of the real gross domestic product (GDP). As a

result, global economic growth declined to

2.5 per cent, the lowest value since 1993. After

a 12.4 per cent increase in 2000, global trade

volume declined by 0.2 per cent in 2001.

115

1986/1987 10.711 68.9 29.31987/1988 11.133 69.7 28.91988/1989 11.664 67.9 29.21989/1990 12.577 70.3 29.51990/1991 14.863 78.3 29.11991/1992 15.894 74.0 29.41992/1993 17.736 73.5 27.91993/1994 19.071 68.5 26.71994/1995 18.874 66.7 26.81995/1996 17.996 63.1 26.41996/1997 18.513 63.2 27.31997/1998 20.216 63.4 28.41998/1999 22.155 69.2 28.71999/2000 28.531 80.7 29.82000/2001 28.349 72.1 30.8

Year gross claims gross loss operatingexpen diture ratio1) expenses ratio2)

EUR bn as % as %

Claims and operating expenses in reinsuranceClaims expenditure and loss and expense ratio of reinsurance companies

1) share of gross expenditure on claims of the financial year in gross premiums earned includingadditional charges, 2) share of gross expenditure on insurance operation in gross premiums earned –Source: Federal Supervisory Office.

Reinsurance profits were affected by three

factors which, although typical for the business,

had hardly ever had such a massive cumulative

effect:

The risk of change has cost insurers and reinsur-

ers dramatically in the reporting year. The terror-

ist attacks on 11 September 2001 went beyond

all known dimensions of politically-motivated

terrorism. It was by far the greatest disaster in

the history of the insurance industry. Policyhold-

ers, direct insurers, and reinsurers had no models

of the terrorism risk in such dimensions in the

past, so prices and terms did not take such risks

into account. An event with such far-reaching

consequences for so many sectors of the insur-

ance industry was not conceivable up to that

point. As a result, new concepts had to be devel-

oped to cover and assess terrorism risks. The risk

of change also includes the substantial reserve

increases on the US market. The largest in-

surance market, with a 46 per cent share of

the global market, placed a burden on major

international reinsurers by requiring reserve in-

creases throughout the market for claims from

the late nineties, asbestos and environmental

claims, and many other risks which were under-

written even earlier.

The second factor whose effect has been sub-

stantially greater this year than on the long-term

average is accidental risk. Spectacular damage

events in 2001 resulted in an unusual frequency

of large-size and maximum claims: the recall of

the drug Lipobay, the explosion of an entire

chemicals factory in Toulouse or the collapse of

the Enron Group. Although 2001 did not set any

new records in terms of natural disasters, indi-

vidual events such as storms and hail in April and

May in the USA, Tropical Storm Allison in June,

also in the USA and Typhoon Nari in September

in Taiwan represented a substantial burden for

the insurance industry. The long-term trend of

insured risks increasing at a considerably faster

rate than economic risks was clearly confirmed

in 2001.




GDV and its members

Motor insuranceLife insuranceFire insuranceGeneral liability insuranceEngineering insurancesAccident insuranceMarine insuranceCredit insuranceHealth insuranceComprehensive insurance on buildingsAviation insuranceComprehensive insurance on contentsStorm insuranceBurglary/theft insuranceOtherTotal

7.454 19.0 89.3 – 11.98.952 22.8 43.9 – 2.65.891 15.0 88.4 – 18.33.392 8.6 78.9 – 10.31.582 4.0 81.0 – 17.91.539 3.9 43.0 3.91.733 4.4 97.6 – 24.81.238 3.1 52.5 7.61.714 4.4 77.6 – 7.30.869 2.2 63.9 1.70.930 2.4 84.8 – 1.00.462 1.2 49.1 13.00.459 1.2 90.7 – 9.10.232 0.6 56.8 3.82.883 7.2 – –

39.330 100.0 72.1 – 8.5

gross premiums loss technicalof professional ratio1) result2)

reinsurers)

2000/2001 share 2000/2001EUR bn as % gross as %

The largest reinsurance classesPremium income earned, loss ratio and technical result 2000/2001

1) gross expenditure on claims of the financial year in proportion to gross premiums earned, 2) grosstechnical result in proportion to gross premiums earned – Source: Federal Supervisory Office.

The third factor was the negative capital market

trend in light of the overall economic situation,

reinforced in drastic fashion by the effects of

11 September 2001, which brought additional

investment losses. This resulted in considerably

lower regular returns for all market participants,

tangibly reduced stock price gains, increased

depreciation, and a sharp decline in valuation

reserves. All of these events and trends had

a negative effect on reinsurance companies’

equity and resulted in losses for most compa-

nies.

The renewal of reinsurance contracts on 1 Janu-

ary 2001 was not enough to achieve the overdue

breakthrough in prices and conditions which

had been hoped for. Although improvements

were made as a result, these were not nearly

enough to make the reinsurance business as a

whole profitable again. 11 September 2001 has

accelerated markets’ return to reason and has

noticeably reinforced the consciousness of the

necessity of reinsurance cover with first-class

credit ratings.

The trend in casualty, property and accident in-

surance was characterised by the unsatisfactory

economic situation on the major insurance mar-

kets. The growth in new business was hesitant,

supported in part by the global trend towards

increased rates in both direct insurance and rein-

surance. The diminishing potential for offsetting

actuarial losses with capital gains and the high

claims burden have resulted in a tangible in-

crease in prices and an improvement of actuarial

conditions, especially on the reinsurance market.

The disproportionately rapid growth in the per-

sonal insurance classes continued in 2001 in

most countries. The trends of recent years of

significance for life assurance continued and

continue unchanged: stable buying power

among the relevant client groups, demographic

changes and progressive dismantling of govern-

ment social security systems. These trends result

in growth stimuli for direct insurers and reinsur-

ers. In addition, cost pressure and capital market

expectations forced direct insurers to further

focus their activities on many markets (including

North America) with minimum profit volatility,

which once again resulted in increased reinsur-

ance requirement. Direct insurers are increas-

ingly using reinsurance as a tool for capital and

risk management.

117




GDV and its members

Investments and capital markets

There is a close relation between an insurance

company’s investments and the provision of

insurance cover, spanning the period from the

premium payments until the maturity of the

insurance benefits. The volume, quality, and

structure of the investments serve as a guar-

antee that the benefits promised to policy-

holders can be fulfilled. Investment assets

arise primarily from the investment of pre-

mium income and the reinvestment of profits.

Though the acquisition of investments is not

the actual goal of the production process for

insurance companies, it represents an impor-

tant element in providing the service of “in-

surance cover”. The investments of insurance

companies place risk protection and old-age

and surviving dependant provisions on a secure

foundation.

Investment principles and objectives

Investments by the insurance industry are

subject to strict legal and administrative provi-

sions, consisting mainly of general investment

principles (security, profitability, liquidity, as

well as mixture and diversification), qualitative

investment categories, and quantitative limits

on investments. Observing these framework

conditions in supervisory law, insurance com-

panies, as major institutional investors, con-

duct professional asset management, which

particularly involves pursuing the following

objectives:

■ timely provision of capital to allow fulfilment

of obligations to policyholders at all times.

119

■ achieving the highest returns possible with

greatest possible security. High profits from

investments benefit life assurance policyhold-

ers in the form of high benefits paid out at

term. They also allow lower insurance premi-

ums for health, casualty, property and acci-

dent insurance.

■ long-term-oriented investment policy em-

ploying consistent asset liability manage-

ment.

Provisions in supervisory law ensure that the

portfolios of insurance companies are broadly

diversified and contain high-quality invest-

ments. In addition, insurance companies are

increasingly using risk management systems

to manage their investments and are adapting

their portfolio structure to the individual

company risk tolerance. As a result of their risk-

sensitive investment policy, life assurance com-

panies have never exhausted the basic invest-

ment allotment for stocks, which was 30 per

cent until the end of 2001. In mid-2002, German

life assurers had an average of almost 15 per

cent invested in stocks, directly and through

funds. In addition, a significant percentage of

these stock investments were hedged through

derivative financial instruments. Almost 80 per

cent was invested in fixed-interest securities.

Although the very weak stock market trend has

naturally left its mark on the insurance com-

panies as well, an investment policy based on

the principles of caution, mixture, and diversifi-

cation, together with state-of-the-art portfolio

management, ensures that massive capital

market slumps will have only a weakened effect

on life assurance companies, in accordance with

their weight in the overall portfolio.

Premium reserve secures claims

The capital paid in by life assurance policyhold-

ers is not only invested securely due to stringent

provisions of supervisory law, it enjoys particular

protection through the premium reserve. The

premium reserve ensures that policyholder

claims are sufficiently covered at all times. These

funds are to be managed separately from the

other assets of the insurance company and

secures policyholders’ claims before all other

creditors in the event of insolvency. The pre-




GDV and its members

Life insuranceHealth insuranceNon-life insuranceTotal for direct insurersReinsurers2)

6.555 18.731 33.574 36.228 37.0460.526 1.493 4.242 4.821 5.2071.879 3.627 6.884 6.510 6.5388.959 23.852 44.700 47.559 48.7910.537 1.888 7.175 – –

Current income from investments1)

1980 1990 1999 2000 2001*)

EUR bn EUR bn EUR bn EUR bn EUR bn

*) figures for 2001 estimated, 1) from 1994 in accordance with new accounting standards, 2) financial year deviates from the calendar year; predominantly previous year‘s figures – Source: Federal SupervisoryOffice – Source: Federal Supervisory Office for Financial Services, GDV.

1980 8.6 8.5 93.8 480.91985 6.9 6.9 105.5 1 366.21990 8.9 8.7 93.5 1 398.21993 6.4 6.4 109.4 2 266.71994 6.7 6.7 99.9 2 106.61995 6.5 6.4 109.2 2 253.91996 5.6 5.6 110.4 2 888.71997 5.1 5.2 111.0 4 249.71998 4.5 4.6 118.2 5 002.41999 4.3 4.4 110.6 6 958.12000 5.4 5.5 112.5 6 433.62001 4.8 4.8 113.1 5 160.120022) 4.5 4.9 115.0 3 712.9

Year flat yield of issuefixed-interest yield1)

securities

as % as %

German bond German shareindex (REX) index (DAX)

current average year-end 1987 =rate 1000

Capital market data

1) annual yield of fixed-interest securities placed for the first time in the reporting month, 2) as perJuly/August 2002 – Source: German Bundesbank, Kapitalmarktstatistik, September 2002 issue.

mium reserve thus represents another impor-

tant instrument to secure the capital paid in by

policyholders.

New legal investment provisions

The new Investment Ordinance for insurance

companies took effect on 1 January 2002, re-

placing the previous §54a of the Insurance

Supervision Act. This ordinance provides an ade-

quate liberalisation of the previous investment

provisions and takes the changing and increas-

ingly internationally-oriented investment poli-

cies of insurance companies into account. For

example, the new Investment Ordinance pro-

vides better possibilities for investment in real

estate companies, real estate funds, and invest-

ment certificates. For the first time, the cata-

logue of investments contains a separate invest-

ment category for “asset-backed securities”, an

asset class which is also gaining in importance in

Europe. Another positive development is the

easing of investments in private equity through

funds of funds. As a result of the increase of the

“opening clause” made possible by approval of

121

1997 1998 1999 2000 2001**)

share share share share shareEUR bn as % EUR bn as % EUR bn as % EUR bn as % EUR bn as %

Type of investment

Investment portfolio by type of investment*)

Balance sheet values

*) spread of investments for life, health, non-life and reinsurance classes, **) provisional figures for the health, non-life and reinsurance business – Source: GDV, FederalSupervisory Office.

Land and immovable property rightsInvestments in affiliated undertakings and participating interests:

shares in affiliatesloans to affiliatesparticipating interestsloans to undertakings linked by virtue of a participating interest

Other investments:sharesshares in pooled investmentsother variable-yield securitiesbearer bonds and other fixed-income securitiesloans guaranteed by mortgages and other loansregistered bondsdebentures and loanspolicy loansother loansdeposits with credit institutions

Other investmentsTotal

24.245 3.8 24.616 3.6 23.927 3.2 23.716 3.0 22.779 2.6

42.309 6.7 54.727 8.0 63.297 8.4 69.596 8.7 86.218 9.92.231 0.4 4.200 0.6 4.884 0.7 8.345 1.0 20.603 2.4

11.899 1.9 9.175 1.3 9.081 1.2 10.851 1.4 14.315 1.6

2.375 0.4 3.015 0.4 3.383 0.5 2.735 0.3 2.362 0.3

24.063 3.8 27.636 4.0 27.978 3.7 30.594 3.8 33.232 3.889.379 14.2 113.978 16.6 146.064 19.5 172.367 21.5 188.407 21.6

4.318 0.7 4.655 0.7 4.725 0.6 4.811 0.6 4.774 0.5

77.910 12.3 78.919 11.5 70.968 9.5 63.425 7.9 69.184 7.9

60.567 9.6 61.236 8.9 63.757 8.5 64.714 8.1 66.737 7.7176.299 27.9 182.122 26.5 197.031 26.2 206.828 25.8 199.969 22.9100.192 15.9 104.540 15.2 114.710 15.3 121.122 15.1 132.711 15.2

5.151 0.8 5.058 0.7 4.898 0.7 5.061 0.6 5.343 0.62.651 0.4 3.492 0.5 5.001 0.7 6.602 0.8 7.264 0.86.397 1.0 7.338 1.1 8.273 1.1 8.363 1.0 14.134 1.61.449 0.2 2.163 0.3 2.767 0.4 3.486 0.4 3.773 0.4

631.437 100 686.871 100 750.745 100 802.618 100 871.805 100

the Federal Supervisory Office for Financial

Services (BAFin), it has finally been taken into

account that financial innovations are steadily

gaining in importance in the asset management

of insurance companies.

Grounding of qualitative criteria

in supervisory law

An important core element of the new Invest-

ment Ordinance is the grounding of qualitative

criteria in supervisory law. As a result, insurance

companies are now required by supervisory law

to observe general and specific investment

principles through qualified investment man-

agement and suitable internal investment prin-

ciples and control procedures and to ensure a

forward-looking investment policy. In addition to

the consideration of ratings for the assessment

of credit risks, e.g. the performance of “stress

tests” will gain in importance in this regard.

These tests are an important tool for analysing

the effects of adverse capital market trends

on the risk capacity of insurance companies.

Many companies have been using stress tests for

a number of years as part of internal company

risk management. GDV developed a stress test

model specially suited for life assurance compa-

nies as early as in 1999. It is important that the

reserves on the liabilities side of the balance

sheet (for example, unused bonus and rebate

provisions), and not only capitalised valuation

reserves, be taken into account as the buffer in

performing stress tests.

Implementation of

the new Investment Ordinance

The new investment regulations will present a

number of interpretative questions and dilem-

mas, many of which will have to be clarified

together with BAFin. BAFin has since begun

adapting the earlier statements and memo-

randa of the Federal Supervisory Office for Insur-

ance to the new legal situation. For example, a

draft has been issued of a basic memorandum

on the investments of insurance companies

which represents the legal situation and gives

indications of under what conditions major ele-

ments and unspecified legal concepts or legal

provisions can be considered applicable. The pur-

pose of a new memorandum on reporting and

notification duties is to ensure that supervisory

authorities are constantly informed as to the

composition of investments and their current

value. The information BAFin receives will be

considerably more transparent, particularly with

respect to the asset allocation of restricted

funds. In addition, BAFin has already recognised

the new standard contract for restricted funds,

which takes into account the expanded invest-

ment possibilities due to the new investment

ordinance and the Fourth Financial Market

Promotion Act.




GDV and its members

Asset-backed securities and credit-linked notes

Investments by insurance companies in asset-

backed securities (ABS) and credit-linked notes

(CLN) have increasingly gained in importance in

recent years. In addition to the opportunity of

improving portfolio diversification, investment

in the “credit” asset class opens up new yield

opportunities for investment companies. In the

past, it was unclear under what specific condi-

tions in supervisory law insurance companies

could acquire ABS and CLN, since these products

could be associated with credit risks. It is there-

fore to be welcomed that the supervisory

authorities have defined the requirements for

investment in ABS and CLN more closely in

Memorandum R 1/2002. According to this

Memorandum, insurance companies may only

take on credit risks through credit derivatives,

in principle, if the relevant products have an

Investment Grade rating. In general, such prod-

ucts can only be allocated to committed assets

if the individual financial instrument has an

investment grade rating. In addition, ABS or CLN

may only be acquired for portfolio mixing.

From the perspective of the insurance industry,

the treatment in supervisory law of investments

in ABS and CLN by BAFin appears fundamentally

appropriate. The investment principles of secu-

rity must be in the forefront for investments in

these asset classes as well. It is therefore appro-

priate that investments in ABS and CLN be

largely based on ratings as a qualitative super-

visory element. Ratings represent an objective,

comprehensible tool for assessing the safety of

investments with respect to creditworthiness

risks. Speculative Grade investments usually do

not meet the high security requirements which

insurance companies are required to meet as

part of their investment policy. Exceptions can

only be made if an additional security, such as a

capital guarantee, exists in an individual case.

123

1997 1998 1999 2000 2001**)


Investment portfolio by insurance class*)


Life insuranceHealth insuranceNon-life insuranceReinsuranceTotal

427.289 67.7 463.398 67.5 505.946 67.4 541.636 67.5 570.948 65.549.598 7.9 57.153 8.3 65.172 8.7 72.686 9.1 80.953 9.386.350 13.7 91.032 13.3 94.397 12.6 96.125 12.0 99.467 11.468.200 10.8 75.289 11.0 85.229 11.4 92.050 11.5 120.437 13.8

631.437 100 686.872 100 750.744 100 802.497 100 871.805 100

*) spread of investments for life, health, non-life and reinsurance classes, **) provisional figures for the health, non-life and reinsurance business – Source: GDV, Federal Super-visory Office.

Accounting for securities

After the events of 11 September 2001 resulted

in a massive price drop on the international cap-

ital markets, the German financial market was

threatened with additional destabilisation since

insurance companies were under pressure to sell

considerable quantities of stock prior to the bal-

ance sheet date in order to prevent additional

depreciation, based on the previous version of

§341b of the Commercial Code. The result

would have been an additional price slump and

thus the further destabilisation of the German

capital market. The more relaxed situation on

the German capital market at the beginning of

2002 can certainly be ascribed in part to the

announcement that §341b of the Commercial

Code would be amended.




GDV and its members

1997 1998 1999 2000 2001**)


Type of investment

Gross new investments by type of investment*)


*) spread of investments for life, health, non-life and reinsurance classes, **) provisional figures for the health, non-life and reinsurance business – Source: GDV, FederalSupervisory Office.

Land and immovable property rightsInvestments in affiliated undertakings and participating interests:

shares in affiliatesloans to affiliatesparticipating interestsloans to undertakings linked by virtue of a participating interest

Other investments:sharesshares in pooled investmentsother variable-yield securitiesbearer bonds and other fixed-income securitiesloans guaranteed by mortgages and other loansregistered bondsdebentures and loanspolicy loansother loansdeposits with credit institutions

Other investmentsTotal

1.881 1.2 2.341 1.1 1.571 0.8 1.435 0.7 2.282 0.8

10.747 6.6 29.724 14.2 9.614 4.8 9.799 4.7 35.671 12.01.079 0.7 3.895 1.9 1.232 0.6 6.174 3.0 11.014 3.71.827 1.1 3.209 1.5 2.435 1.2 2.916 1.4 5.917 2.0

0.367 0.2 0.811 0.4 0.808 0.4 1.055 0.5 0.500 0.2

18.060 11.1 20.661 9.9 18.389 9.1 25.013 12.0 34.342 11.525.007 15.4 31.586 15.1 39.882 19.7 44.993 21.6 53.740 18.1

1.312 0.8 1.310 0.6 1.105 0.5 1.182 0.6 1.112 0.4

40.342 24.9 45.556 21.7 45.771 22.7 41.649 20.0 61.675 20.7

6.852 4.2 7.081 3.4 8.260 4.1 6.628 3.2 6.659 2.226.667 16.5 30.020 14.3 37.234 18.4 27.994 13.4 25.893 8.718.261 11.3 21.015 10.0 25.426 12.6 21.100 10.1 30.678 10.3

1.299 0.8 1.361 0.6 1.252 0.6 1.519 0.7 1.610 0.51.507 0.9 1.148 0.5 1.717 0.8 2.126 1.0 1.027 0.36.262 3.9 9.075 4.3 6.702 3.3 13.280 6.4 24.387 8.20.550 0.3 0.661 0.3 0.683 0.3 1.322 0.6 0.981 0.3

162.022 100 209.455 100 202.080 100 208.186 100 297.489 100

The amendment of the valuation regulations

represented an adjustment to the provisions

already in force for other sectors and inter-

nationally accepted accounting standards; in

other words, it was not merely an accounting

aid for insurance companies. Even according to

the new regulations, securities which undergo

a permanent impairment must be written off,

regardless of whether they are classified as fixed

assets or current assets.

In October 2002, the Institute of German Audi-

tors (IDW) specified the term “permanent

impairment” in greater detail, specifying both

the period and the extent of the discrepancy

between the current value and the book value

of stocks, investment fund shares, or other se-

curities. As a result, the provisions provide the

necessary clarity for determining when depreci-

ation is to be considered as a result of permanent

impairment and what the depreciation should

be. They also provide transparency for the repre-

sentation of companies’hidden expenses which

must be listed in the Notes to the balance sheet.

The modification of the valuation regulations

has taken into account the long-term-oriented

investment policy pursued by insurance compa-

nies. The long-term investment structure of in-

vestment companies, which is based on fulfilling

future obligations, makes short-term capital

market fluctuations insignificant. Valuating se-

curities based on the provisions applicable for

fixed assets means that insurance companies

are not required to sell stock and investment

shares in times when capital markets are weak

in order to make sufficient balance sheet pro-

visions. Instead, insurance companies will be

better able to act in anti-cyclical fashion on the

stock market as part of their long-term invest-

ment policy, thus contributing to the stabilisa-

tion of the market. Still, the modification of the

valuation regulations in no way releases in-

surance companies from their responsibility to

remain within their individual company risk

capacity when making stock investments.

The modification of the valuation regulations

also made it easier for insurance companies to

invest in long-term fixed-interest securities,

such as ten- or thirty-year German government

bonds. Long-term investments in bearer bonds

are expedient from the perspective of asset

liability management, but such investments

were made difficult by the lowest value principle

previously in force.

Sustainable investments

The global discussion about sustainability has

intensified in recent years. In accordance with

the 1987 “Brundtland Report” of the UN Com-

mission on Environment and Development,

sustainability is defined as a development that

meets the needs of the present without com-

promising the ability of future generations to

meet their own needs. As part of the overall

discussion on sustainability, the topic of “ethical

or responsible investments” has also gained in

importance. German insurance companies sup-

port the goal of sustainable development, since

they consider themselves responsible for pro-

moting the preservation of resources for the

benefit of future generations. Insurance com-

panies consider “sustainable management” an

integrated corporate concept of which invest-

ment policy is only one pillar.

125

Notwithstanding the positive basic attitude of

German insurance companies towards “sustain-

able development”, excessive attention to

ecological, ethical, and social considerations in

forming investment policy would nevertheless

cause various problems, especially since there

are no generally accepted standards and criteria

with respect to ethical, social, and ecological

issues. For example, different approaches (nega-

tive screening; best-in-class) would produce

completely different results with respect to the

evaluation of companies. Furthermore, a narrow

definition of “sustainable investments” would

limit diversification possibilities on the global

market considerably, especially in Europe and

certainly in Germany. The inevitable result

would be higher risks and lower returns. As a

result, insurance companies would be in conflict

with the Insurance Supervisory Act, which ex-

plicitly requires secure and profitable invest-

ments.

Sustainable investments can only gain in im-

portance for insurance companies once inter-

national standards and comprehensible criteria

are set for evaluating whether investments are

“sustainable”. However, it must be remembered

that the primary responsibility of insurance

companies is towards their policyholders, who

e.g. expect high returns and maximum invest-

ment security in the interests of maximising

their old-age provision. As a result, insurance

companies are faced with conflicting objectives

when sustainable investments fail to meet the

requirements of policyholders.

Weak economic situation

The global economy began to revive in early

2002 after being driven into a recession in the

fourth quarter of last year by the terrorist attacks

of 11 September 2001. Stimulating the revival

were government programmes as well as

monetary measures, particularly in the US, the

enduring stabilisation of prices, and the replen-

ishment of company stocks. However, global

economic growth has once again slowed con-

siderably since the summer months. The reasons

for this trend are a considerable reduction in con-

sumer confidence, the crisis on the financial

markets, and, last but not least, the expiration of

the stimuli mentioned above. In addition, the

fear of new terrorist attacks, as well as the

danger of a war with Iraq, continues to have

a paralysing effect.

The German economy continues to find itself in

a phase of extremely weak growth. Total eco-

nomic production increased by an estimated

0.25 per cent in the second quarter, while the

real gross domestic product (GDP) was approxi-

mately at the level of the previous year, thus

offsetting the slump in growth. Economic

growth of about 0.5 per cent is expected for

Germany for 2002 as a whole. However, a re-

cession is not to be feared, since most economic

indicators continue to predict at least a slight

economic recovery.

The global economic factors mentioned above

are partially responsible for the economic situa-

tion in Germany. However, these are exacer-

bated by structural problems, particularly on

the labour market, and the after-effects of the

German unification. As a result, Germany will

show the weakest growth rates in the European




GDV and its members

Union for the foreseeable future. In addition

to the global economic trend, Germany’s future

development should be highly dependent on

whether Germany will succeed in implementing

the necessary reforms in its social security

system. In addition, economic developments in

this country are particularly dependent on global

economic developments due to Germany’s high

export rates.

Low prime interest rates

Due to comparable economic developments and

the efforts of industrialised nations to restore

stability on the global markets, monetary

measures were taken, supplemented in part by

elements of fiscal policy. As a result, prime inter-

est rates are at extremely low levels both in the

US and in the European Monetary Union (EMU).

These actions appear appropriate in view of the

stabilisation of prices which has been achieved.

The US discount rate is 1.25 per cent, and has not

been corrected since 11 December 2001, due to

the economic trend. The European Central Bank

(ECB) also made its most recent reduction in

prime interest rates in late 2001. On 9 November

2001, the marginal lending facility rate was

reduced to 4.25 per cent and the deposit facility

rate to 2.25 per cent, and on 14 November 2001

the rate for main refinancing operations was

reduced to 3.25 per cent.

Equities and bond markets

Developments on the capital markets in early

2002 were deeply affected by expectations of a

global economic recovery and reduced political

instability. However, since political concerns in-

creased in mid-year as a result of the Iraq crisis

and a strong global economic recovery seemed

no longer probable, the financial markets were

subject to a renewed crisis situation. The con-

fidence of the players on the financial market

has declined steadily, most recently as a result of

the accounting practices of a few US companies

(Enron, Worldcom). A clear sign of this trend is

the longstanding flight of players on the capital

market towards a safe investment in govern-

ment bonds (“safe haven”).

Late last year, the German stock market was able

to overcome its deep slump, which was caused

by the terrorist attacks, and reach a price level

similar to that which it had prior to 11 Septem-

ber 2001. The German stock index, the DAX,

began 2002 at 5 160 points. In March, it reached

its high for the year, at almost 5 500 points. Sub-

sequently, however, significant price declines

drove the German index down to about 2 500

points by mid-October. However, these dramatic

stock market drops are only a limited reflection

of expected real economic developments. They

are instead primarily the product of deep-seated

political insecurity and represent a clear ex-

aggeration of the negative global framework

conditions. As soon as this insecurity disappears

from the markets, a tangible recovery of the

stock markets may be expected.

127

The German bond market was characterised by

a very low interest level in 2002, which showed

an ever-downward trend over the course of

the year. At the beginning of the year, ten-year

German government bonds matured at about

4.7 per cent. By May, returns increased to about

5.2 per cent, only to fall to about 4.4 per cent due

to the trend depicted above of a flight towards

safe investments. Due to the expected economic

revival in the medium term, interest rates could

be raised slightly. In the medium term, an inter-

est rate level of five per cent appears realistic for

10-year bonds.

Investment portfolio

At the end of 2001, the investment portfolio of

the insurance industry registered about 871 bil-

lion EUR (not including pension and funeral

expenses funds). This corresponds to nominal

growth of about 69 billion EUR or an 8.7 per cent

gain over the previous year. In 1980, the portfolio

of the insurance industry totalled a mere 278.8

billion EUR. At the end of 2002, the portfolio

volume may rise to about 950 billion EUR.

The insurance industry had a gross amount of

approx. 297 billion EUR available for new invest-

ments in 2001. The largest share fell once again

to the investment category “securities and share-

holdings” (stocks, investment shares, bearer

bonds, and other non-fixed-interest securities)

at nearly 51 per cent (151 billion EUR), while

new investments in registered bonds and loans

totalled 19 per cent (56.6 billion EUR). Real estate

credit (mortgage, land charge, and annuity

charge claims) amounted in 2001 to approx.

6.7 billion EUR, while 2.3 billion EUR was in-

vested in real property.

Registered securities dominate portfolios

Registered bonds, notes receivable, and loans

continue to represent the focus of the insurers’

portfolios, although these securities have de-

clined slightly. They accounted for almost 332

billion EUR in 2001, corresponding to a 38.1 per

cent share of the entire investment portfolio.

At the end of 2001, over 96 per cent of the

portfolio (about 319 billion EUR) was invested in

registered securities at public and private law

credit institutes. Considering that an additional

14 billion EUR was invested in fixed deposits,

time deposits, and savings deposits, the signifi-

cance of the insurance industry for the refinanc-

ing of the credit industry is clear.

Equities and shareholdings

Despite the over three-year bear market, invest-

ment in stocks remains an indispensable com-

ponent of the investment policy of insurance

companies, with investment policy taking on an

increasingly global shape. While only 1.7 billion

EUR was newly invested in stocks directly in

1980, about 34.3 billion EUR was invested in this

manner in 2001. Investment through restricted

funds remains the most common form of in-

vestment in stocks.

Insurance companies are acquiring more share-

holdings in order to serve as a counterbalance

to strict nominal investments and in order to

decrease the contingency of funds on market

fluctuations. Holdings increased to about 100

billion EUR in 2001, an almost 25 per cent in-

crease over the previous year. This includes both

direct shareholdings and interposed holding

companies, which also assume exposures in un-

listed venture capital, so-called “private equity”.




GDV and its members

Dynamic growth in restricted funds unbroken

The investments of insurers in investment cer-

tificates, especially in restricted funds, showed

growth in 2001 as well. The investment volume

in investment certificates reached about 188 bil-

lion EUR, corresponding to a 21.6 per cent share

of the total investment portfolio, making insur-

ance companies the most important group of

restricted fund investors among investment

companies. A restricted fund is an investment

fund subject to the regulations governing in-

vestment companies, with the peculiarity that

all shares are reserved for a limited number of in-

vestors. Restricted funds are structured primarily

as strict bond funds, mixed equities and bond

funds, or strict equities funds. The equities per-

centage in the restricted funds of insurance

companies is now almost 40 per cent. Invest-

ments in real estate funds have also continued

to gain in importance.

Restricted funds are employed primarily for pur-

poses of control, since they give insurance com-

panies the opportunity to achieve stock market

gains without an effect on balance sheets, pro-

vided the profits from the funds are reinvested,

rather than being paid out as dividends. Vice

versa, write-offs of fund shares become dispens-

able in this way, provided the price drops of some

shares in the net assets are compensated for by

gains in other shares held by a fund.

Increased importance

of real estate investments

The investment category “land and leasehold

rights”appears at first glance to be of secondary

importance. The book value of this investment

portfolio was 22.8 billion EUR at the end of 2001,

a relative share of about 2.6 per cent. However,

these figures only take into account direct real

estate investments; if one takes into account in-

direct real estate investments through restricted

real estate funds and real property companies,

which are gaining in importance, a somewhat

different picture results. A GDV study has found

that direct and indirect real estate investments

together make up about 4.5 per cent of the

investment portfolio, with a significant portion

of the indirect real estate investments consisting

of foreign real estate.

Code of conduct for the issuing

of mortgage loans

In early 2001, the European Commission released

a Recommendation concerning “pre-contractual

information to be given to consumers by lenders

offering home loans”. The Recommendation

was closely followed by the signing of a “volun-

tary code of conduct on pre-contractual infor-

mation for home loans” (code of conduct) by

the European Consumers’ Organisation and the

European Mortgage Federation. The goal of the

code of conduct is to improve and standardise

the information available to the consumer and

thus to assist potential borrowers in the selec-

tion of their mortgage loan.

129

Over 90 insurance companies have since signed

the code of conduct. Together, these companies

hold a market share of almost 90 per cent in the

real estate credit segment of the insurance in-

dustry. The code of conduct was implemented,

as scheduled, on 30 September 2002. With the

broad adoption of the code, the German insur-

ance industry and the credit industry have made

an important contribution to increasing trans-

parency in the issuance of housing credit. Since

the code has also found broad acceptance in

other European countries, it must be ensured, in

view of the current revision of the Consumer

Credit Directive, that mortgage loans remain

largely excluded from the scope of that Directive

in the future as well. Otherwise, the continued

success of the code could be in serious jeopardy.

Further development of securities supervision

on the EU level

The presentation of the so-called “Lamfalussy

Report” in early 2001 by an expert committee

engaged by the EU Commission was followed by

legislative initiatives on the part of the European

Union to improve securities supervision. The

European Commission thus presented a pro-

posal for a Directive concerning insider dealing

and market manipulation (market abuse) in

May, as well as the draft of a Directive to amend

the securities issuing guidelines.

The aim of the market abuse directive is to

ensure the integrity of the European financial

markets, to establish and implement common

standards against market abuse in Europe, and

to enhance investor confidence in the European

financial markets. This draft directive should

serve as a basis for the creation of a legal EU

framework for protecting market integrity.

The main point of the proposed securities is-

suance directive is the institution of a so-called

“European passport”(good for one-time use) for

securities issuers. This European passport should

contribute to the creation of an integrated Euro-

pean capital market and should increase the

competitiveness of the European economy by

lowering the cost of raising capital for compa-

nies of all types.

From the perspective of the German insurance

industry, as a significant institutional investor in

the international capital markets, these pro-

posed directives are in principle to be welcomed,

even if individual items still need to be discussed.

For example, the aims of the market abuse direc-

tive can only be achieved with a high degree of

co-operation within the European Single Market.

However, the individual cases of market ma-

nipulation are not well-defined enough for this

purpose and allow the member states too much

freedom in their implementation. Generally

speaking, however, the proposals of the Euro-

pean Commission are an important step to-

wards increasing the competitiveness of the

European capital market and permanently in-

creasing investor confidence in the ability of the

existing financial markets to function.




GDV and its members

Outlook

The insurance companies will continue to ad-

here to their investment policy, which is based

on the principles of security, mixture, and diver-

sification, in the future as well. This investment

policy was and is a guarantee that insurance

companies will earn attractive and secure long-

term returns and that policyholders will benefit

from a high real investment return. Fixed-inter-

est investments will continue to be the focus of

the insurance portfolio in the future. These in-

vestments will be dominated by securities from

first-class issuers, but investments in corporate

bonds, ABS, and CLN will gain in importance

for the purposes of portfolio optimisation. A

qualitative, rating-based supervisory approach

ensures that all investments comply with the

principle of security.

Despite the negative development in the stock

markets since March 2000, stocks will continue

to have a place within the insurance industry’s

investment policy in the future. Insurance com-

panies pursue long-term investment strategies

and stocks offer the most favourable long-term

returns. In the future, insurance companies will

be able to manage their risk even more effi-

ciently through increased use of state-of-the-art

risk management tools and the intelligent use of

derivatives for the purpose of hedging against

market fluctuations.

However, “alternative investments” should also

gain in importance for insurance companies. This

investment category includes “private equity”

products and “hedge funds”. Alternative invest-

ments open new diversification possibilities as

well as the prospect of steady returns without

major fluctuations. In this regard, the provision

by the Investment Ordinance, which has been in

force since 1 January 2002, of better possibilities

for investment in private equity products is to be

warmly welcomed. However, it is uncertain at

the moment under what conditions insurance

companies may invest in hedge funds. It there-

fore appears important that a reliable frame-

work in supervisory law be created for these

investments as well. In creating this framework,

consideration must be given to the risk associ-

ated with this asset class without excessively

limiting investment possibilities.

131




GDV and its members


Since Reunification, a significant expansion of

German insurance employees has taken place.

Between 1989 and 2001, insurance companies

added about 34 300 employees, with 245 400

now on their payroll across Germany. Includ-

ing insurance agency and insurance brokerage

employees, especially full- and part-time inde-

pendent field service employees, over 700 000

people currently serve in the insurance industry

across Germany.

The insurance industry has earned its reputation

as a growth industry not only through the ex-

pansion of its business, but also as an employer.

Despite competition and rationalisation pres-

sure, the number of employees has increased

markedly since the end of the eighties, while

employee quality has also increased signifi-

cantly. The quality of training and further educa-

tion is becoming increasingly decisive for the

competitiveness of companies.

Number of employees rises again

According to the employment figures from the

Munich-based Employers’ Association of Ger-

man Insurance Companies, employment figures

in the insurance industry experienced a very

positive development in 2001, rising by 2.2 per

cent, to 245 400. With this increase, the industry

is slowly approaching its “employment peak,”

reached in 1992, when the industry counted

259 000 employees in Eastern and Western

Germany. From this peak, the number of em-

ployees dropped sharply in the next few years

(1993–1998), by a total of 7.8 per cent, to

238 800, as a result of the consolidation

necessary for the establishment of modern

infrastructure in the new federal states and the

intensification of competitive pressure due to

133

the liberalisation of the European insurance

markets. Employment figures then experienced

a slight increase in 1999 and 2000, rising by a

total of 0.6 per cent, or 1 400 persons, to 240 200

employees.

Among the 245 400 company employees in Ger-

many at the end of 2001 were 15 900 (2000:

15 400) trainees, particularly for insurance sales

and clerical office and data processing positions.

There were about 900 training contracts in the

independent field service, primarily for office

vocations. The number of office employees was

175 500 for insurance companies (up 2.3 per

cent), that of field service employees was 51 300

(up 1.6 per cent), and that of commercial per-

sonnel was 2 700 (down 3.6 per cent). Details

can be found in the table on page 135.

Munich – Cologne – Hamburg

According to the evaluation of the Federal Bu-

reau of Statistics, 302 460 employees of insur-

ance companies and agencies performed work

which is subject to social security contributions

in mid-2001, which represents 0.9 per cent more

than the previous year. With 74 180 employees

liable for social security (24.5 per cent), North

Rhine-Westphalia held a considerable lead over

Bavaria (57 380 or 19.0 per cent) and Baden-

Wuerttemberg (37 170 or 12.3 per cent).

Munich edges out Cologne and Hamburg as

the number one insurance centre in terms of

numbers of employees. The Bavarian capital had

27 520 insurance industry employees in 2001

(including insurance agencies). Official statistics

put this figure at 24 730 employees for Cologne

and 22 750 for Hamburg.

Income for more than 706 000 people

About 407 000 employees are engaged in the

independent field service on a full- or part-time

basis. The number of independent full-time

exclusive agents is about 75 000, along with an

estimated 4 000 multiple agents and about

8 000 insurance brokers, some employing up-

wards of 600. The final estimate of independent

part-time agents comes to around 320 000.

If one combines the number of employees in

insurance companies and agencies with the

number of independent employees in market-

ing, about 706 400 persons were dedicated

to private insurance cover in Germany in

2000/2001 – from production to policyholder

advice to claim processing, from preparation of

policies to loss prevention. Part-time employees

made up more than half of this number.




GDV and its members

High level of education

According to the available figures for the end

of 2000, 73.5 per cent of insurance company

employees have completed occupational train-

ing. 38.1 per cent of the employees have passed

A-level examinations, completed a higher tech-

nical school or college, or even university. Ten

years ago, this percentage was 25.9 per cent.

The percentage of employees with academic de-

grees has increased by 6.9 per cent since 1990, to

10.4 per cent (about 25 000 employees). Lawyers

form the largest group, with 6 000 persons, fol-

lowed by commercial and economic graduates,

with 5 500, 3 900 mathematicians, and 1 600

graduated engineers. In addition, a total of 8 000

graduated physicists, computer scientists, doc-

tors, psychologists, and employees with acade-

mic degrees in other fields work in the insurance

industry.

This trend is not only the result of the high

output of high school and college graduates

produced by our training system, it is also an

expression of the heightened employee stan-

dards in the industry. The insurance industry

must improve the quality of its employee struc-

ture. An increasing number of standard tasks

can be performed by machine, while, at the

same time, the products which the industry

offers are becoming increasingly complex, re-

quiring more extensive explanation.

135

1970 126 200 66 000 8 700 6 700 11 200 5 600 43 400 900 189 5001980 140 200 73 500 11 900 6 600 10 500 4 700 39 700 1 200 202 3001985 141 900 71 500 5 100 2 400 13 200 5 500 37 100 700 197 3001990 162 500 84 200 4 700 2 100 15 900 6 800 50 100 3 100 233 2001993 177 400 98 300 4 500 2 000 17 200 8 300 56 800 6 100 255 9001994 176 500 97 100 4 000 1 800 14 800 7 100 54 700 6 100 250 0001995 175 500 96 300 3 700 1 700 13 300 6 200 53 100 6 100 245 6001996 174 100 94 700 3 400 1 600 12 200 5 500 52 000 6 100 241 7001997 171 900 94 200 3 300 1 400 12 700 5 700 51 400 6 500 239 3001998 171 500 94 200 3 100 1 400 13 900 6 300 50 300 7 000 238 8001999 171 000 93 700 3 000 1 400 14 800 6 900 50 800 7 500 239 6002000 171 500 95 000 2 800 1 300 15 400 7 300 50 500 8 100 240 2002001*) 175 500 – 2 700 – 15 900 – 51 300 – 245 400

End of year inside staff non-clerical staff trainees1) field service staff total

total thereof total thereof total thereof total thereoffemale female female female

Employment in insurance companies by field of activityFrom 1990 including the new federal states

*) change of statistical method, update of the table in 2003, 1) qualified insurance clerks, general clerical occupations a.o. – Source: agv.

Experts increasingly in demand

The broad rationalisation wave beginning in

the mid-1970’s has not resulted in the dequalifi-

cation process often lamented by the unions.

On the contrary: highly-qualified experts with

extensive experience are needed nowadays to

develop computer-based workflows in such a

manner as to create specific financial solutions

and employee-customised workplaces. By the

same token, a considerable number of simpler

functions are being eliminated.

Other factors have led in the same direction. In-

tensifying competition, the change of financial

and technological structure, more differentiated

insurance demand, more well-informed and

demanding customers – all of this has resulted

in an increasing professionalisation of corporate

management. As a result, specialists are increas-

ingly needed to develop and implement the

management and control of necessary systems.

Experts from many legal, financial, and technical

fields are needed in order to meet the increasing

demand for consulting services: both within the

insurance company itself and for agents, part-

ners, and customers.

Another challenge which many insurers nowa-

days face is structuring the overall company in a

manner more closely based on the specific needs

of the various customer groups. Employees with

interdisciplinary qualifications are an important

prerequisite for this as well.

Age and fluctuation

The average age of insurance company employ-

ees is 38.3 (39.4 for men and 36.9 for women).

This has not changed significantly in recent

years. The average length of service, however,

showed a marked increase: At 12.3 years at

the end of 2000 (latest available data), this was

considerably higher than the 1980 figure of

8.4 years. The fact that employees are less in-

clined to change occupations due to favourable

working conditions in the insurance industry

may be a significant factor in this trend.

Increased length of service corresponds with

a lower fluctuation rate: while an average of

9.8 per cent of office employees left companies

in 1980, this figure was only 6.4 per cent in 2001.

Of these, 1.5 per cent withdrew for “natural

causes” (death, retirement, early retirement,

parenting time etc.) and 1.0 per cent when their

contracts expired. Employees terminated con-

tracts in 2.8 per cent of the cases, companies in

0.5 per cent of the cases, and the contracts were

cancelled by mutual agreement in an additional

0.5 per cent of the cases.

Ahead in terms of income

Insurance industry employees continue to re-

ceive the highest income within the service

sector. As of January 2002, commercial employ-

ees earned a gross average of 3 266 EUR a month,

according to official statistics, compared to

2 922 EUR for the economy as a whole, 3 061

EUR for banks, 2 812 EUR in the wholesale trade,

and 2 293 EUR in the retail trade.




GDV and its members

Im Dienst der Sicherheit 131In the service of security

Employees of the insurance industry

as well as full- and part-time independent

insurance agents

137

1990

0 200 000 400 000

40 740233 200273 940

thereof, in agencies1)

thereof, in insurance companies

Employeesin the insurance industry

1996287 200241 700

45 500

1998284 000238 800

53 900

1999293 600239 600

54 000

Full-time field service2)

Insurance brokersPart-time independent field service

Total of independentinsurance agents

79 0008 000

320 000407 000

2000299 400245 400

54 000

2001299 400245 400

54 000

0 200 000 400 0001) including employees of insurance brokers2) exclusive agents, multiple agents


The annual expenses per employee (direct re-

muneration plus supplementary employment

benefits) in the Western German insurance in-

dustry amounted to 61 985 EUR in 2001 (2000:

59 985), according to a study by the German

Economic Institute (IW). For banks, this figure

was 59 455 EUR, 48 965 EUR for industry,

45 385 EUR in the wholesale trade, and 35 290

EUR in the retail trade. Supplementary salary

benefits per employee in the insurance industry

amounted to 31 195 EUR in 2001 (2000: 30 320

EUR), higher than the direct remuneration of

30 790 EUR , and clearly higher than that of all

other economic sectors surveyed by the German

Economic Institute.

After employer social security contributions, the

largest item was special payments. According

to the figures of the Employers’ Association of

German Insurance Companies, the German in-

surance industry paid an average of nearly

around 6 480 EUR per employee in special

payments in 2000. As was the case for banks,

Christmas and holiday pay as well as end-of-year

bonuses thus amounted to about 190 per cent

of an office employee’s monthly salary. Special

payments in industry, on the other hand, came

to only about 140 per cent of gross monthly in-

come. The rise in personnel costs is primarily due

to the rise in monthly salaries in 2001 by 2.5 per

cent over the previous year.

It is also worthy of note that the insurance in-

dustry expended about 5 240 EUR per employee

for occupational retirement provision in 2000.

No other economic sector can match these

benefits.

Training and further education

A service industry like the insurance sector

depends on quality training in order to assure

customer satisfaction in the future and to sur-

vive the competition. There were 15 194 trainees

for insurance sales positions throughout Ger-

many in 2001 (2000: 14 900), an increase of 2.0

per cent over 2000. The percentage of female

trainees was 50 per cent. The total training

potential of the industry (insurance companies

and agencies) amounts to about 16 800 posi-

tions, including trainees in other commercial

and sundry apprenticeships. About 8 000 in-

structors are employed in training and further

education in over 200 places of business.

Insurance salesman/saleswoman

The number of school graduates will decline

sharply no later than 2005 (for new federal

states) or 2008 (for the old federal states). The

insurance industry must take this development

into consideration in its personnel planning and

make the necessary provisions. Accordingly, the

number of new training relations increased by

4.1 per cent in 2001, to 5 773 (2000: 5 548). The

percentage of female trainees is 51 per cent. As

a whole, the total number of trainees in all

three training years from 1996 through 2001

increased from 12 200 to 15 900 since the in-

surance salesman job profile was reorganised.

This represents an increase of over 30 per cent in

five years.




GDV and its members

The training rate, i.e. the percentage of trainees

out of the number of total employees, increased

from 5 per cent in 1996 to 6.5 per cent in 2001.

This increase underscores both the attractive-

ness of the job profile and the willingness of

the insurance industry to invest in training.

However, it is becoming increasingly difficult for

insurance companies to attract qualified appli-

cants for “insurance salesman/saleswoman”

positions from the declining applicant pool.

4 951 trainees passed the Chamber of Industry

and Commerce qualifying examinations for

insurance sales in 2001 (2000: 4 436). Career

opportunities have opened up in this manner

for about 185 950 trained insurance sales-

people since 1950. Trainee compensation is

high compared to other sectors: the current

compensation is 711 EUR in the first, 783 EUR

in the second, and 854 EUR in the third year of

training.

Training regulations updated

The partially amended regulations of the “insur-

ance salesman” apprenticeship trade were pub-

lished in the Bundesgesetzblatt (Federal Law

Gazette) on 29 July 2002, providing all insurance

companies conducting training with updated

training regulations based on industry require-

ments, taking effect on 1 August 2002. The core

of the changes in the company training pro-

gramme consists of updating the technical in-

surance content through the adoption of course

objectives for the acquisition of know-how and

skills with respect to “financial products for

insurance salespeople” and “insurance products

for businesses and self-employed persons”.

Knowledge of financial products and their use

has thus become component of training for

insurance salespeople.

Starting in January 2003, trainees, trainers, and

vocational school instructors in the insurance in-

dustry will be able to call up information on the

topic of training under www.azubi-welt.de.

Insurance business administrator

The number of graduates in this further educa-

tion discipline increased by 13.2 per cent in 2001,

to 1 613 persons (2000: 1 425). This increase

demonstrates the high value of this form of

further education within personnel develop-

ment programs, despite the increasingly de-

manding nature of the occupational environ-

ment.

The German Insurance Academy (DVA) also

offers a new, internet-based remote course for

insurance business administrators (Chamber of

Industry and Commerce). 37 participants took

advantage of this time- and location-flexible

training opportunity in 2001. The course mater-

ial is conveyed in the form of independent study

and classes, which are supported by internet-

based information and communications ele-

ments. For this further education course, DVA

trains trainers and lecturers with professional

experience to serve as e-tutors to guide partici-

pants in the individual learning processes.

139

Insurance business economist (DVA) course

The third and highest component in the in-

dustry’s internal training and further education

system is the insurance business economist

(DVA) course. This in-service course of study,

which is oriented towards economics, is a practi-

cal alternative to full-time study at a university

or technical college which was introduced and

remains highly esteemed by the industry. A total

of almost 500 students are currently engaged

in a four-semester course of study at eight

locations. Approximately 2 200 graduates have

successfully completed this in-service course of

study since its inception in 1974, adding approx-

imately 150 to 200 new insurance business

economists (DVA) each year.

The course is divided into two phases. At the

close of the first phase, an interim examination

is administered in:

■ general business administration

■ general economics

■ law

■ business and personnel management

■ insurance business administration

In the second phase of the course, a final acade-

mic thesis of approximately 40 pages is as-

signed, with a completion period of three

months. After two years of in-service classroom

instruction, the course concludes with a final

written and oral examination in each of six

instruction categories. The testing categories of

the final examination correspond with those

of the interim examination, with the addition of

a sixth category: “insurance products and sup-

plementary financial services.”

In addition, graduates who have received good

grades can receive the internationally recog-

nised title “Fellow of the Chartered Insurance

Institute” (FCII) in a considerably simplified pro-

cedure. Prerequisites are an appropriate com-

mand of the English language and successful

completion of the English further education

module of the DVA for British insurance contract

and supervisory law. In a similar procedure,

insurance business economists (DVA) can also

receive the highest in-service qualification of the

Swiss insurance industry, graduated insurance

specialist (with a Swiss diploma).




GDV and its members

Specialists in field service

“Insurance specialist” (BVW) examinations have

been administered since the beginning of 1991.

This internal industry qualification has become

indispensable for full-time agents coming from

other professions who have found a new occu-

pational home in the insurance industry. The

project has since grown incrementally in both

quantity and quality. So far, 102 278 examina-

tions have been given, including repeat exami-

nations, with an average success rate of 77.1 per

cent.

The content of the training courses are con-

stantly being developed and adapted to the

needs and demands of the insurance industry.

The most recent change was made on 1 January

2002, when the “Retirement Savings Act” was

integrated into the training programme. After

the examination procedure was revised accord-

ingly, the topic first became relevant for exami-

nations in June 2002. “Pensions” is now an area

of particular emphasis in the written examina-

tion.

141




GDV and its members

GDV and its members

The Gesamtverband der Deutschen Versiche-

rungswirtschaft e.V. (GDV) was formed in

Cologne in 1948 and has had its registered office

in the federal capital of Berlin since February

1998. Four hundred thirty-six insurance com-

panies belong to the Association, including

40 branch offices of foreign insurers and 5 in-

surers with registered office abroad.

The duties

GDV represents the interests of the German

insurance industry. The Association conducts

dialogue with the Federal Government, mem-

bers of the German Federal Parliament and re-

gional parliaments, and government officials of

the federal states. It seeks and maintains talks

with political parties and other societal groups,

with the bodies of the European Union and

numerous national and international institu-

tions and organisations. At the same time,

the Association is a competent contact for all

specialised issues related to the insurance in-

dustry. GDV is a service provider for its member

companies.

The work

GDV is an interface between the insurance in-

dustry and the political world. Representatives of

member companies contribute their expertise

and experience to numerous Association com-

mittees. Two main committees deal with the

basic issues in their fields: the Main Committee

for Life Assurance and the Main Committee

for Casualty and Property Insurance. Further

issues specific to insurance lines and cross-line

issues are dealt with in a number of other com-

mittees.

143

The specialised knowledge from all these bodies

flows into proposals, commentaries, submis-

sions and intervention vis-à-vis politicians. Many

nexus naturally also exist with the other leading

associations of German industry with whom

GDV co-operates.

By way of its public relations work, GDV ad-

dresses a wide range of consumer groups and

opinion-builders in politics, industry and society.

A steady, comprehensive flow of information

to member companies represents the focus

of internal communications work. Dialogue is

naturally also kept up with foreign associations.

Loss prevention and research likewise form a key

part of the Association’s work. GDV maintains its

own independent institutes exclusively dedi-

cated to questions related to the broad subject

of loss prevention:

■ GDV Office of Loss Prevention

■ GDV Institute for Roadway Transport

■ GDV Institute for Motor Safety

The Munich-based Employers’ Association of

Insurance Companies in Germany (agv) is re-

sponsible for issues related to the insurance

industry in its role as job provider. Private health

insurers are consolidated into the Association of

Private Health Insurance (PHI) with registered

office in Cologne. GDV is the umbrella organisa-

tion for the PHI Association. The chairpersons of

the PHI Association and the Employers’ Associa-

tion are members of the GDV Presiding Commit-

tee by virtue of their offices.

The members

In addition to the PHI Association, 436 member

companies belong to GDV, 40 of which are

branch offices of foreign insurance companies

and five insurers with registered offices abroad.

Of the 391 German member companies, 289

are joint-stock companies, 78 mutual insurance

companies, 22 public-law institutes and corpo-

rations, one registered association and the Asso-

ciation of Public Insurers. Together with agv, GDV

is sponsor of the Vocational Training Institution

of the German Insurance Industry.

The market

Representing over 97 per cent of gross domestic

premium income, the direct insurers consoli-

dated within GDV earned around 135.4 billion

EUR in 2001. In the current financial year, the

gross premium income of GDV members will

foreseeably reach nearly 140.8 billion EUR.




GDV and its members

Private insurance companies employ some

245 400 in-house and field employees within

unified Germany, including 15 900 insurance

and office trainees. There are also around 75 000

full-time self-employed insurance agents work-

ing for one company, approx. 4 000 multi-

company agents and some 320 000 part-time

agents.

To assure the efficiency of the insurance industry

in the interest of the general economy and to

protect consumers, all activity of insurance com-

panies is controlled by the Federal Supervisory

Office for Financial Services (BAFin) in Bonn and,

where appropriate, by the relevant state super-

visory agencies. In addition to general legal

supervision, the Federal Office also has the

responsibility of supervising the financial affairs

of insurers. Even after the completion of the

European Single Market, the insurance industry

therefore remains subject to a degree of govern-

ment control beyond that of any other sector.

The corporate bodies

The corporate bodies of the Association, which

has the legal form of a registered association,

are the Membership Assembly, the Executive

Committee and the Presiding Committee. The

management is responsible for implementing

the goals of the Association. It prepares and

implements the membership and committee

resolutions.

Representatives of the member companies are

entitled to participate in the Membership As-

sembly, which is the Association’s parliament.

The company representatives select the mem-

bers of the Presiding, Executive and Main Com-

mittees. They are also responsible for approving

the annual financial statements and business

plan and for modifying the bylaws.

The Presiding Committee is the board of man-

agement of GDV. Up to ten elected members

and members ex officio belong to the Presiding

Committee, including the Main Committee

chairpersons, the vice chairperson of the Main

Committee for Casualty and Property Insurance,

the chairpersons of the Employers’ Association

and the PHI Association, as well as the chief ex-

ecutive officer of GDV. The highest management

body was composed of the following persons as

of the publication date:

145

– Dr. Bernd Michaels (President), Duesseldorf

– Dr. Claus Michael Dill, Cologne

– Dr. Jürgen Förterer, Wiesbaden

– Dr. Jörg Frank von Fürstenwerth, Berlin

– Dr. Reiner Hagemann, Munich

– Rolf-Peter Hoenen, Coburg

– Dr. Lothar Meyer, Duesseldorf

– Dr. Robert Pohlhausen, Hanover

– Dr. Heiko Winkler, Muenster

– Dr. Gerhard Rupprecht, Stuttgart

– Dr. Hans-Jürgen Schinzler, Munich

– Hans Schreiber, Mannheim

– Reinhold Schulte, Dortmund

– Dr. Edmund Schwake, Muenster

The Executive Committee prepares the guide-

lines for all work of the Association, adopts re-

solutions on the proposals to be submitted to

the Membership Assembly, forms sub-commit-

tees, monitors accounting, etc. Like those of

the Presiding Committee, the members of the

Executive Committee come from insurance

companies. This warrants the relevancy of GDV

resolutions in practice.

GDV managers represent the interests of the

insurance industry on a full-time basis. 187 of

the 335 employees work at GDV headquarters in

Berlin. GDV also has offices in Brussels, Ham-

burg, Cologne and Munich. The following de-

partments and staff offices cover the wide range

of GDV responsibilities:




GDV and its members

– General Liability

– Business Administration /

Information Technology

– Business Administration Institute

– Data Processing

– Investments

– Motor and Loss Prevention

– Crime Prevention / Money Laundering

– Mathematics / Insurance Medicine /

Product Comparisons

– Pension Funds

– Politics / International Relations

– Press and Public Relations with “Clip and

Clear Future”Information Centre and

Documentation / Archiving

– Accounting / Solvency

– Law / Corporate Forms

– Law of Life Assurance / Pension Funds /

Consumer Protection

– Property Insurance and Loss Prevention

– Social Policy

– Statistics and Motor Technology

– Taxes

– Marine

– Accident / Legal Expenses

– Representation in the EU

– Distribution

– Economics

Europe

GDV maintains an office in Brussels and re-

presents the German insurance industry in the

Comité Européen des Assurances (CEA), the

European insurance association with registered

office in Paris.

Outsourced activities

Certain economic activities of GDV have been

outsourced to VdS-Schadenverhütung GmbH in

Cologne and GDV-Dienstleistungs-GmbH and

Co. KG in Hamburg.

147

149

Law of Life Assurance /Pension Funds /

Consumer Protection

Dr. Peter Präve

Economics

Dr. Michael Wolgast

Accident / Legal Expenses

Beate Körkel

Marine

Dr. Jens Schildknecht

Property Insurance and Loss Prevention

Rainer Schönberger

Crime Prevention / Money Laundering

Thomas Staubach

Law / Corporate Forms

Dr. Martin Fricke

Business Administration / Information Technology

Fred Chiachiarella

Personnel / Administration

Thomas Kräutter

Budget / Finance andAccounting / Controlling

Karl Blanik

Gesamtverband der Deutschen Versicherungswirtschaft e.V.(German Insurance Association)Friedrichstr. 191, 10117 BerlinTelephone: (030) 20 20 - 50 00Telefax: (030) 20 20 - 60 00E-mail: [email protected]: http://www.gdv.de

Representation in the EU4 Rue Jacques de Lalaing, B-1040 BrüsselTelephone: (00 32-2) 2 82 47-30Telefax: (00 32-2) 2 82 47-39

Data ProcessingGlockengießerwall 1, 20095 HamburgTelephone: (040) 3 21 07 - 40 00Telefax: (040) 3 21 07 - 70 00

GDV Institute for Motor SafetyLeopoldstr. 20, 80802 MünchenTelephone: (089) 38 18 02 - 0Telefax: (089) 38 18 02 - 21

GDV Institute for Roadway TransportEbertplatz 2, 50665 KölnTelephone: (02 21) 1 60 24 - 0Telefax: (02 21) 1 60 24 - 49

GDV Dienstleistungs GmbH & Co. KGGlockengießerwall 1, 20095 HamburgTelephone: (040) 3 34 49 - 0Telefax: (040) 3 34 49 - 70 50

VdS Schadenverhütung GmbHAmsterdamer Str. 174, 50735 KölnTelephone: (02 21) 77 66 - 0Telefax: (02 21) 77 66 - 341

“Clip and Clear Future”Information Centre

Heidemarie Orlob

Documentation / Archiving

Gloria Neuhaus

Office of Loss Prevention

Dierk Lay

148

GDV Organisational Chart(as per 1 November 2002)

Chief Executive Officer

Dr. Jörg Freiherr Frank von Fürstenwerth

Politics /International Relations

Dr. Bernhard Gause

Managing Director Life Insurance / Pension Funds

Karl Panzer

Mathematics / InsuranceMedicine / Product Comparisons

N.N.

Social Policy

Peter Schwark

Pension Funds

Peter Schwark

Managing Director Cross-section Areas

Dr. Klaus-Wilhelm Knauth

Managing Director Non-life Insurance

Stefan Richter

GDV Beteiligungsgesellschaft mbHManaging Directors

Volker SonnenburgHeiko Beermann

VdS Schadenverhütung GmbHManaging Directors

Gero F. PoppeHans Schüngel

General Liability

Nils Hellberg

Motor and Loss Prevention Institute

N.N.

Statistics and Motor Technology

Dr. Jens Bartenwerfer

Distribution

Wolfgang Marzin

Business AdministrationInstitute

N.N.

Accounting / Solvency

Hans-Jürgen Säglitz

Investments

Dr. Ulrich Krüger

Taxes

Jürgen Wagner

Managing DirectorCommunications

Gabriele Hoffmann

European Managing Director

Ulf Lemor

Managing DirectorOrganisation

Thomas Kräutter

Press and Public Relations

Gabriele Hoffmann

Representation in the EU

Ulf Lemor

Data Processing

Thomas Fischer

Institute for Roadway Transport

Dr. Volker Meewes

Motor Technology

Dr. Jürgen Redlich

Institute for Motor Safety

Prof. Dr. Klaus Langwieder

Table of contents - KU Leuven · 2012. 10. 31. · 2002 Yearbook The German Insurance Industry ......

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