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Munich Re Report of the Board of Management
Liability Owing to a special influence – the assumption of an entire portfolio in
return for a single premium payment – the premium income from our
liability business showed above-average growth in the year under review.
Gross premiums in DM million
Since we considered it expedient to make another increase in our reserves
1,772
2,092
for long-terminated US business, the result was once again negative. The
other business, especially our new business, showed satisfactory results.
1994 1995
1995
Loss ratio 96.3
Expense ratio 26.2
Combined ratio 122.5
Liability insurance is, for us, one of the most promising classes of business
for growth worldwide. We see good opportunities for converting into
profitable growth both the increasing capacity requirements of our clients
in the industrial countries and the rising demand in threshold and
developing countries, some of whose economies are making dynamic
strides forward. The most important sectors in this connection are products
liability and public liability, accompanied by professional liability and D&O
insurance (cf. the section “Topical subjects in reinsurance”). In writing this
business, we take care not to lose sight of the special long-term nature of
the risks involved. This is demonstrated by the fact that we have advocated
the need to restrict unlimited liability covers and have already implemented
such a restriction in parts of our business.
For 1996 we are expecting premium income to be lower than in the year
under review, which was positively affected by the special influence
mentioned above. If this effect is discounted, we can expect premium
to show moderate growth. The result will very likely be better than in the
year under review.
Motor In motor business, the development of our premium income and results is
greatly influenced by our strong presence in the German market.
Gross premiums in DM million
3,560
3,267
1994 1995
1995
Loss ratio 79.0
Expense ratio 20.8
Combined ratio 99.8
Following the very negative impact that the claims situation in the motor
own damage insurance sector had on the results of the German direct
insurers and their reinsurers in the years 1992 and 1993, the situation
in 1994 and 1995 was markedly less strained. Adjustments of direct
insurance premiums and the measures initiated by the insurance industry
to reduce claims costs – for example, the installation of electronic immobilizers
– contributed to this trend. With improved results, however,
competition in the German direct insurance market picked up again in
1995. The deregulation of the market has prompted almost all companies
to introduce new kinds of discount in their attempts to win clients. On
balance, therefore, following the premium growth of the past few years,
we can expect the premium volume in this class of business to stagnate,
which will put a corresponding pressure on earnings. These developments
in the direct insurance market were reflected in reduced premiums from
our German reinsurance business even in 1995, although our results again
strongly improved; for 1996 we are expecting a deterioration in the result.
Foreign motor business is characterized by fierce competition everywhere
in the world. We were able, however, to defend our position successfully
at a high level and to expand our shares in individual markets with results
that continued to be largely satisfactory. Especially in some European
markets and in North America we see good opportunities for profitable
expansion of our business.
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