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Munich Re Report of the Board of Management
Following three years of positive fire results, the pressure of competition in
the reinsurance markets has increased again in 1996. As a result of the
growing supply of capacity worldwide, there is a danger that reinsurance
prices and conditions will begin to soften. It is one of our central objectives
to ensure that we retain promising areas of our business, open up new
business opportunities and make our reinsurance capacity available only in
those sectors in which prices and conditions are still commensurate with
the risks.
Engineering In the engineering classes of business (machinery, EAR and CAR,
electronic equipment, etc.) our premium income also declined in the year
under review. The result was markedly improved: owing to more favourable
experience with regard to large losses, we were able to reduce our deficit
significantly.
aGross premiums in DM million
1,973
1,847
1994 1995
1995
Loss ratio 68.6
Expense ratio 34.3
Combined ratio 102.9
In Germany the direct insurance market for EAR business again recorded a
high loss ratio. The CAR insurance sector did not show a profit either. In
both product areas reinsurance prices and conditions need to be improved
substantially if positive results are to be achieved in the medium term.
Owing to our major commitment in the reinsurance of EAR and CAR
business, we too have recorded correspondingly bad results over the past
few years.
Following the unfavourable loss experience that affected large areas of our
foreign business during the first part of the 1990s, there has been an
improvement which – owing to our large proportion of one-off business
(EAR and CAR) – did not begin to have an effect on our results until
recently. However, in some business sectors we were already seeing signs
of a softening of rates and conditions in the year under review.
In general we have been able to maintain our market position in the various
individual reinsurance markets; where possible we have further expanded
our business, both directly and through our local offices. In some business
areas, where we have been unable to achieve satisfactory terms and
conditions, we have reduced our commitments.
For 1996 we are expecting to achieve approximately the same premium
income from our engineering business. The result should also be much the
same as in the previous year, provided that we are not affected by any
exceptionally large losses.
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