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