Download PDF version - Munich Re

Munich Re
to be settled. This reduces the
capacity requirements for the
market and has a positive effect
on insurance premiums.
Direct insurers need to create the
technical basis for the coverage of
natural hazards. This involves fixing
risk-commensurate prices that take
account of the respective exposure
and also ensuring transparency
of the liabilities assumed for the
purposes of accumulation assessment.
Only careful accumulation control
shows clearly the exposure of the
portfolio and enables insurers to
carry an appropriate portion of the
risk themselves, in keeping with
their capital resources.
Reinsurers are responsible in this
risk partnership for organizing a
global balance of risks. How do
they perform this function?
To do it best, they need to assume
risks at appropriate terms and
conditions from as many exposed
regions in the world as possible.
Hence the necessity for freedom of
services and free movement of
capital in reinsurance.
In addition, reinsurers must be able
to build up the necessary reserves
in years with below-average claims
costs in order to have the requisite
funds for dealing with catastrophe
losses when they do occur. This
presupposes that commercial and
tax law provide the necessary
framework for this.
Even when these preconditions are
fulfilled, reinsurers cannot assume
unlimited liability. Even their funds
are restricted. Reinsurance treaties
with insurers therefore need to
provide for liability limits.
On the basis of the above risk
partnership the international
insurance industry can largely
satisfy the demand for insurance
against natural hazards. The
Munich Re will continue to play a
leading role here. It remains
probably the biggest provider of
capacity for natural catastrophe
risks worldwide. It can draw
on outstanding scientific and
underwriting expertise, and it has
unparalleled financial resources.
48
D&O insurance increasingly
important – Protection against
liability risks of boards and
managers
All over the world the liability risks
for companies’ directors and
managers are growing substantially.
Directors’ and officers’
policies provide these persons
with cover, above all, against
claims arising from financial losses
suffered by third parties as a result
of wrong decisions made or
alleged to have been made in
running companies.
Especially in the case of
spectacular company crises, the
public are tending to look much
more critically at the personal
responsibility of managers and
directors. More and more often
takeovers, mergers and sales of
holdings are resulting in suits for
damages from shareholders,
creditors or other aggrieved
parties.
In recent years, starting in the
USA, legislators and courts in
nearly all industrial nations have
extended the scope for suing
managers and directors personally
for losses. This trend is continuing.
To contain such liability risks,
companies need to take certain
organizational measures: due care
must be exercised in the selection
of staff and in assigning duties and
responsibilities, with the requisite
controls being carried out. For
losses that occur nevertheless,
companies in some countries can
limit the financial consequences
for their managers and directors
by means of hold-harmless
agreements; the more appropriate
solution in most cases, however, is
specially designed insurance
cover. The product which the
insurance industry offers for this –
directors’ and officers’ liability
(D&O) insurance – is comparatively
new in Europe, where it only