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Munich Re
started to establish itself at the
beginning of the nineties, initially in
England, France, Holland, Italy and
Scandinavia.
In the USA, D&O insurance has
been common since the beginning
of the seventies. Today it is taken
for granted that companies will
conclude such insurance for
persons entrusted with directorial
and managerial duties.
The most frequently used policies
cover the individual liability of all
the company’s directors and
officers and also the company
itself insofar as it is legally or
contractually obliged to hold these
persons harmless. Only losses
arising from evident or objectively
determinable wrongful acts are
insured, not the entrepreneurial risk
as such, although in individual
cases it can be very difficult to
make a clear distinction. D&O
policies provide indemnification
both for actual claims for damages
and for legal costs. With litigation
often dragging on for many years,
it is not unusual for legal costs to
be much higher than the damages
themselves.
The sometimes very long
settlement periods result from
the fact that D&O claims usually
involve the interaction of complicated
legal and economic
elements and that the claims
often relate to decisions dating
back many years. This makes the
reconstruction of events difficult
and gives much scope for expert
evidence and counter-evidence,
often stretching courts to the
limit in terms of both technical
understanding and the demands
made on their time.
D&O insurance is certainly a very
complex product, requiring
extensive legal, business and
underwriting expertise on the part
of the insurer. Precise knowledge
of the greatly varying legal
environments from country to
country, the ongoing monitoring
of all events and data that are
economically relevant for the
insured, the calculation of
appropriate prices and conditions
for the insurance of the risk, and
professional claims management –
all these are essential for success
in this attractive but exposed
market segment. Also important is
adequate reinsurance cover.
The Munich Re has extensive
experience with this form of
insurance and not only in the USA,
easily the most important D&O
market. Our experts are ready to
provide tailor-made reinsurance
cover for insurers who want to take
up or expand this interesting and
difficult line of business. We can
also offer comprehensive service
for the design of policies, the rating
of risks and the wording of
insurance conditions.
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Electronic communication in
reinsurance
Electronic communication is
essential for companies to remain
competitive nowadays. In
reinsurance it has been a fact of
life for a considerable number of
years. Electronic communication
increases the speed of processing
business, streamlines business
procedures and thus helps reduce
costs. A distinction can be made
between two basic types:
E-mail makes it possible for
individual correspondence to be
sent in electronic form from one
workstation to another. These
workstations need not be within the
same company: messages can
be swiftly exchanged with staff at
group or client companies as well
as with in-house staff.
Electronic data interchange (EDI)
involves the largely automatic
transmission of data in standard
formats between the communication
partners’ computer systems.
This requires special preparations
in addition to the PC, software,
modem and telephone connection
basically sufficient for electronic
correspondence: sender and
receiver have to agree on the
structure and format of the data to
be transmitted. The realization that
individual agreements for this with
each reinsurance client would
mean an inordinate amount of work
and expense led, back in 1987, to
the formation of the Reinsurance
and Insurance Network – RINET for
short – an initiative of several major
reinsurers, in which the Munich Re
played a leading part. RINET has
developed standards precisely
defining the data fields and the
codes for the different types of
message, e.g. for the exchange of
accounting or claims data. This
means both sender and receiver
each require only a single interface
to their internal systems. Via this