R+V Versicherung AG Annual Report

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Risks of future development Risk management process The Gesetz zur Kontrolle und Transparenz im Unternehmensbereich (KonTraG – German Act on Control and Transparency in Business) that took effect on May 1, 1998 details the duties of the Board of Management to report on the risks of future development and to provide appropriate risk management. In this context, risk management covers all systematic measures involved in recognizing, evaluating and controlling risks. R+V Versicherung AG is integrated in the R+V Group’s risk management process. The organization of the latter – including the relevant risk officers – and the risk principles are documented in a risk management manual. Risks are managed and analyzed with the aid of an IT application. The R+V Group has a number of systems at its disposal to manage and control risks. These systems are further developed on an ongoing basis and supplemented by a topdown approach to these instruments as part of a permanent early warning system. The regular risk conferences and central risk reporting to the Board of Management guarantee that risks to future development that could impact the Company as a going concern are identified, analyzed and controlled in a timely manner. The risks monitored are technical risks, investment risks relating to receivables from the insurance business, default risks, operating risks, and global and strategic risks. The latter relate to risks from changes in the market and relationships with sales partners, as well as risks involved in the core activities of planning and control. 26 Technical risks: The main technical risks for a reinsurer lie in an unbalanced portfolio, inappropriate liability for catastrophic loss and fundamental changes in the basic trends on the main markets. R+V Versicherung AG counters these risks by continuously tracking the markets. Particular importance is attached to maintaining a balanced portfolio – both in terms of diversification on a global scale and across different classes of insurance. Risks are assumed within prescribed underwriting boundaries that limit liability for both individual and cumulative losses. The level and frequency of possible impacts from catastrophic losses are analyzed and tracked on an ongoing basis using established industry software, supplemented by additional verification by the Company itself. Liabilities assumed, particularly in the area of cumulative losses, are reinsured on national and international reinsurance markets with companies with first-class credit ratings. Technical provisions are maintained at appropriate levels. Based on net premiums written, the Company has a high guarantee funds ratio and a high equity ratio. Default risks relating to receivables from the insurance business: The default risk relating to the billed reinsurance receivables from cedents and retrocessionaries is limited by monitoring the Standard & Poor’s ratings on a regular basis.
Investment risks: In order to create „insurance coverage“ products, insurance companies expose themselves to risks such as changes in market prices, credit ratings and liquidity as part of their investment activities. R+V Versicherung AG counters these risks by observing the basic principle of achieving the greatest possible security and profitability while maintaining the liquidity of the insurance company at all times. In particular, investment policy aims to minimize risks by maintaining an appropriate mix and diversification of investments. Derivative financial instruments, structured products or asset backed securities are only used in accordance with supervisory law provisions set out in BAV (Federal Insurance Supervisory Office) circulars R 3/2000, R 3/99 and R 1/2002. Their use is explicitly regulated by internal directives. Extensive, timely reporting ensures that the different risks are regularly monitored and presented transparently. Extrapolating the capital market situation at the end of 2002 to December 31, 2003 and continuing the methods adopted in 2002 to calculate lasting impairments, the Company expects investment income to make a positive contribution to the net income for the year. At an organizational level, R+V Versicherung AG counters investment risks by ensuring the strict functional separation of trading, settlement and financial control. Currency risks: As far as possible, liabilities in foreign currencies arising from reinsurance business are matched with investments in these foreign currencies. This allows exchange rate gains and losses to be largely offset by the correlative effect. 27 Operating risks: Operating risks are risks from general business activities. They arise as a result of human behavior, technical faults, weaknesses in process or project management or external influences. Risk provisioning using the internal control system: The main instrument used by the R+V Group to limit operating risks is the internal control system. The Group protects against the risk of errors and fraudulent activities in its administration by providing regulations and controls in its specialist departments and by reviewing the application and effectiveness of the internal control systems in Group audits. As far as possible, payment flows and undertakings are handled by computer. Additional security is provided by predefined, electronically stored powers of attorney and authorization rules, as well as automatic random checks performed by the stored random generator when policies are drawn up. Manual processing is conducted according to the dual control principle. The internal monitoring of the regulations governing the risk management system, particularly with regard to their effectiveness, was reviewed by the Group audit department in 2001 for the first time. The implementation of the resulting measures was monitored by the Group audit unit and within the framework of the risk conference.
Page 1 and 2: 2002 R+V Versicherung AG Annual Rep
Page 3 and 4: Content Management Report 4 Proposa
Page 5 and 6: However, the significant increase i
Page 7 and 8: Developments on the international r
Page 9 and 10: However, the events of September 11
Page 11 and 12: As a result of the relatively poor
Page 13 and 14: Business development and position o
Page 15 and 16: Liability business developed negati
Page 17 and 18: Including interest on deposits and
Page 19 and 20: In terms of sums insured, the portf
Page 21 and 22: Overall, gross premium income decli
Page 23 and 24: Major claim events such as ”Petro
Page 25: Shareholder structure As of the bal
Page 29: Significant events and outlook The
Page 32 and 33: Proposal on the Appropriation of Pr
Page 34 and 35: Balance Sheet as of December 31, 20
Page 36 and 37: Equity and liabilities 36 2002 2001
Page 38 and 39: Income Statement for the period fro
Page 40 and 41: 40 2002 2001 € € € € 8. Ext
Page 42 and 43: Premiums and discounts were amortiz
Page 44 and 45: List of Shareholdings Shares in aff
Page 46 and 47: Notes to the Balance Sheet Statemen
Page 48 and 49: Assets C. Investments Present value
Page 50 and 51: Notes to the Income Statement I. 1
Page 52 and 53: Dr. Jürgen Förterer Chairman Wolf
Page 54 and 55: Auditors’ Report We have audited

R+V Versicherung AG Annual Report

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