talanx group annual report 2011 en

Nature of risks Notes on the balance
sheet – assets
Notes on the balance
sheet – liabilities
Notes on the
statement of income
Other information List of shareholdings
The loss and loss adjustment expense reserves are constituted for payment obligations from insurance
claims that have occurred but have not yet been settled. They relate to payment obligations
under insurance and reinsurance contracts in respect of which the amount of the insurance benefit
or the due date of payment is still uncertain. To this extent, they are based on estimates that may
vary from the actual payment. The loss and loss adjustment expense reserves are subdivided into
reserves for claims reported by the balance sheet date and reserves for claims that have already
been incurred but not yet reported (IBNR) by the balance sheet date.
The loss and loss adjustment expense reserves are calculated on the basis of recognised actuarial
methods used to estimate future claims expenditure including expenses associated with loss
adjustment, provided no estimates for individual cases need to be taken into account (as regards
estimates for individual cases, we refer to our explanatory remarks on major losses). The reserves
are recognised according to best estimate principles in the amount that will probably be utilised.
Receivables arising from recourse, salvages or knock-for-knock agreements are taken into account
when calculating the “best estimate.” In order to measure the “ultimate liability,” the expected ultimate
loss ratios are calculated for all lines of non-life reinsurance with the aid of actuarial methods
such as the chain ladder method. The development of a claim until completion of the run-off is
projected on the basis of statistical triangles. In this context it is assumed that the future rate of
inflation of the loss run-off will be analogous to the average rate of the past inflation contained
in the data. The more recent underwriting years in actuarial projections are subject to greater
uncertainty, although this is reduced with the aid of a variety of additional information. Particularly
in reinsurance business, a considerable period of time may elapse between the occurrence of
an insured loss, notification by the insurer and pro-rata payment of the loss by the reinsurer. The
realistically estimated future settlement amount (“best estimate”), which is calculated on the basis
of the information provided by ceding companies, is therefore brought to account. This estimate
draws on past experience and assumptions as to the future development, taking account of market
information. The amount of the provisions and their allocation to occurrence years are determined
using established forecasting methods of non-life actuarial science. Provisions for insurance business
assumed are calculated in accordance with the data provided by the prior insurers (in the case
of Group business) or on the basis of actuarial analyses (in the case of non-Group business).
In addition, provisions are established for claims which have been incurred but not reported
(IBNR reserves).
In some cases, sufficient statistical data is not available for major losses. In these instances appropriate
reserves are established after analysis of the portfolio exposed to such risks and, as appropriate,
after individual scrutiny. These reserves represent the best estimates of the Group.
With the exception of a few reserves, the loss and loss adjustment expense reserves are not discounted.
Talanx Group. Annual Report 2011
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