talanx group annual report 2011 en

192
Financial statements Notes
General information
Talanx Group. Annual Report 2011
Accounting principles
and policies
Segment reporting Consolidation,
business combinations
Non-current assets held for
sale and disposal groups
Derivatives embedded in life insurance contracts and not recognised separately
Insurance products may include the following major options on the part of the policyholder, if
agreed upon when the contract was taken out:
Surrender of policy and premium waiver.
Increase in insured benefit without another medical examination – usually with the actuarial
bases with respect to biometric risks and guaranteed interest rate applicable at that time (indexlinked
adjustment, supplementary insurance guarantees in the event of certain changes in living
conditions)
Possibility under deferred annuities to take a one-time payment of the insured benefit (lumpsum
option) instead of drawing a pension. This gives rise to a potential risk if an unexpectedly
large number of policyholders were to exercise their option at an interest rate level significantly
above the discount rate used to calculate the annuities. The adequacy test required by IFRS 4
makes allowance for this option.
Under unit-linked products, the policyholder may opt to take ownership of the accumulated units
upon maturity of the contract instead of payment of their value at that time (benefit in kind).
Management of credit risks from insurance contracts
Bad debts may arise on receivables due under insurance business. In order to limit this risk, we
take care to ensure the good credit quality of debtors, measured in terms of standard market rating
categories. Our choice of reinsurers also takes into account internal and external expert assessments,
e.g. market information from brokers. Accounts receivable from policyholders and insurance
intermediaries are generally unsecured. The default risk on these receivables is subject to constant
monitoring within the scope of our risk management. Here we are concerned with a large number
of receivables in relatively modest amounts due from a diverse array of debtors. Most of these
receivables are due from policyholders who do not have a rating at all. Only commercial clients in
excess of a certain magnitude can provide independent assessments of their creditworthiness.
Insurance intermediaries are either individual brokers or broker organisations, which likewise do
not normally have a rating. Default risks in reinsurance business are controlled largely with the
aid of computer-assisted cession management: cession limits are specified for individual retrocessionaires,
and their remaining capacities for short-, medium- and longterm business are calculated
separately.
Each of the Group companies operates its own effective collections procedure to minimise outstandings
due to delays in or defaults on premium payments directly from policyholders or via
intermediaries. Intermediaries are also subject to credit checks.