Marine Reinsurance: What is Needed A Reinsurance Perspective

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Marine ReinsuranceWhat is Needed?A Reinsurance
Perspective
CEFOR, Oslo H. Grassold August 20, 2002
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Swiss Re Group Global presence
CEFOR, OsloH. GrassoldAugust 20, 2002

• Support from over 70 offices
• in more than 30 countries

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The Ten Biggest Reinsurance Groups
Net premiums in million euro in 2000
CEFOR, Oslo H. Grassold August 20, 2002
Source Standard Poors
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Swiss Re Group Organization
Board of Directors
Corporate Centre
Chief Executive Officer Executive Board
Information Technology
Finance
Communications Human Resources
Risk Knowledge
Business Groups
Life Health
Financial Services
Property Casualty
Asset Management
Investment Banking
Americas
Asia
CEFOR, Oslo H. Grassold August 20, 2002
Credit Solutions
Risk Solutions
Life Health
Europe
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Swiss Re Group Europe Division
Oslo
Dublin
Warsaw
London
Paris
Munich
Zurich
Milan
Linking Zurich Linking Munich
Madrid

Rome
CEFOR, Oslo H. Grassold August 20, 2002

Additionally Linking Zurich South Africa, Israel
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Swiss Re Group Premium Income Gross / Net
Gross premium income 1992 2001 in Million
Euro
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
94
95
96
97
98
99
00
01
93
92
0
CEFOR, Oslo H. Grassold August 20, 2002
net retroceded
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Marine Hull - Results GermanyAfter the crash!
Loss Ratio Marine Hull, 1997-2001
As of Dec. 31, 2002
CEFOR, Oslo H. Grassold August 20, 2002
Source GDV, June 2002
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How can (Re-)Insurance Results be Measured?

• Financial Statement, Local Accounting Standards
• Financial Statement, US-GAAP and IAS
• Internal Technical View (Statistics, Performance
  Measurement)
• Discounted Cash Flow Measurement
• new Economic Viewpoint -Economic Value
  Management (EVM)

CEFOR, Oslo H. Grassold August 20, 2002
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Pricing Basics Claims Expectation and Loading
Frequency of occurrence
But how good is your thumb?
CEFOR, Oslo H. Grassold August 20, 2002
Average Loss
Amount of Loss per occurrence
Q99
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Components of Loading on Local Level

• Internal costs
• External costs
• Capital costs
• Long term target (Demanded by Capital Markets)
• Short term Surcharge / Discount (e.g. Marine
  Cycle)
• Allocation of Targets specifically within each-
  Line of Business- Type of Reinsurance

CEFOR, Oslo H. Grassold August 20, 2002
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Business Cycles Require Flexible Response to
Market Situation
Long Term Target Leveled Results
CEFOR, Oslo H. Grassold August 20, 2002
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Capital Costs Rules of Thumb in the Past,
Specific Calculation now
Up to now Rules of Thumb e.g. 15 RoE Now
Detailed Calculation

• Alternative Return on Investment
• Additional costs being caused by Insurance
  Operations such as - Double Taxation - Agency
  Costs - Cost of Financial Distress (Option to
  default)

CEFOR, Oslo H. Grassold August 20, 2002
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A new ApproachEconomic Value Management

• Measures Performance
• Technical Result
• after Capital Costs
• after Tax
• Assets at Market Value
• Liabilities at Economic Value

CEFOR, Oslo H. Grassold August 20, 2002
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How much Capital do we need to hold?

• Statutory Regulations
• Rating Requirements Standard
  Poors AAA Moodys Aaa A.M. Best A
• Internal Calculations (Risk Adjusted Capital)

The Volume of Capital we have to underlay our
Business with depends on
CEFOR, Oslo H. Grassold August 20, 2002
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Captain Smith, Titanic, 1912
CEFOR, Oslo H. Grassold August 20, 2002
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Outlook
Lets bring the ship back to calm sea!
CEFOR, Oslo H. Grassold August 20, 2002