Our glossary explains technical terms from the areas finance and reinsurance. We hope it facilitates the understanding of our texts, publications and annual reports. If you have comments or suggestions, please use our feedback form!
risk-appropriate allocation of the economic capital to the business segments of property & casualty reinsurance and life & health reinsurance as well as the investments on the basis of the respective economic risk content.
Our internal capital model supplies key parameters such as the volatility of the covered business / investments and the contribution to diversification.
Capital asset pricing model (CAPM)
model used to explain the materialisation of prices / returns on the capital market based on investor expectations regarding the future probability distribution of returns. Under this method, the opportunity cost rate for the shareholders’ equity consists of three components – a risk-averse interest rate, a market-specific risk loading and an enterprise-specific risk assessment, the beta coefficient. The cost of shareholders’ equity is therefore defined as follows: risk-averse interest rate + beta * enterprise-specific risk assessment.
Cash flow statement
statement on the origin and utilisation of cash and cash equivalents during the accounting period. It shows the changes in liquid funds separated into cash flows from operating, investing and financing activities.
securitised (re)insurance risks in respect of which the payment of interest and / or repayment of capital is dependent on the occurrence and severity of a predefined insured event. Purchasers of a catastrophe bond assume the risk carried by the (re)insurer upon occurrence of the catastrophic event. Catastrophe bonds are part of the insurance-linked securities market. cf. securitisation instruments
direct insurer or reinsurer which passes on (also: cedes) shares of its insured or reinsured risks to a reinsurer in exchange for premium.
transfer of a risk from the direct insurer to the reinsurer.
Claims and claims expenses
sum total of paid claims and provisions for loss events that occurred in the business year; this item also includes the result of the run-off of the provisions for loss events from previous years, in each case after the deduction of own reinsurance cessions.
Coinsurance Funds Withheld (CFW) Treaty
reinsurance treaty under which the ceding company retains a portion of the original premium at least equal to the ceded reserves.
sum of the loss ratio and expense ratio.
compliance by an enterprise with legal requirements.
Confidence (also: probability) level
the confidence level defines the probability with which the defined amount of risk will not be exceeded.
serves to ensure responsible management and supervision of enterprises and is intended to foster the trust of investors, clients, employees and the general public in companies.
Mark-up between a risky and a risk-free interest-bearing security with the same maturity, as a risk premium for the credit risk entered into by the investor.
Critical illness cover
cf. dread disease cover: personal rider on the basis of which typically a lump-sum cash payment is made in the event of previously defined severe illnesses.