Accumulation risk

Underwriting risk that a single trigger event (e.g. an earthquake or hurricane) can lead to an accumulation of claims within a portfolio.

Acquisition costs

Costs incurred by an insurance company when insurance policies are taken out or renewed (e.g. new business commission, costs of proposal assessment or underwriting).


Mathematician who deals with questions relating to insurance, investments and retirement provision.

Administrative expenses

Costs of current administration connected with the production of insurance coverage.

Annual Premium Equivalent – APE

Industry standard for measuring new business income in life insurance.

Associated company

Company included in the consolidated financial statement not through full or proportionate consolidation but normally using the equity method and over whose business or company policy a company included in the consolidated financial statement exerts a significant influence.


Partnership between a bank/postal service partner and an insurance company for the purpose of selling insurance products through the banking/postal service partner’s branches. The linkage between insurer and bank often takes the form of a capital participation or a long-term strategic cooperation between the two partners.

Benefit reserve

Value arrived at using mathematical methods for future liabilities (present value of future liabilities minus present value of future incoming premiums), especially in life and health insurance.

Black/Scholes option pricing model

Analytical model used to calculate theoretical option prices. It makes allowance for the current price of the underlying stock, the risk-free interest rate, the remaining time until option expiration, the volatility and possible dividend payments within the remaining period.

Cash flow statement

Statement on the origin and utilization 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.

Catastrophe bond (also: cat bond)

Instrument used to transfer catastrophe risks of a (re)insurer to the capital market.

Cedant (also: ceding company)

Primary insurer or reinsurer that passes on (cedes) shares of its insured risks to a reinsurer in exchange for a premium.

Claims equalization reserve
Coinsurance funds withheld treaty

Type of coinsurance contract where the ceding company retains a portion of the original premium at least equal to the ceded reserves. Similar to a Modified coinsurance contract, the interest payment to the reinsurer reflects the investment return on the underlying asset portfolio.

Combined ratio

Sum of the loss ratio and expense ratio plus interest income on funds withheld and contract deposits in relation to earned premiums. When calculating the adjusted combined ratio, the claims and claims expenses are adjusted so as to eliminate the effect of interest income on funds withheld and contract deposits. This ratio is used by both property/casualty insurers and non-life reinsurers.


Remuneration paid by a primary insurer to agents, brokers and other professional intermediaries.


Statutory regulations and undertaking-specific rules governing the responsible and lawful actions of an undertaking and its employees.


In accounting practice: combining of the individual financial statements of several companies belonging to one group into a consolidated financial statement. In so doing, internal transactions within the group are eliminated.

Corporate Governance

System that 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.

Credit status

Also creditworthiness. Ability of a debtor to meet its payment commitments.

Deferred taxes

Term denoting the difference between the taxes calculated on the profit reported in the commercial balance sheet and those carried in the tax balance sheet, which then evens out in subsequent months. Deferred taxes are recognized in order to offset this difference in those cases where it is evident that it will be eliminated over time.

Deposit accounting

An accounting method originating in US accounting principles for the recognition of short-term and multi-year insurance and reinsurance contracts with no significant underwriting risk transfer.


Financial products derived from underlying primary instruments such as equities, fixed-income securities and foreign exchange instruments, the fair value of which is determined inter alia on the basis of the underlying security or other reference asset. Derivatives include swaps, options and futures.

Due diligence audit

Auditing of a participating interest in the run-up to acquisition or merger. It encompasses, in particular, a systematic analysis of the strengths and weaknesses of the proposition, analysis of the risks associated with the acquisition and a well-founded valuation of the item in question.


Ratio in investment mathematics that represents the average commitment period of the cash value of a financial instrument. The duration can thus also be considered a measure of the interest rate risk associated with a financial instrument.

Earned premiums

Proportion of written premiums attributable to the insurance protection in the financial year.


Earnings before interest and tax. operating profit

Embedded value

Benchmark used to measure the performance of life insurance enterprises. It is composed of the sum total of free assets (net asset value) plus the present value of the projected stream of future after-tax profits on the in-force insurance portfolio.

Equalization reserve

Provision constituted to offset significant fluctuations in the loss experience of individual lines over a number of years.

Equity method

Method of accounting used to measure equity investments (associated companies) in the consolidated financial statement.

Expenditures on insurance business (acquisition costs and administrative expenses)

Sum total of commissions, sales, personnel and material costs as well as regular administrative expenses.

Expense ratio

Ratio of acquisition costs and administrative expenses (net) to net premium earned.


Level of danger inherent in a risk or portfolio of risks.

Facultative reinsurance

Participation on the part of the reinsurer in a particular individual risk assumed by the primary insurer.

Fair value

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Funds held by ceding companies/funds held under reinsurance treaties

Collateral provided to cover insurance liabilities which an insurer retains from the liquid funds which it is to pay to a reinsurer under a reinsurance treaty. In this case, the insurer shows funds held under a reinsurance treaty, while the reinsurer shows funds held by a ceding company. Interest is payable on such funds held. Fund held by ceding companies are also referred to as an investment surrogate.


The amount that a purchaser is prepared to pay – in light of future profit expectations – above and beyond the value of all tangible and intangible assets after deduction of liabilities.


In insurance: before deduction of reinsurance.

Hybrid capital

Capital in the form of subordinated debt and surplus debenture that exhibits a hybrid character of equity and debt.


Unscheduled write-down taken if the present value of the estimated future cash flows of an asset falls below the carrying amount.

Insurance-linked securities

Financial instruments used to securitize risks under which the payment of interest and/or nominal value is dependent upon the occurrence and magnitude of an insured event.

Investment grade

Rating of BBB or better awarded to an entity on account of its low risk of default.


Public entity or private enterprise that issues securities, e.g. the federal government in the case of German Treasury Bonds or a joint-stock corporation in the case of shares.

Letter of credit – LoC

Bank guarantee. In the United States, for example, a common way of furnishing collateral in reinsurance business.

Life/health insurance

Lines of business concerned with the insurance of persons, i.e. life, annuity, health and personal accident.

Loss ratio

Net loss ratio shown in the balance sheet: percentage ratio of claims expenditure (net) including other technical income (net), but excluding any consolidation differences for technical items – including amortization of the shareholders' portion of the PVFP – to net premium earned. Present value of future profits

Major claim (also: major loss)

Claim that reaches an exceptional amount compared to the average claim for the risk group in question and exceeds a defined claims amount.

Matching currency cover

Coverage of technical liabilities in foreign currencies by means of corresponding investments in the same currency in order to avoid exchange-rate risks.

Modified coinsurance (ModCo) treaty

Type of reinsurance treaty where the ceding company retains the assets supporting the reinsured reserves by withholding a fund, thereby creating an obligation to render payments to the reinsurer at a later date. Such payments include a proportional share of the gross premium plus a return on the assets.


Incidence rate of disease relative to a given population group.


Proportion of the total population dying within a given time interval.


In insurance: used primarily to mean after deduction of reinsurance.

Non-proportional reinsurance

Reinsurance treaty under which the reinsurer assumes the loss expenditure or sum insured in excess of a defined amount.

Operating profit (EBIT)

Sum of the result of non-underwriting business and the underwriting result before the change (allocation or withdrawal) in the (claims) equalization reserve.


Over the counter. In the case of securities: not traded on a stock exchange.

Passive reinsurance

Existing reinsurance programs of primary insurers for their own protection against underwriting risks.

Personal lines
Policyholders’ surplus

Total amount of shareholders’ equity excluding minority interests, which is comprised of the common shares, additional paid-in capital, retained earnings and cumulative other comprehensive income, as well as the minority interests in shareholders’ equity and so-called hybrid capital, as equity-replacing debt capital that encompasses the subordinated liabilities.


a) All risks assumed by a primary insurer or reinsurer as a totality or in a defined segment.

b) Group of investments categorized according to specific criteria.


Agreed compensation for the risks accepted by the insurer.

Present value of future profits – PVFP

Intangible asset primarily arising in particular from the purchase of life and health insurance companies or individual portfolios. The present value of expected future profits from the portfolio assumed is capitalized and amortized according to schedule. Impairments are taken on the basis of annual impairment tests.

Primary (also: direct) insurer

Company which accepts risks in exchange for an insurance premium and which has a direct contractual relationship with the policyholder (private individual, company, organization).

Private equity

Investment capital raised by private investors in contrast to public equity, i.e. capital raised on the stock exchange.

Projected benefit obligation

The present value of the earned portion of commitments from a defined benefit obligation.

Property/casualty insurance

All insurance lines with the exception of life insurance and health insurance: all lines in which the insured event does not trigger payment of an agreed fixed amount, but rather the incurred loss is reimbursed.


Liability item as at the balance sheet date to discharge obligations which exist but whose extent and/or due date is/are not known. Technical provisions, for example, are for claims which have already occurred but which have not yet been settled, or have only been partially settled (= provision for outstanding claims, abbreviated to: loss reserve)

Purchase cost, amortized

Cost of acquiring an asset item including all ancillary and incidental purchasing costs; in the case of wasting assets less scheduled and/or special amortization.

Quota share reinsurance

Form of reinsurance under which the percentage share of the written risk and the premium is contractually agreed. The administrative expenditure for the reinsurer is very low.


Percentage (normally applied to the subject premium) of a reinsured portfolio, which under a non-proportional reinsurance treaty produces the reinsurance premium payable to the reinsurer.


Systematic evaluation of companies by a rating agency or bank with respect to their credit status.


Company that accepts risks or portfolio segments from a primary insurer or another reinsurer in exchange for an agreed premium.


Contractual relationships between insurers and reinsurers are maintained over long periods of time. The treaty terms and conditions are normally modified annually in so-called renewal negotiations, and the treaties are renewed accordingly.

Retail business

a) In general: business with private customers
b) AmpegaGerling: business involving investment funds that are designed essentially for private, non-institutional investors, although such funds are also open for investments of group companies.


The part of the accepted risks which an insurer/reinsurer does not reinsure, i.e. carries for > net. Net written premium in relation to gross written premium (excluding savings elements of premium under unit-linked life and annuity insurance policies).


Ceding by a reinsurer of its risks or shares in its risks to other reinsurers.


Cedant, insofar as the ceded business involves reinsurance.

Risk management system

The complete set of rules and measures used to monitor and protect against risks.


Fulfillment of liabilities for which reserves have been constituted.

Segment reporting

Presentation of asset and income data broken down into business segments and regions.

Shareholders’ equity

Funds provided by the owners of an enterprise for its internal financing or left within the company as earned profit (realized/unrealized). The capital providers are entitled to a share of the profit, e.g. in the form of a dividend, in return for making the shareholders' equity available. Shareholders' equity is equal to the total assets of the company less its total liabilities.

Soft capital

Capital components that are economically available but not yet recognized in the balance sheet: the loss reserve discount and the present value of future profits in life business that has not been capitalized, and on the company level the excess loss reserves.

Soft market

Market phase with oversupply of insurance, resulting in premiums that are not commensurate with the risk.


Level of available unencumbered capital and reserves required to ensure that contracts can be fulfilled at all times.

Solvency II

Project of the European Commission to reform and harmonize European insurance regulations.

Specialty lines

a) In general: specialty insurance for niche business such as non-standard motor covers, fine arts insurance etc.

b) Hannover Re: segment of the non-life reinsurance business group, encompassing marine and aviation business, credit/surety, structured products, ILS (insurance-linked securities), the London Market and direct business.

Stress test

Form of scenario analysis used to be able to make quantitative statements about the loss potential of portfolios in the event of extreme market fluctuations.

Surplus participation

Legally required, annually determined participation of policyholders in the surpluses generated by life insurers.


Agreement between two counterparties to swap payments at contractually defined conditions and times. Virtually any type of cash flow can be exchanged. This makes it possible to systematically hedge financial risks associated with a portfolio or to add new risks to a portfolio in order to optimize returns.


Option contract which enables the buyer to enter into an interest rate swap (swap) on or until a specific point in time in return for payment of a once-only premium. It facilitates hedging against rising interest rates without forfeiting the opportunity to obtain funding more reasonably if interest rates fall.

Technical result

Balance of income and expenditure allocated to the insurance business: balance of net premium earned and other technical income (net) as well as claims expenditure (net), acquisition costs and administrative expenses (net) and other technical expenses (net), including amortization of the shareholders' portion of the PVFP but excluding consolidation differences from debt consolidation. Present value of future profits


Underlying instrument of a forward transaction, futures contract or option contract that serves as the basis for settlement and measurement of the contract.


Process of examining and assessing (re)insurance risks in order to determine a commensurate premium for the risk in question. The purpose of underwriting is to diversify the underwriting risk in such a way that it is fair and equitable for the (re)insured and at the same time profitable for the (re)insurer.

Unearned premium reserve

Premiums written in a financial year which are to be allocated to the following period on an accrual basis.

Unit-linked life insurance

Life insurance under which the level of benefits depends on the performance of an investment fund allocated to the policy in question.

Value at Risk

Potential losses that with a certain probability will not be exceeded in a given period.


Measure of variability with respect to stock/bond prices, exchange rates and interest rates, and also insurance lines that can have a sharply fluctuating claims experience.