Group-wide standards of risk management are defined by the Central Risk Controlling Department, which also monitors the observance of those standards in conjunction with the risk controllers of the individual companies. The Central Risk Controlling Department reports directly to the executive board chairman of the Gerling holding company. Across the entire Gerling Group, risk controlling is supplemented by numerous centralized and decentralized functions and mechanisms for identify- ing and managing risks. Like all other processes, risk controlling is sub- ject to supervision by process-independent institutions. The task of internal monitoring is performed chiefly by the Group’s internal audi- tors, who run an annual check on risk controlling. Gerling is also monitored externally by supervisory authorities.
Internal risk model
The Group is managed on a value basis by IAS Return on Capital (IAS- ROC). The Capital Adequacy Model of Standard & Poor’s is applied throughout the Group for determining “available risk capacity” and “required risk capacity”. This model compares the risk funds which are actually available with the so-called standard risk capacity (required for a BBB rating) for liabilities from risks underwritten, losses incurred/ loss reserves, investment risks and other business risks. The risk funds considered for this purpose differ quite substantially from the Group’s equity according to IAS. The way risk capacity is calculated and the ways in which it differs from equity vary from one class of insurance to another.
This model is used throughout the Gerling Group for calculating business key figures and defining risk thresholds for the individual Group companies.
In compliance with German Accounting Standard DRS 5-20, an insur- ance company’s risks can be categorized as follows:
Premium/loss risk in property and casualty insurance is the risk of having to pay claims in future from premiums set in advance, with the size of claims not being known for certain at the time when premiums are set because claims payments are subject to stochastic influences (risk of fortuitous developments and changes).
This risk at Gerling is addressed by a variety of mechanisms and func- tions, e.g. professional actuaries and directives on underwriting risks, monitoring risk accumulations and the settlement of claims at opera- tive units. In view of the increasing incidence of natural and man-made catastrophes, it is very much in our interest to refine accumulation monitoring. Recourse to retrocession, primarily as a result of the much
Gerling-Konzern Globale Rückversicherungs-AG/Management Report 57