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publicized major losses of 1999 (natural catastrophes) and 2001 (World Trade Center), led to dramatic adjustments of premiums and conditions, which we will have to accept even in the future. Nevertheless, we will continue to seek security with top-class retrocessionaires.

One more point which needs to be mentioned with regard to the period under review is the dramatic impact of the World Trade Center events, which presented Gerling Global Re with losses totalling € 233.5 million. The insolvency of Enron – including its effect on our investment portfo- lio – is expected to cost us some € 20 million.

So-called reserve risk is found in connection with underwriting provi- sions. Such provisions are calculated by actuarial methods and – espe- cially for US business – are monitored and adjusted as required.

Premium/benefit risk in Life and Health insurance is defined as the risk of having to pay benefits whose relative size may vary with future developments for many years from a level premium set in advance.

In Life reinsurance, the suitability of the accounting principles ap- plied is certified annually by the Responsible Actuaries or independent actuaries’ offices.

In lines of insurance with guaranteed interest payments, there is an interest guarantee risk. In reinsurance, however, this risk plays only a minor role.

Loss of claims

In reinsurance, the risk involved here is mainly one of non-payment of claims against retrocessionnaires. There is also a risk of non-payment of amounts due from ceding companies and brokers.

We have always – particularly in long-term business – paid close atten- tion to the financial standing of our retrocessionaires. We also keep an eye on the solvency of our brokers.

Investment risks

The investments of Gerling Group companies in Germany and abroad are centrally managed and monitored by specialists with a brief to ensure reasonable profitability with maximum security. Nevertheless, Gerling is not immune – any more than any other player in the insur- ance market – to the vagaries of the capital markets.

Market risk is the risk of losses sustained due to negative changes in market prices or other factors influencing these prices, e.g. changes in interest rates, stock prices or exchange rates.

58 Gerling-Konzern Globale Rückversicherungs-AG/Management Report

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