We use reinsurance as an important element of our day-to-day risk management supported by the internal model. We use the model for assessing the impact of different reinsurance alternatives.
Natural disaster
In order to have protection against natural disaster risks, in 2008 we maintain cover of up to DKK 4.5bn with retention of DKK 100m in Denmark and NOK 100m in Norway. The level of cover was determined based on the risk exposure of our portfolio, using simulation models. These models suggest that a loss in excess of DKK 4.5bn occurs less often than once every 250 years.
Exposure to natural disasters in Norway is furthermore limited through our participation in the Norwegian Pool of Natural Perils.
Catastrophe events
Our catastrophe reinsurance programme also covers other catastrophe events, including terrorist related events, for up to DKK 3.75bn. In case of terrorist events, buildings, building contents and consequential loss are covered with a total insured value of up to DKK 500m.
We have also bought catastrophe reinsurance up to DKK 1.5bn for our personal accident and workers' compensation policies with retention of DKK 50m. This reinsurance covers the risk of multiple injuries from the same cause, including terror.
Other reinsurance
In addition to reinsuring catastrophe events, we also buy reinsurance for certain lines of business for which experience has shown that claims vary considerably. Our corporate portfolio includes very large property risks in Denmark and Norway. We have bought reinsurance in the Danish and Norwegian markets for these policies with retention on a single claim of DKK/NOK 50m and with cover up to a maximum of DKK 1.4bn/ NOK 1.6bn. For property risks exceeding the upper level, we buy individual reinsurance. Other lines of business covered by reinsurance include liability and motor, marine, fish farms and guarantee insurance.
Although we have systematically used reinsurance to eliminate unwnated insurance risk, one single area remains. Exposure to terrorist losses of a biological, chemical or radioactive character can only be covered partly by reinsurance today. Although we deem the occurrence of this type of losses with a catastrophic scope very unlikely, we are working actively within the Danish Insurance Association with a view to establishing a national arrangement for such losses. We expect a solution during 2008.
Last update: 07 April 2008