Diferencias entre los grupos (GC y GSBA) en relación a las variables estudiadas.

opportunities despite difficult economic situation

munich reinsurance company annual report 2009

90 management report

Economic parameters

macroeconomic parameters are likely to improve further in 2010, which should also have positive implications for insurance demand and for expected returns on invest- ments.

Economy

after the sharp downturn in the global economy, the first signs of a recovery began to emerge towards the middle of 2009, a trend that is expected to continue in 2010. the industrial countries will probably show moderately positive growth. more momentum will come from the emerging economies, especially china and india. it is to be feared that despite any economic upturn, the steep rise in unemployment will persist, particu- larly in the developed economies, with a weakening effect on private consumption. the high level of household debt in a number of countries, including the usa, should also contribute to consumer reluctance. the german economy is likely to recover in line with export demand. With the expected return of global demand, prices for consumer goods and raw materials will rise again. the international increase in public debt, which in some cases has been pushed to historic proportions by economic programmes and the support for the financial markets, is likely to affect countries’ economies in the medium to long term.

Capital markets

For the capital markets, 2010 will be a year of transition, in which the after-effects of the crisis and reduction in monetary and fiscal policy stimuli will need to be absorbed. in this environment, we anticipate a modest increase in the yield levels of long-term government bonds. higher-risk investments should be subject to high volatility again in 2010, reflecting the remaining uncertainty about the economy, the stability of the financial system, and a withdrawal – with minimum impact on the market – from the expansive monetary policy practised thus far.

at present, we see no signs of a further weakening of the us dollar. Following the very accommodating monetary policy pursued by the united states until now, we anticipate that 2010 will bring some initial tightening measures that should strengthen the dollar. in addition, a reduction in the us trade deficit could contribute to a positive develop- ment of the us currency.

Insurance industry

the anticipated global economic recovery should also have a favourable effect on the insurance industry in 2010. in most of the developed markets, slight growth in premium income is therefore expected. growth dynamics in the emerging countries should be somewhat more pronounced. in individual areas of life, health and personal accident insurance, delayed effects of the crisis are to be feared, such as the consequences of higher unemployment. likewise, individual segments of property-casualty insurance could continue to suffer in the short term from the impact of the financial crisis. it cannot be ruled out, for instance, that a significant portion of the losses in professional indemnity insurance will not occur until a later stage. other segments such as credit and surety business, however, should benefit directly from an economic upswing and record lower losses. For life insurance, the development of interest-rate and return levels is a crucial success factor. although demand for life insurance cover should pick up again as the prospects for the economy improve, the profitability of the business could suffer in the long term if the financial crisis triggers a prolonged phase of low interest rates.

moderate macroeconomic recov ery expected for 2010

munich reinsurance company annual report 2009

91 management report

the improved capital situation is having a significant effect on prices, terms and condi- tions in the international insurance and reinsurance markets. accordingly, the renewals at the beginning of the year showed a slight weakening of prices. in a number of segments that were hit more severely by the crisis, a further improvement in terms and conditions is expected. as a general principle, primary insurers and reinsurers must continue to ensure – in the interests of clients – that pricing remains risk-adequate.

Risks

although the prospects for the economy have brightened considerably, the outlook remains comparatively uncertain. the durability of economic recovery is still unclear. a repeated slump or even extended period of stagnation with deflationary consequences cannot yet be completely ruled out. Furthermore, the implications of the massive government and central bank interventions and the reactions they provoke are difficult to estimate. For instance, a misguided monetary policy that, in the event of a sustained economic recovery, results in a higher rate of inflation in the medium term constitutes a significant risk for the insurance industry. Further risks may derive from the long-term impact of the crisis – for example in the form of subdued future growth potential. the implications for international trade, in particular as regards protectionist restrictions, remain unclear. geopolitical threats, for instance in the middle east or in eastern and southern asia, are also still a significant risk for the insurance industry.

it remains to be seen whether and to what extent future political decisions will affect the insurance industry’s business activity. Business fields with a link to social insur- ance, e.g. private health insurance, are subject to political risk. moreover, the planned tightening of supervisory regulations in the financial services industry also harbours risks for the industry. there are concerns that the changes – mainly geared to bank - ing – could be transferred indiscriminately to the insurance sector. conceivable in this context are exaggerated capital requirements, excessive reporting obligations, and restrictions for individual types of business.

unexpectedly fierce price competition in the insurance markets is another risk scenario. it could be aggravated by a recession-related drop in demand or politically induced restrictions on business activity. Keeping a clear focus on profitability before growth and on the efficiency of management systems will remain critical to the insur- ance industry’s performance.

risk-adequate terms and conditions still essential

munich reinsurance company annual report 2009

92 management report