Press release

• Munich Re publishes Topics 1/2007 
  
  
• Pandemic: Optimally equipped for the worst-case scenario 
  
  
• Risk trading: Market for securitisations now offers interesting opportunities 
  
  
• Geographical information systems: Geocoding improves risk management and helps clients
   

Munich Re regards itself as well prepared for the possible outbreak of a pandemic. Although the threat of a pandemic this winter had mainly disappeared from the media due to the almost complete absence of instances of bird flu in Europe, experts are largely in agreement that the next pandemic is sure to come, the only question being when and how extensive it will be. As opposed to natural hazards, there are insufficient and no fully reliable statistical data as regards the pandemic scenario.

Munich Re experts have for years been analysing the impact of a pandemic on the Company. The conclusion drawn in the current issue of Topics (1/2007) is that today, due to medical and technical advances, the mortality rate in the event of a pandemic would be much lower than in the past, certainly below that of the Spanish Flu, which claimed between 25 and 50 million lives worldwide in 1918. On the insurance side, Munich Re is no more exposed than in the case of larger natural catastrophes. On the investments side, it is assumed that a pandemic as outlined by the World Health Organization (WHO), which experts regard as being the most likely scenario, would impact the global economy and the capital markets only for a certain period of time.

In Topics, Munich Re regularly publishes analyses from various units in the Company. A whole section in the current issue of Topics is devoted to the Risk Trading Unit (set up at the end of 2006) through which Munich Re is increasing its involvement in the market for insurance-based capital market products such as securitisations. For the Group this means that, besides extended opportunities for managing its own risks, there is also potential for additional business by offering capital market solutions to clients (cross-selling). In addition, investing in securitised risks (risk warehousing) as well as the restructuring and resale of risks open up new sources of income.

In December 2006, the Risk Trading Unit arranged a transaction for the Zurich Financial Services Group involving the issue of a catastrophe bond with a volume of US$ 190m to cover the risk of earthquake in California. The market for so-called insurance-linked securities is becoming increasingly attractive, since the transaction costs for such capital market solutions are lower than they were even a few years ago. In addition, the return demanded by investors has fallen, partly due to growing market transparency and a better ability to assess risks. In 2006, catastrophe bonds with a record volume of almost US$ 5bn were issued, which in terms of capacity is still relatively small in contrast to the volume of the worldwide reinsurance market as a whole.

The third section in Topics deals with the significance for the insurance industry of geocoded data. Here standards have continued to increase due to the demand for ever-better risk models – ultimately only a few metres may decide whether an event will cause a loss occurrence or not. Geocoding is now so advanced that entire portfolios can be broken down to address level. Munich Re’s Geo Data Service is capable of coding and analysing insurance portfolios worldwide. Risks can also be visualised with the help of aerial and satellite imagery. This allows clients to evaluate their risks according to hazard or exposure classes. Risk assessment has thus taken an enormous leap forward.

The next issue of Topics will appear in September 2007, featuring among other items climate change (opportunities and risks) and cycle management.

Münchener Rückversicherungs-Gesellschaft
signed Dr. Jeworrek           signed Dr. Lawrence