Reinsurance

We use reinsurance as an important element of our daytoday risk management supported by the internal model, which we use for assessing the impact of different reinsurance alternatives.

In order to have protection against natural disaster risks, we maintain cover in 2008 of up to DKK 4.5bn with retentions of DKK 100m in Denmark and NOK 100m in Norway. The level of cover was determined based on the risk exposure of the Group’s portfolio, using simulation models. These models suggest that a loss in excess of DKK 4.5bn occurs less often than once every 250 years. Our exposure to natural disasters in Norway is furthermore limited through our participation in the Norwegian Pool of Natural Perils.

Our catastrophe reinsurance programme also covers other catastrophe events, including terrorist-related events, for up to DKK 3.75bn, with terrorist events being covered for buildings, building contents and consequential loss for risks with a total insured value of up to DKK 500m. We have bought catastrophe reinsurance up to DKK 1.5bn for our personal accident and workers’ compensation policies with a retention of DKK 50m, covering the risk of multiple injuries from the same cause, including terror.

In addition to reinsuring catastrophe events, we also buy protection for certain lines for which experience has shown that claims vary considerably. The Group’s 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 a retention on a single claim of DKK/NOK 50m and with cover up to a maximum of DKK1.4 bn/NOK 1.6bn. For property risks exceeding the upper level, we buy individual reinsurance. Other lines covered by reinsurance include liability and motor, marine, fish farms and guarantee insurance.

Although we have systematically used reinsurance to eliminate unwanted 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.