Bond Münchener Rück 1.25% ( XS2221845683 ) in EUR

Münchener Rück

88.74 % ▲

Germany

XS2221845683 ( in EUR )

1.25% per year ( payment 1 time a year)

25/05/2041

Prospectus brochure of the bond Munich Reinsurance Company (Munich Re) XS2221845683 en EUR 1.25%, maturity 25/05/2041

26/05/2026 ( In 235 days )

Munich Re is a global reinsurer and primary insurer providing risk solutions, including property, casualty, and life reinsurance, as well as primary insurance products, to clients worldwide.

The Bond issued by Münchener Rück ( Germany ) , in EUR, with the ISIN code XS2221845683, pays a coupon of 1.25% per year.
The coupons are paid 1 time per year and the Bond maturity is 25/05/2041

Prospectus dated 21 September 2020

Münchener Rückversicherungs-Gesellschaft
Aktiengesellschaft in München
(incorporated as a stock corporation (Aktiengesellschaft) in the Federal Republic of Germany)
1,250,000,000 Subordinated Fixed to Floating Rate Bonds
with scheduled maturity in 2041
ISIN XS2221845683, Common Code 222184568, WKN A289EQ
Issue price: 98.847 per cent
Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München ("Munich Reinsurance Company" or the
"Issuer") will issue on or about 23 September 2020 (the "Issue Date") 1,250,000,000 subordinated fixed to floating rate
bonds with a scheduled maturity in 2041 in the denomination of 100,000 each (the "Bonds").
The Bonds will be governed by the laws of the Federal Republic of Germany ("Germany").
The Bonds will bear interest from and including the Issue Date to but excluding 26 May 2031 (the "First Reset Date") at a
rate of 1.250 per cent. per annum, scheduled to be paid annually in arrear on 26 May in each year, commencing on 26 May
2021 (short first coupon). Thereafter, unless previously redeemed, the Bonds will bear interest at a rate of 2.550 per cent.
per annum above 3-month EURIBOR, being the Euro-zone inter-bank offered rate for three-month Euro deposits, scheduled
to be paid quarterly in arrear on 26 February, 26 May, 26 August and 26 November in each year (each a "Floating Interest
Payment Date"), commencing on 26 August 2031.
Under certain circumstances described in § 4 of the Terms and Conditions of the Bonds (the "Terms and Conditions"),
interest payments on the Bonds may be deferred at the option of the Issuer or will be required to be deferred.
The Bonds are scheduled to be redeemed at the Redemption Amount (as defined in the Terms and Conditions) on 26 May
2041 (the "Scheduled Maturity Date"), provided that on the Scheduled Maturity Date the Conditions to Redemption and
Repurchase (as defined in the Terms and Conditions) are fulfilled. If this is not the case, the Bonds will only be redeemed on
the first Floating Interest Payment Date following the Scheduled Maturity Date on which the Conditions to Redemption and
Repurchase are fulfilled. Under certain circumstances described in § 5 of the Terms and Conditions, the Bonds may be subject
to early redemption, always subject to the Conditions to Redemption and Repurchase being fulfilled.
The Bonds will initially be represented by a temporary global bond in bearer form (the "Temporary Global Bond"). Interests
in a Temporary Global Bond will be exchangeable, in whole or in part, for interest in a permanent global bond (the
"Permanent Global Bond" and together with the Temporary Global Bond, the "Global Bonds") not earlier than 40 days after
the Issue Date (the "Exchange Date"), upon certification as to non-U.S. beneficial ownership. The Global Bonds will be
deposited with a common depositary for Clearstream Banking S.A. and Euroclear Bank SA/NV (together, the "Clearing
System").
This prospectus (the "Prospectus") constitutes a prospectus within the meaning of Article 6.3 of Regulation (EU) No
2017/1129 of the European Parliament and of the Council of 14 June 2017 (as amended, the "Prospectus Regulation"). This
Prospectus will be published in electronic form together with all documents incorporated by reference on the website of the
Luxembourg Stock Exchange (www.bourse.lu) and on the website of the Issuer (www.munichre.com).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, Luxembourg ("CSSF") in its
capacity as competent authority under the Prospectus Regulation. The CSSF only approves this Prospectus as meeting the
standards of completeness, comprehensibility and consistency imposed by the Prospectus Regulation.

By approving this Prospectus, the CSSF gives no undertaking as to the economic and financial soundness of the transaction
or the quality or solvency of the Issuer. Such approval should neither be considered as an endorsement of the Issuer that is
subject of this Prospectus nor of the quality of the securities that are the subject of this Prospectus. Investors should make
their own assessment as to the suitability of investing in the Bonds.
This Prospectus will be valid until 21 September 2021 and may in this period be used for admission of the Bonds to trading
on a regulated market. In case of a significant new factor, material mistake or material inaccuracy relating to the information
included in this Prospectus which may affect the assessment of the Bonds, the Issuer will prepare and publish a supplement
to this Prospectus without undue delay in accordance with Article 23 of the Prospectus Regulation. The obligation of the Issuer
to supplement this Prospectus will cease to apply once the Bonds have been admitted to trading on the regulated market of
the Luxembourg Stock Exchange and at the latest upon expiry of the validity period of this Prospectus.
Application has been made to the Luxembourg Stock Exchange for the Bonds to be listed on the official list of the Luxembourg
Stock Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock Exchange's regulated market.
The Luxembourg Stock Exchange's regulated market is a regulated market for the purposes of Directive 2014/65/EU of the
European Parliament and of the Council of 15 May 2014 on markets in financial instruments (as amended, "MiFID II").
This Prospectus does not constitute an offer to sell, or the solicitation of an offer to buy, the Bonds in any jurisdiction where
such offer or solicitation is unlawful.
The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act")
and subject to certain exceptions, the Bonds may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons.
The Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the European Economic Area ("EEA") or the United Kingdom. For these purposes, a
retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II;
or (ii) a customer within the meaning of Directive (EU) 2016/97 (as amended, the "Insurance Distribution Directive"),
where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.
Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended, the "PRIIPs
Regulation") for offering or selling the Bonds or otherwise making them available to retail investors in the EEA or the United
Kingdom has been prepared and therefore offering or selling the Bonds or otherwise making them available to any retail
investor in the EEA or the United Kingdom may be unlawful under the PRIIPs Regulation.
Following the First Reset Date, interest amounts payable under the Bonds are calculated by reference to 3-month EURIBOR
("EURIBOR"), which is provided by the European Money Market Institute ("EMMI"). As at the date of this Prospectus,
EMMI appears on the register of administrators and benchmarks established and maintained by the European Securities and
Markets Authority ("ESMA") pursuant to Article 36 of the Benchmark Regulation (Regulation (EU) 2016/1011) (the
"Benchmark Regulation").
Prospective purchasers of the Bonds should ensure that they understand the nature of the Bonds and the extent of their exposure
to risks and that they consider the suitability of the Bonds as an investment in the light of their own circumstances and financial
condition. Investing in the Bonds involves certain risks. Please review the section entitled "Risk Factors" beginning on page
6 of this Prospectus.
Sole Structuring Agent to the Issuer
Citigroup
Joint Lead Managers
Citigroup
Crédit Agricole CIB
Deutsche Bank
Goldman Sachs International

HSBC
Co-Managers
NATIXIS
Société Générale Corporate &
UniCredit Bank
Investment Banking

RESPONSIBILITY STATEMENT
The Issuer with its registered office in Germany accepts responsibility for the information contained in this Prospectus
and hereby declares that the information contained in this Prospectus is, to the best of its knowledge, in accordance with
the facts and contains no omission likely to affect its import.
The Issuer further confirms that (i) this Prospectus contains all relevant information with respect to the Issuer and its
consolidated subsidiaries taken as a whole ("Munich Re" or the "Group") and to the Bonds which is material in the
context of the issue and the offering of the Bonds, including all relevant information which, according to the particular
nature of the Issuer and of the Bonds is necessary to enable investors and their investment advisers to make an informed
assessment of the assets and liabilities, financial position, profits and losses, and prospects of the Issuer, Munich Re and
of the rights attached to the Bonds; (ii) the statements contained in this Prospectus relating to the Issuer, Munich Re and
the Bonds are in every material respect true and accurate and not misleading; (iii) there are no other facts in relation to
the Issuer, Munich Re or the Bonds the omission of which would, in the context of the issue and offering of the Bonds,
make any statement in the Prospectus misleading in any material respect; and (iv) reasonable enquiries have been made
by the Issuer to ascertain such facts and to verify the accuracy of all such information and statements.
NOTICE
No person is authorised to give any information or to make any representation other than those contained in this Prospectus
and, if given or made, such information or representation must not be relied upon as having been authorised by or on
behalf of the Issuer or Citigroup Global Markets Limited, Crédit Agricole Corporate and Investment Bank, Deutsche
Bank Aktiengesellschaft, Goldman Sachs International, HSBC Bank plc, NATIXIS, Société Générale or UniCredit Bank
AG (together, the "Managers").
This Prospectus should be read and understood in conjunction with any supplement hereto and with all documents
incorporated herein or therein by reference.
The legally binding language of this Prospectus is English. Any part of this Prospectus in German language constitutes a
translation, except for the Terms and Conditions in respect of which German is the legally binding language.
In this Prospectus, all references to "", "EUR" or "Euro" are to the currency introduced at the start of the third stage of
the European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No. 974/98 of 3 May
1998 on the introduction of the Euro, as amended. References to "billions" are to thousands of millions.
Each investor contemplating purchasing any Bonds should make its own independent investigation of the financial
condition and affairs, and its own appraisal of the creditworthiness, of the Issuer. This Prospectus does not constitute an
offer of Bonds or an invitation by or on behalf of the Issuer or the Managers to purchase any Bonds. Neither this Prospectus
nor any other information supplied in connection with the Bonds should be considered as a recommendation by the Issuer
or the Managers to a recipient hereof and thereof that such recipient should purchase any Bonds.
This Prospectus reflects the status as at its date. The offering, sale and delivery of the Bonds and the distribution of this
Prospectus may not be taken as an implication that the information contained herein is accurate and complete subsequent
to the date hereof or that there has been no adverse change in the financial condition of the Issuer since the date hereof.
To the extent permitted by the laws of any relevant jurisdiction, none of the Manager, any of its affiliates or any other
person mentioned in this Prospectus, except for the Issuer, accepts responsibility for the accuracy and completeness of
the information contained in this Prospectus or any other documents incorporated by reference and accordingly, and to
the extent permitted by the laws of any relevant jurisdiction, none of these persons accept any responsibility for the
accuracy and completeness of the information contained in any of these documents. The Managers have not independently
verified any such information and accept no responsibility for the accuracy thereof.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer
or solicitation.
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The distribution of this Prospectus and the offering, sale and delivery of the Bonds in certain jurisdictions may be restricted
by law. Persons into whose possession this Prospectus comes are required to inform themselves about and to observe any
such restrictions. For a description of the restrictions see the section "Subscription and Sale of the Bonds Selling
Restrictions" below. In particular, the Bonds have not been and will not be registered under the Securities Act and are
subject to United States tax law requirements. Subject to certain exceptions, the Bonds may not be offered, sold or
delivered within the United States of America or to U.S. persons as defined in Regulation S under the Securities Act
("Regulation S").
The Bonds issued pursuant to this Prospectus are complex financial instruments and are not a suitable or appropriate
investment for all investors. In some jurisdictions, regulatory authorities have adopted or published laws, regulations or
guidance with respect to the offer or sale of securities such as the Bonds to retail investors.
For the avoidance of doubt the content of any website referred to in this Prospectus does not form part of this Prospectus
and the information on such websites has not been scrutinized or approved by the CSSF as competent authority under the
Prospectus Regulation.
MIFID II PRODUCT GOVERNANCE / TARGET MARKET: PROFESSIONAL INVESTORS AND ECPS
ONLY
Solely for the purposes of each manufacturer's product approval process, the target market assessment in respect of the
Bonds has led to the conclusion that: (i) the target market for the Bonds is eligible counterparties and professional clients
only, each as defined in MiFID II; and (ii) all channels for distribution of the Bonds to eligible counterparties and
professional clients are appropriate. Any person subsequently offering, selling or recommending the Bonds (a
"distributor") should take into consideration the manufacturers' target market assessment; however, a distributor subject
to MiFID II is responsible for undertaking its own target market assessment in respect of the Bonds (by either adopting
or refining the manufacturers' target market assessment) and determining appropriate distribution channels.
PRIIPS REGULATION / PROSPECTUS REGULATION / PROHIBITION OF SALES TO EEA AND UK
RETAIL INVESTORS
The Bonds are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the EEA or the United Kingdom. For these purposes, a retail investor means a
person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; or (ii) a customer
within the meaning of the Insurance Distribution Directive, where that customer would not qualify as a professional client
as defined in point (10) of Article 4(1) of MiFID II. Consequently, no key information document required by the PRIIPs
Regulation for offering or selling the Bonds or otherwise making them available to retail investors in the EEA or the
United Kingdom has been prepared and therefore offering or selling the Bonds or otherwise making them available to
any retail investor in the EEA or the United Kingdom may be unlawful under the PRIIPs Regulation.
Where acting as agent on behalf of a disclosed or undisclosed client when purchasing, or making or accepting an offer to
purchase, any Bonds (or any beneficial interests therein) from the Issuer and/or the Managers the foregoing
representations, warranties, agreements and undertakings will be given by and be binding upon both the agent and its
underlying client.
SINGAPORE SECURITIES AND FUTURES ACT PRODUCT CLASSIFICATION
In connection with Section 309B of the Securities and Futures Act (Chapter 289) of Singapore (the "SFA") and the
Securities and Futures (Capital Markets Products) Regulations 2018 of Singapore (the "CMP Regulations 2018"), the
Issuer has determined, and hereby notifies all relevant persons (as defined in Section 309A(1) of the SFA), that the Bonds
are 'prescribed capital markets products' (as defined in the CMP Regulations 2018) and Excluded Investment Products
(as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice
on Recommendations on Investment Products).
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BENCHMARK REGULATION: STATEMENT ON REGISTRATION OF BENCHMARK ADMINISTRATOR
Following the First Reset Date, interest amounts payable under the Bonds are calculated by reference to the EURIBOR,
which is provided by the EMMI. As at the date of this Prospectus, EMMI appears on the register of administrators and
benchmarks established and maintained by ESMA pursuant to Article 36 of the Benchmark Regulation.
STABILISATION
IN CONNECTION WITH THE ISSUE OF THE BONDS, CITIGROUP GLOBAL MARKETS LIMITED (THE
"STABILISING MANAGER") (OR ANY PERSON ACTING ON BEHALF OF ANY STABILISING MANAGER)
MAY OVER-ALLOT BONDS OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET
PRICE OF THE BONDS AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER,
STABILISATION MAY NOT NECESSARILY OCCUR. ANY STABILISATION ACTION MAY BEGIN ON OR
AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE
BONDS IS MADE AND, IF BEGUN, MAY CEASE AT ANY TIME, BUT IT MUST END NO LATER THAN THE
EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE BONDS. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE
CONDUCTED BY THE STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF THE
STABILISING MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, including statements using the words "believes",
"anticipates", "intends", "expects" or other similar terms. This applies in particular to statements under the caption
"Description of the Issuer and Munich Re" and statements elsewhere in this Prospectus relating to, among other things,
the future financial performance, plans and expectations regarding developments in the business of the Issuer and Munich
Re. These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that
may cause the actual results, including the financial position and profitability of the Issuer or Munich Re, to be materially
different from or worse than those expressed or implied by these forward-looking statements. Neither the Issuer nor the
Managers assume any obligation to update such forward-looking statements and to adapt them to future events or
developments.
ALTERNATIVE PERFORMANCE MEASURES
Certain terms used in this Prospectus and financial measures presented in the documents incorporated by reference are
not recognised financial measures under International Financial Reporting Standards as adopted by the European Union
("IFRS") ("Alternative Performance Measures") and may therefore not be considered as an alternative to the financial
measures defined in the accounting standards in accordance with generally accepted accounting principles. The Issuer has
provided these Alternative Performance Measures because it believes they provide investors with additional information
to assess the operating performance and financial standing of Munich Re's business activities. The definition of the
Alternative Performance Measures may vary from the definition of identically named alternative performance measures
used by other companies. The Alternative Performance Measures for Munich Re, presented by the Issuer should not be
considered as an alternative to measures of operating performance or financial standing derived in accordance with IFRS.
These Alternative Performance Measures have limitations as analytical tools and should not be considered in isolation or
as substitutes for the analysis of the consolidated results or liabilities as reported under IFRS.
For further information, please see "Description of the Issuer and Munich Re Alternative Performance Measures".
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TABLE OF CONTENTS
RISK FACTORS................................................................................................................................................................. 6
TERMS AND CONDITIONS OF THE BONDS ............................................................................................................. 24
USE OF PROCEEDS ....................................................................................................................................................... 76
DESCRIPTION OF THE ISSUER AND MUNICH RE .................................................................................................. 78
TAXATION .................................................................................................................................................................... 107
SUBSCRIPTION AND SALE OF THE BONDS .......................................................................................................... 111
GENERAL INFORMATION ......................................................................................................................................... 114
DOCUMENTS INCORPORATED BY REFERENCE .................................................................................................. 116

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RISK FACTORS
Before deciding to purchase the Bonds, potential investors should carefully review and consider the following risk factors
and the other information contained in this Prospectus. Should one or more of the risks described below materialise, this
may have a material adverse effect on the business, prospects, shareholders' equity, assets, financial position and results
of operations (Vermögens-, Finanz- und Ertragslage) or general affairs of the Issuer or the Group. Moreover, if any of
these risks occur, the market value of the Bonds and the likelihood that the Issuer will be in a position to fulfil its payment
obligations under the Bonds may decrease, in which case the holders of the Bonds could lose all or part of their
investments. Factors which the Issuer believes may be material for the purpose of assessing the market risks associated
with the Bonds are also described below.
The Issuer believes that the factors described below represent the principal risks inherent in investing in the Bonds, but
the Issuer may be unable to pay interest, principal or other amounts on or in connection with the Bonds for other unknown
reasons than those described below. Additional risks of which the Issuer is not presently aware could also affect the
business operations of Munich Re and have a material adverse effect on Munich Re's business activities and financial
condition and results of operations. Prospective investors should read the detailed information set out elsewhere in this
Prospectus (including any documents incorporated by reference herein) and reach their own views prior to making any
investment decision.
Words and expressions defined in the Terms and Conditions shall have the same meanings in this section.
The following risk factors are organized in categories depending on their respective nature. In each category the most
material risk factors, based on the probability of their occurrence and the expected magnitude of their negative impact,
are mentioned first.
Potential investors should, among other things, consider the following:
Risks relating to the Issuer and Munich Re
Underwriting Risks
The prospects and the profitability of Munich Re are, among other things, subject to underwriting risks. Underwriting
risks at Munich Re consist essentially of premium and reserve risks in the Property-Casualty business segment as well as
biometric risks and policyholder behaviour (e.g. lapses) risks in the Life/Health business segment.
Property and Casualty
The property-casualty risk category encompasses the underwriting risks in the property, motor, third-party liability,
personal accident, marine, aviation and space business segment as well as credit classes of insurance, together with special
lines also allocated to property-casualty, e.g. contingency business or non-damage business interruption. Underwriting
risk is defined as the risk of insured losses being higher than expected. Premium and reserve risks are significant
components of the underwriting risk.
Premium risk is the risk of future claims payments relating to insured losses that have not yet occurred being higher than
expected. Reserve risk is the risk of technical provisions established being insufficient to cover losses that have already
been incurred. An adverse development of claims from new, newly renewed or in-force business could thus adversely
impact Munich Re's financial result.
Munich Re calculates its reserves and prices its (re-)insurance contracts using actuarial methods and loss estimates. For
the decision to enter a specific reinsurance or retrocession agreement and for the assessment of the adequate technical
provisions Munich Re relies, among others, on the provision of correct and sufficient risk information by the relevant
ceding company. A provision of incorrect or incomplete information may result in the underwriting of unprofitable
business.
6

Risk-adequate pricing and reserving is particularly difficult in property and casualty business because claims are often
settled significantly after the exposure period has ended. Examples of past estimates that turned out to be inaccurate in
the market and to a certain extent also within Munich Re are claims in connection with unprecedented large catastrophes
(e.g. hurricane Katrina), asbestos, environmental liability claims, as well as bodily injury driven claims (e.g. in workers'
compensation insurance or motor insurance). In case of these and other claims, changes in legislation or regulations,
trends to more plaintiff-friendly legal decisions and larger compensatory jury awards ("social inflation"), changes in
policyholder behaviour, changes in healthcare expenses and repair costs, along with other inflationary variables may make
higher claims reserves necessary. Given the dynamically developing practice of court rulings and the unpredictability of
future court practice in some of the environments in which Munich Re operates, the accuracy of the level of reserves can
be particularly difficult to assess.
Munich Re endeavours to restrict the writing of individual risks by means of underwriting constraints which set out
uniform maximum limits on a group-wide basis. Nevertheless there is a risk that the claims burden of any one risk may
exceed the underwriting limit for Munich Re. Reasons for this could be, among others, wrong assumptions being made
for the calculation of Probable Maximum Loss (PML) for individual risks. There also remains the possibility of an
unknown loss accumulation in one and the same risk by way of treaty acceptances from different cedants.
Part of Munich Re's property and casualty business covers potentially large losses from unforeseeable natural catastrophes
such as hurricanes, windstorms and hailstorms, earthquakes, tsunamis, wildfires, freezes and floods. The frequency and
extent of these catastrophes over a certain period of time can only be estimated using scientific methods based on
experience values and prognoses of future changes. However, the frequency of such events can change e.g. due to natural
climate cycles.
Large losses to Munich Re's property and casualty (re)insurance book can also arise due to man-made catastrophes such
as terrorist attacks, international war and cyber-attacks. Munich Re is exposed to terrorist attacks which are only partially
excluded from insurance coverage. Further there is a risk that terrorist attacks cannot be clearly identified, classified or
evidenced as terrorist attacks. In this context cyber-attacks present a special challenge in terms of identification of the
source of an incident and the potential background. In a similar manner Munich Re could be negatively affected by an
international military confrontation given that it is not possible to implement war exclusions in all lines of business and
for all regions. It is also likely that cyber warfare will play an increasing role in the future.
Claims arising from natural or man-made catastrophes may result in unexpectedly high losses if catastrophes affecting
assets insured by Munich Re occur with higher frequency or have an even greater impact than estimated by Munich Re
on the basis of statistical data and scientific models. These unexpectedly high losses may adversely affect the financial
condition and consolidated results of Munich Re. In addition to impacting its traditional reinsurance business, natural and
man-made catastrophes may, among others, have an impact on Munich Re's economic situation due to its participation in
insurance pools and public-private partnerships.
Significant deviations from the expectations and assumptions applied in pricing and reserving compared to the actual
claims in the various business segments may negatively affect Munich Re's earnings and could have a material adverse
effect on Munich Re's business and financial condition.
Life and Health
Underwriting risk in life and health insurance business is defined as the risk of insured payable benefits being higher than
expected. Biometric risks and policyholder-behaviour risks such as lapses and lump-sum options are of particular
relevance.
In addition to the risk of random fluctuations of basic parameters such as morbidity and mortality rates, resulting in higher
claims expenditure in a particular year, the adverse developments with a short-term impact include rare events such as
pandemics. A global pandemic is the largest short-term accumulation risk in the life and health risk category. It could
cause an unexpected mortality shock to the portfolio of Munich Re and have a severe cross-balance sheet impact on
Munich Re. Munich Re aims to limit this risk by examining its overall exposure in detail using scenario analysis and by
defining appropriate measures and limits to manage the risks. Nonetheless, if pandemic events occur more frequently and
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result in higher losses than previously expected, these losses may materially adversely affect the financial conditions and
consolidated results of Munich Re. An assessment of the potential impact of the current COVID-19 crisis on Munich Re
is included in the category "Other risks" below.
Life primary insurance products in particular but also a large part of Munich Re's health primary insurance business are
by nature long-term commitments and the results they produce are distributed over the entire duration of the policies. This
means that negative developments in risk drivers with long-term effects may sustainably reduce the value of the insurance
portfolio (trend risks). Trends that may lead to shorter life expectancies than currently assumed, constitute a significant
risk for life insurance products with fixed premiums. On the contrary, lower than expected mortality rates constitute the
longevity risks for annuity insurance contracts. If longevity trends intensify, additional amounts may have to be allocated
to the provision for future policy benefits.
The lower life expectancy risk and the longevity risk arise out of trends moving in opposite directions. However, these
risks may not compensate each other due to the different underlying portfolios with regard to, e.g., age and region.
Significant deviations from the expectations applied in pricing and reserving compared to the actual claims for the long-
term business in the Life (re-)insurance business may negatively affect Munich Re's earnings and could have a material
adverse effect on Munich Re's business and financial condition.
In its health insurance business, Munich Re generally works on the assumption that there will be further advances in
medical treatment potentially giving rise to higher medical costs. If it is foreseeable that the assumptions behind these
calculations are permanently inadequate it is possible to adjust premiums for long-term contracts, thus limiting the
financial and balance sheet effects of permanent changes in morbidity. However, such biometric risks may accumulate or
be aggravated. This could happen due to the interventions of courts or legislators which may decide to redistribute the
risks and rewards of the underlying contracts concluded between the parties or to strengthen policyholders' rights. For
example, under the regulations applicable for policyholders in Germany it is no longer possible for an insurer to terminate
insurance contracts on the grounds of non-payment of premiums by the policyholder.
In addition policyholder behaviour risks may adversely affect Munich Re. Given that assumptions with respect to the
future policyholder behaviour are required to derive adequate life/health insurance reserves, unfavourable and unexpected
developments may negatively affect Munich Re's earnings and could have a material adverse effect on Munich Re's
business and financial condition.
Policyholder protection schemes
Munich Re may also be affected by increased obligations under the policyholder protection schemes of which some of
Munich Re's legal entities are members. For example, the German life and health insurers are members of the policyholder
protection schemes "Protektor" and "Medicator".
If a crisis adversely affects the financial situation of members of the protection scheme, Munich Re entities may be
required to make substantial contributions to settle guaranteed policyholder claims against insolvent members. If Munich
Re's contributions to policyholder protection schemes are considerably higher than currently anticipated, this may
negatively affect Munich Re's earnings and could have an adverse effect on Munich Re's business and financial condition.
Market Risks
The prospects and the profitability of Munich Re are, among other things, subject to market risk. Market risk is the risk
of economic losses resulting from price changes in the capital markets. Market risk is a very material risk for Munich Re
due to its large investment portfolio. The most relevant market risk categories for Munich Re include interest rate and
credit spread risk, equity risk, currency risk and real estate risk.
Interest rate and credit spread risk
Interest rate risk relates to changes in the basic yield curves, whereas credit spread risk refers to changes of the difference
in the rate of interest between a risk-bearing security and a risk-free security of the same tenor and currency. Examples
8

include Euro government bonds from various issuers and corporate bonds. Changes in basic interest rates or credit spreads
lead to changes in the market value of the corresponding securities.
A sharp increase of the basic interest rate or an increase of credit spreads, e.g., due to higher risk aversion in the financial
markets, may have a significant negative impact on Munich Re because the majority of the Group's holdings are invested
in fixed-income securities. This could have a negative impact on Munich Re's assets, financial results and financial
position.
Fluctuations in interest rate levels not only affect the market value of Munich Re's investments but also the market value
of its liabilities from an economic view. Since Munich Re's asset and liability positions do not necessarily match in terms
of interest rate sensitivity, any material changes in interest rates may have a negative impact on the economic capitalization
of Munich Re. This particularly applies to Munich Re's life and health (re-)insurance business due to the long-term nature
of the liabilities and the interest-rate guarantees given to the policyholders in some product families. For example, the
primary life insurers and pension scheme providers of Munich Re have a substantial portfolio of policies with guaranteed
interest and other policyholder options, including annuity and endowment policies. The benefits paid under life insurance
policies in Germany and in other countries are based on guaranteed interest rates equivalent to market standards used to
calculate provisions for future policy benefits at the time of issuance of the respective policies.
With interest rates at a very low level for the past years and a potential continuation of this low-interest rate environment,
Munich Re's life insurer may be obliged to set up further provisions for products with high guaranteed interest rates. Thus,
interest rate risk could materially impact the economic capitalization in a low interest rate environment as long term
guarantees in life and health business increase in value. Additionally, the longer the very low interest rate levels continue
the more Munich Re's results will be negatively affected by lower reinvestment yields.
Hence, interest rate and credit spread risks may negatively affect Munich Re's earnings and could have a material adverse
effect on Munich Re's business and financial condition.
Equity risk
Equity risk is caused by changes in the value of listed and unlisted equities, equity derivatives or equity index derivatives.
Additionally, Munich Re considers alternative investments (e.g. renewable energy and infrastructure investments) in the
context of equity risk. The overall equity exposure of Munich Re varies over time due to strategic and tactical decisions
around the asset allocation.
Munich Re's investments are subject to market volatility affecting their value and liquidity. In prior years Munich Re has
incurred significant impairments on the value of its equities and the risk remains that Munich Re will have to make
significant impairments in the future as well. Unfavourable changes in the value of investments in equities may negatively
affect Munich Re's earnings and could have a material adverse effect on Munich Re's business and financial condition.
Currency risk
Munich Re prepares and consolidates its financial statements and solvency position in Euro. However, a significant
portion of the revenues and expenses of Munich Re originates from companies outside the Euro zone, including the United
States, Canada, Australia, Switzerland and the United Kingdom. As a result, given that Munich Re's non-Euro zone
subsidiaries generally record their revenues and expenses in local currency, changes in the exchange rates used to translate
foreign currencies into Euro may adversely affect the financial result and shareholder equity of Munich Re on a Group
level.
Additionally, negative effects from exchange rate fluctuations may also be caused by a currency mismatch between
liabilities and investments on a legal entity level including the Issuer. In general, the management of Munich Re's
investment risks is fundamentally based on the maturity and currency structure of the economic liabilities. However, due
to various restrictions and differences in accounting standards and regulatory requirements in and between various
countries Munich Re operates in, a perfect matching of the liabilities is not feasible. Therefore, a limit for a tolerated
mismatch between assets and liabilities is defined in Munich Re's risk strategy. As a consequence, currency risks remain
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