This business was then typically passed on via retrocession to second- or third-tier counterparties. However, their capacity was soon exhausted. Moreover, in London some business was underwritten fraudulently without the necessary authorisation. To make matters worse, Deutsche Rück’s US involvement also fully exposed it to the emerging asbestos and liability crisis. 

The company had entered international markets at precisely the wrong time and with the wrong partners. 

A Vicious Circle 

The company lacked the expertise needed to establish itself in Anglo-American markets. Oversight of the London business was also inadequate. Other German reinsurers also encountered difficulties with their international business at the time. However, they generally had the ability to offset their losses through other lines of business. 

Letterheads of Doric Re and Deutsche Rück UK; 
In 1982, Deutsche Rück renamed its subsidiary Doric Re to Deutsche Rück UK.

However, Deutsche Rück had entered international markets precisely to offset the strain on its core business. Its plan to diversify risks did not work out. 

In the Red 

It was now facing heavy losses from its international business. Its entire technical result slipped into the red. The UK regulator threatened to impose a business ban due to insufficient capital coverage. The company therefore had to significantly increase the capital of its UK subsidiary.

St Saviour’s Dock, London

Lean Years 

Dividends for Deutsche Rück’s shareholders were suspended for several years. Instead, they were forced in 1984 to significantly increase the equity of their joint reinsurer from 22 to 30 million DM. 

By that point, the international venture had cost the company several hundred million DM. 

Existential Crisis 

It was not only the losses from its international business that put pressure on Deutsche Rück. On top of this, 1990 brought an additional severe burden from the German business: Between January and March, a series of six severe storms caused damage on an unprecedented scale. 

DARIA (Burns Day Storm) – one of a total of six severe storms – left a trail of devastation like its “sister storms”.

The storms DARIA (Burns Day Storm), HERTA, JUDITH, POLLY, VIVIAN and WIEBKE resulted in the largest loss burden in the company’s history up to that point, with gross losses of 500 million DM and a loss ratio in storm insurance of 312 per cent. 

The massive storm losses, combined with the high losses from international business – costly late claims from US liability policies drove the loss ratio up to as much as 700 per cent – plunged Deutsche Rück into a severe existential crisis. It was no longer able to bear these burdens on its own. 

Felled trees caused by Storm WIEBKE near Sauerlach