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## 10 Cash and cash equivalent 

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Compulsory deposits on accounts with the national central banks un- der restrictions due to required reserves from the European Central Bank totaled ¤ 3,357 mn for the credit institutions. 

Balances with central banks include balances held with the Deutsche Bundesbank of ¤ 3,321 (2002: 1,205) mn, which also have the function of meeting minimum reserve requirements. 

## 11 Amounts ceded to reinsurers from insurance reserves 

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The amounts ceded to reinsurers from insurance reserves stated un- der assets include rights of recourse against reinsurers. The credit risk is partly covered by funds held for others under reinsurance con- tracts, securities portfolios and bank guarantees. 

The Group reinsures a portion of the risks it underwrites in an ef- fort to control its exposure to losses, and protect capital resources. Each subsidiary, where applicable, has its own reinsurance program and determines its own risk limits. A large portion of the business ceded by the Group’s subsidiaries is assumed by Allianz AG, which acts as the reinsurer for the Group, although the subsidiaries also cede business to companies outside of the Group. Allianz AG retains 

a portion of the intercompany business it assumes and retrocedes the remainder to companies outside of the Group. Some of the business ceded by the subsidiaries and Allianz AG is ceded to associated com- panies (see Note 41 for related party transactions). 

The majority of the business ceded by Allianz AG is placed on a quota-share basis. For its property and casualty business, Allianz AG retained ¤ 50 mn in 2003 and ¤ 38 mn each in 2001 and 2002. The limits for cat events are ¤ 75 mn for 2003 and ¤ 50 mn each for 2002 and 2001. 

The reinsurance department of Allianz AG compiles a list of ap- proved reinsurers, provides the subsidiaries with orientation guide- lines for reinsurance contracts on a per-event basis and collects ces- sion data from the subsidiaries to avoid concentration of risk with particular reinsurers and to ensure that the aggregate risk retention of the Group is within the Group’s guidelines. Reinsurance is placed with companies based on an evaluation of the financial strength of the reinsurers, terms of coverage, and price. 

The Group pays premiums to reinsurers based upon the risk and exposure of the policies subject to such reinsurance. On most of the premium the Group cedes, the reinsurer pays a commission to the Group, which includes a reimbursement of the cost of acquiring the portion of the premium that is ceded. 

Reinsurance involves credit risk and is subject to aggregate loss limits. Reinsurance does not legally discharge the Group from pri- mary liability under the reinsured policies. Although the reinsurer is liable to the Group to the extent of the reinsurance ceded, the Group remains primarily liable as the direct insurer on all risks reinsured, including the amounts ceded. The Group monitors the financial con- dition of its reinsurers on an ongoing basis and reviews its reinsur- ance arrangements periodically in order to evaluate the reinsurer’s ability to fulfill its obligations to the Group under respective existing and future reinsurance contracts. 

