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KD Holding Group
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2007
These models serve as a basis for measuring the
level of exposure an individual company in the Group
and the Group to individual risks. On the basis
of identification and measurement of risks in the
Group, the management adopts adequate measures
for reducing or controlling these risks (stage three).
insurer is the possibility that claims and benefits
exceed the amount of insurance liabilities (technical
provisions) created for a portfolio of insurance
contracts using statistical methods. This may happen
because of the change in the frequency of claims or
their amount which can be higher than expected.
Measures used by the management are different and
depend on the level of exposure and the type of risk.
Insured events are incidental which means that
their number and amount varies in individual years
The management of the Group manages risks present
in individual companies in the Group and on the level
of the Group as a whole. It thereby sets guidelines
concerning the balance between the risks, returns and
capital, performs periodic controls and sets guidelines
for implementation of business policies and strategy
and in relation to statistically established averages.
Experience shows that the larger the portfolio of
similar insurance contracts, the smaller the relative
variability of the expected outcome will be. In
addition, a more diversified portfolio is less likely to
be affected by a change in any subset of the portfolio.
for individual companies in the Group.
Individual companies in the Group have established
a system of reporting for the needs of management
that enables regular monitoring of risks to which
they are exposed. The insurance companies in
the Group have set up investment and liquidity
committees, which take care of the ALM function.
Types of risks
Insurance companies in the Group have developed
their own policy of concluding insurance contracts
with the aim of spreading the assumed risks and
achieve, within each individual category, a sufficient
amount of risk population to reduce the variability of
expected results. The principal means for reducing
insurance risks is reinsurance, i.e. the transfer of
risks that exceed the predetermined amount to the
reinsurance company.
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5.1 Insurance risk
Risk related to the insurance policy represents the
possibility that the event insured against actually
occurs and uncertainty in relation to the amount
of the sum insured or indemnity. It is the nature of
insurance contracts that insurance risks are incidental
and unpredictable; however, the main risk for the
When developing a new insurance product it is
very important that the parameters defining the
insurance premium are assessed adequately. The
risk accepted by the Group at the inception of an
insurance contract is reflected in the price, i.e. the
insurance premium. If the parameters defining the
insurance premium are not assessed adequately
when developing a new insurance product, this is a