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KD Holding Group
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2007
which exceed the contractual reinsurance protection by
scale, special optional reinsurance protection is ensured.
Analysis of the Groupʼs portfolio from the aspect of
reinsurance risk
Basic assumptions used in sensitivity tests
In the largest group of other property insurance
contracts we analysed the sensitivity of individual
We assume two types of reinsurance protection
risks. The first risk is whether the structure
and scale of protection have been adequately
chosen, which can be checked by simulation of
whether decreasing reinsurance protection would
significantly decrease net profit or loss, which
would consequently jeopardise the Group's capital
adequacy. The second risk is whether the profit
or loss would worsen significantly if an aboveaverage
number of large-scale and mass losses
(which would also involve above-average amounts)
occurred in a given period.
Two income sensitivity tests have been designed to
assess reinsurance protection risk. Firstly, the test
of sensitivity to a decrease in reinsurance protection
and secondly, the test of sensitivity to an
above-average incidence of loss (for large-scale and
mass losses).
portfolios of insurance categories/groups of
insurance categories to large-scale and mass
losses, with the aim of focusing the reinsurance
risk management analysis on the most exposed
insurance categories. This analysis showed that
reinsurance risk is most significantly affected, both
in terms of the amount and number of potentially
large-scale and mass losses, by the portfolio of
auto liability insurance and the portfolio of fire
and other damage insurance. These portfolios
also significantly affect profit or loss, therefore the
sensitivity analysis was made on the basis of these
reinsurance contracts.
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