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KD Holding Group
Notes to Consolidated Financial Statements as at and for the year ended 31 December 2007
the course of the year. Change of net damages and
net reserves have the same effect on profit.
The risk of unfavourable changes in investment
values can be the consequence of foreign exchange
rates, as well as changes of interest rates or stock
In total, EUR 32,952,000 in gross damages were
prices.
added, which would have affected profit in 2006 in
the amount of 8.35% of additional damages, and
8.7% of the amount of added damages in 2007.
The Group manages and controls the risks to which
it is exposed by constantly monitoring cash flows and
ensuring that it always has enough liquid assets at its
5.2 Financial risks
disposal to settle its liabilities, by investing its assets
in a manner which ensures stable long-term returns
Group is exposed to financial risks through its
financial assets and liabilities, reinsurance receivables
and insurance liabilities. Financial risks are risks that
due to changes in the capital markets and ratings
which exceed the amount of returns on insurance
liabilities, by matching the terms of financial assets
against financial liabilities, and by ensuring adequacy
of financial assets.
of the Group’s clients inflows will not be sufficient
to cover outflows. The most significant components
of this financial risk are liquidity risk, credit risk and
market risk, the Group is exposed to the risks of
changes in interest rates, securities market prices and
currency rates.
Currency risk is less important for the Group because
of ERM2 and adopting the euro in 2007.
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Liquidity risk is the risk that the Group may be
unable to repay all of liabilities, including potential
liabilities, without threat to its normal activities. The
Group maintains capital adequacy with a sufficient
adequate amount of capital in order to be able to
ensure liquidity at any moment and so that it is
sustainably able to meet its obligations (solvency).
Market risks appear especially in investment of
assets, where there is the potential that expectations
regarding the value of investments are not met or are
not met entirely.