major risk factors and their management within the ... - Euler Hermes

4 Quantitative
MAJOR RISK FACTORS AND THEIR MANAGEMENT WITHIN THE GROUP
and qualitative appendices relating to risk factors
The main Risk Management flows
The various types of risk, identified and classified by category and function together with the related control flows, are presented in the following diagram:
ASSESSMENT
OF RISK
MAIN
CATEGORIES
RISKS
COMMITTEES
AND CONTROL
TOOLS
AND REPORTING
Market and credit
risks
Share Rates
Real estate
Finance committee
Asset/liability
management. Capital
risk measurements
This structure aims to identify and proactively monitor all risks by
maintaining responsibility for their management at the operational level.
This allows routine Risk Management to be spread across the operations of
the entire Group, while at the same time allowing the function to respond
to specific events as efficiently as possible. The Group Risk Office prepares
risk reports in collaboration with the operational functions in order to keep
management informed. Committees are important channels, as centers
4.2.2 INSURANCE RISK
Product approval
100 EULER HERMES I 2011 Registration Document
Reinsurance
Credit risks
Reinsurance
committee
Capital risk.
Risk measurement
management
Assessment of risks
and control
Counterparty
and insurance risks
Subscription
risk
Product/subscription,
high risk and commercial
High-risk insurance
management
Euler Hermes has set up a group-level Product Committee responsible for
approving all new products or changes to existing products.
The Product Committee comprises the Group’s main functions, especially
marketing, commercial underwriting, risk underwriting, management
control, reinsurance and risk management.
The Committee’s purpose is to approve products from different
perspectives (commercial, internal processes, profitability, impact on
solvency, etc.) and to make a recommendation to the Group Management
Board.
Underwriting of the risk
The underwriting of the risk is done in two phases
Reserve
risk
AREAS COVERED BY THE RISK COMMITTEE
Actuarial committee
Internal model
on insurance risk
and other actuarial
models
■ Assessment of risk ■ Control including the risk function ■ Main tools & reporting
Business risk
Local and Group
controls
Cost and business
reporting
Operational
and legal risks
Business continuity
/legal/IT/regulatory
Business continuity
/SOX committee
Reporting/analysis
and self-assessment
of responsibility and decision-making for Risk Management, but also in
spreading a culture of risk awareness and identifying the strengths and
weaknesses of the risk management process. All these elements combine
to form an ongoing risk management mechanism that includes a forwardlooking
view of major risks, especially with regard to any changes in the
environment or trends. As such, Euler Hermes is particularly well prepared
to monitor adverse developments and take appropriate action.
a) the signature of the insurance contract
The credit insurance contract contains all management rules and
parameters of the relationship between Euler Herrmes and the
policyholder (deductible, maximum liability,…). These rules and
parameters are differentiated depending on the risk profile of each
policyholder. The functionning of the contract is based on the declaration
by the policyholder of the unpaid invoices he has emitted according to a
certain declaration term and, during the insurance period, the exchanges
between Euler Hermes and the policyholder are regular in order to
manage the most adequately as possible the list of grandted limits. The
principle of global coverage of the turnover of the policyholder is one of
the key element in order to increase the diversification of the risk and
avoid anti-selection phenomenon
b) the management of granted limits
Euler Hermes has implemented a risk business model in order to face in
the most efficient way the insurance risk