Erste Bank JPMorgan Merrill Lynch International

Auditing
In keeping with the minimum requirements for internal auditing, the independent internal auditing
department monitors operating processes and business transactions as well as the functional capacity
and adequacy of risk management. In its capacity as an independent supervisory agency, the auditing
department reports the results of its audits, analyses and evaluations, along with any potential
recommendations, directly to the managing board.
Risk Management
Actuarial Risk
The actuarial risks to be managed differ from one another by area of insurance. Included among
them in the property and casualty area are premium and reserve risks. Reinsurance, however, is
treated separately here. Actuarial risks in life insurance relate to actuarial reserves.
Property and Casualty Insurance
Actuarial risks in property and casualty insurance are primarily managed through actuarial models
used for the setting of rates and the monitoring of loss experiences, and also through guidelines for
entering into insurance contracts and the assumption of insurance risks.
The Vienna Insurance Group pursues a risk-appropriate policy for setting rates adapted to the
respective market and customer segments. In the retail and commercial client business, actuarial
calculations are based primarily upon the objects being insured, such as in motor vehicle or
homeowners insurance, upon the activity being insured, such as in professional liability or construction
risks insurance, or upon subjective risk factors inherent in the person of the policy holder, such as, for
example, his age.
Rates for risks in the corporate client business are generally determined on the basis of an
individual risk analysis. This is due to the fact that, in the insurance business, very specific risks are
often covered for which no adequate statistical data are available. However, general risks are always
also assessed based on the actuarial model for rate setting.
Reserves need to be set aside for insurance claims incurred but not settled. In order to estimate
the amounts of such reserves, the Group relies on empirical values as well as on statistical test
methods. In addition, the Vienna Insurance Group limits risk by monitoring these reserves on an
ongoing basis. The information gained in this way is then used to update the estimates.
Life Insurance
In the area of life insurance, the Vienna Insurance Group concentrates primarily on biometric
risks, such as life expectancy, disability, illness and needs for nursing care. Furthermore, the Vienna
Insurance Group manages the risks that may result from future contract cancellations.
Reserves in the life insurance area are determined using actuarial methods. The calculations are
based on biometrical data from the policyholder, thus primarily on national mortality tables.
Claims Adjustment
The objective of claims adjustment is the efficient settlement of claims and cost control, while
providing the highest possible level of customer service. The Vienna Insurance Group continuously
works to further optimize its claims handling. In this respect, telephone contact with customers through
the call center and electronic data exchange increasingly play a key role, from claim reporting to
payment transactions.
In the retail customer area, there is an increasing push for a changeover to communication by
electronic means only, a trend that is beginning with motor vehicle insurance. Particular significance is
attached to heightened quality management of loss appraisals by internal or external experts. To that
end, the Vienna Insurance Group employs its own experts’ organization, EXPERTA. Central coordination
of loss appraisals by EXPERTA allows for the cost-effective appraisal of losses, ensuring
consistent assessment of loss magnitudes.
In the corporate customer area, the Group’s RiskConsult is regularly used for adjustments of
large losses. In such cases RiskConsult acts as the loss adjuster, assuming the role of the expert and
preparing a settlement proposal, including an examination of any possible subrogation claims.
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