Erste Bank JPMorgan Merrill Lynch International

To manage these underwriting risks, Vienna Insurance Group has formed reserves for paying future
insurance benefits.
The Vienna Insurance Group limits its potential liability from its insurance business by passing on
some of the risks it assumes to the international reinsurance market. It spreads this reinsurance
coverage over a large number of different international reinsurance companies that the Vienna
Insurance Group believes have adequate creditworthiness, in order to minimise the risk (credit risk)
due to the insolvency of one reinsurer.
Risk types
Function
Risk controlling
- All (goal)
- Currently focused on
financial/credit risks
- Monitor compliance
with guidelines
AREAS INVOLVED IN RISK MONITORING AND CONTROL
MANAGING BOARD
Investment
management
- Market risks
- Credit risks
- Implement guidelines and
practice active management
Risk committee
Internal actuarial
department
Actuarial practice
Life / Non-Life
- Insurance risks (direct)
- Implement guidelines and
practice active management
Ceded reinsurance Controlling
- Insurance risks (non-life),
especially NatCat/major risks
- Implement guidelines and
practice active management
- Strategic risks
- Operational risks
- Monitor compliance
with guidelines
The Vienna Insurance Group monitors the various market risks in its security portfolio using fair
value valuations, value-at-risk (VaR) calculations, sensitivity analyses and stress tests.
Liquidity risk is limited by matching the investment portfolio to insurance commitments. Operational
and strategic risks which might be caused by deficiencies or errors in business processes,
controls and projects and changes in the business environment are also monitored continuously.
Risk committee: The cross-class risk committee is formed by the actuarial, operations,
reinsurance, internal audit and corporate risk controlling departments. The risk committee is
responsible for optimisation and ongoing development of an ERM system. ERM is a framework
for company-wide risk management that uses key principles and concepts, uniform
terminology and clear instructions and support.
Group actuarial department: Underwriting risks are managed by the Group actuarial
department. This department subjects all insurance solutions to in-depth actuarial analysis
covering all classes of insurance business (life, health, property and casualty). Stochastic
simulations are performed regularly as part of the ALM process.
Reinsurance: The reinsurance business for all Group companies is managed by the central
reinsurance department set up in Wiener Städtische AG.
Risk controlling: The risk controlling department is responsible for coordination of ERM and
the risk inventory, and risk committee organisation. The risk controlling department prepares a
quarterly risk budget for the investment area. Budget compliance is checked weekly. Compliance
with security guidelines and the Company’s own limit system is monitored continuously.
Periodic VaR calculations and analyses, and detailed stress tests are performed for this
monitoring. An analysis of the Company’s risk capital model is an element of Standard &
Poor’s FSR (Financial Strength Rating) for the Vienna Insurance Group.
Controlling: The controlling department monitors and controls operational developments at
domestic and foreign insurance companies. This is accomplished by means of monthly reports
submitted to the controlling department by the companies and an analysis of plan and forecast
figures.
Audit: The audit department systematically monitors operating and business processes, the
internal controlling system of all operational corporate areas and the functionality and
adequacy of risk management. The internal audit department operates continuously and
reports directly to the Management Board as a whole.
F-104