8.1. Risk management
With the publication of the interim guidelines, major elements of Solvency II are already legally binding in 2014. This means the UNIQA Group is focusing on implementing the ORSA process and the concluding ORSA report.
The preparations are complete and the rollout is being accompanied by intensive information and training measures.
The data warehousing issue is a major success factor for risk management. Here, the integration of the Solvency II approach in the finance data warehouse will be completed in 2014. All subsidiaries will therefore be able to make their solvency calculation with a standardised and modern system.
The training initiatives and awareness measures will be continued and extended to sales executives with the same intensity. Since the basic, broad-based training has already been carried out, more in-depth courses will be offered in 2014.
8.2. Market risk management
In market risk management, the overhaul of the sensitivity calculations and stress testing, among other things, will continue in 2014. This includes improved models for VaR calculation, their extension to the entire investment portfolio and initial developments towards “reverse stress testing”.
In addition, an even greater expansion of the market and credit risk processes and the limit system to the international companies is targeted.
Processes and governance to ensure the highest possible data quality shall also be advanced. This relates both to the consistent rollout of the existing IT solution and the expansion of data sources for actuarial models and to the establishment of a Data Governance Committee for better organisation of data quality issues.
The above sets of issues are the major development goals for 2014 in addition to the major set of issues relating to phasing in and preparing for Solvency II and ORSA/FLAOR, which are of course also highly significant for market and credit risk management.
8.3. Group actuarials
Life insurance valuation models (Prophet)
Since 2005, the UNIQA Group has used the Prophet software for actuarial valuation in the context of profit testing, balance sheet projections, ALM modelling and especially stochastic modelling. At the heart of these applications are projections of the cash flows relevant for estimating future income or liabilities.
Because the Group’s Austrian companies have historically insured the greatest number of lives, the development of the models was always closely linked to these companies. Due to the increasing importance of the life insurance business in the international companies and the increasing qualitative requirements regarding risk capital calculations, the target is to establish a unified standard model in the Group. The standard model for stochastic modelling in the UNIQA Group is Prophet ALS (Asset Liability Strategy). This environment enables shared and efficient modelling of liabilities and assets.
Prophet ALS was already successfully implemented for the Austrian companies in 2012 and for the companies in Slovakia, Czech Republic and Hungary (Central Europe region) in 2013. The priority in 2014 is the further rollout of the standard model to the Italian companies, which account for a significant portion of the international life insurance business. Credit risk modelling is particularly important here in order to reflect corresponding risks in the values of financial options and guarantees. In the long term, all relevant life insurance portfolios are to be modelled under the Group standard in order to meet a high quality standard for all regulatory requirements and also to enable internal analyses – for example to support the ALM process.
Independent reserve review
As part of the consolidated financial statements according to IFRS, the provision for outstanding claims is valued according to actuarially accepted methods. This realistic estimate forms a relevant item on the liabilities side of the balance sheet, and how good the original estimate was is eventually verified by the settlement of the claims. In this respect, settlement gains or losses can be made.
In order to objectivise internal quality assurance (review of locally generated realistic estimates by Group actuarials), an independent analysis of the appropriateness of the reserve for outstanding claims in property and casualty insurance was commissioned. The analysis is to be carried out between January and May 2014 and cover around 90 per cent of the Group’s reserve for outstanding claims as of 31 December 2013. In addition to the specified sectors analysed in all companies covered by the analysis, additional focus areas will be looked at in specific countries.
The work for natural hazards begun in 2013 will be pursued continuously in 2013. In addition to deepening knowledge of the structure and specifications of individual Group-relevant natural hazard models, establishing and implementing validation concepts and sensitivity tests are now also priorities. In order to implement a distinct second-opinion culture, UNIQA Re AG will strengthen the network of external service providers and experts in the field of natural hazards and intensify the cooperation.
To supplement UNIQA’s own documentation, a comprehensive knowledge database will be compiled to provide additional basic and detailed literature on individual topics.
In 2014, additional attention will be paid to the development of training concepts to implement the transfer of knowledge to the companies. Alongside basic knowledge building, great value is placed on introducing analysis and decision-making instruments to the responsible parties in the companies. Furthermore, individual local technical support will continue unchanged from previous years in order to guarantee the companies adequate assistance even for very specific requirements.
8.5. Business continuity management
According to international standards, the UNIQA Group – as a financial service provider – is part of the critical infrastructure of great importance for the governmental community, whose failure or impairment would result in considerable disruption to public security or other dramatic consequences.
Emergencies, crises and disasters usually occur unexpectedly and cannot be planned. However, procedures and processes for handling such events can. Nonetheless, they must be handled as a special task for the management – professionally, efficiently and as quickly as possible.
At UNIQA the issues of crisis prevention, crisis management and business recovery (including contingency plans) are being dealt with by implementing a Business Continuity Management (BCM) system.
Its main objectives are:
- To prevent injury and loss of life of employees and third parties
- To minimise the impact of the failure of important business processes by being prepared with constantly updated contingency and recovery plans
The UNIQA BCM model is based on international regulations and standards and will continue to be implemented in 2014. By implementing BCM, UNIQA is responding to the requirements of the authorities (solvency, critical infrastructure) and the market (tendering). This comprehensive risk management approach not only reduces the potential loss after an event but also increases the quality of everyday operations.
8.6. IT security at UNIQA
As a financial service provider, UNIQA Insurance AG – like nearly all companies today – relies on the high availability of its IT infrastructure as support for its business processes.
At UNIQA, there are numerous measures to secure the operation of the IT infrastructure and, for example, to protect the data stored there.
In addition to the existing security measures customary for the industry, UNIQA I is implementing an Information Security Management System (ISMS). This ISMS, by establishing procedures and rules within a company, allows information security to be defined, managed, controlled, maintained and improved on an ongoing basis in the long term.
The compliance rollout is continuing in 2014. All EU countries are to implement the UNIQA Code of Conduct by the end of the year. The pilot countries, together with Group Compliance, are tasked with consolidating the compliance structure in 2014 and beginning the implementation and practical application of the selected compliance tools. The second group of countries (the remaining EU countries) are beginning the rollout and shall implement the UNIQA Code of Conduct and the Group Compliance Policy (while taking account of compulsory local requirements) and apply selected compliance tools by the end of the year.