Sustainability risks

With a strong risk and sustainability culture, UNIQA has set the stage to ensure our business can be successful and profitable in the long term. In accordance with the latest amendment to the delegated act of the Solvency II Directive (2009/138/EC) in April 2021, sustainability risks must be taken into account in the risk management system. Our objective is to develop an appropriate and consistent approach to considering sustainability risks, apply this approach at all times and ensure it is updated regularly. With this in mind, we analyse climate-related risks and opportunities as part of our risk management (when conducting our internal assessment of the risk and financial situation). With regard to climate risks, the risks particularly relevant to UNIQA are those resulting from increasing weather extremes, which raise the loss ratio and also amplify default risks. The results from the sustainability risk identification and assessment process are intended to help support management decisions as part of UNIQA’s product design or investment strategy.

Against this backdrop, in 2021 the Group Risk Management team conducted an impact and GAP analysis of current and future regulatory requirements, industry guidelines and market best practices. ESG was identified as a key focal point within the framework of the overall risk cycle (risk identification, risk assessment, limit setting, controlling and reporting), the design of climate risk scenarios and the integration of ESG into UNIQA’s risk models. The development of ESG indicators within the investment and portfolio management process was also regarded as essential. Areas for improvement in conjunction with sustainability risks were identified, with a roadmap drawn up to safeguard their implementation.

In order to adequately deal with climate risks, we also set up the NatCAT Competence Centre (NCCC), which allows us to observe and monitor emerging social and environmental risks. The Group’s risk exposure and changes to said exposure, accumulations and annual expected losses, as well as the reinsurance cover required to protect the Group from major natural disasters, are all assessed in the NCCC. In our assessment, we use the very latest modelling techniques based on stochastic models that cover hundreds of thousands of hail, storm, flood and earthquake events. These models have either been procured from external providers or developed internally by the NCCC R&D team. Their outcomes form the basis of our Group-wide risk management for natural disasters. These models are also used to calculate annual stress scenarios in order to test out the robustness of our underwriting and reinsurance coverage. The threat arising from the models can be visualised in maps that are fed into the Corporate Business Navigator (CBN), a risk review and assessment tool that is used by Group underwriters and risk engineers.

Sustainability risks are not currently dealt with as a separate risk category, but are instead taken into account within ten existing risk categories. During the course of the 2021 reporting year, no material reportable ESG risks were identified that were related to our business activities, commercial relationships, products or services, or that might have a severe negative impact on material non-financial concerns.