43. Risk profile

UNIQA’s risk profile is very heavily influenced by the life and health insurance portfolios of UNIQA Österreich Versicherungen AG. This situation means that market risk plays a central role in UNIQA’s risk profile.

The Group companies in Central Europe operate in the property and casualty business lines as well as in the life and health insurance business lines. In the CEE region, the property and casualty sectors are the most dominant.

This structure is important to UNIQA because it offers a high level of diversification from the life and health insurance lines that dominate in the Austrian companies.

The distinctive risk features of the regions are also reflected in the risk profiles determined by using the internal measurement approach.

Market and credit risk

The strength of the market and credit risks depends on the structure of the capital investment and its allocation to the different asset categories. The table below shows investments classified by asset category.

Asset allocation

In € thousand

31/12/2022

31/12/2021

Fixed-income securities

12,442,938

16,021,778

Real estate assets

1,299,752

1,241,860

Pension fund

1,928,801

2,059,540

Equity investments and other stocks

882,288

815,421

Shares and equity funds

1,156,693

1,224,155

Time deposits

461,531

272,172

Other investments

253,640

150,051

Total

18,425,644

21,784,976

However, the market and credit risks not only have an impact on the value of investments, but also influence the level of technical liabilities. Thus, there is – particularly in life insurance – a dependence between the (price) growth of assets and liabilities from insurance contracts. UNIQA manages the income expectations and risks of assets and liabilities arising from insurance contracts as part of the asset liability management (ALM) process. The objective is to ensure sufficient liquidity while retaining the greatest possible security and balanced risk in order to achieve a return on capital that is sustainably higher than the guaranteed performance of the technical liabilities. To do this, assets and liabilities are allocated to different accounting groups.

The following two tables show the main accounting groups generated by the various product categories.

Assets

In € thousand

31/12/2022

31/12/2021

Long-term life insurance contracts with guaranteed interest and profit participation

9,829,677

12,414,127

Long-term unit-linked and index-linked life insurance contracts

3,957,281

5,154,053

Long-term health insurance contracts

3,913,534

4,444,807

Short-term property and casualty insurance contracts

5,629,524

5,814,056

Total

23,330,016

27,827,042

These values refer to the following items:

  • Land and buildings for own use
  • Investment property
  • Financial assets accounted for using the equity method
  • Other investments
  • Unit-linked and index-linked life insurance investments
  • Cash
Technical provisions and liabilities (net)

In € thousand

31/12/2022

31/12/2021

Long-term life insurance contracts with guaranteed interest and profit participation

10,148,531

10,979,313

Long-term unit-linked and index-linked life insurance contracts

3,878,799

5,028,507

Long-term health insurance contracts

3,983,062

3,813,196

Short-term property and casualty insurance contracts

4,094,413

3,891,198

Total

22,104,805

23,712,214

These values refer to the following items:

  • Technical provisions
  • Technical provisions for unit-linked and index-linked life insurance
  • Reinsurance liabilities (only securities account liabilities from reinsurance ceded)
  • Reinsurers’ share of technical provisions
  • Reinsurers’ share of technical provisions for unit-linked and index-linked life insurance

The market and credit risk is broken down into interest rate, credit spread, equity, currency and market concentration risk.

The interest rate risk arises on all asset and liability items of the statement of financial position whose value fluctuates as a result of changes in risk-free yield curves or associated volatility. Given the high proportion of interest-bearing securities in the assets, interest rate risk forms an important part of market risk. The interest rate risk is actively managed as part of the ALM-based investment strategy.

The following table shows the maturity structure of fixed-income securities.

Exposure by term

In € thousand

31/12/2022

31/12/2021

Up to 1 year

953,115

908,460

More than 1 year up to 3 years

1,687,938

1,481,601

More than 3 years up to 5 years

2,125,802

2,369,538

More than 5 years up to 7 years

1,825,398

2,521,545

More than 7 years up to 10 years

1,674,795

2,259,623

More than 10 years up to 15 years

1,875,176

2,640,465

More than 15 years

2,300,714

3,840,546

Total

12,442,938

16,021,779

In comparison with this, the next table shows the insurance provision before reinsurance in health and life insurance and the gross provision for unsettled claims in non-life insurance, broken down into annual brackets. In health and life insurance the breakdown takes place using expected cash flows from the ALM process.

IFRS reserve by expected maturity date

In € thousand

31/12/2022

31/12/2021

Up to 1 year

1,416,995

1,244,623

More than 1 year up to 3 years

1,686,872

1,244,715

More than 3 years up to 5 years

1,348,266

1,194,601

More than 5 years up to 7 years

1,126,827

1,002,338

More than 7 years up to 10 years

1,670,265

1,556,280

More than 10 years up to 15 years

1,963,653

2,167,754

More than 15 years

7,608,350

8,170,662

Total

16,821,228

16,580,974

Since the interest rate risk is particularly relevant in life insurance as a result of the long-term liabilities, the focus below is placed on this business line. Using UNIQA Österreich Versicherungen AG as an example, the average interest rate sensitivity of life insurance in the event of a change in interest rates of +/–50 basis points for the assets is € 238.5 million and that of liabilities is € 339.1 million. The difference between these two values is used as the control basis for the interest rate risk or the duration gap. During the annual ALM process, it is determined from a strategic point of view which budgets for interest rate risk can be accepted at the operating company level.

The discount rate that may be used in the costing when new business is written in most UNIQA companies takes into account a maximum discount rate imposed by the relevant local supervisory authority. In all those countries where this is not the case, appropriate prudent, market-based assumptions are made by the actuaries responsible for the calculation. In our core market of Austria, the maximum interest rate beginning 1 July 2022 is 0 per cent per year. However, the portfolio also includes older contracts with different discount rates. In the relevant markets of the UNIQA Group, these rates amount to as much as 5 per cent per year. The following table provides an overview of the average technical discount rates by region and currency.

Average technical discount rates, core business by region and currency

In per cent

EUR

USD

Local currency

Austria (AT)

2.0

 

 

Central Europe (CE)

0.0

 

3.4

Eastern Europe (EE)

3.3

3.4

3.0

Southeastern Europe (SEE)

2.7

2.9

1.5

Russia (RU)

2.1

2.3

3.9

As these interest rates are guaranteed by the insurance company, the financial risk lies in not being able to generate these returns. Since classic life insurance business predominantly invests in interest-bearing securities, the unpredictability of long-term interest rate trends is the most significant financial risk for a life insurance company. Investment and reinvestment risk arises from the fact that premiums received in the future must be invested to achieve the rate of return guaranteed when a policy is written. However, it is entirely possible that no appropriate securities will be available at the time the premium is received. Likewise, future income must be reinvested to achieve a return equivalent to at least the original discount rate. For this reason, UNIQA has already decided to only offer products in its key markets that are based on a low or zero discount rate. One example of this in Austria is the sale of deferred pension products with a discount rate of 0 per cent.

The credit spread risk refers to the risk of changes in the price of asset or liability items in the statement of financial position, as a consequence of changes in credit risk premiums or associated volatility, and is ascertained for individual securities in accordance with their rating and duration. When investing in securities, UNIQA chooses securities with a wide variety of ratings, taking into consideration the potential risks and returns.

The following table shows the credit quality of those fixed-income securities that are neither overdue nor written down, based on their ratings.

Exposure by rating

In € thousand

31/12/2022

31/12/2021

AAA

2,535,682

3,117,422

AA

3,070,791

4,112,915

A

3,375,608

4,714,695

BBB

2,039,156

2,708,020

BB

341,657

403,258

B

135,688

314,606

≤ CCC

84,315

11,773

Not rated

860,041

639,089

Total

12,442,938

16,021,778

Equity risk arises from movements in the value of equities and similar investments as a result of fluctuations in international stock markets, and therefore stems in particular from the asset categories “Equity investments and other stocks” and “Equities”. The effective equity weighting is controlled by hedging with the selective use of derivative financial instruments.

Foreign currency risk is caused by fluctuations in exchange rates and associated volatility. Given the international nature of the insurance business, UNIQA invests in securities denominated in different currencies, thus following the principle of ensuring matching liabilities with assets in the same currency to cover liabilities at the coverage fund or company level. Despite the selective use of derivative financial instruments for hedging purposes, it is not always possible on cost grounds or from an investment point of view to achieve complete and targeted currency matching between the assets and liabilities. The following tables show a breakdown of assets and liabilities by currency.

Currency risk

In € thousand

 

31/12/2022

Assets

Provisions and liabilities

EUR

21,468,516

20,827,928

USD

259,492

110,422

CZK

1,660,112

1,222,883

HUF

422,203

352,559

PLN

2,992,495

2,513,510

RON

354,182

236,602

Other

1,039,153

879,862

Total

28,196,153

26,143,766

Currency risk

In € thousand

 

31/12/2021

Assets

Provisions and liabilities

EUR

24,569,387

22,541,840

USD

572,248

367,172

CZK

1,450,892

1,238,123

HUF

457,405

365,382

PLN

3,035,889

2,550,947

RON

340,731

231,992

Other

1,121,230

929,041

Total

31,547,783

28,224,497

In addition to figures from the established market and credit risk models (MCEV, SCR, etc.), stress tests and sensitivity analyses are used to measure and manage market and credit risk and their components.

The following tables show the most important market risks in the form of key sensitivity figures, along with their impact on equity and profit/(loss) for the period. Depending on the measurement principle to be applied, any future losses from the measurement at fair value may result in different fluctuations in profit/(loss) for the period or in other comprehensive income. The key figures are calculated theoretically on the basis of actuarial principles and do not take into consideration any diversification effects between the individual market risks or countermeasures taken in the various market scenarios.

Sensitivities for other investments are determined by simulating each scenario for each individual item, keeping all other parameters constant in each case. Market value changes that have no effect on the balance sheet include reclassified bonds and loans in the case of interest rate and credit spread risk.

Interest rate risk

In € thousand

31/12/2022

31/12/2021

+ 50 basis points

–50 basis points

+ 50 basis points

–50 basis points

Government bonds

–278,391

355,091

–484,651

548,866

Corporate bonds (incl. covered)

–118,131

144,699

–176,478

189,139

Other

–40,402

47,102

–65,832

76,753

Total

–436,924

546,892

–726,962

814,759

Of which income statement

–2,244

2,969

–1,358

5,082

Of which equity

–434,680

543,922

–725,603

809,678

Credit spread risk

In € thousand

31/12/2022

31/12/2021

+ 50 basis points

–50 basis points

Income statement

–10,304

–374

Equity

–433,191

–785,327

Total

–443,494

–785,701

Equity risk

In € thousand

31/12/2022

31/12/2021

–25%

–25%

Income statement

–175,192

–4,098

Equity

–25,581

–301,161

Total

–200,773

–305,259

Currency risk

In € thousand

31/12/2022

31/12/2021

10%

–10%

10%

–10%

PLN

129,435

–129,435

128,226

–128,015

USD

43,649

–43,702

57,494

–57,227

CZK

63,320

–63,482

64,740

–64,753

RUB

25,822

–25,822

24,046

–24,046

HUF

12,603

–12,603

14,479

–14,479

Other

53,811

–53,746

57,479

–57,479

Total

328,640

–328,790

346,464

–346,000

Of which income statement

315,200

–315,350

323,681

–323,554

Of which equity

13,440

–13,440

22,783

–22,446

In life insurance the interest rate assumptions are the crucial influencing factor on the liability adequacy test and deferred acquisition costs. The impact of the implied new funds assumption (including reinvestment) is therefore stated below.

If new funds are assumed with a + 100 bp increase, then the resulting net effect (after accounting for the deferred profit participation) amounts to € 6 million. A –100 bp reduction in this assumption results in a net effect of €–8 million. The effects described relate to the changes in deferred acquisition costs along with the impact on the liability adequacy test. The results were determined using the traditional business in Austria which makes up the bulk of insurance provision in the Group.

In non-life insurance, the provision for unsettled claims is formed based on reported claims and applying accepted statistical methods. One crucial assumption here is that the pattern of claims observed from the past can be sensibly extrapolated for the future. Additional adjustments need to be made in cases where this assumption is not possible.

The calculation of claim provisions is associated with uncertainty based on the time required to process claims. In addition to the normal chance risk, there are also other factors that may influence the future processing of the claims that have already occurred. In particular, the reserving process for court damages in property and casualty insurance should be mentioned here. A reserve estimate is prepared here for these damages based on expert assessment, although this estimate can be exposed to high levels of volatility specifically with major damage at the start of the process for collecting court costs.

The partial internal model in property and casualty insurance is a suitable instrument for quantifying the volatility involved in processing. Pursuant to analysis of these model results, it was determined that a deviation of 5 per cent from the basic provision calculated may represent a realistic scenario. Based on the current provision for unsettled claims of € 3,453 million (excluding additional provisions such as provisions for claim settlement) in the Group on a gross basis, this would mean an increase in claims incurred by € 173 million.

In health insurance (similar to life technique), since 1 July 2021 only tariffs with a discount rate of 0.5 per cent are being sold. Together with measures to reduce the assumed interest rate in the portfolio, an average assumed interest rate of approx. 2.5 per cent was achieved as at 31 December 2022. A reduction in the capital earnings by 100 bp (based on 2021 investment results) would reduce the earnings before taxes by € 43 million.

Liquidity risk

Ongoing liquidity planning takes place in order to ensure that UNIQA is able to meet its payment obligations over the next twelve months.

Obligations with a term of more than twelve months are covered by investments with matching maturities as far as possible within the framework of the ALM process and the strategic guidelines. In addition, a majority of the securities portfolio is listed in liquid markets and can be sold quickly and without significant markdowns if cash is required.

There are underwriting obligations mainly in the form of funds from holdings in healthcare and investments in private debt, as well as in the infrastructure sector, amounting to € 833,162 thousand (2021: € 794,770 thousand).

Financial liabilities – Contractual maturities at 31 December 2022

In € thousand

Liabilities from bonds and loans

Derivative financial instruments

Lease liabilities

Total

2023

8,250

0

12,897

21,147

2024

8,250

0

11,745

19,995

2025

8,250

0

10,724

18,974

2026

8,250

0

8,153

16,403

2027

8,250

0

7,081

15,331

> 2028

624,750

11,645

42,354

678,749

Financial liabilities – Contractual maturities at 31 December 2021

In € thousand

Liabilities from bonds and loans

Derivative financial instruments

Lease liabilities

Total

2022

8,250

10,015

10,502

28,767

2023

8,250

0

9,026

17,276

2024

8,250

0

7,497

15,747

2025

8,250

0

10,877

19,127

2026

8,250

0

5,174

13,424

> 2027

633,000

11,828

60,154

704,982

Subordinated liabilities – Contractual maturities at 31 December 2022

In € thousand

Notional amount1)

Coupon payments

Total

2023

148,700

45,207

193,907

2024

0

34,984

34,984

2025

200,000

34,984

234,984

2026

326,300

28,484

354,784

2027

0

8,906

8,906

> 2028

375,000

35,625

410,625

1)

Contractual maturities based on the first possible termination date

Subordinated liabilities – Contractual maturities at 31 December 2021

In € thousand

Notional amount1)

Coupon payments

Total

2022

0

45,207

45,207

2023

148,700

45,207

193,907

2024

0

34,984

34,984

2025

200,000

34,984

234,984

2026

326,300

28,484

354,784

> 2027

375,000

44,531

419,531

1)

Contractual maturities based on the first possible termination date

Concentration risks

UNIQA strives to keep concentration risks as low as possible.

These could arise, for example, from the transfer of insurance business to individual reinsurance companies to an inappropriate extent. This can have a material influence on UNIQA’s result in case of late payment (or non-payment) by an individual reinsurer. UNIQA controls such risks with an internal reinsurance company that is responsible for selecting external reinsurance parties, taking into account strict guidelines for avoiding material concentration risks.

However, concentration risk can also arise among other things from the composition of balance sheet items reported in the assets. Throughout the investment period, the company continuously checks to ensure that the investment volumes in securities of individual issuers do not exceed certain limits in relation to the total investment volume, defined according to the respective credit rating.

Underwriting risks

The underwriting risks are subdivided into non-life insurance, health insurance and life insurance.

The underwriting risk in non-life insurance is broken down into the three risk categories of premium, reserve and catastrophe risk.

Premium risk is defined as the risk that future benefits and expenses in connection with insurance operations will exceed the premiums collected for the insurance concerned. Such a loss may also be caused in insurance operations by exceptionally significant, but rare loss events, known as major claims or shock losses. Natural catastrophes represent a further threat from events that are infrequent but that nevertheless cause substantial losses. This risk includes financial losses caused by natural hazards, such as floods, storms, hail or earthquakes. In contrast to major individual claims, insurance companies in this case refer to cumulative losses.

Reserve risk refers to the risk that technical provisions recognised for claims that have already occurred will turn out to be inadequate. The loss in this case is referred to as settlement loss.

The claim reserve is calculated using actuarial methods. External factors, such as changes in the amount or frequency of claims, legal decisions, repair and/or handling costs, can lead to differences compared with the estimate.

To counter and actively manage these risks, UNIQA runs a number of processes integrated into its insurance operations. For example, a Group Policy specifies that new products may only be launched if they satisfy certain profitability criteria. Major claims and losses from natural catastrophes are appropriately managed by means of special risk management in the underwriting process (primarily in corporate activities) and by the provision of suitable reinsurance capacity.

In connection with claim reserves, guidelines also specify the procedures to be followed by local units when recognising such reserves in accordance with IFRSs. A quarterly monitoring system and an internal review process safeguard the quality of the reserves recognised in the whole of the Group.

An essential element in risk assessment and further risk management is the use of the non-life partial model. This risk model uses stochastic simulations to quantify the risk capital requirement for each risk category at both company and Group levels.

The health insurance business is operated primarily in Austria. As a result, risk management in this line focuses mainly on Austria.

Health insurance is a loss insurance which is calculated under consideration of biometric risks and is operated in Austria mainly according to the similar to life technique.

The main techniques for risk mitigation in health insurance are the adjustment of future profit participations and the premium adjustment, which is carried out in compliance with legal and contractual framework conditions. These measures are crucial for the underlying risk models and contain detailed information and regulations, particularly with regard to profit participation. In practice, classic risk-mitigation techniques are also relevant here.

For health insurance they include:

  • prudent setting of the discount rate at a level that is expected to be earned in the long term;
  • risk selection, i.e. a targeted pre-selection of prospective customers for insurance products, for example through health checks;
  • careful selection of the termination rate probabilities (death and lapse) in order to calculate adequate premiums for the benefits to be expected;
  • the consideration of premium adjustment clauses in various health insurance products in order to be able to adjust premiums in line with changes in the calculation principles in case of changes in the expected values; and
  • where necessary, reinsurance solutions are applied to partial portfolios.

In addition to these classic risk mitigation techniques, an ongoing process for managing portfolios has been established. This process is carried out annually by determining and evaluating the need for rate adjustments. The effectiveness of the risk mitigation techniques described for the health business is assessed by comparing invoiced and actual benefits as well as by calculating contribution margin calculations.

In life insurance, the underwriting risk is generally defined as the risk of loss or adverse developments affecting the value of insurance liabilities. It is divided into the categories of mortality, longevity, disability-morbidity, lapse, expense, revision and catastrophe risk.

The mortality risk depends on possible fluctuations in mortality rates due to an increase in deaths which would have an adverse effect on the expected benefits to pay on risk insurance policies.

Longevity risk refers to the adverse effects of random fluctuations in mortality rates due to a decline in the mortality rate. The insurer is thereby exposed to the risk that the anticipated life expectancy in the calculation of the premium will be exceeded in reality and that the expenditure for pension payments will be higher than planned.

The disability-morbidity risk is caused by possible adverse fluctuations in disability, sickness and morbidity rates compared to what they were at the time the premium was calculated.

The lapse risk arises from the fluctuations in policy cancellation, termination, renewal, capital selection and surrender rates of insurance policies. Overall, it represents the uncertainty regarding customer behaviour.

The expense risk refers to adverse effects due to fluctuations in the administrative costs of insurance and reinsurance contracts.

The revision risk results from fluctuations in the revision rates for annuities due to changes in the legal environment.

The catastrophe risk results from significant uncertainty in relation to pricing and the assumptions made in the creation of provisions for extreme/exceptional events. The most relevant risk in this context is an immediate dramatic increase in mortality rates: in this case, death benefits in the risk portfolio could not be fully financed by the risk premium collected.

In the context of life insurance, the main techniques for risk mitigation are the adjustment of future profit participations or a corresponding premium adjustment as well as additional reinsurance policies, which are carried out in compliance with legal and contractual framework conditions. These measures are crucial for the underlying risk models and contain detailed information and regulations, particularly with regard to profit participation. In practice, profitable new business supports the risk-bearing capacity of the existing portfolio, whereby careful risk selection (e.g. health checks) and cautiously chosen calculation principles for premiums are essential cornerstones when designing products. By including premium adjustment clauses, the potential to reduce risk can be improved, especially in the risk and occupational disability portfolio.

Operational risk

Operational risk includes losses that are caused by insufficient or failed internal processes, as well as losses caused by systems, human resources or external events.

The operational risk includes legal risk, but not reputation or strategic risk. Legal risk is the risk of uncertainty due to lawsuits or uncertainty in the applicability or interpretation of contracts, laws or other legal requirements. At UNIQA, legal risks are monitored on an ongoing basis, and reports are made to the Group Management Board. UNIQA’s risk management process also defined the risk process for operational risks in terms of methodology, workflow and responsibilities. The risk manager is responsible for compliance throughout all Group companies.

A distinctive feature of operational risk is that it can surface in all processes and departments. This is why operational risk is identified and evaluated in every operational company at a very broad level within UNIQA. Risks are identified with the help of a standardised risk catalogue that is regularly checked for completeness.

According to international standards, UNIQA – as a financial service provider – forms part of the critical infrastructure of key importance to the national community. If this infrastructure were to fail or become impaired, it would cause considerable disruption to public safety and security or lead to other drastic consequences.

As a rule, emergencies, crises and disasters are unexpected events for which it is impossible to plan, although systems and processes can be put in place to deal with such events. The systems and processes must then be treated as a special responsibility of management and must be dealt with professionally, efficiently and as quickly as possible.

UNIQA has implemented a business continuity management system covering the issues of crisis prevention, crisis management and business recovery (including business emergency plans). The UNIQA BCM model is based on international rules and standards and is developed on a continuous basis.

Emerging risk

Emerging risk refers to newly arising or changing risks that are difficult to quantify and can have a significant impact on an organisation. Among the main drivers of the changing risk landscape are new economic, technological, socio-political and ecological developments and the increasing interdependencies between them, which may lead to a growing concentration of risk. In addition, a changing business environment – the further development of regulatory rules, the increased expectations of stakeholders and the shift in risk perception – must be taken into account.

Reputational risk

Reputational risk describes the risk of loss that arises because of possible damage to the company’s reputation, because of a deterioration in prestige, or because of a negative overall impression caused by negative perception by customers, business partners, shareholders or supervisory agencies. Reputational risks that occur in the course of core processes such as claim processing or advising and service quality are identified, evaluated and managed as operational risks in the Group companies.

Contagion risk

Group risk management analyses whether the reputation risk observed in the Group or in another unit may occur, and whether the danger of “contagion” within the Group is possible. The analyses performed guard against contagion risk.

Strategic risk

Strategic risk refers to the risk that results from management decisions or insufficient implementation of management decisions that may influence current or future income or solvency. This includes the risk that arises from management decisions that are inadequate because they ignore a changed business environment. Like operational and reputational risks, strategic risks are evaluated on an ongoing basis.

(Partial) internal model
Internally generated model developed by the insurance or reinsurance entity concerned and at the instruction of the FMA to calculate the solvency capital requirement or relevant risk modules (on a partial basis).
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Asset liability management
Management concept whereby decisions related to company assets and the equity and liabilities are coordinated. Strategies related to the assets and the equity and liabilities are formulated, implemented, monitored and revised with this in a continuous process in order to attain the financial objectives given the risk tolerances and restrictions specified.
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Deferred acquisition costs
These include the costs of the insurance company incurred in connection with the acquisition of new or the extension of existing contracts. Costs such as acquisition commissions as well as costs for processing applications and risk assessments are some of the items to be recorded here.
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Equity method
Investment in associates is accounted for using this method. The value carried corresponds to the Group’s proportional equity in these companies. In the case of shares in companies that prepare their own consolidated financial statements, their Group equity is assessed accordingly in each case. Within the scope of ongoing measurement, this value must be updated to incorporate proportional changes in equity with the share of net income/(loss) being allocated to consolidated profit/(loss).
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Fair value
The fair value is the price that would be collected in an ordinary business transaction between market participants for the sale of an asset or that would be paid for transferring a liability.
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Hedging
Hedging against unwanted changes in exchange rates or prices using an appropriate offsetting item, particularly derivative financial instruments.
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IFRSs
International Financial Reporting Standards. Since 2002 the term IFRSs has applied to the overall concept of standards adopted by the International Accounting Standards Board. Standards already adopted beforehand continue to be referred to as International Accounting Standards (IASs).
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Insurance provision
Provision in the amount of the existing obligation to pay insurance benefits and reimbursements, predominantly in life and health insurance. The provision is determined using actuarial methods as a balance of the present value of future obligations less the present value of future premiums.
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Profit participation
Policyholders have a reasonable right under statutory and contractual regulations to the company’s surplus profits generated in life and health insurance. The level of this profit participation is determined again each year.
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Provision for unsettled claims
Also known as a claims reserve; takes into account obligations from claims that have already occurred as at the reporting date but which have not yet been settled in full.
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Reinsurance
An insurance company insures part of its risk via another insurance company.
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Solvency capital requirement (SCR)
The eligible own funds that insurers or reinsurers must hold to enable them to absorb significant losses and give reasonable assurance to policyholders and beneficiaries that payments will be made as they fall due. It is calculated to ensure that all quantifiable risks (such as market risk, credit risk, life underwriting risk) are reliably taken into account. It covers both current operating activities and the new business expected in the subsequent twelve months.
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