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), sustainability risks must be taken into account in the risk management system. This Directive entered into force on 2 August 2022. 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. Accordingly, we analyse climate-related risks and opportunities as part of our risk management (when conducting our internal assessment of the risk and financial situation). The main climate-related risks relevant to UNIQA are those arising from increasing levels of extreme weather, which raise the loss ratio but also amplify the default risk.

The results of the sustainability risk identification and assessment process are intended to help support management decisions as part of UNIQA’s product design or investment strategy.

The implementation of sustainability risks in UNIQA’s risk management processes was a key priority last year. Over the past twelve months, risk management focused heavily on identifying sustainability risks. As a result, one of the main topics we dealt with in 2022 was measuring long-term climate scenarios and how they will develop. Given the magnitude and complexity of risk profiles among Group subsidiaries, UNIQA differentiated between quantitative and qualitative approaches when measuring these climate risks. We also focused on the integration of sustainability risks in our investment reporting across the Company and monitoring this work. The issue of sustainability was also incorporated into our outsourcing risk management processes. The objective of the risk management approach is to identify potential risks at an early stage so as to be able to react to them in a timely fashion. Sustainability risks are not currently dealt with as a separate risk category. Instead, they are taken into account within ten existing risk categories1).

To combat climate risks appropriately, we set up the NatCat Competence Centre (NCCC) back in 2013. It deals with all kinds of issues related to natural disasters at a Group level and is currently heavily focused on climate change. The NCCC is responsible for assessing the Group’s risk exposure, any changes over time, accumulations, annual expected losses, scenario analyses such as realistic scenarios, extreme event scenarios or climate change scenarios when subject to different temperatures and the minimum level of reinsurance cover that the Group requires in the event of major natural disasters. Our assessment work uses the very latest modelling techniques based on stochastic models that cover hundreds of thousands of hail, storm, flood and earthquake events and are constantly updated. In addition, two-thirds of our models include historic individual losses incurred by our Company. Therefore they represent the risk perspective of UNIQA as opposed to that of the market. The results obtained from these stochastic NatCat models provide the basis for our Group-wide risk management for natural disasters. The models are also used to calculate stress scenarios every year in order to test the robustness of our underwriting and reinsurance cover. 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.

1) Underwriting risks, market risks, credit and default risks, liquidity risks, concentration risks, strategic risks, reputational risks, operational risks, contagion risks, emerging risks

Loss ratio
The ratio of insurance benefits in property and casualty insurance to premiums earned.
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Solvency II
European Union Directive on publication obligations and solvency rules for the equity base of an insurance company.
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