Management of risk and opportunities
We consider the management of risk and opportunities to be one of our core strengths. Comprehensive monitoring and precise management of our risk position within the Group and the individual companies with the aim of avoiding developments that could threaten the Group’s continued existence while at the same time acting on the available opportunities is a central task of the holding company.
The paramount objective is ensuring adherence to the strategically defined risk position on the basis of the risk budget. This is specified by the following three stipulations:
- The maximum amount of this position is defined as the loss of one Group net income calculated under IFRS (return on equity ≤ 0), with a return frequency of at most once in ten years.
- The capital base must be at least equivalent to an aggregated 200-years shock.
- The risk of the primary insurance group attributable to investment risks shall be limited to less than 50% of the total required risk capital.
The insights gained from our Risk Management System give us an overview of our Group’s current and expected overall risk situation at all times. They therefore form an integral component of decision-making on all management levels by facilitating comprehensive and systematic consideration of the available opportunities and associated risks.
In this respect, risk management at Talanx draws on appropriate simulation models and processes based on recognized, advanced methods for risk identification, quantification and steering as well as for determination of the required risk capital.
The risk strategy, centrally defined guidelines, methods and processes as well as limits and threshold serve as our framework for local monitoring and ad hoc reporting. In addition, central risk management quantifies and aggregates all risks on the Group level. It prepares our central reporting and monitors Group-wide the measures taken to manage risks that could jeopardize the Group’s survival as well as adherence to limits and risk budgets.
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