Capital Modelling in Central and Eastern Europe. Paul Buchner, UNIQA Insurance Group

Transcription

1 Capital Modelling in Central and Eastern Europe Paul Buchner,

2 Introduction UNIQA Group Agenda Experience from UNIQA s capital increase IMAP & other challenges 2

3 UNIQA at a glance Key financials EURm 2011 (a) 2012 (a) H14 Gross written premiums (b) 5,534 5,543 5,886 3,130 Profit on ordinary activities (adjusted for one-off items) (a) Consolidated net profit (246) Combined ratio (net) (P&C) 104.9% 101.3% 99.9% 98.3% Return on Equity (e) 8.7% 11.8% 8.5% Diversification by regions and products (GWP (b)(d) 1H14) International representation Raiffeisen Insurance 14% UNIQA Austria 48% Life 39% 45% P&C 38% 15% UNIQA International Health (a) Excluding Mannheimer Group in 2011 and 2012 and one-off items in 2011, (b) Including savings portion of premiums from unit- and index-linked life insurance, (c) No active external business, (d) Excluding consolidation and UNIQA Reinsurance, (e) adjusted, annualized for 1H14 3

4 UNIQA s geographical footprint CH LI IT PL CZ SK AT HU HR BiH RS ME KS AL MK RO BG UA RU UNIQA s activitiy in CEE Active in 19 countries With 40 business units 10 Composite 16 Life 12 Non-Life 2 Internal Reinsurance Serving 9,3 Mio. customers

5 UNIQA position in selected markets 5

6 ReMetrica Background UNIQA Insurance Group Capital Modelling Team / Group Risk Management UNIQA Business Unit 1 Actuarial Department Risk Management Model development & maintenance Support & guidance Group aggregation ReMetrica Enterprise Version Control Standard Multi Core Server Mostly standard components (~16000 for group model) Model Parameterisation Perform Simulation ReMetrica Frozen UNIQA Business Unit 16 Actuarial Department Risk Management 6

7 Introduction UNIQA Group Agenda Experience from UNIQA s capital increase IMAP & other challenges 7

8 The Story In 2012 new strategic programme UNIQA 2.0 for years Realisation needed additional capital (700 Mio EUR) For successful capital increase, we had to publish our economic figures coming from our models Economic Capital Requirement Economic own funds 8

9 UNIQA Group Risk Profile at YE % ECR-Quota increased from 108% in 2012 to 161% in Subordinated 600 ECR decrease by 103 m Market risk: Decrease due to risk reducing measures (private equity and hedge funds and ALM) Increase of own funds 725 Mio. (net of costs) Re-IPO 150 Mio. additional subordinated liabilities 366 Mio. less net technical provisions due to economic valuation principles compared to 2012 Mainly due to higher interest rates Market risk Life underwriting Non-life underwriting (PIM) Health CAT & SLT Counterparty default Diversification Change vs Basic ECR Tax Adj. OpRisk ECR Tier 1 capital Own funds Source:

10 UNIQA Group underwriting risk profile Life underwriting risk Health underwriting risk Non life underwriting risk Disability CAT Longevity Mortality Lapse 1% 2% 11% 8% 10% 10% 8% 8% 22% 28% Mortality Expense Disability 5% 6% 32% 14% 14% 24% Legal Accident & Health TPL Motor TPL MAT Other 1% 11% 18% 2% 19% 4% 1% 12% 26% 5% 6% Expense 49% 44% Lapse 57% 48% Motor Hull Technic Property 8% 1% 36% 12% 10% 2% 26% % risk profile 6% 7% 6% 6% 9% 11% Key underwriting risks Lapse risk (28%): lapse of profitable life business in mass lapse scenario Expense risk (44%): Increase of maintenance expenses Biometric risks have minor relevance Measures Clear expense monitoring and cost optimization In force management Key underwriting risks Mass lapse scenario is dominating: lapsing of profitable business Variance of disability (premium insufficiency because of variance in calculation assumptions) Loss of business Measures Premium adaptions in case of underrating Strict profitability monitoring of portfolio Key underwriting risks Lines with the highest risk burden are the ones with CAT losses (Property and Other) Second highest risk is Motor TPL with overwhelming reserve risk (e.g. negative developments in UPL) Change in allocation method, therefore more capital allocation in NON-CAT LOBS Measures Motor initiative (pricing and portfolio shift) Source: 10

11 Risk Mitigation through reinsurance Effective reinsurance program Diversification reduces ECR for NatCat exposure Diversification amounts of 51,6% Ceded CAT XL is the most efficient coverage and the main driver of the capital release in property lines covering CAT and motor hull Net Among standard XL contracts, technic insurance can be characterized by the highest efficiency. Remaining XL treaties influence the risk capital moderately The costs of ceded capital for UNIQA Group amounts of around 5,6% Cost of ceded capital: 5,6% 383 Stand alone Diversification effect Total Source: 11

12 Takeaways Disclose figures once a year Challenge for external auditors What to compare against? Review by external auditors not sufficient for S2 validation Great support for Use Test at group level Disclose figures and discuss them with bank analysts Management board understanding 12

13 Introduction UNIQA Group Agenda Experience from UNIQA s capital increase IMAP & other challenges 13

14 Challenges in CEE Basics need to be solved Pricing Premium collection A lot still in development Small actuarial community Scarce availability of data Prominent sources for model risk Make the model fit your business 14

15 and their influence on the group Group Accumulation at group level Model risk BU1 BUn BU16 Preventative Measures Standardised Processes & Tools Training (face-to-face, online) Follow-Up Measures Review & feedback by group Model approval by group Detailed Guidance! Systemic Risk! 15

16 UNIQA s IMAP IMAP started for use of partial internal model Underwriting risk non-life Underwriting risk health NSLT Use of group model according to Art. 231 of Level 1 IMAP started for group and 10 business units in 7 EU countries Separate College of Supervisors for IMAP besides regular one 16

17 UNIQA s IMAP Project plan for final phase 17

18 Topics in our IMAP 7 countries => 7 FSA s => 7 areas to focus on Resources on the supervisory side scarce as well UNIQA only company in IMAP in 1 country Suitability of centrally developed model components Knowledge on external NATCAT models 18

19 CEE provides a lot challenges besides modelling 19