kontinuita - Komunálna Poisťovňa

NOTES TO
THE FINANCIAL
STATEMENTS
These circumstances may affect the Company’s ability
to acquire new financial assets under conditions applied
in similar transactions in the past. Issuers of financial
assets held by the Company may also be
affected by a lower liquidity level that may subsequently
influence their ability to settle the outstanding
debt. Deteriorating operational conditions of issuers
may also have an impact on the management’s assumptions
concerning cash flows and on evaluating
impairment of financial and non-financial assets.
When assessing impairment, management has reviewed
the expected future cash flows based on the information
available.
The Company’s management is not able to reliably evaluate
either the impact of further liquidity deterioration
on financial markets or the impact of a higher volatility
on currency and stock markets. Management believes
that all steps are being undertaken to support the Company’s
sustainable growth under current conditions.
4. Management of insurance and financial risk
The Company concludes contracts that transfer insurance
risk or financial risk, or both. This section summarizes
these risks and the way the Company
manages them.
4.1 Insurance risk
The risk of insurance contracts relates to the fact that
it is not clear whether or when an insurance event will
occur, or how big the related claim will be. It is evident
from the nature of an insurance contract that such risk
is incidental and cannot be predicted.
In the case of insurance contracts that were valued
using the probability theory, the main risk the Company
is facing is that the amount of insurance claims
may be higher than the related insurance reserves.
This may occur if the amount or significance (as to the
amount of insurance claim) of actually occurred insured
events is higher than originally assumed. Insured
events are random and the actual number and the actual
number and amount of claims and benefits will
vary from year to year from the level calculated using
statistical techniques.
Experience shows that the larger the portfolio of similar
insurance contracts, the smaller the relative variability
about the expected outcome will be. In addition,
a more diversified portfolio is less likely to be affected
by a change in any subset of the portfolio. The Company
has developed its own insurance underwriting
strategy to diversify the type of insurance risks accepted,
and has worked within each of these categories to
achieve a sufficiently large population of risks to reduce
the variability of the expected outcome.
Factors affecting the insurance risk include insufficient
diversification of risk in view of its type and size, geographical
location, and the type of the industrial sector.
4.1.1 Long-term insurance
(i) Amount and significance (in terms of size) of insurance
benefits
For insurance contracts with the insurance risk being
death, the most significant factors that might increase the
overall frequency of claims include epidemics or lifestyle
changes, such as eating habits, smoking, or regular spor-
KONTINUITA ANNUAL REPORT 123