talanx group annual report 2011 en

Overall assessment of
the economic situation
Non-financial
performance indicators
Controlling elements Key risk management tasks
Corporate Governance Remuneration report Events of special
significance
Risk report Forecast and
opportunities report
Supervisory Board Advising and monitoring the Board of Management in its management of the company, inter alia with respect to risk
strategy and risk management
Board of Management Overall responsibility for risk management
Defining the risk strategy
Responsible for the proper functioning of risk management
Risk Committee Risk-monitoring and coordinating body, charged especially with the following tasks:
critical observation and analysis of the risk position of the Group as a whole, with particular attention paid to the risk
budget approved by the Board of Management and the risk strategy
monitoring of steering measures within the Group with a focus on risks that could threaten the Group’s continued
existence
Chief Risk Officer Responsible for holistic risk monitoring across divisions (systematic identification and assessment, control/monitoring
and reporting) of all risks that are material from the Group perspective
Central Risk Management Group-wide, independent risk monitoring function
Methodological competence, inter alia for
development of processes/methods for risk assessment, management and analysis
risk limitation and reporting
risk monitoring and quantifying the risk capital needed across the Group
Local Risk Management Risk monitoring function in the divisions
Observance of the centrally defined guidelines, methods and processes, and systems of limits and thresholds that serve
as a framework for local implementation, monitoring and reporting
Internal Auditing Process-independent review of the functional areas of the Group
In addition to these (risk) functions and bodies, organisational
structures have been set up to deal with special issues, e.g. task
forces for managing contingencies and crises.
Risk management process
The Talanx Group and its divisions cover an extensive range of
products – from insurance to financial and other services. Accordingly,
Talanx AG and its subsidiaries use a diverse range of methods
and tools to monitor and manage their risks. The Talanx Group follows
a central/local approach: within the framework of the model to
be used from now on (for Solvency II), overall responsibility for and
to a very minor extent the operative running of models for the risk
categories that are of Group-wide relevance rests with the Group. By
contrast, the divisions operate those models that map the insurance
risks. These models are evolved jointly by both levels, ownership
of the models being vested with the Group holding company. The
Group carries out dedicated audits to verify the adequacy of the
models implemented and their compliance with Group guidelines.
The risk management process encompasses the identification,
measure ment, analysis, evaluation, limitation and monitoring of
risks and also risk reporting.
We identify Group-wide risks using appropriate indicators and
various risk surveys. Central reviews are carried out to verify the
completeness of the risk catalogue and its qualitative analysis
and evaluation. Further analyses are then performed by the risk
management units in the divisions. Risks of general relevance,
such as compliance risks, are addressed by involving the segments
or experts concerned. The applicable methods and procedures
are documented and are subject to in-house adequacy checks and
reviews by Internal Auditing. In the year under review, an initiative
was launched to further promote Group-wide harmonisation of the
risk data collection method.
In addition to this software-based risk identification procedure,
Group Risk Management holds quarterly meetings with the local
risk management experts of the divisions and service companies.
These risk meetings leverage the analysis and evaluation of the
risks at the Talanx AG level. An upward referral procedure has been
arranged for bringing significant changes in the risk position to the
attention of Group Risk Management, ensuring ad-hoc risk management
at the Talanx AG level.
In order to measure, analyse and evaluate risks, Group Risk Management
derives the risk situation of the Talanx Group from the local
risks with the aid of an internal risk capital model. This internal
risk capital model enables us to assess the risks. Still based during
the reporting period in key respects (albeit refined) on the so-called
GDV (German Insurance Association) standard model, it is used to
analyse and measure individual risks and the Group’s overall risk
position. A primary purpose of risk quantification is to calculate the
risk-based capital on the basis of a 99.97% value at risk. The internal
risk model covers a time horizon of one calendar year and makes
allowance for the effects of correlations between Group companies
and risk categories.
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