Výročná správa 2009 - Komunálna Poisťovňa

(All amount are in thousands of Euros, unless stated otherwise)(ii)Currency riskThe Company is exposed to currency risk, mainly in respect to the Croatian kuna (HRK). Ingeneral, the Company invests in assets denominated in currencies in which the Company’s liabilitiesare denominated, thus mitigating the currency risk arising from the nature of its businessactivities. Currency risk arises mainly for securities and liabilities denominated in other currencies.If the Croatian kuna weakened or strengthened by 5% against the Euro, the Company is expectedto suffer a loss or generate a profit of EUR 43 thousand from securities denominated in Croatiankuna.(iii)Price riskThe price risk is the risk of a change in the fair value of financial instruments from movementsin market variables other than in interest rates and currency exchange rates. The Company isexposed to price risk due to its investment in equity securities. The risk is mainly exposure tomovements in prices of securities affected by market developments.The outcome of the sensitivity analysis shows an impact on the Company’s profit and ‘othercomprehensive income’ in changes in the market price of equity securities. At 31 December 2009,equity securities totalled EUR 20,956 thousand (2008: EUR 0 thousand). If their market pricedecreased or increased by 10%, ‘other comprehensive income’ would be lower or higher by EUR979 thousand (2008: EUR 0 thousand). The impact of price risk on profit is not material for equitysecurities that cover investment life insurance, as the related liabilities arising from these contractsare affected in the same way.4.2.3 Credit riskThe Company has exposure to credit risk, which is the risk that a counterparty will be unableto pay amounts in full when due. Key areas where the Company is exposed to credit risk are:• amounts due from insurance contracts;• amounts due from reinsurance;• amounts due from intermediaries;• securities issuers;• balances in banks; and• other receivables.Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’sliability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Companyremains liable for the payment to the policyholder. The Company reviews the creditworthiness ofreinsurers in co-operation with its shareholder.The Company uses several tools to manage insurance receivables from the insured – one ofthem being the reminder process for overdue receivables that is carried out in regular intervals.If being unsuccessful, the Company takes other measures, using a several-stage collectionprocess (intervention activities, court settlement, and seizure). In addition, the Company monitorsreceivables on a monthly basis, by checking their payments and ageing structure. Based on this,the default risk is assessed and the value of impaired receivables is reduced by setting up animpairment provision in compliance with IAS 39.Credit risk of issuer of securities is managed through the investment strategy and rules, whichare regularly reassessed by the shareholders.Ročná účtovná závierka a komentár I Company Accounts151