Annual Report 2011 - R+V Versicherung

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Risk report
fulfilment of obligations arising from insurance policies. In
this respect the risks from financial instruments have the
character of an asset-liability risk. R+V Versicherung AG counters
these risks by observing a general guideline of achieving
the greatest possible security and profitability while ensuring
liquidity at all times. By maintaining an appropriate mix and
diversification of capital investments, the R+V investment
policy makes a considerable contribution to risk minimisation
targets.
Compliance with investment regulations and investment principles
and regulations under supervisory law at R+V is ensured
by qualified asset management, appropriate internal capital
investment guidelines and control procedures, a far-sighted
investment policy and organisational measures. R+V applies
continual supplements and refinements to its risk assessment
and evaluation instruments for new investments and the observation
of the investment portfolio. This is done in order to
meet any changes on the capital markets and to recognise,
limit or avoid any risks early.
Transactions with derivative financial instruments or structured
products are explicitly regulated in in-house guidelines.
In particular, these includes volume and counterparty limits.
The different risks are monitored regularly and presented
transparently using an extensive and up-to-date reporting
procedure.
Underlying transactions with a nominal value of 25.6 m euros
and hedging transactions with a nominal value of 25.6 m euros
to hedge interest rate change risks were included in evaluation
units in the form of micro-hedges. Because all the important
factors determining value between the underlying transactions
to be hedged and the parts of the hedging instruments
providing security (face value, term, currency) are in accordance,
in future, a full, opposite change in value of underlying
and hedging transactions related to the hedged risk can also
be assumed (critical term match). No transactions where a
high probability is expected were included in an evaluation
unit.
At an organisational level, R+V counters investment risks with
a strict functional separation of investment, settlement and
financial controls.
The following explanations of the risk categories market,
credit, liquidity and concentration risk refer both to risks from
financial instruments and risks from other areas.
Market risk
The market risk describes the risk that arises directly or
indirectly from fluctuations in the market prices of assets,
liabilities and financial instruments. The market risk includes
the exchange rate, interest rate change and asset-liability
risks.
In order to measure possible market risks to its capital investments,
R+V Versicherung AG carried out scenario analyses on
the accounting date 31 December 2011 under the following
assumption: the effects of a 20% price fall of the current
market value was simulated for equities held directly and
through funds.
The effects of a movement of the interest rate curve of one
percent or upwards or downwards of the current market value
was simulated for fixed interest securities, registered bonds,
notes receivable and loans.
Within the framework of standard reporting, stress simulations
are carried out continuously over the course of the year
to represent the effects of adverse capital market scenarios on
the development of the portfolio and results. The simulation
parameters used include a 35% fall in equities, a movement in
the interest rate curve of 200 basis points and stressing of currency
reserves by a standard annual deviation.
Furthermore, R+V Versicherung AG regularly conducts a duration
analysis on the portfolio of all its interest bearing investments.
Any liabilities in foreign currencies arising from the
reinsurance business were covered with congruent capital
investments in the foreign currency. Consequently, exchange
rate profits and losses are largely neutralised.