16 Annual Report 2019 Risk identification Risk is defined as the possibility of a fu ture deviation from a predefined goal which can individually or cumulatively significantly affect NewRe s financial situ ation Risks are identified and classified according to their potential exposure to one or a combination of the following risk types financial underwriting market credit liquidity strategic operational compliance and reputational risks The majority of NewRe s risk and control activities are in the area of underwriting risks focusing on the correct assessment of risk exposure price wording and guidelines Risk evaluation and measurement The evaluation and quantitative measure ment of the risks are documented in the regular Internal Risk Report NewRe de termines the economic capital required to carry its risks by using a stochastic intern al risk model as developed for the Swiss Solvency Test SST The economic risk capital corresponds to the 99 tail value at risk TVaR over a one year time horizon This represents an estimate of the expected annual loss likely to occur with a frequency of less than once in a hundred years Internal Control System ICS NewRe has a holistic approach to the ICS and its application is a continuous process mainly based on the segregation of duties The ICS is refined periodically to reflect changes in the business and control environment As part of Munich Re NewRe adheres to the Group frame work of regulations and policies Risk assessment addendum to the management report Governance and responsibilities The Board of Directors is responsible for the risk management principles and pol icies as well as for approving the overall risk tolerance The operational risk pro cesses are delegated to an independent risk function that is responsible for risk assessment reporting and escalation NewRe s risk management function is fully embedded in the Group risk man agement framework As one of its risk management tools NewRe operates an efficient internal control system ICS to promote and enhance the risk and con trol culture at NewRe in all areas and at all levels All staff are instructed to pro actively report deficiencies and risks in their areas of activity in order for timely action to be taken to remedy them Risk management objectives and methodology The careful selection of reinsurance risks is at the core of NewRe s business model The company deploys a variety of risk management tools processes and func tions to manage its risks and seeks to optimise the balance between risks taken and earnings opportunities NewRe s risk management strategy is aimed at maintaining NewRe s financial strength safeguarding the reputation of NewRe and Munich Re Group enabling NewRe to protect and generate sustainable shareholder value The two main elements of NewRe s risk management approach are a system of internal controls aimed at avoiding and reducing undesired risk the regular and structured analysis and measurement of risks The primary tool for measuring and quan tifying risks at legal entity level is the in ternal risk modelling framework which is based on the Munich Re Group capital model and was specially developed for the Swiss Solvency Test SST NewRe AnnualReport 2019 Korrekt indd 16 27 04 20 09 43

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