NewRe Annual Report 2021 21 Management Report Risk assessment addendum to the management report Governance and responsibilities The Board of Directors is responsible for the risk man agement principles and policies as well as for approving the overall risk tolerance NewRe s risk management function is fully embedded in the Group risk management framework The risk management function sets up and implements a risk management system This risk man agement system comprises strategies processes and procedures necessary to regularly identify measure monitor manage and report any risks to which NewRe is or could be exposed Risk management objectives and methodology The careful selection of underwritten risks is at the core of NewRe s business model The Company uses a variety of risk management tools processes and functions to manage its risks and seeks to optimise the balance be tween 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 three main elements of NewRe s risk management approach are risk identification the regular and structured analysis and measurement of risks the effective management of operational risks internal control system Risk identification Risk is defined as the possibility of a future deviation from a predefined goal which can individually or cumula tively significantly affect NewRe s financial situation or result in reputational damage Risks are identified and classified according to their potential exposure to one or a combination of the following risk types strategic finan cial underwriting market credit liquidity operational reputational and compliance risks Only financial risks are quantified with appropriate models while the rest are assessed qualitatively Risk measurement The evaluation and measurement of the quantifiable risks are documented in the Internal Risk Report that is pre pared on a regular basis NewRe determines the econom ic capital required to carry its risks by using a stochastic risk model This risk model is based on the Munich Re Group capital model and was specially 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 As part of its operational risk management NewRe oper ates an effective internal control system ICS The objective is to promote and foster a risk and control cul ture for the relevant processes NewRe takes a holistic approach to the ICS and its application is a contin uous process based mainly on the segregation of duties The ICS is refined periodically to reflect changes in the processes and business environment NewRe s ICS is embedded in the Group s operational risk control system process NewRe Annual Report 2021 Inhalt indd 21 25 04 22 10 19

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