Risk Response

1. Strategic.

The Group works on reducing the unintended risks of strategic business decisions through its risk assessment processes and tools, including the Total Risk Profiling™ process.

1. Insurance.

Zurich actively seeks to write those risks it understands and that provide a reasonable opportunity to earn an acceptable profit. As Zurich assumes certain customer risks, it aims to manage that transfer of risk, and minimize unintended underwriting risks, through such means as:

• Establishing limits for underwriting authority

• Requiring specific approvals for transactions involving new products or where established limits of size and complexity may be exceeded

• Using a variety of reserving and modeling methods

to address the various insurance risks inherent in the

Group’s insurance business

• Ceding insurance risk through proportional, non-proportional and specific risk reinsurance treaties. The Group centrally manages reinsurance treaties

1. Market.

The Group has policies and limits to manage market risk. The Group aligns its strategic asset allocation to its risk-taking capacity. The Group also diversifies portfolios, investments and asset managers.

1. Credit.

Although the Group actively uses collateral to mitigate credit risks, the principle is nevertheless to manage the underlying credit risks independently from the collateral. In light of the 2008-2009 banking crisis, the Group has established limits and quality criteria to identify acceptable letter of credit providers. Letters of credit enable Zurich to limit the risk embedded in reinsurance captives and deductibles.

1. Liquidity.

Zurich’s policy is to maintain adequate liquidity and contingent liquidity to meet its liquidity needs under both normal and stressed conditions. To achieve this, the Group assesses monitors and manages its liquidity needs on an ongoing basis.

1. Operational.

The Group considers controls to be key instruments for monitoring and managing operational risk. Although primarily focused on important controls for financial reporting, internal control efforts also include related operational and compliance controls. Therefore, the Group continues to strengthen the consistency, documentation and assessment of internal controls for significant entities, processes and locations.

1. Reputation.

Every risk type has potential consequences for Zurich’s reputation, and therefore, effectively managing each type of risk helps Zurich reduce threats to its reputation.

Date: 2015-02-16; view: 665