Rental income
17 Risk management and organisation
17.1 Main developments risk profile
17.3.3 Decision making processes Risk management committees
Decisions are made by a majority of the votes present, subject to a quorum set in advance for the relevant committee. In the event of a tie, the chairman decides.
The highest-level risk officer present has a right of veto, and if this right is exercised, the decision making is passed on to the next higher risk committee. Every member of the Group committees has an equal right to vote, and in addition to the voting right, a right to escalate the decision taken within the committee to a higher committee.
In the GRC, decisions can only be taken within the statutory powers allocated to the parties present.
17.4 Risk management departments
In order to promote efficiency and uniformity, the risk management departments advise on risk management and report on the risk profile. They act as shared service centres for REAAL NV, and they are responsible for modelling, measuring, monitoring, reporting and advice on risks. They are not responsible for determining the policy, but have an advisory role in this area. Actual policy determination is the responsibility of the risk management committees authorised to that end. This advisory role entails a supporting role in defining and implementing policy, as well as monitoring the quality of risk control.
At SNS REAAL the following departments are involved in risk management of REAAL NV:
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Group Risk Management (GRM)•
Group Actuarial department and BU Actuarial departments•
Compliance, Security & Operational Risk Management (CS&O)•
Legal Affairs (LA)•
Insurance Treasury & Investment Management (IT&IM)•
Group Audit (GA)Group Risk Management (GRM)
GRM supports SNS REAAL in taking on well-considered risks and the monitoring thereof for the benefit of all
stakeholders. GRM’s primary task is to carry out its second-line role based on the ‘three lines of defence’ model used by SNS REAAL.
Within this context, GRM supports the Executive Board, the Management boards of the business units and other stakeholders in:
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Formulating and monitoring the risk profile;•
Defining the framework within which the risk owners (can) operate;•
Identifying changing market conditions and regulations in the field of Risk Management that are relevant to the strategy and policy;•
Ensuring and controlling efficient risk management processes;•
Achieving coherence in SNS REAAL’s risk management organisation;•
Portfolio valuation aiming at structural value creation;•
Coordinating strategic projects related to the management of financial risks (including Solvency II programmes);•
Building models;In addition, GRM gives direction to the areas of attention pertaining to Reinsurance and Economic Capital: advising on policy and framework development, modelling, implementation and monitoring/advising.
Actuarial duties at Group level and at the Actuarial departments of the business units
Within GRM, the actuarial duties are allocated between the Insurance Risk & Policies (IR&P) and Risk Reporting Insurance (RRI) departments. They support the stakeholders within SNS REAAL in assuming and managing all financial risks related to the Insurance activities in correlation with the other risks and returns. In that respect, the IR&P
department is responsible for developing and setting the framework, policies and methodologies with regard to the management of technical claims and benefits risks. With regard to the technical claims and benefits risk reports, the RRI department performs a central supervisory role and is responsible for providing relevant management information. This includes identification, measurement and reporting. In this context, the primary focus lies with the impact of insurance risks on the risk profile and the value standards (Value New Business, Embedded Value, etc.).
At business unit level, these duties are entrusted to the risk management department and the actuarial departments of REAAL and Zwitserleven. Besides reporting, these duties consist of modelling and carrying out analyses, providing the business units with advice on technical claims and benefits risks and implementing adopted policies.
The business units accept insurance risks using a system of procedures and criteria for product development and acceptance. Risks that do not fit the profile or risks that exceed pre-set limits – if accepted – are transferred to a reinsurance company as much as possible.
The portfolio development is periodically monitored by committees, represented by members of the Management boards of the Insurance activities and the financial and actuarial departments. For the Life Insurance activities, this includes monitoring developments in expenses, interest and turnover. For the Non-life Insurance activities, the developments of premiums and loss ratios are analysed by segment.
Compliance, Security & Operational Risk Management (CS&O)
CS&O advises the Executive Board and the Management boards of the business units on managing non-financial risks. These are risks that are related to human behaviour and structuring of business processes. The main duties of the department are providing recommendations for ethical and controlled business operations, coordinating and promoting operational risk management, security risk management and integrity risk management, formulating policies, giving advice and providing support with regard to issues related to non-financial risks, providing training & awareness programmes, monitoring and reporting in this respect. The scope of non-financial risks is divided into seven themes: employee, client, business process, product, information, risk control, and collaboration. These themes serve as guidance for the risk analyses to be performed and provide the structure for supervision and risk reporting.
Legal Affairs
Legal Affairs (LA) prepares policy and supports operational activities for risk management. The main responsibilities of the department in this area are:
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Identifying and advising on present (and future) legislation and regulations.•
Advising on products and product documentation.•
Handling (impending) legal disputes.•
Advising on cooperation agreements.Insurance Treasury & Investment Management (IT&IM)
The duties and responsibilities of Insurance Treasury & Investment Management (IT&IM) are primarily aimed at investments for own account and risk of REAAL NV. In the risk governance structure, IT&IM is the central point of contact of the operationally responsible investment managers. The director of IT&IM is a member of ALCO Insurance and ALCO Group.
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Drafting the strategic investment policy for REAAL NV.•
Operational control on the execution of the strategic investment policy through the asset managers.•
Responsible for investments outside the regular mandate, like mortgages and property.•
Supervising the asset managers’ actions within their mandates, and assessing their performance.•
Execution of the hedge policy in respect of balance sheet management for REAAL NV.•
Cash management and other treasury activities.•
Monitoring of security lending and repo activities in the insurance portfolios, the execution of which has been outsourced to professional and specialised parties.•
First line investment Risk Management.Group Audit
Group Audit (GA) reports to the chairman of the Executive Board and also has a reporting line to the Audit Committee of the Supervisory Board. In this way, the department is able to perform its activities independently of the business units and the departments of SNS REAAL.
Group Audit primarily carries out its audits on behalf of the Executive Board based on a dynamic risk analysis. This risk analysis is in line with the Banking Code and the Insurance Code and has been discussed with the external auditor and the Dutch Central Bank. The audits focus on the internal risk management and control system, related processes, procedures and (the reliability of) management information.
Group Audit is also responsible for carrying out differentiated internal audit activities on behalf of the business units’ Management boards and line management. These audits focus on the (permanent) effect of control measures included in procedures. In addition, various types of audits are performed at the request of the Management boards, including certification activities for external parties.