Financial instruments

Risk control

Insurance risks in general

Offering Effecting and carrying out non-life and loss-of-income insurance contracts are the core activities of Anker

Verzekeringen n.v. According to the standards applied by Anker, these insurances cannot pose any unacceptable risk. However, unwanted and even unacceptable risks may still arise as a result of these insurance activities.

The insurance risk assumed by Anker Verzekeringen n.v. is part and parcel of conducting insurance business. The main concern in this context is that the loss frequency and the extent of the loss work out unfavourably for each case compared to the

expectations beforehand.

Anker Verzekeringen n.v. operates mainly in the area of crew insurances and legal assistance insurances.

The company offers its crew insurances to maritime employers such as shipowners, crew agents and shipmanagers. Anker offers its legal assistance insurances to private persons and to SMEs.

In addition, since 2010 the company has acted to a limited extent as risk bearer for group loss-of-income insurances for instance, sick leave insurances for SMEs in North East Netherlands.

An explanation of the principal financial instruments can be found in the specific itemized explanatory notes. The related risks are expained in the following.

Insurance risk

On entering into insurance contracts Anker runs the risk of accepting insurances on the basis of imperfect insurance

acceptance rules or accepting insurances contrary to insurance acceptance rules. The company controls this risk by drawing up clear acceptance rules and monitoring mechanisms. Anker has set up an acceptance and claim committee which considers specific applications and claims. Furthermore, control is in place on the internal processing of legal assistance claims. If risks are offered which exceed the financial capacity, these risks will not be accepted. The acceptance rules for the crew insurances and the legal assistance insurances have been developed and tightened over the years resulting in the current portfolios for Anker Crew Insurance and Anker Legal Assistance. The possibility that the current package of rates, acceptance guidelines and monitoring mechanisms on main points fails, as a result of which Anker may run unacceptable risks, is very remote.

Reinsurance and catastrophe risk

For its activities in the area of crew insurance Anker provides for a stop loss reinsurance, which provides reinsurance cover for loss and damage exceeding EUR 750,000, by which the catastrophe risk is covered. The reinsurance is placed with a leading reinsurer with a sound creditworthiness and a good rating. A long-term relationship is in principle maintained with the reinsurer.

Investment risk

With regard to its investments, Anker has engaged an external investment consultant. The developments of the investment portfolio are closely monitored, tested and evaluated by the investment committee on a monthly basis. Agreements have been made regarding the strategic and tactical allocation of the portfolio for the purpose of generating maximum profits from the investments. Anker pursues a conservative investment policy.

Market and price risks

The fluctuations in the value of the financial products involve a price risk. To limit this risk as much as possible, in accordance with the diversification rules, investments are made in fixed-interest securities within the currently unsteady financial markets.

Interest rate risk

This risk implies that the value of loans will decrease or that the value of liabilities will increase as a result of a change in the market rate of interest. There is a risk involved in balancing the duration of the assets and liabilities with the interest rate. Investments will be brought in line with this, where deemed desirable.

Credit risk

Credit risk refers to the risk that the other party fails to meet its financial obligations. The risk pertaining to to the accounts receivable is minimized by an adequate credit control policy. Anker Verzekeringen n.v. analyses the rating of the reinsurers on an annual basis. The reinsurers are required to have at least an A-rating.

Exchange rate risk

Exchange rate risk refers to the risk that the value of investments decreases as a result of exchange rate movements. Given the international nature of Anker Crew Insurance, the company is exposed to exchange rate risks with respect to a part of the insurance portfolio and the assets invested. The investment committee discusses the foreign currency position on a regular basis and it adopts resolutions about the sale of currency to the extent that there are no associated

insurance liabilities.

Liquidity risk

Liquidity risk refers to the risk that Anker is unable to met its financial obligations at short notice due to a lack of liquid assets. The other financial investments are exposed to a liquidity risk. To limit this liquidity risk as far as possible, an adequate credit management policy is pursued and investments are made in short-term deposits.

Cash flow risk

Claims, investments and debts for which variable interest rates were agreed are exposed to future cash flow risks. This cash flow risk is minimized by means of interest rate swaps, short-term time deposits and adequate credit management.