• Risk Measurement And Modeling Methods
• Risk Appetite
• Risk Reporting
This overall framework is constantly reviewed, while changes in it are made based on the company’s own experience so as to make it stronger. The risk management structure is also kept up to date to ensure that it remains in line with the risk management policies of its two biggest shareholders (H.Ö. Sabancı Holding and Ageas Insurance International NV) as well as with Aksigorta’s own changing requirements. The purpose of this structure is to support the company’s mission, the fulfillment of its goals, and the maintenance of its high standards.
Risk Appetite
Aksigorta’s risk profile recognizes five separate risk categories:
• Financial risks
• Insurance risks
• Operational risks
• Strategic risks
• Externality risks Financial Risks
The assets in the company’s portfolio are exposed to risks that arise from movements that occur in financial markets. These are defined as “financial risks” and they are separately classified as follows:
• Market risk (exchange rate risk and spread risk)
• Interest rate risk
• Credit risk
• Liquidity risk
• Capital risk
• Reserves
The company determines its free and blocked asset investment policy at the beginning of every year. Limits are set in line with this policy and these limits are approved by the Board of Directors. The Risk Management Unit subjects this policy to stress tests according to different scenarios and whenever significant risks are identified, management is notified of them along with suggested remedies. The Risk Management Unit monitors specific limit compliance and non-compliance on a monthly basis and it reports limit overruns, along with the reasons why they occurred.
Risk Management
Insurance Risks
Insurance risks arise when appropriate premium charges are not sufficiently ascertained because there are disparities between the assumptions that are made when a policy is drawn up about such things as costs and cancellation rates on the one hand and, on the other, the amounts and timings of claims. In non-life branches, the biggest insurance risk occurs when collected premiums are insufficient to cover expected claims. There are two crucially important sources of insurance risk. The first are catastrophic events such as earthquakes and storms which occur all at once but whose effects are huge. The second are claims arising from risks whose long-term effects and consequences become apparent slowly and only over a long period of time. The latter category includes movements in inflation rates and changes in people’s behavior.
Insurance, which is the company’s core business activity, involves many different sorts of risk, the proper management of which is of great importance to the company’s success. Aksigorta has installed the systems that are needed to manage insurance risks in the best way possible. The company classifies its insurance risks in the following way:
• Underwriting risk
• Product management risk
• Reinsurance-related risks
• Concentration risk
• Claims management risk.
All of these risks are managed with Actuarial Department support whenever that is deemed to been necessary by the appropriate technical units of the company. Additionally, the company’s technical reserves, which are intended to cover its obligations arising from its insurance activities, are also classified among its financial risks and as such they are tracked jointly by Aksigorta’s actuarial and risk management units.
Operational Risks
All companies, including those whose business is financial products and services, are exposed to operational risks. Some of these risks are intrinsic and arise from insufficiently controlled processes and systems, human error, and lack of compliance with government regulations; others arise from externalities.
Operational risks are among the risks which a company must identify, measure, and manage as part of its overall risk management activities. At Aksigorta, operational risks are managed by the appropriate units of the company in coordination with its internal audit, internal control, and risk management units.
Strategic Risks
Strategic risks are risks which arise from Aksigorta’s strategy-planning and corporate governance activities and which might have an impact on the company’s ability to carry out its existing business plans and/or to achieve its growth and value-creation targets. Strategic risks are identified, quantified, and managed by strategy planning departments under the oversight of senior management.
Externality Risks
Externality risks are risks that arise from the various extrinsic contexts in which Aksigorta conducts its business. These risks consist of:
• Regulatory risk
• Economic, political and social risk
• Competition risk
• Sectoral risk.
While it is not easy for the company to control externality risks it is always possible for it to take measures to counter them. Aksigorta takes such measures as are necessary to minimize the impact that externality risks may have on it and it employs such systems as are necessary to keep a close watch on such risks.
Aksigorta’s risk management unit was set up to manage not only all the risks mentioned above but also any new types of risk that might arise. This unit continued to perform its functions in 2011. The Aksigorta Risk Management Unit worked together with all other company units to assess risks at regular intervals. Having examined in detail the risks to which the company was exposed, an Aksigorta Risk Map was drawn up.
Aksigorta deals with risk through a comprehensive and systematic assessment process within the framework of its risk management system. The causes and relative weights of risks are identified and the risks are measured and analyzed both quantitatively and qualitatively. Priority is given to defining risk seeking levels and limits, as this is what determines the amounts of risks which it is acceptable for the company to take. After this has been done, action plans are developed accordingly.
While risk management activities are ultimately the responsibility of the Aksigorta Board of Directors, they are carried out at the company under the leadership and coordination of the Internal Systems & Actuary Group Department, which reports to the general manager. The results of risk assessments and risk-related developments are reported regularly to senior management. A Risk Committee has been set up and given responsibility for approving risk management policies, strategies, and action plans and for monitoring developments.
The risks to which the company may be exposed are classified and dealt with under the headings of “Financial Risks”, “Externality Risks”,
“Operational Risks”, “Strategic Risks”, and “Insurance Risks” within the overall framework of the “Aksigorta Risk Model”. The company keeps abreast of current practices and innovations in the area of risk management, with changes being made in its own systems and practices as required.
In addition to ongoing activities, risk management at Aksigorta in the period ahead will also be giving importance to such issues as managing business continuity, information security, and financial risks taking Solvency II rules into account as well. The company is sufficiently prepared for possible developments in this direction in 2012 so as to continue creating value for its shareholders by managing its risks effectively.
To the Annual Ordinary General Assembly of Aksigorta A.Ş.
Partnership’s Title: Aksigorta A.Ş.
Headquarters: Meclis-i Mebusan Cad. No:67 34427 Fındıklı/İstanbul Capital: 306.000.000 TL
Field of Activity: Insurance
Name, term of office of the auditors and whether they are a shareholder or employee of the Company:
Şerafettin Karakış – İlker Yıldırım
Our terms of office are respectively 1 year and up to the first ordinary general assembly meeting. We are not company personnel and have not the Company shares.
Number of Board of Directors’ Meetings Participated and Auditing Committee Meetings Convened:
We participated in the Board of Directors’ meetings 4 times, convened Auditing Committee Meetings 6 times.
Content of the inspection made on the partnership’s accounts, books and documents and the dates in the inspections are made and the result obtained:
The inspections and controls regarding Tax Legislation and Commercial Law were made on the first week of 3rd, 6th, 9th, and 12th months of the year and no issue of criticism was found.
Number of results of the counting made at the cash office of the partnership in accordance with 3rd subparagraph of 1st paragraph of Article 353 of the Turkish Commercial Code:
The cash count was made 6 times and it was observed that the existing amount is in conformity with the records.
Dates and results of the inspection made in accordance with 4th subparagraph of 1st paragraph of Article 353 of the Turkish Commercial Code:
At the inspections made on the first business day of every month, it was ascertained that the existing negotiable instruments are in conformity with the book entries.
Complaints and corruptions conveyed and actions taken with regard to such:
No complaints were conveyed.
We have inspected the accounting transactions of Aksigorta A.Ş. pertaining to the term of 01.01.2011-31.12.2011 in accordance with the Turkish Commercial Code, articles of association of the partnership and other legislation as well as the generally accepted accounting principles and standarts.
According to our opinion, the attached balance sheet prepared as of 31.12.2011 and the income statement for the term of 01.01.2011-31.12.2011, the contents of which we support, reflect the financial status of the partnership as the of the date
specified and truly and accurately reflect the results of operation of the specified term, respectively; profit distribution proposal is in conformity with the laws and the articles of association of the partnership.
We submit to your consent the approval of the balance sheet and the income statement and release of the Board of Directors.
Date: 14.03.2012
Şerafettin Karakış İlker Yıldırım
Auditor Auditor