BPCE - 2019 RISK REPORT Pillar III

OPERATIONAL RISKS

INSURANCE RISKS

The following main Insurance policies to cover its insurable operational risks and protect its balance sheet and income statement: A combined “Global Banking (Damages to Valuables and A/ Fraud) ” & “Professional Civil Liability” policy with a total maximum payout of €178 million per year of insurance, of which: €30 million per year, combined “Fraud/Professional Civil a) Liability” insurance available, subordinate to the amounts guaranteed set out in b) and/or c) and/or d) below (with Natixis also holding its own similar coverage with a maximum payout of €15 million per year); €38 million per claim and per year, solely reserved for b) “Global Banking” risk; €25 million per claim and per year, solely reserved for c) “Professional Civil Liability” risk; €70 million per claim and per year, combined “Global d) Banking/Professional Civil Liability” insurance available in addition to or after use of the amounts guaranteed set out in b) and/or c) above. The maximum amount that can be paid out for any one claim under this arrangement is €109.75 million under “Professional Civil Liability” coverage and €109.75 million under “Fraud” coverage in excess of the applicable deductibles.

“Regulated Intermediation Liability” (in three areas: Financial B/ Intermediation, Insurance Intermediation, Real Estate Transactions/Management) with a total maximum payout of €10 million per claim and per year. “Operating Civil Liability” covering €100 million per claim, as C/ well as a “Subsidiary Owner Civil Liability”/”Post Delivery-Reception Civil Liability” coverage extension for up to €35 million per claim and per year of insurance. “Company Directors Civil Liability” for up to €200 million per D/ claim and per year of insurance. “Property Damage” to “Registered Offices & Similar” and to E/ their content (including IT equipment) and the consecutive “losses in banking activities”, for up to €400 million per claim. “Protection of Digital Assets against Cyber-Risks” & the F/ consecutive “losses in banking activities”, for up to €140 million per claim and per year of insurance. This coverage extends worldwide for initial risk or umbrella risk, subject to certain exceptions, mainly in terms of “Professional Civil Liability” where the policy does not cover permanent institutions based in the United States (where coverage is obtained locally by Natixis’ US operations). All the insurance policies mentioned above were taken out with reputable, creditworthy insurance companies and in excess of the deductibles and Groupe BPCE’s risk-retention capacity.

Insurance risks

Natixis Assurances

Natixis Assurances is the Insurance division of Natixis and is divided into two business lines: the personal insurance business line, focused on developing • portfolios of life insurance and endowment policies for investment and retirement purposes, as well as personal protection insurance portfolios; the non-life insurance business line, focused on developing • portfolios for auto and multi-risk home insurance, personal accident insurance, legal protection, health insurance, and property & casualty insurance. Given the predominance of the investment solutions activity, the main risks to which Natixis Assurances is exposed are financial. The company is also exposed to underwriting risks (life and non-life), as well as counterparty risk. Market risk is in large part borne by subsidiary BPCE Vie on the financial assets that underpin its commitments with guaranteed principal and returns (euro-denominated policies: €58.2 billion on the main fund balance sheet). The company is exposed to asset impairment risk (fall in the equity or real estate market, widening spreads, interest rate hikes) as well as the risk of lower interest rates which would generate insufficient income to meet its guaranteed principal and returns. To deal with this risk, BPCE Vie has only sold policies with a minimum guaranteed return in recent years: more than 95% of the policies have a zero MARKET RISK

minimum guaranteed return. The minimum guaranteed return averages 0.13%. To manage market risk, the sources of return have been diversified, namely via investments in new asset classes (funding the economy, infrastructure, etc.). This diversification is managed by a strategic allocation, defined on a yearly basis, that takes into account regulatory constraints, commitments to policyholders and commercial requirements. CREDIT RISK Credit risk is monitored and managed in compliance with Natixis Assurances’ internal standards and limits. At December 31, 2019, 67% of the fixed-income portfolio is invested in securities rated A- or higher. LIFE INSURANCE UNDERWRITING RISK The main risk to which life insurance underwriting is exposed is associated with the investment solutions activity. In an especially low interest-rate environment, the biggest risk is that of fewer redemptions and/or excessive inflows in euro-denominated vehicles, as reinvestments in securities dilute the main fund’s return. To prioritize inflows in unit-linked policies, measures have been taken, such as the creation of unit-linked products and communication campaigns, and a communication campaign targeting customers and the network.

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RISK REPORT PILLAR III 2019 | GROUPE BPCE