BPCE - 2019 Universal Registration Document

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RISK REPORT

OPERATIONAL RISKS

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 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 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.

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. NON-LIFE INSURANCE UNDERWRITING RISK The non-life insurance underwriting risk to which Natixis Assurances is exposed is borne by its subsidiary BPCE Assurances: premium risk: to ensure that the premiums paid by the • policyholders match the transferred risk, BPCE Assurances implemented a portfolio monitoring policy whereby each policy is given a score based on its track record over three years. The score factors in types of claims, number of claims, their cost and other variables specific to the activity in question (degree of liability and bonuses/penalties for auto insurance, for instance). This supervision policy also helps to detect potential risks arising from large claims, and to arrange adequate reinsurance coverage; risk of loss: each time inventory is taken, an actuarial • assessment of the reserves for claims payable is conducted based on methods widely recognized by the profession and required by the regulator; catastrophe risk: catastrophe risk is the exposure to an event • of significant magnitude generating a multitude of claims (storm, risk of civil liability, etc.). This risk is therefore reinsured either through the government in the event of a natural disaster or an attack, for example, or through private reinsurers, specifically in the event of a storm or a civil liability claim, or through reinsurance pools. COUNTERPARTY RISK The counterparty risk to which Natixis Assurances is exposed mainly concerns reinsurance counterparties. The selection of reinsurers is a key component of managing this risk: Natixis Assurances deals with reinsurers that are subject to a • financial rating by at least one of the three internationally recognized rating agencies, and that have a Standard & Poor’s equivalent rating of A- or higher; using several reinsurers ensures counterparty diversification • and limits counterparty risk. COFACE Through its activities, Coface is exposed to five main types of risk (strategic risk, credit risk, financial risk, operational and non-compliance risk, and reinsurance risk), of which the two principal risks are credit risk and financial risk.

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

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UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE

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