BPCE - 2019 Universal Registration Document

RISK REPORT

OPERATIONAL RISKS

MARKET RISK CEGC’s short-term investment portfolio totaled around €2.52 billion on its balance sheet at December 31, 2019, hedging underwriting provisions, i.e. up sharply (+24.8%) since end-2018. Market risk associated with the short-term investment portfolio is limited by the company’s investment choices.

The company’s risk limits are set out in the asset management agreement established with Ostrum. By collecting surety insurance premiums at the time of commitment, CEGC does not require funding. Nor does CEGC carry transformation risk: the investment portfolio is entirely backed by own funds and technical reserves.

CEGC INVESTMENT PORTFOLIO

12/31/2019

12/31/2018

Balance sheet value, net of provision

Balance sheet value, net of provision

% breakdown

Mark to market

% breakdown

Mark to market

in millions of euros

Equities

194

7.7%

213

150

7.4%

144

Bonds

1,771

70.2% 6.3% 7.7% 7.4% 0.6% 0.1% 100%

1,934

1,451

71.8% 5.6% 5.5% 9.0% 0.6% 0.1% 100%

1,547

Diversified

159 194 187

162 194 202

113 111 182

112 111 179

Cash

Real estate

FCPR Other

16

23

12

19

2

2

2

2

TOTAL

2,523

2,730

2,021

2,114

REINSURANCE RISK CEGC hedges its liability portfolio by implementing a reinsurance program tailored to its activities. In loan guarantees, reinsurance is used as a tool for regulatory capital management. It protects guarantee beneficiaries in the event of an economic recession leading to a loss of up to 2% of outstanding guaranteed loans. In the Corporate segments, the program is used to protect CEGC’s capital by hedging against high-intensity risks. It has

been calibrated to cover three major individual loss events (loss related to a counterparty or a group of counterparties) with the potential to significantly impact CEGC’s income statement. Any modification of the reinsurance program (reinsurers, pricing, structure) is subject to validation by the Capital and Solvency Management Committee, chaired by a director. Reinsurer default risk is governed by counterparty concentration and rating limits. CEGC’s reinsurance programs are underwritten by a broad panel of international reinsurers with a minimum rating of A on the S&P scale.

6

657

UNIVERSAL REGISTRATION DOCUMENT 2019 | GROUPE BPCE