BPCE_REGISTRATION_DOCUMENT_2017

3 RISK REPORT

Non-compliance risks, security and operational risks

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 underwritingrisks (life and non-life), as well as counterparty risk. Market risk Market risk is in large part borne by the subsidiary BPCE Vie on the financial assets that underpin its commitments with guaranteed principaland returns (euro-denominatedpolicies: € 48.5 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 90% of the policies have a zero minimum guaranteed return. The minimum guaranteed return averages 0.15%. To manage market risk, the sources of return have been diversified, namely via investmentsin new asset classes (financingthe economy, low-volatility equities, etc.). This diversification is managed by a strategicallocation,defined on a yearly basis, that takes into account regulatoryconstraints,commitmentsto policyholdersand commercial Credit risk is monitored and managed in compliance with Natixis Assurances’standards and internal limits. As of 12/31/2017,61% of the fixed-incomeportfolio is invested in securities rated higher than A-. Life insurance underwriting risk The main risk to which life insuranceunderwritingis exposedis linked to the InvestmentSolutionsactivity.In an especiallylow interest-rate environment, the biggest risk is that of fewer redemptions and/or excessive inflows in euro-denominatedvehicles, as reinvestmentsin 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 communicationcampaigntargeting customers and the network. Non-life insurance underwriting risk The general insurance underwritingrisk to which Natixis Assurances is exposed isborne by its subsidiary BPCE Assurances: premium risk: in order 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. Factoredin are types of claims, numberof claims, their cost and other variables specific to the activity in question (degree of liability and bonuses/penaltiesfor auto insurance,for instance).This monitoring policy also helps to detect potential risks arising from large claims, and to arrangeadequate reinsurance coverage; requirements. Credit risk

risk of loss: each time inventoryis taken, an actuarialassessmentof ● the reserves for claims to be paid is conducted based on methods widely recognized by theprofessionand required by the regulator; catastrophe risk: catastrophe risk is the exposure to an event of ● significantmagnitudegeneratinga multitudeof claims (storm, risk of civil liability, etc.). This risk is therefore reinsured either through the governmentin the event of a natural disaster or an attack, for example,or throughprivate reinsurers,specificallyin the event of a storm or acivil liability claim, or through reinsurance pools. Counterparty Risk The counterpartyrisk 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 ratingof A- or higher; using several reinsurers ensures counterparty diversification and ● limits counterparty risk. COFACE Throughits activities,Coface is exposedto five types of risk: strategic risk, credit risk, financial risk, operational risk and non-compliance risk, and reinsurance risk. The two main types of risk are credit risk and financial risk. Credit risk Credit risk is defined as the risk of loss, due to non-payment by a debtor, of a receivable owed to a policyholder of the Group. Coface manages credit risk through a number of procedures, whose scope includes the approval of the terms of policies relating to products, pricing, monitoringof credit risk hedges and portfolio diversification. Credit risk can be exacerbateddue to the concentrationof exposure (country,sector, debtor, etc.) and is modeled as premiumrisk, reserve risk and disaster risk. Traditionally, Coface makes a distinction between frequency risk and event risk: frequency risk represents the risk of a sudden material increase in ● delinquencyby a large number of debtors. This risk is measuredfor each region and country by monitoring the instantaneous loss ratio (1) and the monthly indicator that breaks down the changes in domestic/exportcredit by DRA (2) and businesssector, by acceptance rate on the DRA scale, or by product line (deposit, single risks). As regards exposure and portfolio monitoring,the Group has set up a refined management of its risks based on a sector/country breakdown. Accordingly,delinquent payments are analyzed weekly by the Senior Management Committee and monthly by Coface’s Underwriting Committee. This risk is mitigated by Coface Re reinsurance. Loss ratios for the different underwriting regions are also monitored at the consolidated Coface level;

The instantaneous loss ratio is a weekly indicator that reproduces the change in the loss ratio. It is monitored for each region and each country and is reported weekly by Coface, particularly (1) so that underwriters can monitor the change in their portfolio and detect any deterioration in order to introduce corrective actions as early as possible. Debtor Risk Assessment : Assessment of debtors using a Group-wide grid. (2)

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Registration document 2017