GROUPAMA / 2018 Registration document

RISK FACTORS AND RISK MANAGEMENT RISK MANAGEMENT AND SENSITIVITY ANALYSES

contributing to drawing up replies to the authorities, with the ❯ Group Legal Department andentities that are concerned; reportingto the governancebodies of the Group and the entities ❯ about the management of non-compliance risks. Each Group entity has Risk Management,PermanentControl, and Compliance Functions. The definition of the information systems security policy and its implementation by the entities is the responsibility of Groupama Support & Service (G2S), which reports to the Group Operational Risk Management andPermanent ControlDepartment. In addition, the Group Management Control Department is responsible for the ongoing monitoring of results and achievement of the Group’s objectives based on a process of estimated management common to all entities. This monitoring system also involves business reviews of subsidiaries conducted by the Executive Management of Groupama Assurances Mutuelles with biannual business reviews. These reviews include a specific “risk” section that presents, by entity, the level of deployment of the internal control system and the principalwork in progress in terms ofrisk management. Prudential oversight 5.2.2.1 Pursuant to European Directives, Groupama is subject to regulationsfor covering the solvencymargin, both at the corporate level for each of the insurance companies and at the level of the combined Group. Objectives for managing risks 5.2.2.2 resulting from insurance policies and methods to limit these risks The Group’s insurance business exposes it to risks primarily related to product design, underwriting, claims management, valuation of reserves,and reinsurance. Most of Groupama’s business lines are subject to strong and increasing competition from other insurance companies, bancassurancecompanies,and mutual insurancecompanies.This fierce competition places great pressure on the price of certain Groupama products and services and therefore on its profitability. The Insurance Divisions of Groupama Assurances Mutuelles ensure that the product line is adapted to the Group’s strategy. Life and non-life insurance products are designed by the business units of Groupama AssurancesMutuelles and Groupama Gan Vie on behalf of the Group’s companies. This design is the result of market and profitability studies performed with actuarial tools to control margins in collaboration with the Actuarial Department of the Group and the Investment Department where appropriate. Product launches or changes are carried out on the basis of a standard process incorporating the validation of the deliverables for customers and salespeople by the Group’s Legal, Risk, and Productdesign (a) INSURANCE RISKS 5.2.2

Compliance Departments and are adapted by Division (regional mutuals, subsidiaries in France, International subsidiaries). Throughout the product governance process, measures are integrated to take into account the interests and characteristicsof the target customers. The main steps of this process are validated in the determined committees (Operating Committees, Insurance Risks Committee, Group Executive Committee). In 2017, the product design process underwenta global review as part of the work related to the application of the Insurance DistributionDirective, which came into force in 2018. To that end, a product governance policy was developed and validated by the Board of Directorsin December 2017. Underwriting andclaimsmanagement (b) The underwriting risk management and claim management principles are formalised in the Group Underwritingand Reserving policy approved by the GroupamaAssurancesMutuelles Board of Directors. In particular, it specifies the underwriting rules, limits of cover, and exclusions in accordance with the reassurance agreements by areaof insurance. Assignmentof powers for underwritingand claims are defined in all of the Group’s companies.Risks are accepted or refused at every level, based on underwriting guidelines that include the Group’s underwriting and commercial policies. Underwriting in particular is secured through a cross Managerial control procedure and through integratedcontrolsperformed implicitlyby the IT system. Claims management procedures are defined on a standard basis throughout the Group and are regularly updated in procedural specifications governing the management of bodily injury and property damage claims. Moreover, the integration of processing within the IT systems of the entities ensures that management actions are performed. Claims management includes a review of claims files startingat an average commitment threshold. The Group’s insurance business is explicitly or implicitly monitored using analytic procedures,such as regular analysis of the results of each entity and monitoring underwriting statistics and loss experience by entity. The most significant and most complex risks are individually monitored by the specialist Divisions and the entities concerned. In addition, these specialist Divisions also act to warn and advise the entities. Valuationof reserves (c) In accordancewith the practices of the insurance sector and with accounting and regulatory requirements, Groupama recognises technical reserves to cover claims and its property and life insurance business lines. Determining technical reserves, however, remains an intrinsically uncertainprocess, relying onestimates. The application of reserve rules is continually monitored, both before and after the fact, by teams dedicated to this task, in addition to the reviews that are conductedby the local supervisory authorities.

5

137

REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES