GROUPAMA / 2018 Registration document

5 RISK FACTORS AND RISK MANAGEMENT RISK MANAGEMENT AND SENSITIVITY ANALYSES Information on concentrations 5.2.2.4 of insurance risk The Group is potentially facing a concentration of risks that will accumulate. There are two types of overlapping risks: the risks of underwritingoverlaps in which the insurancepolicies ❯ are underwritten by one or more of the Group’s entities for the same risk; the risk of claim overlaps in which the insurance policies are ❯ underwritten by one or more entities of the Group on different risks, which may be affected by claims resulting from the same loss event,or the same initial cause. Identification (a) Overlapping risks can be identified at the time of underwriting or during ongoingmanagementof the portfolio. A major role in the process of identifying overlaps during underwriting is assumed by the Group, through risk inspections, verification of the absence of overlapping co-insurance or inter-network insurance lines, identification of overlapping commitments bysite. In addition, the underwritingprocedures for certain risk categories help to control overlapping risks at the time of underwriting. The procedures applicable to property damage underwritinginclude: the verification of overlapping geographical risks at the time of ❯ underwriting for major risks (agricultural risks, agri-business risks, industrial risks, municipalities); initial elimination during the underwriting process of cases of ❯ inter-network co-insurance overlapping risks. These Directives are defined ininternal procedural guidelines. The procedures in force for managing overlapping portfolio risks cover: identification of theinter-network co-insurance overlapping risks; ❯ inventories of commitments by site for agri-business risks; in ❯ addition, high-risk business sectors for which the Group insures the property damage and/or third-party liability risks are specifically monitored by the relevant specialist Insurance Division; statements of commitments for risks of storms, hail, ❯ greenhouses, frost and commercial forestry, which are used to calculate the exposureof these portfolios to storm risk. Protection (b) Protection consists of implementing reinsurance coverage, which will first be adapted to the total amount of the potential loss and, second, correspondsto the kind of risk covered. The loss may be human in origin (fire, explosion, accident involving people) or of natural origin(weather event, suchas storm, hail, etc.).

The underwriting limits (maximum values insured per risk in property insurance or per person for life and health insurance) are used in the context of catastrophic scenarios and compared with losses that have already occurred.Once these amounts have been defined, they are increased by a safety margin. Moreover, specific monitoring is performed to track the adequacy of the coverage with the risks underwritten. In the case of a natural event, a needs analysis consists of an initial study on the basis of the reference loss, which is re-evaluatedon the basis of the change in the portfolio and the French ConstructionFederation (FFB) index. At the same time, simulation calculations of the exposure of the portfolios are performed using stochastic methods that result in the production of a curve showing the change in the potential maximum loss as a function of different scenarios. The results are cross-checked, analysed and discounted every year to allow the Group to opt for appropriate reinsurance solutions witha reduced margin oferror. The general system for managing risks relating to Asset/Liability Management and investment operations is specified in the Group Asset/Liability Management and investment risk policy approved by the GroupamaAssurances Mutuelles Board of Directors. There are several categories of major market risks to which Groupama might besubject: interest rate risk; ❯ risk of variation in theprice of equity instruments (stocks); ❯ foreign exchange risk; ❯ credit risk; ❯ risk on property assets. ❯ Interest rate risk 5.2.3.1 Type ofand exposureto interestrate risk (a) During a period of interest rate volatility, the Group’s financial margins might be affected. Specifically, a drop in interest rates would have a negative effect on the profitabilityof the investments. As such, during a period of low interest rates, the financial performance ofthe Group might beaffected. Conversely, in the event of an increase in rates, the Group may have to face a rush of redemptionsfor these policies, which would lead to the sale of a portion of the bond portfolio under unfavourablemarket conditions. The consequencesof interest rate changes would also impact the SCR andMCR coverage rates. Group risk management (b) Several years ago, the Group implemented systematic studies on the exposureof the Group’s subsidiaries to market risks. MARKET RISKS 5.2.3

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REGISTRATION DOCUMENT 2018 - GROUPAMA ASSURANCES MUTUELLES