GROUPAMA / 2019 Universal Registration Document

7 FINANCIAL STATEMENTS Consolidated financial statements and notes

Underwriting and claims management 2.2.2 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 byarea of 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 securedthrougha cross Managerialcontrol procedureand through integrated controls performed implicitly by 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 monitoringunderwritingstatistics and claims rates 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 theentities. 2.2.3 In accordancewith the practices of the insurance sector and with accounting and regulatory requirements, Groupama recognises underwriting reserves to cover claims and its property and life insurance business lines. Determining technical reserves, however, remains an intrinsically uncertain process, relyingon estimates. 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. The rules for reserving claims and the funding tables for life and non-life disability payments are defined within the Insurance Divisions in guidelines that are harmonised for all Group entities. Reserves are evaluated by the claims managers within the operational entities and, if necessary, are supplemented by reserves for losses that have occurred but have not yet been declared. Valuation of reserves

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 deploymentof the internalcontrol systemand the principal work in progress in terms of risk management.

2

Insurance risks

Prudential oversight 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.

2.2

Objectives for managing risks resulting from insurance policies and methods to limit these risks

The Group’s insurancebusinessexposes it to risks primarilyrelated to product design, underwriting,claims management,valuation of reserves, and reinsurance. 2.2.1 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 InsuranceDivisionsof GroupamaAssurancesMutuellesensure that the product line is adapted to the Group’s strategy. Life and non-life insurance products are designed by the business units of GroupamaAssurancesMutuellesand GroupamaGan Vie on behalf of the Group’s companies.This design is the result of market and profitabilitystudiesperformedwith actuarialtools to control margins in collaborationwith the ActuarialDepartmentof 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 Compliance Departments and are adapted by division (regional mutuals, subsidiaries in France, International subsidiaries). Throughout the product governanceprocess, measures are integrated to take into accountthe interests andcharacteristicsof the targetcustomers. 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 Boardof Directorsin December 2017. Product design

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Universal Registration Document 2019 - GROUPAMA ASSURANCES MUTUELLES