Groupama // 2021 Universal Registration Document

7 FINANCIAL STATEMENTS Combined financial statements and notes

Each Group entity has Risk Management, Control and Compliance functions. Defining the information systems security policy and its implementation by entities fall under the remit of Groupama Support and Services (G2S) which reports to the Group Operational Risk Management and Permanent Control Department. 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 entails business reviews of subsidiaries conducted by the Executive Management of Groupama Assurances Mutuelles with business reviews at least twice per annum. These reviews include a specific “risk” section that presents, by entity, the level of deployment of the internal control system and the principal work in progress in terms of risk management.

The main steps of this process are ratified in the committees stipulated (Operating Committees, Insurance Risk Committee, Group Executive Committee). In 2017, the product design process was comprehensively reviewed as part of the work done to apply the Insurance Distribution Directive which came into force in 2018. In fact, a product governance policy was produced and approved by the Board of Directors in December 2017. 2.2.2 The underwriting risk management and claim management principles are formalised in the Group Underwriting and Reserving policy approved by the Groupama Assurances Mutuelles Board of Directors. In particular, it specifies the underwriting rules, limits of cover, and exclusions in accordance with the reassurance agreements by area of insurance. Delegations of authority for underwriting and claims are defined in all of the Group’s companies. Risks are accepted or refused at every level of delegation, 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 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 starting at 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 claims rates by entity. The most significant and most complex risks are individually monitored by the specialist business lines and the entities concerned. In addition, these specialist business lines also act to warn and advise the entities. 2.2.3 In accordance with 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 underwriting reserves, however, remains an intrinsically uncertain process, relying on estimates. The application of reserve rules is continually monitored by teams dedicated to this task, both before and after the fact, in addition to the reviews that are conducted by the local supervisory authorities. The rules for establishing reserves for claims and the funding tables for life and non-life incapacity & invalidity annuities are defined within the insurance divisions in guidelines that are harmonised for all of the Group’s entities. Reserves are valued by claims Managers within the operational entities and, if necessary, are supplemented by reserves for losses that have occurred but have not yet been reported. Underwriting and claims management Valuation of reserves

2.

Insurance risks

Prudential oversight 2.1 Pursuant to European Directives, Groupama is subject to regulations for covering the solvency margin, 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 insurance business exposes it to risks primarily related 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, combined banking & insurance operations, and mutual insurance companies. 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 in keeping with Group strategy. Life and non-life insurance products are designed by the business units of Groupama Assurances Mutuelles and Groupama Gan Vie on behalf of the Group’s companies. Product design is the result of market and profitability research performed with actuarial systems to control margins in conjunction with the Group Actuarial Department and the Investment Department where appropriate. Product launches or changes occur following a standard process incorporating the approval of the deliverables for customers and salespeople by the Group’s Legal, Risk, and Compliance Departments, and are then adapted by division (regional mutuals, subsidiaries in France, International subsidiaries). Throughout the product governance procedure, metrics are built in to take target customers’ interests and characteristics into account. Product design

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Universal Registration Document 2021 - GROUPAMA ASSURANCES MUTUELLES