Groupama // Universal Registration Document 2022

5

GROUP RISK FACTORS The Group’s main risks

5.1.2

INSURANCE RISKS

5.1.2.1 Climate risk on crops As one of the leading agricultural risk insurers on the French market, the Group is exposed to the risk of occurrence of major cumulative climate events affecting the insured crops (mainly hailstorms, floods, or droughts). The Group, whose main expertise is agricultural insurance, insures all types of crops throughout France through its regional mutuals and also offers its expertise internationally (Romania, and China). As at 31 December 2022, the areas covered by multi ‑ risk climate insurance in France were divided among the following crops: large crops (wheat, maize, rapeseed, etc.): 93.97%; ❯ viticulture: 3.95%; ❯ vegetables: 1.57%; ❯ grassland: 0.49%; ❯ arboriculture: 0.02%. ❯ 5.1.2.2 Storm risk If this risk were to materialise, it may have a significant impact on the Group’s income. The Group’s reinsurance programme enables it to reduce this impact. For example, in 2017, the exceptional weather ‑ related claims associated with storms Irma and Maria in the Caribbean had a limited impact on the Group’s income: while the gross impact of these events totalled 330 million euros, the actual impact on the Group after reinsurance was 38 million euros in the financial statements at the end of December 2017. The Storm risk is considered “moderate”. Risk of insufficient reserves The Group is exposed to the risk of insufficient outstanding claims reserves and other technical reserves related to the non ‑ life insurance and non ‑ life health insurance business. The materialisation and magnitude of the risk may be influenced by internal and external factors. The Group establishes reserves in accordance with the applicable accounting and regulatory requirements. However, these reserves do not represent a valuation of the corresponding liabilities, but rather an estimate of the amounts of claims, on a given date, using actuarial projection techniques. Claims reserves may therefore be subject to changes due to the number of variables that affect the ultimate cost of claims. These variables may be varied, such as the intrinsic change in claims, regulatory changes, trends in case law, and variations in the interest rates used to update annuity reserves. These items are not always predictable, as actual losses may differ significantly from the gross reserves initially established. Any upward or downward revaluations may therefore have an impact on net income. 5.1.2.3 If this risk were to materialise, a technical loss may have a direct impact on the Group’s net income. However, it is mitigated by risk management measures and the effectiveness of reinsurance covers. The adopted external reinsurance scheme is based on stop ‑ loss retention cover, supplemented by a quota share agreement. The climatic risk on crops is considered “moderate”.

The cycles associated with the non ‑ life insurance business are of varying length. These cycles may involve the occurrence of catastrophic events at an unusual frequency or be impacted by economic conditions. The increasing number of climate events, on a global level, as well as other risks, such as acts of terrorism, explosions, the appearance, and development of pandemics, and the impact of global warming, may have major consequences, not only in terms of their immediate damage and impact, but also in respect of insurers’ current and future activities and income. The potential increase in compensation and claims, the emergence of new kinds of liability, growing uncertainty as to the volume and level of maximum losses may, for example, have a material impact on Groupama’s business activities, consolidated net income and liquidity. Through the diversification of its portfolio, the individual selection of risks accepted, the limitation of its exposure to risks (specifically in respect of natural disasters), the management of overlapping risks and reliance on reinsurance, Groupama significantly reduces the negative impacts of its exposure. However, the negotiation of reinsurance renewals for 2023 took place in a considerably tough market: price increases after several years of unsatisfactory results and in a context of rising rates; reduction in capacity supply; requirement of higher retentions (demand for a return period of at least 10 years); and refusal of cumulative covers. Insurance risks are managed in accordance with the principles and rules relating to underwriting and reserves. In particular, these principles and rules specify the cover limits and the exclusions fixed under reinsurance agreements, the monitoring of the appropriateness of the portfolio and the price level, preventive measures such as in the case of adverse climatic risks, the provision of information to insured municipalities and, where appropriate, to policyholders in order to anticipate and address such risks, the rules for managing claims, and the standards on reserves. Despite the careful attention paid to the monitoring of these risks and the risk control systems put into place, Groupama, because of its historical customer base and inflation of catastrophic events related to global warming, might experience major losses in the future on such risks, which would have a substantial negative impact on its financial position and net income. The Group’s main insurance risks are presented below in descending order.

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Universal Registration Document 2022 - GROUPAMA ASSURANCES MUTUELLES