NATIXIS -2020 Universal Registration Document

RISK FACTORS, RISK MANAGEMENT AND PILLAR III Risk management

event risk represents the risk of abnormally high losses recorded V for the same debtor or group of debtors, or of an accumulationof losses for the same country. Event risk is covered by Coface Re reinsurance. In addition to weekly and monthly monitoring of each region and country, Coface has implemented a system based on: the centralization of reserves for claims exceeding a certain V amount per debtor which are then analyzed ex-post to improve the information, underwriting and recovery activity’s performance; a Debtor Risk Assessment (DRA) system covering all debtors; and V monitoringat the risk underwriting level, which, above a given level V of outstandingsbased on the DRA, generates an approval and the establishment of an overall budget by Coface’s underwriting department. Diversification of the credit risk portfolio Coface maintains a diversified credit risk portfolio, in order to minimize the risk of debtor default, a slowdown in a given business sector, or an adverse event in a given country having a disproportionateimpact on its overall claims expense. The insurance policies also contain clauses allowing credit limits to be changed mid-contract: the credit insurer may reduce or cancel its credit insurance cover for new sales to the debtor in question. As an exception to this rule, and depending on the policyholder’sexpertise, Coface may grant certain policyholders a certain amount of autonomy in setting credit limits, for outstandings which do not exceed the amount set in the contract. Underwriting decisions are made by groups of underwriters in various underwritingcenters, who work in real time and on a network with the advanced ATLAS arbitration system. These underwriting decisions are part of the overall risk underwritingpolicy placed under the responsibility of the group underwriting department. The overall quality of the insured receivables portfolio is monitored by an indicator which compares the volume of exposureweightedby the risk assessment with the estimated volume of premiums. This indicator is broken down by geographic area. Furthermore, the fact that the vast majority of Coface’s risks are short-term (95% of total outstandings) allows it to reduce the risk covered for a debtor or a group of debtors relatively quickly and to anticipate a decrease in their solvency. Level 2 controls are set up to ensure adherence to the Group’s credit risk standards. The following chart shows the breakdown of debtors by total credit risk exposure incurred by Coface at December 31, 2020:

8 % €1 - €100K 5 %

5 % €200M and +

9 % €50M - €200M

€101 - €200K 6 %

€201 - €400K 8 %

€401 - €800K

33 % €5M- €50M

8 % €801 - €1,500K

18 % €1,500K - €5M

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Financial risk The group has implemented an investment policy that incorporates the management of financial risk through the definition of its strategic allocation, regulations governing insurance companies and investment constraints related to the management of its liabilities. The investment strategy implementedmust ensure that the group’s commitments to its policyholders are met while optimizing investments and performance within a defined risk framework. Managementof financial risks is thus based on a rigorous systemof standards and controls which is regularly reviewed: interest rate risk and credit risk: The majority of Coface’s V allocations are in fixed-income products, ensuring stable and recurring revenues. The overall maximum sensitivity of the bond portfolio has been deliberately capped at 5 and stood at 4.17 at December 31, 2020. There is still no exposure to Greek sovereign debt. As part of the strategic allocationand due to the health crisis, Coface implemented actions aimed at reducing the investment portfolio exposure from the start of the crisis. The risk was controlled thanks to the review of all portfolio counterparties, starting at the end of February, and the reduction in exposure to Italian and Spanish government debt, emerging market debt and high-yield debt, BBB-rated investment grade corporate bonds and equities, with a preference for the money market; foreign exchange risk: the majority of Coface’s investment V instruments are denominated in euros. Subsidiaries and branches using other currencies must observe the same principles of congruence. In addition, for the majority of the portfolio, which includes all of the group’s European entities, foreign exchange risk is systematicallyhedged for investments in foreign currencies that do not comply with the matching principle. As a result, as of December 31, 2020, investments in bonds denominated in US dollars, pounds sterling, yen, Norwegian krone and Swedish krona in this portfolio were systematically hedged against euros by the managers in charge of the relevant portfolios. Foreign currency transactions carried out by the subsidiaries are monitored by the Group to decide on a case-by-case basis whether an associated hedge is required; equity risk: exposure is capped at less than 10% of the portfolio V and is concentrated in the euro zone, in connection with its core business. At December 31, 2020, equities represented 5.3% of the investment portfolio, including 5% of equities listed on a euro zone market. These investments were partially hedged on the Eurostoxx 50 index. This hedging can be adjusted in line with investments and the amount of unrealized capital gains or losses on shares held;

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NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2020