NATIXIS_PILLAR_III_2017_EN

OTHER RISKS Risks related to insurance activities

Risks related to insurance activities 13.2

NATIXIS ASSURANCES 13.2.1

Non-life insurance underwriting risk The general insurance underwriting risk to which Natixis Assurances is exposed is borne by its subsidiary BPCE Assurances: premium risk: in order to ensure that the premiums paid by the a policyholders corresponds to the transferred risk, BPCE Assurances implemented a portfolio monitoring policy whereby each policy is given a score based on its track record over three years. Factored in are types of claims, number of claims, their cost and other variables specific to the activity in question (degree of liability and bonuses/penalties for motor insurance, for instance). This monitoring policy also contributes to detecting potential risks arising from large claims, and to arranging adequate reinsurance coverage; risk of loss: each time inventory is taken, an actuarial a assessment of the reserves for claims to be paid is conducted based on methods widely recognized by the profession and required by the regulator; catastrophe risk: catastrophe risk is the exposure to an event of a significant magnitude generating a multitude of claims (storm, risk of civil liability, etc.). This risk is therefore reinsured either through the government in the event of a natural disaster or an attack, for example, or through private reinsurers, specifically in the event of a storm or a civil liability claim, or through reinsurance pools. Counterparty risk The counterparty risk to which Natixis Assurances is exposed mainly concerns reinsurance counterparties. The selection of reinsurers is a key component of managing this risk: Natixis Assurances deals with reinsurers who are subject to a a financial rating by at least one of the three internationally recognized rating agencies, and who have a Standard & Poor’s equivalent rating of A- or higher; using several reinsurers ensures counterparty diversification and a limits counterparty risk.

Natixis Assurances is the Insurance division of Natixis and is structured into two businesses: the personal insurance business, focused on developing portfolios a in life insurance, savings and retirement capitalization, as well as provident insurance; the non-life insurance business, focused on developing a portfolios for motor and multi-risk home insurance, personal accident insurance, legal protection, healthcare and property and casualty insurance. Given the predominance of the Investment Solutions activity, the main risks to which Natixis Assurance is exposed are financial. The Company is also exposed to underwriting risks (life and non-life), as well as counterparty risk. Market risk Market risk is in large part borne by the subsidiary BPCE Vie on the financial assets that underpin its commitments with guaranteed principal and returns (euro-denominated policies: €48.5 billion on the main fund balance sheet). The Company is exposed to asset depreciation risk (fall in the equity or real estate market, wider spreads, interest rate hikes) as well as the risk of lower interest rates which would generate a shortfall in terms of principal and meeting its the guaranteed rate of return. To deal with this risk, BPCE Vie has only sold policies without a minimum guaranteed return in recent years: more than 90% of the policies have a zero minimum guaranteed return. The minimum guaranteed return averages 0.15%. To manage market risk, the sources of return have been diversified, namely via investments in new asset classes (financing the economy, low-volatility equity, etc.). This diversification is managed by a strategic allocation, defined on a yearly basis, that takes into account regulatory constraints, commitments to policyholders and commercial requirements. Credit risk Credit risk is monitored and managed in compliance with Natixis Assurances’ standards and internal limits. As of December 31, 2017, 67% of the fixed-income portfolio is invested in securities rated higher than A-. Life insurance underwriting risk The main risk to which life insurance underwriting is exposed is linked to the Investment Solutions activity. In an especially low interest-rate environment, the biggest risk is that of fewer redemptions and/or excessive inflows in euro-denominated vehicles, as reinvestments in securities dilute the main fund’s return. To prioritize inflows in unit-linked policies, measures have been taken, such as the creation of unit-linked policy products and communication campaigns, and a communication campaign targeting customers and the network.

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NATIXIS Risk report Pillar III 2017

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