Clear and Sustainable Risk Management
In line with these new regulatory requirements and our UNIQA Sustainability Strategy, our objective is to develop an appropriate and consistent approach to take sustainability risks into account and apply it on an ongoing basis and ensure it is updated regularly. Incorporating ESG criteria into the risk management assessment process therefore has far-reaching implications. Sustainability acts as a key aspect over the entire risk cycle, i.e. from the identification and assessment of a risk to the controlling and reporting of said risk. This also drives forward the development of ESG indicators in investment and portfolio management as well as the integration of sustainability aspects in third party risk management.
Likewise, addressing opportunities from the deep integration of sustainability criteria into our business model is becoming an increasingly important part of our analyses. In the context of climate risks, the increasing weather extremes are particularly relevant for us, as they lead to an increase in the loss ratio and thus also in the default risks. The results of sustainability risk identification and assessment are intended to support management decisions within the framework of the company's product design or investment strategy.
The risk strategy is regularly validated and discussed in the Risk Committee with the involvement of the Management Board. The UNIQA Group’s risk management system is based on our Risk Management Policy, where we have embedded the definition of sustainability risks: we do not define sustainability risks as a separate risk category, but rather as a general risk classification that influences existing risk categories to which the UNIQA Group is exposed. The occurrence of sustainability risks may have actual or potentially material adverse effects on the value of assets, liabilities, the financial position, or the reputation of the Group.
Continuous process optimisation ensures security
The UNIQA Group Risk Management actively monitors various developments in the area of sustainability and analyses their impact on the Group as part of the risk management process. To identify further areas for improvement in managing sustainability risks and to define appropriate measures, the UNIQA Group Risk Management established a dedicated working group in 2021. This group monitors developments in sustainability regulation and their impact on the risk management system. Additionally, market-specific best practices are analysed within this framework.
Sustainability risks also need to remain controllable
In recent years the UNIQA Group has worked hard on further developing our internal control system (ICS) for risk management. This is used to ensure more efficient processes and reliable reporting. As part of this project, the risk catalog is continuously expanded to include sustainability risks and potential ESG-related causes, ensuring that these risks are explicitly considered. The aim is to capture a comprehensive picture of all sustainability risks while defining and documenting the associated measures.
The risk identification process and the risks are reviewed annually across the Group. Short-term impacts are defined with a time horizon of one year.
UNIQA pushes quantitative risk assessment and scenario analyses of climate risks
In assessing sustainability risks, the UNIQA Group currently focuses on climate scenarios from the IPCC (Intergovernmental Panel on Climate Change) and the corresponding RCPs (Representative Concentration Pathways). Both "Early Action" scenarios (i.e., RCP 4.5) and "No Additional Action" scenarios (i.e., RCP 8.5), and their impacts on the value of the UNIQA Group's investments and NatCat claims, are considered. Data from the Bank of England’s scenarios are used for both, while short-, medium-, and long-term effects are considered.
Additionally, the UNIQA Group continuously monitors the ESG-related investment profile of its international subsidiaries. Limits are set to ensure ongoing improvement of the Group's ESG profile and reduction of transitional risks, with monthly monitoring.
For each significant residual risk identified, a mitigation plan or strategy is developed, detailing the response to this risk (including sustainability risks or risks with a sustainability-related cause).