42. Activities and objectives in 2021
Based on external and internal developments, activities in 2021 focused on the following:
- Covid-19 and capital market environment
- AXA integration
- Further development of the internal model
- GRC tool rollout
Covid-19 and capital market environment
UNIQA already began to strictly monitor its own solvency position at the beginning of the Covid-19 crisis. In contrast to 2020, the economic environment was more stable in the following year. In 2021, the target capital position of the entity and its associated companies was maintained, showing that they were well prepared for unexpected shocks such as the Covid-19 crisis. UNIQA will continue to monitor the situation closely in order to be able to respond quickly to potential changes (triggered by another wave of Covid-19). The pandemic has affected UNIQA’s business development in some areas. It had both negative (business interruptions, event cancellations) and positive (lower claims frequency in motor and accident business, high demand for health insurance) effects. The development of the capital market environment, as well as the changes in fair values, were closely monitored. The company also carried out monthly solvency assessments. The year 2021 brought a positive interest rate development, which led to the strengthening of UNIQA’s capital situation.
Sustainability (or Environmental Social Governance (ESG)) is one of the topics that has become increasingly important in recent years, both in the applicable regulations as well as in terms of public perception. First steps for the integration of sustainability into the risk management framework have already been taken and further improvements are planned for next year. In 2021, the definition of sustainability risks was anchored in the Group Risk Management Policy. Furthermore, the investment portfolio was examined on the basis of ESG criteria. The risk catalogue of the internal control system was also expanded to include risks from climate change. In principle, this year’s risk assessment process attempted to gather initial experience with the challenging task of measuring long-term climate scenarios. The objective of this measurement is to obtain as good a quantitative statement as possible. However, since this is not (yet) always possible in all aspects or is associated with great uncertainty, qualitative simplifications were also used last year.
At the end of 2020, UNIQA took full control of the AXA subsidiaries in Poland, the Czech Republic and Slovakia. For one and a half years, local project teams in Poland, the Czech Republic and Slovakia have been working on the integration under the leadership of central integration management in Vienna. In 2021, important milestones were reached from a risk management perspective. The acquired companies were successfully included in UNIQA’s risk management processes. Among other things, the integration into the risk capital calculation process was successfully carried out.
Further development of the internal model
Building on the expertise gained through the development of the partial internal model, it was decided to take further steps to expand the risk model into a full internal model. In the medium term, this internal model is to be approved by the regulator and used to determine the capital requirement ratio. The objective is to use the internal model to depict UNIQA’s specific risk situation more adequately than via the standard model and to take it into account in risk management accordingly. Another advantage of an internal model is that it is less vulnerable to future regulatory adjustments to the Solvency II standard model. If approved, this would make UNIQA the first Austrian insurance group to have a full internal model. The multi-year project started in 2021 with an initial development phase.
GRC tool rollout
UNIQA has been working intensively on expanding the concept of its internal control system (ICS) in recent years. A Governance, Risk & Compliance (GRC) tool was introduced in order to support implementation of the ICS through the systems. The GRC tool is used as a central element in managing operational risk. Rolling it out across the entire Group was one of the focal points and challenges in 2021. The focus was on training the staff in the new system on the one hand, and on migrating the data on the other. The full rollout within the Group should be completed by the end of 2022.