Market risks and portfolio assets and liabilities management in insurance portfolios

► In assets and liabilities management Triglav is most exposed to interest rate and equity risks on the assets side. To a lesser extent, Triglav is also exposed to the regulatory risk of potential changes in the minimum standard for setting the applicable technical interest rate for calculating mathematical provisions on the existing insurance portfolio.

Triglav monitors and manages market risks by applying several techniques, such as optimum strategic asset allocation with regard to the nature of liabilities and the effect of the external economic environment, regular monitoring of the current ratios of long-term business funds and assets backing liabilities, regular monitoring of capital adequacy by applying models and hedging against certain risks with derivative financial instruments. Triglav's life insurance portfolio includes unit-linked insurance policies, where most of the financial risk is borne by the insureds.

The goal of the asset-liability management process is to ensure an optimal return on investments with respect to the nature of insurance liabilities. Due to regulatory constraints, insurance liabilities are not sensitive to market parameter changes under the current legislation. Thus, the process of asset-liability management optimisation takes into account the static nature of insurance liabilities as an input parameter and aims at improving the investment policies by optimising the ratio between the market sensitivity of the balance sheet and the return on assets. This process also considers the results of other capital adequacy measurement models (Standard & Poor's, Solvency II), but only to the legally acceptable limit.

By means of the optimisation process, investment policies are determined for long-term business funds and assets backing liabilities, specifying the strategic asset allocation for every portfolio. These policies are approved by the Assets and Liabilities Committee, which also regularly monitors the current ratios for all long-term business funds and assets backing liabilities.


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