Underwriting risks are associated with the threat of a loss or adverse change in the value of insurance liabilities due to inadequate assumptions in pricing and provisioning. Triglav is exposed to these risks in the process of risk underwriting, i.e. in the assumption of risk, in the development of insurance products and their pricing, as well as in loss development changes, the allocation of insurance technical provisions, changes in policyholders' behaviour and general changes in the external economic environment.
Individual insurance companies within the Triglav Group are primarily responsible or active management of the underwriting risk. Underwriting risk is managed by clearly structured competences and powers, which include suitable delimitation of powers, underwriting limits and an authorisation system. In addition, underwriting risks are managed with a set of actuarial techniques applied in product pricing and insurance technical provisions allocations, as well as by means of regular performance monitoring, optimisation of reinsurance schemes and regular supervision of the adequacy of insurance contract provisions.
Reinsurance is one of the basic tools used to mitigate underwriting risks. Insurance companies within the Triglav Group are cosignatories of the same reinsurance contract. Net retained lines, as defined in reinsurance contracts, are based on the tables of maximum net retained lines of Zavarovalnica Triglav. For each business year, a plan of reinsurance is adopted that contains:
- calculated retained lines by individual class of insurance,
- a table of maximum coverage based on retained lines, and
- procedures, bases and criteria for establishing the highest probable loss arising from individual risks underwritten.
The choice of suitable reinsurers depends to a great extent on their credit rating, enabling the Group to conduct more stable business operations, which are reflected in more stable cash flows.