Underwriting risk concentration is managed by adequate re-insurance schemes, which are used as the basis for the tables of maximum net retained lines. Underwriting risk concentration occurs due to the concentration of an insurance operation in a geographic area, or an industry or an insurance peril. It may also occur as a result of a correlation between individual insured perils. Even a single event in a business segment or industry may have a material impact on re-payment capacity.
Particular attention is paid to events with a low frequency and a high impact, for example storms, hail and floods. Over the last four years, on average the Group has been exposed to two natural disasters per year resulting in reinsurance claims. Past events showed that the reinsurance scheme is suitable, as Triglav was able to discharge its obligations arising from its insurance contracts without exposure to increased liquidity risk and capital adequacy risk.
Experience from previous years suggests that the number of such natural events will continue to rise in the future, and therefore Triglav will continue to adapt its reinsurance schemes accordingly, on an on-going basis. Natural events predominantly affect the fire, technical and car insurance classes (comprehensive car insurance), as well as crop insurance.
In the previous two years, Triglav began to intensely adapt its business to climate change. In the future reinsurance schemes of this kind are likely to become increasingly costly and coverage increasingly narrower. In an attempt to minimise climate change impacts, Triglav started to adapt its products accordingly and exercise greater prudence in the process of underwriting insurance contracts.