annual report 2020 - Flipbook - Side 50
INDUSTRIENS PENSIONSFORSIKRING A/S ANNUAL REPORT 2020
NOTES
Market risk
Insurance risks
Market risk includes risks of losses on investment assets, among others things arising from losses on
shares, interest rates, currency and properties. Furthermore, the risk of losses as a consequence of
credit and counterparty risks, as well as liquidity risk, are included.
Insurance risk includes the risk of losses because of negative changes in mortality rates, life
expectancy, loss of ability to work as well as critical illness.
Operational and strategic risks
The company is exposed to market risk on own funds as well as provisions at average rate and sickness
and accident insurance. The most important financial risks for members who still have a pension
scheme with average interest rate, are linked to the interaction between investment assets and current
insurance obligations.
Operational risk comprises the risk of losses attributable to internal errors in IT systems, incorrect
procedures, inadequate internal controls, fraud, etc.
The risk relates to whether the return on investment assets is sufficient to cover liabilities on insurance
contracts. The most important risk here is changes in interest rates. The interest-rate risk on liabilities
is eliminated by hedging with interest-rate derivatives.
Strategic risks include reputation risks and other risks related to external events and factors.
Members in the market-rate scheme carry the market risk themselves, and this is managed through a
lifecycle product for which the risk depends on the investment horizon of each member, determined
on the basis of the age of the individual member.
The risk of losses in the event of changes in exchange rates is mitigated by using derivatives.
The counterparty risk is generally mitigated by applying the "delivery versus payment" principle in
connection with securities trading and by demanding collateralisation for positive fair values over a
certain level on the derivatives used.
These risks are mitigated with regular monitoring of errors and by establishing suitable controls.
The most important operational risks are linked to use by Industriens Pension of IT, including in
particular the risk of cyberattacks.
Solvency capital requirement
As an insurance company, Industriens Pension must regularly calculate a solvency capital requirement.
The scope of the capital requirement depends on the current risk profile.
The Board of Directors approves the methods used to calculate the solvency capital requirement. The
capital requirement is calculated in accordance with the standard model, parameters and buffers laid
down by the Danish Financial Supervisory Authority in the Executive Order on Calculation of the
Solvency Capital Requirement.
The current solvency capital requirement at the end of 2020 is stated in the table of financial and
operating data in the management's review.
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