RISK MANAGEMENT SYSTEM IC «VAB Re» Iryna Nyenno, Doctor of Economics, Professor of the Department of Management and Innovations Foggia, 21 – 28 th of February. - презентация

1 RISK MANAGEMENT SYSTEM IC «VAB Re» Iryna Nyenno, Doctor of Economics, Professor of the Department of Management and Innovations Foggia, 21 – 28 th of February 2019

2 RISK CLASSIFICATION – VAB case Risk management is the process associated with identification, risk analysis and decision-making, which include maximizing the positive and minimizing the negative consequences of the occurrence of risk events. The main risks of the activities to be managed are: financial operating (production) investment personnel management technical

3 CURRENT STATE BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis

4 BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis CURRENT STATE

5 BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis CURRENT STATE

6 BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis CURRENT STATE

7 BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis CURRENT STATE

8 BASIC BUSINESS PROCESSESPARTICIPANTSPROCEDURESCOMMENTS FINANCIAL ACTIVITIES RESERVATIONVAB ReCalculation of reserves PRICINGVAB ReBilling BUDGETINGVAB Re VAB Group Reconcile and consolidateCorporate risk OPERATING ACTIVITIES BUSINESS ACTIVITY (SALES)VAB ReIncrease market share UnderwritingVAB Re According to the Underwriting Policy Tough competition RETROCESSIONVAB Re Calculation of own retention limits SETTING LOSSESVAB Re According to the Claims Regulation INVESTMENTVAB Re VAB Group Coordination of conditionsCorporate risk PERSONNEL MANAGEMENTVAB Re Lack of corporate interaction TECHNICAL RISKS EXTERNAL COMMUNICATIONSVAB Re VAB Group IT support ACCOUNTING CONTRACTSVAB ReDevelopment of a new IT system ANALYSISVAB Re Compliance with the timing and completeness of the analysis CURRENT STATE

9 CURRENT STATUS OF RISK MANAGEMENT Availability of a financial risk management system Formation of the system of management of investment risks and personnel risks The functioning of the operating management system

10 CHALLENGES AND RISKS OF RISK MANAGEMENT Difficulties Intensive growth of the company is associated with the emergence of new risks that must be taken into account, evaluated and controlled: economic industry manufacturing Innovative Disadvantages of the existing solution The lack of an integrated corporate risk management system prevents the introduction of a new concept for managing the Company's business.

11 RISK MANAGEMENT TASKS Construction and implementation of a corporate risk management system Continuous monitoring of external and internal risks

12 RESERVATION What is doing with risks today? Reservation is carried out in accordance with the current legislation of Ukraine. Formed by: reserve of unearned premium (the method of "3 floating quarters" for external and the method of "1/24" for management reporting) claimed loss reserve What needs to be done! By the end of the year, form the following reserves: unearned premium (1/24 and 1/365 methods depending on the business) loss reserve (Borneatter-Ferguson method): reserve for reported but unsettled losses reserve of incurred but not claimed damages disaster reserve

13 PRICING Current state: Tariffs for the next period are determined in relation to the accepted business classes. What is it for? The calculation is related to the assessment of the profitability of existing premium rates, forecasting profitability for the next period. Pricing factors: existing statistics statistics obtained from assignors analyst forecasts competitive environment

14 BUDGETING What do we use now? General corporate scorecard, which is based on the needs of past periods and the recommended growth rates. Difficulties The objectives of the strategic course are not clearly defined, which complicates the development budget procedure. It is necessary: adopt a development strategy (for at least 5 years) identify threats and challenges for the development of the Company and the implementation of the strategy establish directions and key performance indicators corresponding to the strategic direction display the development of strategic initiatives within the period

15 BUSINESS ACTIVITY (SALES) Place on the market today The key indicator of the level of development is the Company's share in the reinsurance business in the country. As of July 1, 2007, it accounted for between 3.2% and 18.53% in Ukraine within the key business lines. Tasks : securing the status of the leading "internal" reinsurer creation of on-line procedures for quoting and accepting risks on mass lines of business Reinsurer financial reliability rating (A.M. Best, S & P, Fitch, Moodys) enter the market of the CIS and Eastern Europe

16 Underwriting Current state The regulation on underwriting prescribes procedures for assessing the proposed risks and the conditions for their acceptance. Clear criteria for underwriting for optional and recommendations on obligatory business are used. Perspective: increase in the share of property risks in the Company's portfolio expansion of the reinsurance product line transition to disproportionate forms of reinsurance in the class of "auto insurance" pooling - domestic and international

17 RETROCESSION What do we have today? VAB Re has reliable retrocession contracts and a positive history of their placement in "tough markets": property bondage (disproportion) motor vehicle obligator (disproportion) freight (proportion) carrier liability Target: increase in capacity for existing business classes maximum filling of containers according to the principle of regional diversification (expansion to neighboring markets) inclusion of new business classes (if necessary) mutual use of retrocession placements between professional reinsurers tight control to avoid cumulation

18 SETTING LOSSES What we have today: The claims handling system is defined in the Claims Claims Regulation and describes settlement procedures: optional business obligatory programs cash losses in excess of the established amount of a single claim in the mass lines of business - simplified procedures for small and uncomplicated events Target: determination of common principles and approaches to settlement of claims the establishment of uniform procedures of the assignor and the reinsurer in the settlement and payment formalization of the claim settlement process to automate it creating online claiming tools

19 INVESTMENT Today: VAB Re has an investment portfolio: placed in bank deposits and metals transferred to the management of AMC - VAB Asset Management Securities not traded on the open market Target: Maximum use of existing and acceptable investment instruments: invest in high-rated assets set internal limits taking into account liquidity and investment horizon have a part in European holdings

20 PERSONNEL MANAGEMENT Today: All key positions in the Company are filled: administrative staff - 5 people salesmen - 6 people damages settlement - 4 people financial service - 2 people legal service - 2 people back office - 4 people Principles of personnel management: staffing needs are driven by business growth staff development system for professional growth staff motivation system from performance

21 EXTERNAL COMMUNICATIONS Current state Complete dependence of the Company's business activity on the state of technical channels that the Company does not affect. Problems The company is not fully represented on the Internet Tasks: creating a full-fledged web portal development and implementation of on-line pre-quotation and acceptance technology

22 ACCOUNTING OF CONTRACTS (1) The most important component of corporate risk management is the contract accounting system. What do we have today? The existing system allows you to accumulate policy information (accounting is carried out on objects taken in reinsurance) for: accounting analysis calculations administration, control loss accounting

23 ACCOUNTING OF CONTRACTS (2) Problems The system does not fully meet the needs: of accounting risk management reservations, assessing unfinished risk product pricing analysis of statistics of experience state reporting Task New IT system

24 ACCOUNTING OF CONTRACTS: REALIZABLE REQUIREMENTS (1) The new IT system should consolidate the entire block of information on the Company's operating activities. Provide accumulation, accounting and analysis of data on: concluded reinsurance treaties, terms of optional and obligatory treaties, cover notes objects accepted for reinsurance, risks for which protection is granted counterparties provided quotes planned and actual payments (connection with the Company's accounting system) The system will also provide: automatic control of retention limits management of claims settlement procedures, accounting for loss reserves

25 ACCOUNTING OF CONTRACTS: REALIZABLE REQUIREMENTS (2) The block of incoming reinsurance will allow automating the business processes of entering into and maintaining optional and obligatory reinsurance contracts: planning and controlling the processing time of documents received from customers distribution of information flows between employees in accordance with the functions performed automate the mailing and messaging tools The loss adjustment automation module performs the following functions: handling insurance event notifications and incoming borderos control of settlement terms calculation of the share of retrocessionaires, accounting for recourse procedures

26 ACCOUNTING OF CONTRACTS: REALIZABLE REQUIREMENTS (2) The introduction of an IT system should lead to an increase in operational efficiency and optimization of the work of the front and back office.

27 BUSINESS ANALYSIS Task Conducting operational analysis in the context of business class / counterparty. Analysis objectives: determination of real results income profitability cost allocation determination of total cost net profit cash flow forecasting for estimating investment reserves and total costs

28 APPROACHES TO THE IMPLEMENTATION OF CORPORATE RISK MANAGEMENT SYSTEM Securing the scope of authority and responsibility for risk management for the actuarial analytical support service Minimization of labor costs and distraction of front-office employees during the implementation Trial testing of all tools intended for use by the system Extensive use of corporate IT systems to automate risk management Focusing on the successful experience of international companies in the implementation of risk management Seamless integration of the new structure into the company management system Phased development of risk management at all levels of management

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