Risk Management

Risk Management Policy
Risk management is a major issue in the operations of the insurance industry. KGI Life has incorporated strict risk management into the business goals requiring regular follow-ups, and has established and periodically reviewed the Risk Management Policy, which serves as the highest guiding principle for internal risk management mechanisms. The Policy clearly stipulates overall risk management goals and strategies, organization and duties, capital adequacy assessment, risk appetite and limits, and identifies major risk categories and management processes. In addition to complying with the trend of Enterprise Risk Management (ERM), it is also the basis for establishing regulations, mechanisms, and implementation practices.

Emerging Risk Management

The Company annually assesses external emerging risks that could impact its primary business operations and develops corresponding mitigation and response strategies.
KGI Life's identification of emerging risks is informed by the World Economic Forum's (WEF) Global Risks Report and other emerging risk reports and publications issued by leading institutions, and follows its emerging risk identification process. This year, the key emerging risks identified are: negative impacts of AI and failure of technology governance; social fragmentation and labor market imbalances; and heightened geopolitical risks and anti-globalization trends.

Emerging Risk Identification Process

STEP1

Identification

KGI Life's parent company, KGI Financial, initiates the emerging risk identification and assessment process. This draws on the opinions of external experts and reports from domestic and international research institutions, and produces a list of identified risk factors together with an emerging risk assessment form.

STEP2

Assessment

Based on the identified risk factors, KGI Life analyzes potential emerging risk profiles that could affect the Company, assesses their likelihood, and evaluates their potential operational impact.

STEP3

Response Measures

Using the risk assessment results, KGI Life develops risk reduction actions and response measures to lessen the impact of these emerging risks, and identifies any potential business opportunities that may arise.

STEP4

Reporting

KGI Life reports the identified emerging risks, their potential operational impacts, and its proposed response measures internally before submitting them to KGI Financial, so that KGI Financial can consolidate the emerging risks faced across the group.

Emerging Risk Identification Results

Operational Impact

Inaccurate or unavailable responses from external AI models can degrade service quality and disrupt business processes, as the Company has limited ability to intervene promptly or correct the underlying problem. As AI is adopted more widely across operations and decision-making, biased or poorly governed AI systems could also lead to compliance risks, operational disruptions, customer grievances, and reputational damage.

Mitigation and Response Measures / Opportunities

The Company has established a Policy for the Governance of Artificial Intelligence Use and related rules, setting out a framework for AI governance and accountability, with supervision and control exercised through its Artificial Intelligence Governance Committee and executive working groups. It has also defined usage protocols that clearly delineate the purpose of each AI model and conducts ongoing training to raise employees' awareness of the characteristics and risks of generative AI. Contingency plans drawing on existing resources are in place for system adjustments or usage restrictions, and the Company regularly reviews its vendors' service quality and governance practices.

Operational Impact

As AI regulations mature across jurisdictions, high-risk AI systems will be required to be explainable and to meet principles of safety, reliability, and accountability. Companies unable to meet these regulatory and ethical requirements may face operational and compliance risks, and the challenge of falling out of step with regulatory expectations.

Mitigation and Response Measures / Opportunities

KGI Life continues to bring cross-disciplinary talent into its governance mechanisms, including AI training engineers, cybersecurity specialists, industry experts, and personnel familiar with the applicable regulations, in order to strengthen the compliance and transparency of its AI algorithms, reduce the risk of bias and discrimination, and enhance the trustworthiness of its AI applications.

Operational Impact

Malicious actors may use generative AI to spread false information about the Company, impersonate its official social media accounts, or carry out scams, damaging its reputation and customer trust and potentially causing financial losses for the public. AI-generated misinformation could also contribute to market volatility and lead to the use of incorrect data in reports.

Mitigation and Response Measures / Opportunities

The Company continues to strengthen the management of its Corporate Identity, and its official Facebook and Instagram pages are Meta-verified to help the public identify authentic sources of information. It conducts daily news monitoring, sweeps for impersonation accounts, and operates a major incident reporting mechanism so that misinformation incidents are handled promptly. KGI Life has also established information governance and data source verification mechanisms and strengthened manual review of AI outputs and risk identification capabilities, in order to reduce the impact of misinformation.

Operational Impact

Advances in AI may increase the speed, sophistication, and success rate of cyberattacks, threatening the availability of the Company's information systems and equipment, raising information security risks and operating costs, and undermining operational stability.

Mitigation and Response Measures / Opportunities

The Company continues to deploy AI-powered cybersecurity defenses, using more flexible and proactive monitoring and protection measures to improve detection and response capabilities, counter new forms of AI-driven attack, and reduce the operational impact of security incidents.

Operational Impact

Escalating international geopolitical confrontation may lead to tariff policy adjustments, capital market volatility, and disruptions to energy supply chains. Trade tensions, for example, may affect capital market performance and the operating results of the Company's reinvestment businesses, while rising energy prices may push up corporate production costs, affecting the financial performance of investee companies and the Company's investment income.

Mitigation and Response Measures / Opportunities

KGI Life continues to track market developments and the financial and business performance of its reinvestment businesses, staying informed of key operational decisions through their board and shareholder meetings in order to manage overseas investment risk. It also allocates appropriately to inflation-linked investments such as infrastructure funds and renewable energy to diversify investment risk, while growing attention to energy issues may create development opportunities for renewable energy industries.

Operational Impact

Rising geopolitical tensions in the surrounding region and the growing risk of military conflict could lead to regional economic disruption, unstable energy supplies, and a deteriorating investment climate. Military conflict could also damage communications equipment and network infrastructure, affecting the continuity of the Company's operating processes.

Mitigation and Response Measures / Opportunities

The Company maintains a Business Continuity Management Policy and regularly reviews its Business Impact Analysis (BIA) and Business Continuity Plan (BCP). This ensures that in the event of a major incident, its critical business functions can be restored within an acceptable timeframe, minimizing operational interruptions and related losses.

Operational Impact

Growing geopolitical risks and anti-globalization sentiment are leading to divergent regulatory policies worldwide, including differing ESG standards, personal data protection rules, and data localization requirements. Where business activities involve cross-border regulations and standards, the Company must devote more resources to meeting the requirements of each jurisdiction, increasing business development and compliance costs.

Mitigation and Response Measures / Opportunities

When its business involves cross-border regulations or standards, KGI Life assesses in advance how those requirements affect its operations and, if necessary, consults external advisors to navigate the differences between national and regional regulatory requirements and to reduce compliance risk.

Operational Impact

Shifts in the political environment may affect the advancement of sustainability policies worldwide, creating uncertainty around ESG policies and regulatory requirements and slowing progress on the green transition. As issuance momentum in the ESG bond market slows and the green premium narrows, related investment positions may face valuation losses, affecting the efficiency of capital allocation to sustainable investments.

Mitigation and Response Measures / Opportunities

In addition to assessing the financial performance of investee companies, KGI Life refers to sustainability ratings such as MSCI to prioritize investment in companies with strong ESG performance and financial resilience, thereby reducing portfolio risk. It also continues to monitor whether companies advance their sustainability policies, issue green and sustainable bonds, and make progress toward net zero, using capital allocation to promote the sustainable development of the real economy.

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