Risk Management

Risk Management Policy
Risk management is a major topic of the insurance industry. We have set strict risk management as a business goal of concern, and established and periodically reviewed the risk management policy. The policy clearly defines overall risk management goals and strategies, organization and duties, capital adequacy assessment, risk appetite and limit, and identifies material risk categories and management processes. Besides matching the trend of Enterprise Risk Management (ERM), it is also the basis for establishing regulations, mechanisms, and implementation practices.
Identification and Response to Material Risks
Market Risk
Manage the risks of interest rates, exchange rates, and equity securities price according to the internal Market Risk Management Regulations. Related mechanisms include limit management, sensitivity analysis, stress test, and value at risk. The Company also established an Asset and Liability Management Group responsible for measuring and monitoring risks related to assets and liabilities.
Credit Risk
Monitor issuers, guarantors, trading counterparts, and custodian banks according to the internal Credit Risk Management Regulations. Related mechanisms include internal credit rating and trading limit management, credit rating distribution and tracking credit rating changes, expected credit loss, and credit risk; strengthen monitoring of subordinated debentures, including risk limit and percentage of subordinated debentures.
Liquidity Risk
Manage funds and market liquidity risks according to the internal Liquidity Risk Management Regulations. Related mechanisms include using cash flow model to assess liquidity risks and stress tests.
Operational Risk
Use the three management tools for operational risks, namely Risk Control Self Assessment (RCSA), Key Risk Indicators (KRI), and Loss Data Collection (LDC) to continuously supervise and manage overall operational risks.
Climate Change Risk
Climate change is mainly divided into physical risks and transition risks. Physical risks originate from direct or indirect losses caused by climate change. Transition risks originate from the impact of policies and regulations, low carbon emission technologies, and social preferences, as well as potential changes in operating costs in the process of transitioning to a low carbon economy. We have included the physical risks and transition risks of climate change in the Company‘s risk management policy, and created the scenarios RCP (Representative Concentration Pathway) 8.5/6DS and RCP 2.6/1.5DS to assess related mechanisms. We included climate change risks and related assessments, scenarios, and response plans in the 2022 ORSA report, strengthening our climate change governance to reduce future impacts, seize business opportunities, and respond to the expectations of external stakeholders for our climate change management.
Business Continuity Management
To ensure personnel safety and protect customer rights and interests, business reputation, and assets, we have made a commitment to minimize damage and prevent the suspension of operations when a risk event takes place, and thus implemented business continuity management mechanisms. We also announced a business continuity management policy and statement that all employees are required to comply with. Furthermore, the Company established related management procedures and response plans to systematically handle the risk of catastrophic disasters. We also provide related training and organize disaster evacuation drills, and strengthen and improve current management measures to reduce the impact of catastrophic disasters on the Company.

We integrated the resources required for the business continuity management system, evaluated the resources required for the core business of departments, and successfully obtained ISO 22301:2019 Management System certification to ensure that key operations, such as policyholder services, claims, and new contracts, are not suspended, thus fulfilling our commitment to sustainable development. We strengthened offsite and remote work mechanisms and capacity in response to the impact of the pandemic, expanded equipment of the disaster readiness center, and continued to strengthen business continuity mechanisms to complete disaster recovery drills.