Risk Management
Risk Management Basic Policy
The MS&AD Insurance Group has set out the "Group Risk Management Basic Policy" which stipulates the basic processes and the group wide framework for risk management. The group companies implement and execute commonly shared risk management subject to the Policy.
It also defines the categories of risks which our Group should identify and manage them.
The Group companies under our holding system set out their own "Risk Management Policies" and manage risk by their own responsibilities in line with the "Group Policy".
Risk Management Structure
The Group insurance companies implement risk management on an individual basis. The Holding Company implements an enterprise-wide risk management program and monitors integrated risk and group companies' risk management activities.
The Corporate Risk Management Department obtains and analyzes the enterprise-wise risk reported from group insurance companies on a regular basis at the Risk Compliance Committee and the all important items are to be reported to the Board of Directors.
Enterprise Risk Management
Based on risk reports and risk management activities at the Group's insurance companies, the Company manages risk in both the ways of a quantitative and qualitative approach, covering risk that is difficult to quantify.
- • Quantitative approach
Based on quantitative analysis (VaR), the Company periodically measures insurance underwriting risk, asset management risk, and operational risk to confirm that the risk threshold is in alignment with group capital.
The Company also monitors the risk of the Group insurance companies to confirm it does not exceed the set-up limit.
To ensure that risk is within capital adequacy, the Company confirms financial plans and an impact on uncertainty of an anomalistic but probable event such as a large-scale natural disaster or turmoil in the financial markets by stress tests. - * VaR (Value at Risk) is the particular level of maximum loss in terms of its chance of occurrence.
- • Qualitative approach
To evaluate insurance underwriting risk, asset management risk, liquidity risk, and operational risk, the Company assess Group insurance company's risk management activities and risk management framework.
The Company also regulates the accumulation of loans and investments, and monitors transactions between Group companies. This is to ensure that propagation, maldistribution and concentration of risk shall not have an impact on the soundness of MS&AD Insurance Group.
Risk of Insurance business
There are a variety of risks inherent in the insurance business. Given that the insurance business engages on the payment of insurance claims and benefits, insurance underwriting risks and asset management risks which arise within insurance business must strike a proper balance with capital adequacy and return. Liquidity Risk shall be managed based on funding requirements in presence and future. By ensuring appropriate operation, operational risks stemming from issues such as clerical errors and system failures need to be minimized to prevent losses as far as possible.
The MS&AD Insurance Group takes precise action in response to these risks and regards risk management as its foremost priority in business in order to achieve its corporate vision and management target.
Insurance Underwriting Risk |
Insurance underwriting risks relate to the possibility of a decline in insurance income as a result of unexpected changes in the frequency and damageability of accidents, or natural disasters. |
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Asset Management Risk |
Asset Management risks relate to the possibility of a decline in asset value (including off-balance assets) or income. The major causes are fluctuation of interest rates, stock prices, exchange rates, real estate values, rents, or financial difficulties of investments and loans. Risks stemming from the inability to matching the mix of assets and the liabilities of payment of insurance claims. |
Liquidity Risk |
Cash Flow Risk is risk that the group may incur losses due to being forced to sell assets at a price considerably lower than normal in order to maintain funds, owing to deteriorating cash flows as a result of such event as an outflow of funds in the aftermath of a large-scale disaster. Market Liquidity Risk is risk that the group may incur losses due to the inability to trade on a market or being forced to trade at a price considerably less advantageous than normal owing to a market disruption, etc. |
Operational Risk |
Operational risks is risk that group may incur losses due to loss resulting from inadequate or failed internal processes, people and systems, or from external events. |
Crisis Management Structure
To prepare for risk discovery and having its influence spreading within the group, the Group's companies have created crisis management manuals and business continuity plan, and perform drills to assure the effectiveness of these measures. The Company promotes these preparations and oversees the situation by holding crisis management administrators meetings in the Group regularly. And it also evaluates business continuity structure and plan in the domestic insurance companies of the Group every year and confirms the feasibility of them.
Crisis Management Structure of each company of the Group |
Each company of the Group is carrying out timely and suitable measures at the time of crisis by organizing operational structure for crisis management and creating crisis management manuals. We requires each company to report about group crisis situations such as the case of economic loss which may have the serious influence to the Group and needs timely disclosure. By establishing Group crisis management office, we formulate settlement policies for Group crisis issues with the discussion among Group companies. |
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Business continuity structure and plan in the domestic insurance companies of the Group |
The domestic insurance companies of the Group have completed formulating the business continuity structure (instituting the policies, development of rules for management, establishment of management structure), and business continuity plans for the capital city strong local earthquake and super-flu. We will continuously review the structure through the PDCA cycle, meetings for group's risk management and implementation of shared trainings in each management system of member companies. We also evaluate business continuity structure and plan in the domestic insurance companies of the Group once a year in collaboration with InterRisk Research Institute & Consulting. Through the evaluation, we confirm the feasibility and undertake the necessary revision. |
Crisis management administrators meetings in the Group |
For the risk management department of each group company, the crisis management administrators meeting on the theme of crisis management structure and business continuity plan are held once in the quarter. Through periodical management of those meetings, it confirms the constant review situation by the PDCA cycle in the management organization of each group company, and by sharing information between each group company it promotes the consolidation of systems for timely and appropriate handling of crisis. |
