HDI Global Specialty SE - Solvency and Financial Condition Report … · 2020. 10. 5. · 3 HDI...

1 HDI Global Specialty SE | Solvency and Financial Condition Report (SFCR)

Solvency and Financial Condition Report (SFCR)

2019 HDI Global Specialty SE


Contents Summary ...................................................................................................................................... 6

A. Business and Performance ................................................................................................. 11

A.1 Business ......................................................................................................................... 11

A.1.1 Business model ..................................................................................................... 11

A.1.2 Results of operations and major business transactions ........................................ 11

A.1.3 Registered office, supervisor and auditor .............................................................. 13

A.1.4 Group structure...................................................................................................... 13

A.2 Underwriting Performance .............................................................................................. 14

A.3 Investment Performance ................................................................................................. 16

A.4 Performance of other activities ....................................................................................... 17

A.4.1 Other income and expenses .................................................................................. 17

A.5 Any other information ...................................................................................................... 17

B. System of Governance ........................................................................................................ 18

B.1 General information on the system of governance ......................................................... 18

B.1.1 Governance structure ............................................................................................ 18

B.1.2 Remuneration policy .............................................................................................. 20

B.1.3 Key transactions with associated companies and related parties in the reporting period .............................................................................................................................. 22

B.2 Fit and proper requirements ........................................................................................... 22

B.2.1 Description of requirements ................................................................................... 22

B.2.2 Evaluation procedures ........................................................................................... 23

B.3 Risk management system, including the own risk and solvency assessment (ORSA) .. 24

B.3.1 Risk management system, including risk management function ........................... 24

B.3.2 Own risk and solvency assessment (ORSA) ......................................................... 27

B.4 Internal control system .................................................................................................... 28

B.4.1 Components of the internal control system ........................................................... 28

B.4.2 Compliance function .............................................................................................. 29

B.5 Internal audit function ..................................................................................................... 31

B.6 Actuarial function ............................................................................................................ 32

B.7 Outsourcing .................................................................................................................... 34

B.8 Any other information ...................................................................................................... 34

B.8.1 Evaluation of the appropriateness of the system of governance ........................... 34

B.8.2 Other disclosures ................................................................................................... 35


C. Risk Profile ...................................................................................................................... 36

C.1 Underwriting risk ............................................................................................................. 36

C.1.1 Underwriting risk - Non-Life primary insurance and reinsurance ........................... 36

C.1.2 Reserve risks ......................................................................................................... 38

C.1.3 Risk mitigation techniques in the field of Non-Life primary insurance and reinsurance ......................................................................................................................... 38

C.2 Market risk ...................................................................................................................... 39

C.3 Credit risk ........................................................................................................................ 41

C.4 Liquidity risk .................................................................................................................... 42

C.5 Operational risk ............................................................................................................... 42

C.6 Other material risks ......................................................................................................... 44

C.6.1 Emerging risks ....................................................................................................... 44

C.6.2 Strategic risks ........................................................................................................ 44

C.6.3 Reputational risks .................................................................................................. 44

C.7 Any other information ...................................................................................................... 45

D. Valuation for Solvency Purposes ..................................................................................... 46

D.1 Assets ............................................................................................................................. 49

D.1.1 Intangible assets R0030 ........................................................................................ 49

D.1.2 Deferred tax assets R0040 .................................................................................... 49

D.1.3 Property, plant and equipment held for own usage R0060 ................................... 50

D.1.4 Property (other than for own usage) R0080 .......................................................... 50

D.1.5 Shares/investments in affiliates, including shareholdings R0090 .......................... 50

D.1.6 Shares R0100........................................................................................................ 51

D.1.7 Bonds R0130 ......................................................................................................... 51

D.1.8 Collective Investments Undertakings R0180 ......................................................... 53

D.1.9 Deposits, excluding cash equivalents R0200 ........................................................ 53

D.1.10 Recoverables from reinsurance contracts R0270 ................................................. 54

D.1.11 Deposits retained on assumed reinsurance business R0350 ............................... 54

D.1.12 Receivables from insurance companies and intermediaries R0360 ...................... 55

D.1.13 Receivables from reinsurers R0370 ...................................................................... 55

D.1.14 Receivables (trade, not insurance) R0380 ............................................................ 56

D.1.15 Cash and cash equivalents R0410 ........................................................................ 56

D.1.16 Any other assets, not shown elsewhere R0420 .................................................... 57

D.2 Technical provisions ....................................................................................................... 57


D.2.1 Technical Provisions of indemnity insurance ......................................................... 58

D.3 Other liabilities ................................................................................................................ 62

D.3.1 Other Technical Provisions R0730 ........................................................................ 62

D.3.2 Provisions other than Technical Provisions R0750 ............................................... 62

D.3.3 Pension benefit obligations R0760 ........................................................................ 63

D.3.4 Deposits retained on ceded reinsurance R0770 ................................................... 64

D.3.5 Deferred tax liabilities R0780 ................................................................................. 64

D.3.6 Financial liabilities other than liabilities to credit institutions R0810 ...................... 65

D.3.7 Liabilities from insurance companies and intermediaries R0820 .......................... 66

D.3.8 Payables from reinsurers R0830 ........................................................................... 66

D.3.9 Payables (trade, not insurance) R0840 ................................................................. 67

D.3.10 Subordinated liabilities not in basic own funds (BOF) R0870 ................................ 67

D.3.11 Any other liabilities, not shown elsewhere R0880 ................................................. 68

D.4 Alternative methods for valuation ................................................................................... 68

D.4.1 Projected unit credit method .................................................................................. 68

D.4.2 Market value determination for unlisted assets ..................................................... 69

D.5 Any other information ...................................................................................................... 69

E. Capital Management ........................................................................................................... 70

E.1 Own funds ....................................................................................................................... 70

E.1.1 Management of own funds .................................................................................... 70

E.1.2 Tiering.................................................................................................................... 70

E.1.3 Basic own funds .................................................................................................... 70

E.2 Solvency Capital Requirement and Minimum Capital Requirement ............................... 73

E.2.1 Solvency Capital Requirement (SCR) ................................................................... 73

E.3 Use of the duration-based equity risk sub-module in when calculating the Solvency Capital Requirement ............................................................................................................... 74

E.4 Differences between the Standard Formula and any internal model used ..................... 74

E.5 Non-compliance with the Minimum Capital Requirement and non-compliance with the Solvency Capital Requirement ............................................................................................... 75

E.6 Any other information ...................................................................................................... 75

Glossary of abbreviations and terms .......................................................................................... 76

Disclosure forms to be published ............................................................................................... 78


This document is an English language translation of the German document prepared by a pro-fessional translation service in accordance with international translation standard. However, in case of discrepancies, the German language document is the sole authoritative and universally valid version.


Summary Key figures

Values in EUR thousand 2019 2018 Solvency overview Assets 2,236,815 1,940,658 Technical Provisions 1,800,420 1,560,049 Other liabilities 181,372 157,656 Excess of assets over liabilities 255,023 222,953 Eligible own funds Tier 1 Basic own funds (unrestricted) 255,023 222,953 Tier 1 Basic own funds (restricted) - - Tier 2 Basic own funds 85,463 82,730 Eligible own funds (SCR) 340,485 305,683 Eligible own funds (MCR) 265,517 231,740 Capital requirements Solvency Capital Requirement 209,893 175,722 Minimum Capital Requirement 52,473 43,930 Coverage ratios Ratio of eligible own funds to SCR (solvency ratio) 162% 174% Ratio of eligible own funds to MCR 506% 528%

HDI Global Specialty SE (“HDI Global Specialty”) meets the regulatory Minimum and Solvency Capital Requirements (hereinafter referred to as “MCR” and “SCR” respectively) as at the report-ing date of 31 December 2019 and satisfied this in the financial year 2019 with a Solvency Ratio of 162%.

The principles for calculating the Solvency Ratio are explained in this document. Chapter D de-scribes the valuation principles for determining eligible own funds and Chapter E describes the valuation principles for determining the SCR.

The solvency overview has been audited by PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, as required by law.

This report is a mandatory publication pursuant to Section 40 of the German Insurance Supervi-sion Act (VAG).

Note: Rounding differences of +/- one unit may occur in all tables.


A. Business and Performance

HDI Global Specialty transacts property and casualty primary insurance and reinsurance in the specialty segment. Through its global presence and activities in all lines of non-life primary insur-ance and reinsurance, the company achieves an effective risk balance. HDI Global Specialty underwrites single risk business, but also cooperates with managing general agencies (under-writing agents). We write our business in Hannover, where the registered office of the company is situated, as well as from our branches in London (UK), Stockholm (Sweden), Sydney (Australia) and Toronto (Canada). Our branch in Milan (Italy) has been underwriting new business since 1 July 2019.

In the 2019 financial year, HDI Global Specialty substantially boosted its premium income com-pared to the previous year. A higher burden from major loss events led to a marked increase in the gross balance sheet loss ratio to 82.0% (previous year: 65.6%). Due to the positive result from reinsurance, an underwriting result of EUR 7,900 thousand (previous year: EUR -4,500 thousand) was achieved in the 2019 financial year. We are satisfied with the performance of our investments during the reporting period. Ordinary investment income developed as expected. The financial year ended with a loss of EUR 12,818 thousand (previous year: loss of EUR 20,500 thousand).

Details regarding the business activities and performance can be found in Section A.

Apart from the listed developments, there were no significant changes in business performance.

B. System of Governance

HDI Global Specialty operates an effective system of governance which enables the company to achieve the goals for its business and risk strategy. Written guidelines are available for all major business transactions. The key functions according to Section 26 and Sections 29 to 31 of the German Insurance Supervision Act (VAG) are established, entrusted with the required tasks, equipped with necessary powers and staffed with appropriate resources.

Both the Internal Control System and the Risk Management System are consistent with the com-plexity of the business. The remuneration system is based on the goal of a sustainable value development of the company.

In addition to monitoring the internal risk management and control system, the system of govern-ance also comprises the ORSA process (the company's Own Risk and Solvency Assessment process). The Executive Board confirmed the ORSA process was carried out in the reporting period and approved the ORSA report. Currently, the Executive Board of HDI Global Specialty does not see any risks that might either endanger the continued existence of the company in the short or medium term or significantly and sustainably impair its net assets, financial position and results of operations.

The business model of HDI Global Specialty of working with underwriting agencies and claims administrators provides for extensive outsourcing. Furthermore, activities are outsourced in order to generate synergies within the Talanx Group. Guidelines amended to this end were adopted and appropriate processes have been established. HGS outsources three important functions.

The Executive Board commissioned the Risk Committee and the key function holders to carry out the evaluation of the system of governance. The Risk Committee and the key function holders arrived at the conclusion that the system of governance at HDI Global Specialty is consistent with the nature, scope and complexity of the risks inherent in their business activities.

The individual elements of the system of governance at HDI Global Specialty are explained in Section B.


C. Risk Profile

HDI Global Specialty assumes a broad variety of risks in the course of its business activities. These risks are deliberately taken and actively managed. Specifically, these risks are underwriting risks in indemnity and casualty insurance, capital market risks, liquidity risks and bad debt risks. In addition, business operations also involve operational, strategic and reputational risks. We de-scribe the cause of these risks and how we deal with them in Section C. Moreover, we explain how we deal with potential future risks (emerging risks).

HDI Global Specialty quantifies risks using the internal capital model. HDI Global Specialty is obliged to use the Solvency II standard formula for the purpose of calculating Solvency Capital Requirements. The Solvency Capital Requirement at the reporting date of 31 December 2019 is shown in the following table.

Solvency Capital Requirement according to the standard formula – breakdown according to risk category Values in EUR thousand

Solvency Capital Requirement 2019 2018 Underwriting risk – Non-Life primary insurance and reinsurance 86,061 67,446 Underwriting risk – Health primary insurance and reinsurance 11,031 4,182 Market risk 68,201 63,525 Counterparty credit risk 64,297 61,488 Diversification 63,141 52,120 Basic total risk 166,448 144,522 Operational risk 49,935 43,356 Total risk (before taxes) 216,383 187,878 Deferred tax 6,490 12,156 Total risk (after taxes) 209,893 175,722

The increase in the underwriting risk (Non-Life insurance and reinsurance) is attributable above all to strong premium growth. An increased market risk ensues due to the expansion of business.

Apart from the listed developments, there were no significant changes to the risk profile.

D. Valuation for Solvency Purposes

For the purpose of calculating eligible own funds, HDI Global Specialty values the assets and liabilities according to the provisions of Sections 74 et seq. of the German Insurance Supervision Act (VAG).

Valuation for solvency purposes is generally based on the fair value (market value). To the extent IFRS values appropriately reflect the fair value, these values are applied.

Technical Provisions according to Solvency II differ significantly from the concept of provisions under the German Commercial Code (HGB) both in terms of the structure and in terms of the calculations; cf. Section D.2.

HDI Global Specialty does not currently use any adjustments to the yield curves required by the EIOPA and no transitional measures pursuant to Sections 80, 82, 351 and 352 VAG.

There were no material changes in the reporting period.


E. Capital Management

HDI Global Specialty aims at maintaining a Solvency Ratio of at least 120% at all times and therefore exceeds the regulatory requirements of 100%. In addition, a threshold value of 140% is defined. If the Solvency Ratio drops below the threshold value, HDI Global Specialty will either consider measures to strengthen its own funds or reduce its risk exposure or both.

The Solvency Ratio is continuously monitored. Its change is taken into account in planning pro-cesses and a possible change of the Solvency Ratio, as may be caused by major transactions is examined in advance. In the financial year 2019, the Solvency Ratio was significantly above the 140% threshold at all times. Further details for determining the Solvency Ratio can be found in Section E.

Own funds comprise basic own funds, which consist of the excess of assets over liabilities and the subordinated loans. Supplementary own funds are not used.

HDI Global Specialty’s own funds increased overall in the reporting period. The highest quality level (tier 1) accounts for the overwhelming share of the total eligible own funds. The remaining own funds are held by HDI Global Specialty in the subordinated loans, which are classified as tier 2.

The total amount of the Solvency Capital Requirement, which was calculated according to the Standard Formula, increases by 19.4% in the reporting period. Various effects can be observed in the individual risk categories, which are explained in Chapter E.

HDI Global Specialty uses the standard formula for calculating the Solvency Capital Requirement. The internal model is used in numerous corporate control and decision-making processes. The future development of the SCR and MCR is forecast at regular intervals as part of the planning process.

Apart from the listed developments, there were no significant changes in capital management.


Information on the Nature and Impacts of the COVID-19 Pandemic on HDI Global Spe-cialty

In accordance with regulatory requirements, this report relates primarily to the developments in the financial year 2019. Since the beginning of 2020, a new infectious disease COVID-19 has appeared, which has been classified as a pandemic by the World Health Organization.

The COVID-19 pandemic could lead to economic disruption that can also have a negative impact on our customers and business partners, as well as the Talanx Group as a whole.

HDI Global Specialty supports the measures of the government authorities to reduce the number of COVID-19 infections and slow the spread of the virus. We are very aware of our responsibility towards our customers and partners and know that a reliable partnership is of crucial importance – especially in difficult times of crisis like these.

We have implemented corresponding business continuity measures that allow us to maintain our business operations even in the current situation. For example, many of our locations around the world are currently working remotely, either fully or partially.

On the claims side we currently expect a manageable additional claims burden. Pandemic-related incidents are generally not covered by insurance in the area of property insurance. Nevertheless, we are exposed, for example, to event cancellations, D&O or, to a small extent, plant closures. However, lower economic activity also reduces exposure, as is becoming particularly evident in the aviation line of business. HDI Global Specialty is constantly analysing the situation in order to identify the potential claims burden for the company at an early stage. We take into account the duration of the implementation of the containment measures, the overall economic developments in various countries and emerging case law with regard to our terms and conditions, among other aspects.

Losses in value on the financial markets also affect the assets we hold. At the same time, the increasing uncertainty about future developments also increases the risk. We counter this risk through our conservative capital investment policy and strict asset-liability management.

Currently and until further notice, forecasts are subject to great uncertainty and depend on the further course of the crisis and the effectiveness and efficiency of the countermeasures.

This report contains information on the Solvency Capital Requirement and own funds as of 31 De-cember 2019.

The sensitivities of these key figures with respect to significant external effects can be found in Chapter C.2 Market Risk.

Between 1 January 2020 and the publication of this report, the individual macro-economic indica-tors have undergone significant negative developments in some cases. The stock markets have collapsed across the board and the interest rates associated with German government bonds have fallen again, for example. In addition, a significant widening of spreads can be seen. All of these effects are expected to negatively affect the eligible own funds and increase the SCR.

Despite these negative effects, which might lead to a decline in the reported ratios, we expect the Solvency Ratio to be above our threshold value of 140%.


A. Business and Performance A.1 Business

A.1.1 Business model

HDI Global Specialty (formerly International Insurance Company of Hannover SE) generated a gross premium volume of around EUR 1,426,500 thousand in the 2019 calendar year, which is well above the previous year's level of EUR 946,760 thousand. We conduct our business in the market segment of Non-Life primary insurance and reinsurance.

We write single risk business, but also cooperate with managing general agencies (underwriting agents). Apart from our headquarters in Hannover, we write business in our branches in London (UK), Stockholm (Sweden), Sydney (Australia) and Toronto (Canada). Our branch in Milan (Italy) has also been underwriting new business again since 1 July 2019. The focus of our strategy tends to be on short-term business. Moreover, we also offer specialist cover in niche areas. All our business activities focus on being the best option, to the extent possible, for our business partners when choosing the primary insurance partner. That is why we focus on the customer and his concerns.

We achieve competitive advantages for the benefit of our customers and shareholders by oper-ating our insurance business with lower administrative costs than our competitors. In this way, we want to generate above-average earnings, on the one hand, and can offer our customers primary insurance cover at competitive conditions, on the other hand.

We balance risks effectively through the broad diversification of our portfolio. Here, we ensure that the various risks are not fully correlated across countries.

We manage HDI Global Specialty on the basis of a clearly defined risk appetite to exploit business opportunities while safeguarding our risk-bearing capacity in the long term.

In addition to our core business of primary insurance, we carry on reinsurance business in se-lected market segments and niches.

In the Non-Life primary insurance and reinsurance market segment, we see ourselves as a relia-ble, flexible and innovative partner. Effective cycle management and outstanding risk manage-ment are key elements of our competitive positioning.

A.1.2 Results of operations and major business transactions

In the 2019 financial year, the markets hardened such that we were able to profit from rising rates in several segments and seize opportunities for an overall profitable insurance business. Overall, we applied a risk-adequate and selective underwriting policy. Fortunately, we were able to clearly increase the premium income compared with the previous year.

The gross premium volume in the financial year amounted to EUR 1,426,500 thousand and, at 50.7%, is significantly higher than the level of the previous year (EUR 946,760 thousand). The direct insurance business continues to account for the overwhelming share of EUR 1,315,100 thousand (previous year: EUR 850,500 thousand). To supplement our business we also assumed reinsurance business to a small extent. For the assumed reinsurance business we recorded gross premiums amounting to EUR 111,400 thousand (previous year: EUR 96,200 thousand).


The continued disproportionate increase in business conducted from Germany caused the share of the international branches to fall to 78.2% (previous year: 79.1%). These achieved a total pre-mium volume of EUR 1,115,600 thousand (previous year: EUR 748,400 thousand). Therefore, they continue to represent a decisive share in the gross premium income and thereby reflect the international orientation of the Company.

During the financial year 2019, we underwrote premiums amounting to EUR 565,000 thousand (previous year: EUR 373,300 thousand) through the London branch. To achieve strong premium growth in line with our strategy, both new business opportunities were used and business with existing customers was further expanded. The Stockholm branch underwrote gross premiums of EUR 311,800 thousand in the financial year 2019 (previous year: EUR 230,900 thousand) and is therefore further expanding its market position. As in previous years, we were able to significantly expand our business at the Hannover location and registered gross premiums of EUR 310,900 thousand (previous year: EUR 198,300 thousand). This also reflects the transfer of business from HDI Global SE as agreed in the context of the joint venture. The pleasing develop-ment of the previous year also continued for our Sydney location in the financial year 2019, as reflected in particular in a significant increase in the gross premiums written from EUR 81,400 thousand to EUR 138,300 thousand. Our Canadian branch with its registered office in Toronto also achieved dynamic growth in gross premiums written to EUR 98,400 thousand (previous year: EUR 62,900 thousand). Our branch in Italy underwrote new business with a pre-mium volume of EUR 2,100 thousand in this reporting year.

During the reporting year, we continued to cede a large part of our business to the Hannover Re Group. Following the reorganisation of the specialty business, our Company also reinsured part of the business within the HDI Group in 2019. In the future, this share will gradually increase. In addition, we also use external reinsurance to a minor extent to optimally manage our risks. The gross earned premiums amounted to EUR 1,219,400 thousand (previous year: EUR 895,600 thousand) and the premiums earned for own account to EUR 97,300 thousand (previous year: EUR 78,900 thousand).

A higher number of major loss events led to a noticeable increase of the balance sheet loss ratio (gross) to 82.0% compared to the previous year’s 65.6%. The gross expenses for insurance claims amount to EUR 1,000,200 thousand (previous year: EUR 587,600 thousand).

Gross expenses for insurance operations reflects the continuing high level of competition, as well as the sharp increase in the business volume, and amount to EUR 381,400 thousand (previous year: EUR 275,300 thousand) or 31.3% (previous year: 30.7%).

The combined ratio (gross) stands at 113.3% (previous year: 96.4%).

In accordance with the statutory regulations, we have allocated an amount of EUR 11,900 thou-sand (previous year: EUR 12,300 thousand) to the equalisation reserve and similar provisions. The balance sheet value of the equalisation reserve and similar provisions therefore amounts to EUR 34,400 thousand (previous year: EUR 22,500 thousand). To the extent necessary, we sup-plemented the observation period on which the calculation of the equalisation reserve is based, by the loss ratios from the tables published by the German Federal Financial Supervisory Author-ity (BaFin) for the insurance industry.

Due to the positive result from reinsurance, we achieved an underwriting result for our own ac-count amounting to EUR 7,900 thousand (previous year: EUR -4,500 thousand) in the financial year 2019.

The current investment income in the reporting year amounted to EUR 5,339 thousand (previous year: EUR 4,479 thousand) and is attributable in the amount of EUR 5,339 thousand (previous


year: EUR 4,438 thousand), to current interest income from bearer bonds and other fixed-interest securities.

The result from the disposal of investments amounted to EUR 864 thousand (previous year: EUR 8 thousand) and comprised the profits from the disposal of investments amounting to EUR 1,008 thousand (previous year: EUR 340 thousand) and losses from the disposal of invest-ments amounting to EUR 144 thousand (previous year: EUR 771 thousand). The disposal result relates exclusively to disposals of bearer bonds and other fixed-interest securities.

Depreciation on investments amounted to EUR 1,098 thousand (previous year: EUR 1,204 thou-sand) and relates to bearer bonds and other fixed-interest securities, which were recognised ac-cording to the strict lowest value principle. Appreciation on investments for which write-downs were made in the previous year amount to EUR 649 thousand (previous year: EUR 337 thousand).

The management of investments during the financial year caused expenses of EUR 583 thou-sand (previous year: EUR 586 thousand). The total capital investment income amounted to EUR 5,171 thousand (previous year: EUR 2,595 thousand).

The other result consists of other income of EUR 21,325 thousand (previous year: EUR 11,223 thousand) and other expenses of EUR 44,684 thousand (previous year: EUR 27,247 thousand), resulting in a loss on balance of EUR 23,539 thousand (previous year: loss of EUR 16,024 thou-sand) as other result.

The financial year ended with a loss of EUR 12,818 thousand (previous year: loss of EUR 20,500 thousand). Moreover, we withdrew an amount of EUR 2,018 thousand from the capital reserve in accordance with Section 272 Paragraph 2 No. 4 of the German Commercial Code (HGB) and, hence, the balance sheet profit amounted to EUR 33,405 thousand (previous year: EUR 44,205 thousand).

A.1.3 Registered office, supervisor and auditor

HDI Global Specialty is a European company, i.e. Societas Europaea (SE), which has its regis-tered office at Roderbruchstraße 26, 30655 Hannover, Germany, and is entered in the Commer-cial Register of Hannover Local Court under the number HRB 211924. During the reporting year, 50.2% of the shares in HDI Global Specialty were held by HDI Global Specialty Holding GmbH, Hannover, while the remaining 49.8% were held by Hannover Rück SE, Hannover ("Hannover Re").

HDI Global Specialty is supervised by the German Federal Financial Supervisory Authority (BaFin), located in Graurheindorfer Strasse 108, 53117 Bonn, Germany, as the responsible su-pervisory authority.

The appointed auditor for HDI Global Specialty within the meaning of Section 318 of the German Commercial Code (HGB) is PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, lo-cated at Fuhrberger Strasse 5, 30625 Hannover.

A.1.4 Group structure

The present report refers to HDI Global Specialty as an individual company. Since HDI Global Specialty was integrated as a subsidiary in a group in the reporting period, we provide information on the group structure in this section.


Talanx Subsidiaries (Selection as of 31 December 2019)

The Group companies of the Talanx Group operate under various brands. These include HDI, with insurance products for private, corporate and industrial clients, Hannover Re, one of the world's leading reinsurers the bancassurance specialists neue leben, PB and TARGO Versicher-ungen, as well as Ampega, a fund provider and asset manager. The Group operates in the fields of property and accident primary insurance, personal primary insurance, property and personal reinsurance as well as the field of asset management. The Hanover-based Group operates in more than 150 countries.

A.2 Underwriting Performance

During the financial year 2019, HDI Global Specialty was able to achieve an underwriting result of EUR 97,316 thousand with net premiums earned of EUR 77,359 thousand and underwriting expenses of EUR 19,957 thousand before changes in the equalisation reserve and similar provi-sions.

Broken down by Solvency II lines of business, the (net) underwriting result as of 31 December 2019 is distributed as follows:


Underwriting result (net) – breakdown according to Solvency II lines of business in EUR thousand

The significant value drivers of the underwriting result in the financial year 2019 were, above all, the lines of business of general liability insurance (EUR 8,418 thousand) and other motor vehicle insurance (EUR 8,159 thousand).

According to geographic regions, the distribution of the (net) underwriting result is as follows:

Underwriting Result (net) – Breakdown according to Geographical Region in EUR thousand

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Measured against the overall underwriting result during the financial year 2019, the main value contributions of HDI Global Specialty were generated in the regions of Europe (EUR 15,849 thou-sand) and North America (EUR 6,523 thousand) . In contrast, Africa (EUR -2,757 thousand) de-livered a negative result.

A.3 Investment Performance

As an insurance company, we naturally focus our investment management activities primarily on preserving the value of our investments, and attach great importance to the stability of the result-ing returns. Hence, we base our investment portfolio on the principles of a balanced risk/return ratio and a broad level of diversification. With a low-risk mix overall, our investments reflect both the currency and maturity composition of our liabilities. Our portfolio mainly consists of fixed-in-terest securities and does not contain any investments in securitisations. Hence, our market risk mainly consists of credit, spread and exchange rate risks.

The development of our investments in the reporting period met with our expectations. Although the reporting year was once again a challenging one with interest rates remaining low and the global economy being characterised by various uncertainties and risks, we were spared payment defaults in our fixed-income portfolio. Ordinary investment income developed in the range of our expectations.

The result from the sale of investments is predominantly attributable to our normal business ac-tivities.

The following overview depicts the breakdown of the capital investment result achieved by HDI Global Specialty pursuant to the German Commercial Code (HGB) by individual asset classes according to Solvency II and the respective shares of income and expenses.

Investment Income

2019 2018

Values in EUR thousand Ordinary in-come

Gains on disposal Write-ups Ordinary in-

come Gains on disposal Write-ups

Holdings in related affiliates, incl. shareholdings

- 151 - - - -

Government bonds 2,766 666 232 2,653 246 268 Corporate bonds 2,122 313 416 1,566 93 69 Collective investments under-takings 272 - - 41 - -

Deposits, excluding cash equivalents 28 - - 219 - -

Total 5,188 979 648 4,479 339 337

Investment Expenses

2019 2018

Values in EUR thousand Write-downs Losses on dispos-als Write-downs Losses on dispos-

als Holdings in related affiliates, incl. shareholdings

- - - -

Government bonds 682 118 850 629


Corporate bonds 416 26 354 142 Total 1,098 144 1,204 771

HDI Global Specialty does not recognise any profits or losses directly in equity.

A.4 Performance of other activities

A.4.1 Other income and expenses

The following tables depict the other income and expenses. They are disclosed in line with the German Commercial Code (HGB).

Other Result

Values in EUR thousand 2019 2018 Other income 21,325 11,223 Other expenses 44,684 27,247 Other Result -23,539 -16,024

Other expenses predominantly include staff and material expenses which cannot be allocated to the functional areas as well as expenses affecting the company as a whole, such as remuneration for the audit of the annual financial statements. Other income is generated by the provision of services.

A.5 Any other information

There are no other disclosures that have a material effect on the business activities and perfor-mance of HGS.


B. System of Governance B.1 General information on the system of governance

B.1.1 Governance structure

The business organisation of HDI Global Specialty is adequately structured in line with the risk situation and the business model. The adequacy of the system of governance was reviewed and approved by the Risk Committee in collaboration with the key functions during the reporting period.

The administrative and supervisory body of HDI Global Specialty consists of the Supervisory Board and the Executive Board. For the purpose of supporting and delegating tasks and respon-sibilities, the Executive Board formed the Executive Committee, the Risk Committee, the Actuarial Committee and the Investment Committee. Therefore, the individual specialist departments pro-vide detailed reports mainly within the relevant committee. In contrast, the four key functions re-port directly to the Group Executive Board.

The following overview depicts the interactions of the main elements of the business organisation:

The organisation and interaction of the individual functions are decisive and appropriate to the risk profile for HDI Global Specialty’s internal risk management and control system. The first line of defence assumes risk management and risk responsibility at the level of the specialist depart-ments, whereas risk management in the second line of defence is performed by the Actuarial Function (cf. Chapter B.6), Compliance Function (cf. Chapter B.4.2) and Risk Management Func-tion (cf. Chapter B.3.1.3). The difference between the two lines is that the specialist departments take the primary risks and the three key functions monitor risks across the divisions. In the third line of defence, the Internal Audit function performs process-independent monitoring as instructed by the Executive Board.

All functions are closely interlinked and the roles, tasks and reporting channels are clearly defined in the sense of the so-called three lines of defence. One example of this is the involvement of the Executive Board in risk management, as on the one hand all members are also represented on


the Risk Committee, while on the other hand the Chief Risk Officer is a member of the Executive Board.

Supervisory Board

The Supervisory Board of HDI Global Specialty consists of three members. In the last reporting period, the Supervisory Board held three Supervisory Board meetings.

One of the main tasks of the Supervisory Board is to provide advice to the Executive Board of HDI Global Specialty regarding the management of the company and to supervise its manage-ment activities. Moreover, monitoring tasks include reviewing the accounting process, the effec-tiveness of the Internal Control System, the risk management as well as the internal audit system. Another field of activity of the Supervisory Board is the monitoring of the audit of the annual finan-cial statements. The Supervisory Board not only reviews the annual financial statements, the management report and, if applicable, the proposal for the appropriation of profits, but also ap-points the auditor and submits the audit application.

Furthermore, the Supervisory Board has approval rights for certain measures and transactions of the Executive Board which have to be approved exclusively by the Supervisory Board. This in-cludes, for example, changes to the strategic principles, the adoption of annual earnings plans or the conclusion and/or termination of company agreements as well as significant cooperation agreements.

Executive Board

The Executive Board of HDI Global Specialty was composed of four members. As a rule, monthly ordinary Board meetings are held in each calendar year, which can be supplemented by extraor-dinary meetings as required.

The Executive Board members manage the company and bear responsibility jointly for the entire management of the business. Apart from overall responsibility, each member of the Executive Board is assigned a department for which he or she bears his or her own responsibility. This results in an obligation for each member to inform the other members of the Executive Board about important business transactions and developments in their respective area of responsibility. The distribution of tasks within the Executive Board is defined in the schedule of responsibilities of HDI Global Specialty as follows:

Chief Executive Officer Chief Financial Officer Chief Risk Officer Chief Marketing Officer Ralph Beutter Thomas Stöckl Andreas Bierschenk Richard Taylor

Underwriting (medium & long tail classes) Claims (claims processing) Human Resources Manage-ment (personnel) Internal Audit Representation towards Su-pervisory Board / General Meeting

Asset Management Facility Management Finance & Tax (Accounting) Financial Planning & Devel-opment (Controlling) Information Technology Data Management Technical Accounting Project Management

Compliance Legal Risk Management & Actu-arial Delegated Authority Con-trol Reinsurance (ceded rein-surance)

Managing Director UK branch Underwriting (short tail classes) Marketing & Distribution (incl. HDI Global Spe-cialty brand) Coordination and Inte-gration of HDI Network Product Development

The main tasks of the Executive Board include reporting to the Supervisory Board. To this end, the Supervisory Board is informed in writing about the business development and the risk situation


of the company. Moreover, the Group Executive Board is responsible for deciding on certain busi-ness transactions. The decision-making responsibilities result from the law, the Articles of Asso-ciation or the Procedure Rules of HDI Global Specialty and include, for example, the preparation and submission of the annual financial statements, the execution of resolutions of the General Meeting as well as the establishment of a monitoring system for the early identification of devel-opments that could jeopardise the existence of the company.

Committees of the Executive Board

The business policy of HDI Global Specialty includes the principle of the "delegation of responsi-bility" in order to delegate decision-making powers of the Executive Board to the lowest possible functional level. For this purpose, the Executive Board has established the Executive Committee, the Risk Committee, the Actuarial Committee and the Capital Investment Committee.

The main task of the Executive Committee is to support the Executive Board in the management of day-to-day operations. This committee also ensures that effective and clear reporting lines are established and adhered to within the business organisation. In order to achieve these goals throughout HDI Global Specialty, not only all four members of the Executive Board, but also the head of the branch in Stockholm is a member of the Executive Committee.

The Risk Committee advises the Executive Board on the implementation of risk-reducing measures which are in line with the business strategy and the business plan of HDI Global Spe-cialty. Moreover, the Risk Committee supports the Executive Board in ensuring the effective im-plementation of the risk management system and in performing the annual evaluation of the busi-ness organisation. And the Risk Committee deals with risk aspects in rules and guidelines.

The Actuarial Committee assists the Executive Board in determining appropriate reserves and reviewing the reserve calculation. Moreover, this Committee supports the Executive Board in specifying the reserves for major losses and reviewing the pricing strategy.

The Capital Investment Committee is responsible for the implementation of the current capital investment guideline and supports the Executive Board with questions regarding decisions on investments. Another task is the monitoring of the securities portfolio and reporting on its perfor-mance.

Key Functions

HDI Global Specialty has four key functions. These are the Compliance Function, the Risk Man-agement Function, the Actuarial Function and the Internal Audit Function. To be able to effectively perform their tasks, the key functions have been provided with adequate resources.

The key functions are directly accountable to the Executive Board and report both regularly and on an ad-hoc basis on their activities and internal assessments. Written guidelines assign the tasks to the key functions and, in this way, confer the necessary powers for the fulfilment of the requirements imposed. The operational independence of the key functions is ensured by means of the three lines of defence within the business organisation.

The relevant main tasks and responsibilities are described in more detail in Chapters B.3.1.3, B.4.2, B.5 and B.6.

Important Changes

In the reporting year, HDI Global Specialty focused on the conversion of the system of governance from a dualistic to a monistic system.

B.1.2 Remuneration policy


The remuneration strategy of HDI Global Specialty as a subsidiary of Talanx is aligned to the goal of sustained value development of the company and of the Group. The remuneration structure and the remuneration arrangements of HDI Global Specialty are integrated into the remuneration organisation of the Talanx Group.

B.1.2.1 Remuneration of the executive Board

The level and structure of the remuneration of the Executive Board at HDI Global Specialty are based on the size and activities of the company, its economic and financial situation, its success and future prospects, as well as the customary nature of the remuneration, taking into account the comparative environment (horizontal) and the remuneration structure which otherwise apply in the company and in the Group (vertical). Moreover, the remuneration is based on the duties of the respective Executive Board member, his or her personal performance and the performance of the Group Executive Board.

Aligned to these objectives, the remuneration system has two components: fixed salary/benefits in kind as well as variable remuneration. For structuring the variable remuneration, both positive and negative developments are considered. Overall, the remuneration is calculated such that it takes into account a sustainable corporate development, is in line with the market and is compet-itive. The remuneration model provides for a percentage distribution between fixed and variable remuneration if targets are met.

The performance-related remuneration (variable remuneration) depends on certain defined re-sults and the achievement of certain targets. The targets vary depending on the function of the relevant Executive Board member. The variable remuneration consists of a short-term variable compensation, the annual cash bonus and a long-term share-based remuneration, the so-called Share Award Programme. The remuneration is determined by the Supervisory Board.

B.1.2.2 Remuneration of the Supervisory Board

The members of the Supervisory Board are refunded the expenses incurred by them in performing their duties.

B.1.2.3 Staff and manager remuneration

The remuneration system in the management team below the Executive Board comprises a var-iable remuneration component in addition to the fixed annual salary. This variable remuneration consists of a short-term variable compensation, the annual cash bonus and a long-term share-based remuneration, the so-called Share Award Programme.

The Group Performance Bonus (GPB) also allows members of staff at Chief Manager, Senior Manager and Manager levels to participate in a variable remuneration system. The GPB is a remuneration model linked to the success of the Hannover Re Group, which was introduced in 2004 and has continued unchanged since the basis of calculation was modified in 2006.

For members of staff at the HDI Global Specialty branch in London below the management levels 2 and 3, the remuneration system consists of a short-term variable compensation in addition to the fixed annual salary. The bonus payment depends on the result of the branch and on the individual achievement of the staff's targets. Depending on the classification of the employee, the bonus payment amounts to a maximum of 20% to 60% of the basic salary.

Members of staff at the HDI Global Specialty branch in Stockholm below the management levels 2 and 3 are paid a fixed annual salary and have the opportunity to participate in a variable remu-neration system under the "Profit Sharing Scheme". The bonus payment is 40% dependent on the economic result of the Scandinavian branch as a whole and 60% dependent on the result of the division for which the member of staff is employed.


B.1.3 Key transactions with associated companies and related parties in the reporting period

HDI Global Specialty has not carried out any significant transactions with individuals who exercise a significant influence on the company or members of the Executive Board or Supervisory Board.

Hannover Re sold 50.22% of the shares in HDI Global Specialty to HDI Global SE with effect from 1 January 2019. The company name was changed to HDI Global Specialty SE with effect from 1 January 2019. In order to exploit synergies within the Talanx Group, HDI Global Specialty pur-chases services from Group companies, for example in the areas of information technology and asset investment and administration. A large part of the gross business is ceded within the Group to companies in Germany and abroad.

B.2 Fit and proper requirements

On 29 January 2020, the framework guideline of HDI Global Specialty for satisfying the Fit & Proper requirements was adopted by the Executive Board and replaces the previous frame-work guideline dated 29 January 2016.

B.2.1 Description of requirements

The professional qualification (fitness) of the individuals with key tasks is measured by an occu-pational qualification that is appropriate for the respective position as well as the knowledge and experience required for sound and prudent management and the fulfilment of the position. The appropriateness is assessed on the basis of the principle of proportionality and takes into account the company-specific risks along with the type and scope of the business operations. Specific "fitness" requirements need to be complied with, which result from the existing supervisory prac-tice for individuals who actually run the company and for members of the Supervisory Board. Collective "fitness" requirements are defined for mutual control. The requirements for the profes-sional qualifications of key function holders are closely linked to the specific nature of the respec-tive governance task.

Regarding their personal reliability (propriety), individuals with key tasks must be responsible and behave with integrity and carry out their activities in a conscientious manner and with due dili-gence. There must be no conflicts of interest and, prior to the appointment, the person must not have proven unreliable through criminal acts. There is no need to positively prove personal relia-bility. It will be assumed as long as no facts are discernible that give rise to assume unreliability. Unreliability will only be assumed if personal circumstances based on general life experience justify the assumption that they may impair the careful and proper performance of the function.

For HDI Global Specialty, regarding the group of individuals with key tasks, a distinction is made between persons who

• actually manage the company (Executive Board members, Executive Director), including chief representatives of an EU/EEA branch; and

• have other key tasks (Supervisory Board members, one of the key function holders includ-ing Compliance, Internal Audit, Risk Management, Actuarial, individuals who have signif-icant influence on corporate decisions).

These persons are required to demonstrate their professional qualifications in various fields under due consideration of their different roles:

• Training • Practical knowledge • Management experience


• Language skills • Knowledge with reference to the respective role • Key function task • Collective requirements • Necessary expertise

If key tasks are outsourced, general requirements for them are defined in the Outsourcing Guide-line. HDI Global Specialty ensures that those persons of the service provider that are responsible for the key task are sufficiently qualified and personally reliable. To this end, HDI Global Specialty appointed an Outsourcing Officer in compliance with the regulatory requirements, who is obliged to notify the supervisory authority as the person responsible for the respective key function in the company. The supervising Outsourcing Officer is responsible for the proper performance of the tasks connected with the outsourcing of the key task.

B.2.2 Evaluation procedures

The requirements and reporting processes vis-à-vis the supervisory authority correspond to the current standard processes based on the BaFin bulletins on professional suitability and reliability.

According to the framework guideline for fulfilling the Fit & Proper requirements, persons who actually run the company or have other key tasks are requested before their appointment for relevant positions to submit a detailed curriculum vitae, and a requirements profile is compiled which lists and describes the proof to be furnished of necessary qualifications. The framework guideline includes a checklist in its annex for reviewing the Fit & Proper requirements of these persons.

The requirement profile includes proof of the following minimum requirements:

Description of the position with key tasks: • Service catalogue (job description) • Decision-making and instruction powers • Extent of personnel responsibility

Professional qualification (general):

• Level of education (commercial or job-specific training) • University degree or professional standards. (for example, for auditors or actuaries) • Knowledge and understanding of the corporate strategy • Knowledge of the system of governance • Knowledge of foreign languages, at least English and, if possible, another foreign lan-

guage Professional qualification (depending on the position):

• Industry expertise • Knowledge and understanding of the business model • Ability to interpret accounting and underwriting figures • Knowledge and understanding of the regulatory framework conditions affecting the com-

pany • Expertise in personnel management, staff selection, succession planning

To assess the qualification for the allocation of tasks, a detailed curriculum vitae is requested before a position is filled and a requirements profile is specified, which contains proof of defined


minimum requirements. If parts of the requirement profile are not fulfilled when making a new appointment, a substantiation will be documented in writing. To ensure ongoing compliance with the relevant requirements, the requirements profile is reviewed every five years by the responsible organisational unit.

In case of major changes in the underlying parameters, compliance with the catalogue of require-ments is checked within the framework of the assessment that is carried out as and when required. A distinction is made between characteristics associated with the person and those associated with the position.

The audit and control processes are summarised in an overview, which contains the interval of the review of the requirements profile and the responsibility for auditing and notification regarding the individuals who actually run the company and the persons who have other key tasks.

B.3 Risk management system, including the own risk and solvency assess-ment (ORSA)

B.3.1 Risk management system, including risk management function

B.3.1.1 Strategy implementation

Our corporate strategy sets out the guiding principles that, across all businesses, ensure the re-alisation of our vision of a profitable, growing and diversified special lines insurer with efficient processes and a responsible organisation. We derive our risk strategy from the corporate strategy. The main strategic points of reference for our risk management are the following principles of the corporate strategy:

• We actively manage risks. • We provide adequate capital resources. • We focus on risk culture, corporate governance and compliance.

The risk strategy is the central element in our handling of opportunities and risks. It further spec-ifies the objectives of risk management and documents our understanding of risk. We have de-fined ten overriding principles in the risk strategy:

1. We comply with the risk appetite set by the Executive Board. 2. We integrate risk management into value-based management and allocate our capital

according to risk-based principles. 3. We promote an open risk culture and the transparency of the risk management system. 4. We support HDI Global SE in meeting the requirements of rating agencies. 5. We fulfil regulatory requirements. 6. We act under due consideration of materiality and proportionality. 7. We apply appropriate quantitative methods. 8. Through our organisational structure we ensure that the individual functions are kept sep-

arate from each other. 9. We use suitable qualitative methods. 10. We continuously develop ourselves in order to adequately address changes in our risk

profile. Our risk strategy identifies our core risks, risk-bearing capacity and risk tolerance. It is the central element in our handling of risks. We review the risk strategy, the risk register, the guidelines for managing operational and reputational risks, the limit and threshold system and the risk and cap-ital management guideline at least once a year. This ensures that our risk management system is up to date.


B.3.1.2 Risk capital

In the interest of its policyholders and shareholders, HDI Global Specialty ensures an appropriate relationship between risks and equity. Our quantitative risk management, based on our internal capital model, provides a uniform framework for the assessment and management of all risks affecting the Company and our capital position. As part of HDI Global Specialty’s risk manage-ment activities, compliance with regulatory solvency regulations is regularly monitored.

The internal capital model I of HDI Global Specialty is a stochastic corporate model covering all business areas of HDI Global Specialty. It takes into account all material risks affecting the de-velopment of equity. We have identified a number of risk factors for each of the various risk cate-gories, for which we define probability distributions. Risk factors include, for example, economic indicators such as interest rates, exchange rates and inflation indices, but also insurance-specific indicators like the number of natural catastrophes in a particular region and the insured damage amount per catastrophe. When determining the probability distributions for the risk factors, we make use of historical and publicly available data as well as internal data. Moreover, the process is complemented by the knowledge of internal and external experts.

Using the internal capital model, HDI Global Specialty calculates the required risk capital in terms of the Value at Risk (VaR) of the change in the economic value over a period of one year with a confidence level of 99.5%. This corresponds to the goal not to exceed the one-year probability of ruin of 0.5%. Complying with the regulatory reporting obligations, HDI Global Specialty regularly determines the capitalisation requirements according to the Solvency II standard formula. This includes the capital requirements for market risks, underwriting risks, bad debt risks and opera-tional risks. Internal capitalisation should always exceed 120% of the regulatory requirements.

B.3.1.3 Organisation of risk management and tasks of the Risk Management function

The risk management function consists of three main components: the Risk Committee, the Chief Risk Officer and the risk monitoring function.

Risk Committee

The tasks of the Risk Committee are derived from the procedure rules of the Risk Committee. Support for the Executive Board in all matters relating to risk management is one of the core activities. The decision-making scope of the Risk Committee lies within the risk propensity as defined by the Executive Board. Changes and – in all cases – increases with regard to the risk appetite require the approval of the Executive Board. The Risk Committee monitors the risk situ-ation of HDI Global Specialty. Other tasks include assessing the adequacy of the system of gov-ernance, developing recommendations and monitoring the implementation of risk-related measures.

Chief Risk Officer

The Chief Risk Officer heads up the independent risk monitoring function, is the Chairman of the Risk Committee and is a member of the Executive Board. The duties of the Chief Risk Officer include ensuring the framework conditions for an effective risk management system. Moreover, the Chief Risk Officer is involved in the key decision-making processes of HDI Global Specialty and informs the Risk Committee and the risk monitoring functions regarding relevant projects.


Risk monitoring function

The risk monitoring function coordinates, and is responsible for, the monitoring (identification, assessment, supervision and reporting) of all material risks and the regular coordination and ex-ecution of the Own Risk and Solvency Assessment (ORSA, cf. B.3.2). In addition, it develops and implements methods, standards and processes for risk assessment and risk monitoring.

The risk monitoring function performs its tasks for HDI Global Specialty in an objective and inde-pendent manner.

B.3.1.4 Key elements of our risk management system

Our risk strategy, the guideline for risk and capital management, the limit and threshold value system and the guidelines for the management of the reputational and operational risk relating to the major risks of HDI Global Specialty describe the elements of our risk management system. The risk management system is subject to a permanent cycle of planning, action, control and improvement. In particular, systematic risk identification, analysis, assessment, control and mon-itoring as well as risk reporting are of importance for the effectiveness of the overall system.

The guideline for risk and capital management describes, among other things, the tasks, rights and responsibilities, the organisational framework conditions and the risk control process. The regulations are derived from the corporate and risk strategy and also take into account the regu-latory requirements for risk management.

Risk communication and an open risk culture are important concerns of our risk management.

Risk bearing capacity concept

Determination of the risk-bearing capacity includes the determination of the overall risk coverage potential available and the calculation of how much of this should be used to cover all material risks. This is carried out in line with the specifications of the risk strategy and the definition of the risk appetite by the Executive Board. Our risk model is used to assess the individual risks that can be quantitatively assessed as well as the overall risk position. A system of limits and threshold values is in place to monitor material risks. In addition to other key figures of risk relevance, also parameters derived and determined from the risk-bearing capacity are included in this system. Compliance with the overall risk appetite is monitored on an ongoing basis by using the results of the standard formula and the internal capital model.

Risk identification

Regular risk identification is an essential information basis for monitoring risks. All identified risks are documented in the risk register, which contains all material risks. Risks are identified, for instance, in the form of qualitative assessments, interviews or scenario analyses. External find-ings, such as recognised industry know-how from relevant bodies or working groups, are also incorporated in the process. Risk identification is important to permanently keep our risk manage-ment up to date.

Risk analysis and assessment

Essentially, each risk identified and deemed significant is quantitatively assessed. Only risk types for which a quantitative risk measurement is currently not possible or difficult, are assessed qual-itatively, e.g. strategic risks, reputational risks or emerging risks. Qualitative assessments are made, for instance, by means of expert estimates. For the quantitative assessment of the main risks and of the overall risk position the internal capital model of HDI Global Specialty is applied, which is operated by the Risk Management function. The model takes into account the risk con-centration and risk diversification.


Risk management

The control of all material risks is the responsibility of the operational departments within their scopes of responsibility. The identified and analysed risks are either consciously accepted, avoided or reduced. The opportunity and risk ratio is taken into account when such decision is made by the business unit. Risk management is supported, for instance, by the requirements of the underwriting guidelines, the investment guideline and by defined limit and threshold values.

Risk monitoring

The task of the Risk Management function is to monitor all identified material risks. This includes, without limitation, monitoring of the implementation of the risk strategy and compliance with the defined limit and threshold values as well as of risk-relevant methods and processes. Another important task of risk monitoring is to determine whether the risk management measures have been implemented and whether the planned effect of the measures is sufficient.

Risk communication and risk culture

Risk management is firmly integrated into our operational processes. This is supported by trans-parent risk communication and an open approach to risks as part of our risk culture. The regular exchange of information between risk-controlling and risk-monitoring units is fundamental to the proper functioning of risk management.

Risk reporting

Our risk reporting provides systematic and timely information on all significant risks and their po-tential impact. The risk reporting function consists of regular risk reports regarding, for example the comprehensive risk situation and compliance with the parameters defined in the risk strategy. In addition to regular reporting, an integrated immediate reporting function regarding significant and short-term risks can be implemented as needed.

B.3.2 Own risk and solvency assessment (ORSA)

The annual ORSA process mainly consists of an analysis of current and emerging risks which could threaten the continued existence of HDI Global Specialty. The overall solvency needs are determined by various analyses and processes according to the risk situation and the business model of HDI Global Specialty. ORSA comprises the following process steps:

Figure 1: Annual ORSA process The results of these processes are documented by the operational departments and the key func-tions in the form of reports, and are submitted to the relevant bodies and committees. Manage-ment is therefore closely involved in the ORSA process. One example is the internal risk report, which is prepared by risk management on a quarterly basis and is first discussed and/or evaluated by the Risk Committee and then is subject to approval by the Chief Risk Officer and submitted to the Group Executive Board. Other examples are the Supervisory Board evaluating and approving


the business strategy, medium-term planning including scenario analysis and capital develop-ment planning as well as reinsurance purchasing, but also, for example, the risk strategy, under-writing guidelines, the limit and threshold value system and the standard formula report being evaluated by the Executive Board or the Executive Committee. This ensures that the ORSA pro-cess steps are appropriately integrated into the organisational and decision-making structure of HDI Global Specialty.

All work results from the above processes form the basis for the annual ORSA report, which is supervised and coordinated by Risk Management. In the last reporting year, the risk and solvency assessment from the period from December 2018 to November 2019 were evaluated in the ORSA report. The report was approved by the Executive Board in December 2019 and also communi-cated to the key Actuarial and Compliance functions.

HDI Global Specialty determines its solvency needs by applying the Solvency II standard formula. In the last reporting year, the internal model was used for internal management purposes. How-ever, it is intended to use the internal model as an approved solo model since the assumptions made in the standard formula provide a very conservative picture of the risk profile of HDI Global Specialty and do not adequately reflect all of the company's risks. Capital management is closely linked to the risk management system due to integration of the solvency ratios of the standard formula and the internal model into the limit and threshold system. The solvency ratios of the branches in Canada and Australia, which are calculated according to local supervisory law, are also provided with limits and thresholds. The figures are included in the internal risk report on a quarterly basis and, therefore, are also submitted to the Risk Committee.

B.4 Internal control system

B.4.1 Components of the internal control system

We conduct our business activities such that they always comply with all legal requirements. The Internal Control System (ICS) is an important sub-system that serves, for instance, to secure and protect existing assets, prevent and detect errors and irregularities and comply with laws and regulations. The core elements of the ICS of HDI Global Specialty are documented in a guideline, which creates a common understanding for a differentiated implementation of the necessary con-trols. Its ultimate goal is to consistently control and monitor the implementation of our business and risk strategy.

The guideline defines terms, regulates responsibilities and provides guidance on the description of controls. Moreover, it forms the basis for the implementation of the internal goals and the fulfil-ment of external requirements placed on HDI Global Specialty. The ICS consists of systematically structured organisational and technical measures and controls within the company. They include, for example:

• The four-eyes principle, • the separation of functions, • the documentation of the controls within the processes • as well as technical plausibility checks and access authorisations in the IT systems.

To work properly, the ICS requires the involvement of the management, executives and employ-ees at all levels. Financial reporting must comply with both the international and national account-ing standards and the regulatory requirements. To accomplish this, processes with integrated controls in the area of accounting and financial reporting ensure that the annual financial state-ments are prepared completely and correctly. With the help of a structure of differentiated criteria, control points and materiality thresholds we are able to identify and reduce the risk of material errors in the financial statements at an early stage.


B.4.2 Compliance function

Implementation of the compliance function

HDI Global Specialty has opted for a decentralised approach to implementing the Compliance function, i.e. the tasks of the Compliance function are not only performed by the Compliance department, but also by various other departments. Hence, the Compliance function is integrated in various areas and branches.

The Compliance function is free of any influences that could impair the objective, fair and inde-pendent execution of its tasks. The Compliance function is authorised to request access to rele-vant information at any time and to approach members of staff directly on compliance-relevant questions.

The Chief Compliance Officer is the holder of the key function of Compliance and reports directly to the Executive Board.

HDI Global Specialty has written down its compliance policy in a manual titled "Compliance Framework". This manual is reviewed for its relevance to the current situation and updated as and when required by the Chief Compliance Officer on a regularly basis, i.e. at least once a year, and on an occasional basis if new developments occur.

The only significant change to the compliance policy in the reporting period was the re-integration of compliance monitoring into the Compliance function. Up to and including 2018, the Compliance function had used the key Internal Audit function to carry out compliance monitoring activities and had had on-site checks carried out by it on behalf of the Compliance function. With the change of the outsourcing partner for the Internal Audit area, compliance monitoring was fully transferred back to the area of responsibility of the key function of Compliance in 2019.

On the basis of a risk-based assessment, HDI Global Specialty has identified the following topics to be of particular relevance to compliance and defined them as key compliance issues:

• Compliance with regulatory requirements • Compliance with foreign trade regulations and sanction regulations • Compliance with insurance regulations • Compliance with company law • Compliance with antitrust and competition regulations • Compliance with the code of conduct • Combating corruption/embezzlement/fraud • Compliance with data protection standards • Compliance with employment law regulations • Compliance with tax laws • Implementation of proper financial reporting

Tasks

The task of the Compliance function is to ensure compliance of HDI Global Specialty with the essential external regulations.

These key compliance issues are monitored by the Compliance function at HDI Global Specialty. The Compliance Department is not responsible for handling all compliance-relevant issues out-lined above. Responsibility for employment law was outsourced and therefore remained with the Human Resources Department at Hannover Re until 28 February 2019, then from 1 March 2019


on with the Human Resources Department at HDI Service AG; the Tax Department is responsible for tax law. Data protection is the responsibility of the company's Data Protection Officer. Moreo-ver, compliance with the financial reporting requirements is the responsibility of Finance and Ac-counting. The Legal Department is responsible for company law. Together, those departments that deal with issues of particular compliance relevance, form the Compliance function of HDI Global Specialty. Dealing with issues of particular compliance relevance by the departments form-ing the Compliance function, includes at least the following activities:

• Identification and assessment of risks associated with non-compliance with the legal and regulatory requirements (risk control)

• Assessment of the possible consequences of changes in the legal framework on the ac-tivities of the company (risk due changes of the legislation/early warning)

• Advice regarding compliance with the legal regulations applicable to the activity • Verification of the appropriateness of the implemented measures regarding compliance

with legal requirements (monitoring function)

The Chief Compliance Officer requests regularly (at least once a year) a risk overview from the departments dealing with issues of particular compliance relevance, indicating the risks identified for non-compliance and the measures to minimise these risks in those departments. This ensures that all issues dealt with within the Compliance function are monitored and dealt with.

The Chief Compliance Officer appointed for HDI Global Specialty is responsible for the following, without limitation:

The Chief Compliance Officer monitors changes to legal regulations and standards made by the legislator and the courts. He/she evaluates the relevance of these new developments and com-municates relevant innovations or changes to the respective departments and the Executive Board. Through ongoing monitoring, the Chief Compliance Officer and the members of staff of the other departments that make up the Compliance function contribute towards compliance with the legal and regulatory framework conditions by the members of the executive bodies (Executive Board and Supervisory Board) and the members of staff of HDI Global Specialty.

Upon request, the Chief Compliance Officer advises members of the Executive Board and mem-bers of staff of HDI Global Specialty on compliance issues.

Each year, the Chief Compliance Officer prepares a compliance plan for the following year. This plan is based on a risk analysis of the significant compliance risks identified. Also, for 2019, the Chief Compliance Officer generated a compliance plan together with the other departments form-ing the Compliance function. This plan defines the key activities scheduled for the compliance function in the subsequent year.

The Chief Compliance Officer reviews the compliance reports of the branches and generates quarterly compliance reports for the Executive Board of HDI Global Specialty, as well as an annual compliance report for Talanx. The report contains information on issues of compliance relevance, such as details of any major compliance violations, which have become known, as well as pro-posed or implemented measures to remedy them, current assessments of risks resulting from compliance and changes in the legislation, proposals for measures to limit compliance risks, etc.

Reporting channels

As the holder of the key Compliance function, the Chief Compliance Officer reports to the member of the Executive Board responsible for Compliance. Any severe compliance infringements are reported directly to the Group Executive Board.


Reports on major compliance incidents are submitted in the written, verbal or electronic form and, usually, verbal reports are subsequently confirmed in writing.

Depending on the severity of the incident, reporting may take the form of quarterly reports or ad hoc reports.

B.5 Internal audit function

Implementation of the internal audit function

The execution of the tasks of the HDI Global Specialty’s internal audit department was transferred by the holder of the key function, the Chairman of the Executive Board to Talanx AG, Group Audit Central Division (TX GA) and to Hannover Re SE, Group Auditing Division (HR GA) by means of outsourcing agreements. HR GA provides auditing services to the Executive Board of HDI Global Specialty for the functions outsourced by HDI Global Specialty to Hannover Re SE (in particular IT, business continuity management, sanction screening and facilities management).

The objectives of internal audit function are the sustained protection of operating assets against losses of all kinds, the promotion of the business and operating policy and the safeguarding of the company's continued existence. To this end, the internal audit department performs inde-pendent, autonomous and objective audits of all important business units, processes, procedures and systems in a risk-oriented manner in accordance with the principles of security, compliance and cost-effectiveness.

The auditing tasks are performed in line with the audit plan drawn up by internal audit and ap-proved by the Executive Board of the company. Within the framework of this audit plan, the audit function performs its work free from specialist instructions and reports its audit results and rec-ommendations directly to the Executive Board of HDI Global Specialty. Its independence and objectivity with regard to the activities for which it is responsible to review is guaranteed. This is because the outsourcing partners TX GA and HR GA are assigned exclusively auditing tasks. TX GA and HR GA are not involved in first or second line of defence tasks and responsibilities ac-cording to the Three-Lines-of-Defence concept. The heads of TX GA and HR GA also report to the Chairmen of the Executive Boards of Talanx AG and Hannover Re SE respectively.

One measure to ensure objectivity at the auditor level is the observance of waiting periods when employees from operational areas change to internal audit. Apart from the key internal audit func-tion, the holder does not exercise any other key function.

Task

The internal audit department has a full, unrestricted, active and passive right to information in order to perform its duties. The active right to information includes access to all business units, documents, assets and to discussion partners. The passive right to information ensures that in-ternal audit is integrated into the company's information flows that are relevant to it.

Unscheduled special audits required at short notice due to deficiencies that have become appar-ent can be carried out at any time. In order to be able to perform the monitoring function for all relevant divisions of the company in a systematic, targeted and efficient manner, the audit plan-ning process is comprehensive and prepared from the risk point of view. The following factors, among others, are taken into consideration as factors influencing risk:

Inherent risk of the audit fields Results of the last audit checks Legal and organisational changes regarding the audit fields and


Knowledge gained from participation in committee meetings and regular meetings with other governance functions.

Reporting channels

A report is prepared for each audit which provides the Executive Board and the audited area with the important information. With the report, corresponding implementation dates and persons re-sponsible for implementation are stipulated and agreed for the measures. Implementation is mon-itored, with the Executive Board delegating this operationally to the Audit Function.

Internal Audit's reporting system also includes quarterly and annual reports, which provide their recipients (including the Executive Board, Supervisory Board, Risk Management and the auditor) with information on the effectiveness of Internal Audit and the audit results. In the event of a particularly serious finding, there is an immediate reporting obligation to the Executive Board con-cerned. Depending on the risk content, the risk control function, actuarial and/or compliance func-tion is also informed.

In order to ensure the effectiveness of TX GA and HR GA, internal quality assurance measures and assessments by external auditors are carried out.

B.6 Actuarial function

Implementation of the actuarial function

The tasks of the actuarial function are centrally implemented at HDI Global Specialty and its tasks are performed by an organisational unit. This structure guarantees adequate actuarial knowledge in all processes concerned as well as independent monitoring. The calculation of the Solvency II Technical Provisions (hereinafter referred to as Technical Provisions/ TP) is performed centrally for all branches of HDI Global Specialty.

The tasks to be assigned to the actuarial function are coordinated by the responsible owner of the actuarial function. He/she acts autonomously and independently with regard to the perfor-mance of the tasks within the framework of the actuarial function requirements and has a direct reporting line to the Executive Board. When exercising his/her function, the holder of the actuarial function is supported by various activities and persons within Risk Management and the actuarial department.

Moreover, the two key functions, i.e. actuarial function and risk management, share a common understanding that a broad exchange of information and competent expert support for the respec-tive other function is useful to facilitate the fulfilment of the individual tasks and, in addition, en-hance HDI Global Specialty's goal of an efficient structure.

The actuarial function evaluates the underwriting and acceptance policy using internal guidelines, data and processes to measure the underwriting risk. Close contacts are maintained with the reinsurance unit regarding the assessment of reinsurance and the associated risks assumed. An additional contact is the department of Hannover Re, which coordinates the Hannover Re Group retrocessions and provides reinsurance placement services for HDI Global Specialty.

Tasks

The tasks of the actuarial function include, without limitation:

• Coordination and validation of the calculation of the TP • Ensuring the appropriateness of the methods and underlying models used as well as the

assumptions made


when calculating the TP, both for the solvency overview and for accounting purposes, and

when considering the risks associated with these methods, models and assumptions in the internal model

• Evaluation of the uncertainties inherent in the estimates made when evaluating the TP • Regular review and assessment of the underlying data in terms of sufficiency and quality • Regular comparison of the Best Estimated values with empirical values • Reconciliation of TP from local accounting standards to Solvency II • Communication with the auditor as part of the solvency overview audit • Recommendations for the improvement of the processes and models for calculating the

TP including data collection, if deficiencies are observable, as well as monitoring of ap-propriate measures to be implemented

• As part of the support for the risk management function, including: assistance for the internal model, in particular regarding underwriting risks (provision

and/or review of models, data, parameters) monitoring the reserve level within the framework of the limit and threshold value sys-

tem with regard to reserves (IFRS or German Commercial Code (HGB)) valuation/risk analysis of high-volume transactions and new business areas

• Preparation of a report of actuarial function, for example, on: tasks of the actuarial function, measures performed in the reporting period, methods, results and sensitivity analyses regarding the TP, comment on the underwriting and acceptance policy as well as assessment of reinsurance

• Involvement of expertise in the branches request and evaluation of additional information concerning the tasks of the actuarial

function, such as data quality and assumptions regarding the calculation of the TP.

Reporting channels

The responsible actuarial function holder, reports directly to the Executive Board at regular inter-vals by means of the actuarial function's report, which is to be drawn up annually. If necessary, ad hoc reports are also submitted to the Executive Board or enquiries are directed by the Execu-tive Board to the actuarial function holder responsible. These direct reporting lines ensure inde-pendence from other key functions and from the operational management.


B.7 Outsourcing

Description of the outsourcing policy

The business model of HDI Global Specialty provides for the outsourcing of activities to internal and external service providers. On the one hand, insurance activities are outsourced to managing general agencies, underwriting agents and claims managers, with whom HDI Global Specialty enters into a close partnership. On the other hand, HDI Global Specialty seeks to make use of synergies within the Talanx Group. In the reporting period this is reflected by the outsourcing of major insurance activities and one key function to Talanx AG and Hannover Re, as well as Am-pega Asset Management. Outsourcing within the Group yields a positive cost effect apart from high-quality execution of the work. The same applies to the outsourcing partners outside the Group, which generate insurance business for HDI Global Specialty in addition to the above as-pects and meet the legal requirements in legal expenses insurance.

Description of important outsourcings

As a result, HDI Global Specialty concluded a large number of outsourcing agreements, of which three were classified as "important". The "important" outsourcing agreements are subject to spe-cial requirements for the management of the outsourcing partner. The following important out-sourcings were made in the reporting period:

• Asset investment and asset management are outsourced within the Group to Ampega Asset Management GmbH, Germany

• Internal audit partially outsources within the Group to Talanx AG, Germany (primary) and to Hannover Re, Germany (supplementary)

• Claims settlement in legal expense insurance in Sweden is outsourced to Svedea Skadeserv-ice AB, Sweden.

B.8 Any other information

B.8.1 Evaluation of the appropriateness of the system of governance

In its decision on August 16, 2016, the Executive Board of HDI Global Specialty delegated the evaluation of the appropriateness of the system of governance to the Risk Committee. The Risk Committee members and the key function holders participate in the assessment of the appropri-ateness of the system of governance. The Risk Committee performs an assessment of the system of governance of HDI Global Specialty at least once a year.

The assessment performed by the Risk Committee on 18 February 2020 was approved by the Executive Board on 28 February 2020.

The Risk Committee concludes on the basis of the assessment that the system of governance of HDI Global Specialty is consistent with the nature, scale and complexity of the risks inherent in its business activities.


B.8.2 Other disclosures

In the reporting year, HDI Global Specialty conducted preparatory work for the conversion of the system of governance from a dualistic structure to a monistic one.

There are no other disclosures that have a significant influence on the system of governance.


C. Risk Profile HDI Global Specialty assumes a large amount of risks in the course of its business activities. These risks are consciously entered into, managed and monitored in order to take advantage of the associated opportunities. Currently, the greatest risk exposure for HDI Global Specialty is the reserving risk within the underwriting risk. The stipulations and decisions of the Executive Board concerning risk appetite are fundamental to the assumption of risks for HDI Global Specialty. These are based on the calculations of the risk-bearing capacity.

Within the framework of medium-term planning, we consider the development of the business over a planning horizon of five years. Apart from the baseline scenario, we also consider alterna-tive scenarios which, among other things, take into account a major drop in premium income, an increase in operational risks or possible major loss burdens and subsequent premium changes. Based on the assumptions of medium-term business planning, the risk profile develops in line with the expected business expansion. The targeted expansion of business activities results in capital requirements growing stronger than the available capital. If appropriate, shareholders take suitable measures to strengthen own funds. It should be noted that the capital requirement fore-cast is based on a variety of assumptions relating to future economic and business developments.

Large transactions are analysed with regards to their impact on the risk profile, the level of capi-talisation and the defined threshold values for the different risk categories. This allows us to en-sure that the risks develop in sync with our risk appetite.

External reinsurance, which is specifically used to hedge high or volatile exposures, is of particular importance in terms of risk appetite and risk mitigation. Extensive Group-internal reinsurance pro-tects the capital of HDI Global Specialty. This also ensures that HDI Global Specialty can benefit from rising prices following a market-changing event. The process of strategic placements for HDI Global Specialty and its branches is defined and monitored by the Executive Board.

Identified risks or product ideas may lead to insurance solutions, which need to be reviewed in terms of risk exposure by using a specific process, in particular for the additional operational risk that arise. In 2019, a “new products process” was carried out and also approved by the Executive Board.

C.1 Underwriting risk

C.1.1 Underwriting risk - Non-Life primary insurance and reinsurance

Risk management of Non-Life primary insurance and reinsurance has defined various overarch-ing guidelines for efficient risk management. They also include the extensive use of reinsurance to reduce volatility and protect capital. It is also important that the available risk capacities are always utilised on the basis of the risk management guidelines of HDI Global Specialty, and in close coordination with the business partners from the HDI Group, and that the assumption of risks is systematically controlled by means of the existing centralised and decentralised under-writing guidelines. Our conservative level of reserves is a decisive indicator for risk management.

Essentially, we distinguish between risks resulting from business operations in previous years (reserve risk) and risks resulting from business operations in the current year or in future years (price/premium risk). Diversification within Non-Life primary insurance and reinsurance is actively managed by allocating the cost of capital depending on the diversification contribution. A high diversification effect is achieved by underwriting business in different lines of business and re-gions with different business partners via various distribution channels. In addition, the active limitation of individual risks enhances the diversification effect. The risk capital at the 99.5% con-fidence level for the underwriting risks of Non-Life primary insurance and reinsurance is as follows:


Required risk capital for underwriting risks of Non-Life primary insurance and reinsurance according to the standard formula

Values in EUR thousand 2019 2018 Underwriting risk of Non-Life primary insurance and reinsurance 86,061 67,446 Underwriting risk of Health primary insurance and reinsurance 11,031 4,182

The increase in the risk capital is in line with the planned expansion of HDI Global Specialty in its target lines of business. Due to the broad base according to lines of business, distribution channel and regions, there is no particular concentration of the price and reserve risk.

C.1.1.1 Risks from natural hazards

A large share of the required risk capital for the premium risk (including disaster risk) is attributable to natural disaster risks.

Licensed, scientific simulation models are used to assess the important risks of disaster from natural hazards (in particular earthquakes, storms, bush fires and floods), which we supplement on the basis of the experience of our specialist departments. The monitoring of risks resulting from natural hazards is complemented by realistic extreme loss scenarios.

In the management of these natural hazard risks for HDI Global Specialty, the exposures of the wider HDI Group are also taken into account. As part of this process, the Executive Board of HDI Global Specialty determines the risk appetite for natural hazards once a year on the basis of the risk strategy. To this end, it determines the portion of the economic capital that is available to cover risks stemming from natural hazards. This is the essential basis for our underwriting policy in this segment. The HDI Group also takes into account a variety of scenarios and extreme sce-narios as part of its holistic risk management across all business fields, determining their impact on the portfolio and success variables, assessing them in comparison with the planned values and identifying alternative courses of action.

The Executive Board, the Risk Committee and the Non-Life Reinsurance Committee responsible for management are regularly informed about the degree of capacity utilisation. The limit and threshold value for the 200-year net total loss from natural disasters as well as its utilisation are as follows for HDI Global Specialty:

Limit and threshold value for the 200-year total loss as well as its utilisation of HDI Global Specialty Loss with reference to the underwriting result

Values in EUR thousand Limit 2018/2019

Threshold value

2018/2019 Actual value

(July 2019) Actual value

(July 2018)

All natural disaster risks

200-year total loss 27,000 24,300 22,470 13,200

HDI Global Specialty is particularly exposed to the natural hazards of bushfires in Australia, and hurricanes and earthquakes in the United States of America. In the area of man-made loss, the company underwrites peak risks in the energy and aviation sectors, but they are much lower than the cumulative risks from natural disasters.


C.1.2 Reserve risks

The reserve risk, i.e. the risk of under-reserving for losses and the resulting burden on the under-writing result, has high priority in our risk management. A conservative level of reserves is im-portant for us. Traditionally, our confidence level is high (>50%). To counteract the risk of under-reserving, we calculate our loss reserves on the basis of our own actuarial assessments and, if necessary, create additional reserves to those abandoned by our claims department, which has been partly outsourced to claims administrators. Liability claims have a significant influence on this reserve. The IBNR reserve is calculated differentiated according to risk classes and regions.

HDI Global Specialty uses statistical run-off triangles for monitoring purposes. They show how the provision has changed over time as a result of the payments made and the recalculation of the provision to be formed as at the respective balance sheet date. Their adequacy is actuarially monitored.

On an annual basis, quality assurance of our own actuarial calculations regarding the adequacy of the reserve amount is additionally performed by external actuarial and auditing companies.

HDI Global Specialty issues bank guarantees – so-called letters of credit (LoC) – to business partners from the United States of America to HDI Global SE. The amount of the bank guarantees is based on the total amount of premium transfers and provisions for claims payments. In the event that the bank guarantee is drawn, it is offset against outstanding payments. There is an administration-related time lag between the ongoing payments and adjustments to the level of the bank guarantees, which can result in exposure.

C.1.3 Risk mitigation techniques in the field of Non-Life primary insurance and reinsur-ance

C.1.3.1 Strategic aims and key figures

The strategic aims with regard to the placement of reinsurance are defined by the unit carrying out the placement and the responsible member of the Executive Board. The Group Executive Board monitors the placement of reinsurance, in particular the limits, premiums and contractual conditions. Moreover, the Reinsurance Department regularly reviews the effectiveness of the in-dividual reinsurance programmes. This is done by preparing relevant reports and evaluating their results. On this basis, corresponding placement suggestions are submitted to the Executive Board. The placement proposals take into account the volatility of the respective portfolio, the highly exposed natural disaster business and the results from the internal model of HDI Global Specialty.

In a loss event, HDI Global Specialty is relieved by its various proportional and non-proportional covers.

C.1.3.2 Reinsurance coverage at HDI Global Specialty

HDI Global Specialty reinsures almost the entire assumed business in the form of quota share reinsurance contracts with Group companies. For each portfolio, the major share of the under-written business is ceded to Hannover Re and HDI Re Ireland. Typically, the risks are ceded to the reinsurer as assumed. However, HDI Global Specialty usually receives a commission.

Parts of the assumed business of HDI Global Specialty are additionally protected by non-propor-tional covers. This applies, in particular, to the lines of business of motor vehicle insurance where partially unlimited insurance policies need to be issued, aviation where high limits are encountered as well, and property insurances which are particularly exposed to natural disasters.


The retrocession contracts placed by the Hannover Re Group also partially protect the business underwritten by HDI Global Specialty. In the case of a loss, HDI Global Specialty therefore re-ceives relief from, for example, the aviation and marine programme of the Hannover Re Group.

C.1.3.3 Reinsurance placement process

The Executive Board derives the risk budget for underwriting risks from the overall risk budget and sets it forth with binding effect in the limit and threshold value system. The utilisation of these limits is monitored with a traffic light system. On this basis, the risk appetite in actuarial practice is adequately specified in the underwriting guidelines. Then, reinsurance is arranged such that the risks on a net basis correspond to the requirements. Moreover, in view of the volatility of assumed business, stabilising re-insurance solutions are purchased on a case-by-case basis.

C.1.3.4 Bank guarantee

For cessions to reinsurers that only meet our security requirements to a limited extent, we agree clauses that grant HDI Global Specialty a bank guarantee in the amount of the receivables.

C.2 Market risk

The investments must be of a high quality to achieve the greatest possible security in terms of repayment and current interest payments under due consideration of the most attractive return possible. Therefore, HDI Global Specialty bases its portfolio with the principles of a balanced risk/return ratio and a broad level of diversification. Based on a low-risk investment mix, the in-vestments reflect both currencies and maturities of our liabilities. Market risks include equity, in-terest rate, currency, real estate, spread and credit risks. Our international insurance portfolio requires the company to hold securities in foreign currencies. Consequently, the exchange rate risk represents a significant part of the market risk.

The following table shows the risk capital at a confidence level of 99.5% for the market risks stemming from investments held by ourselves and by third parties.

Risk capital required for the market risks as calculated by using the standard formula Values in EUR thousand 2019 2018 Market risk 68,201 63,525

The market risk has grown, in particular due to the increase in the volume of business. In addition, other investments in the field of real estate and the acquisition of a shareholding contributed to the increase to the market risk.

To ensure that our investments retain their value, we continuously monitor compliance with a cross-portfolio early warning system based on a clearly defined traffic light system. Within the framework of the limit and threshold system, operational limits for the market risk are defined in the form of Asset Liability Matching Value at Risk (ALM VaR) and Credit Value at Risk (CVaR), as well as structural limits for asset classes. This system defines clear thresholds and escalation channels for the market value fluctuations and realisation gains from investments accumulated since the beginning of the year. They are clearly defined in line with our risk appetite and will lead to specified information and escalation paths if a corresponding market value development is exceeded.

We minimise interest rate and currency risks by matching payments from fixed-income securities as closely as possible with forecasted future payment obligations from our insurance contracts.

http://sapdm.hr-applprep.de/


In order to monitor the credit and concentration risks, the Credit Value at Risk (CVaR) is calculated at 99.5% across the entire portfolio and at the individual customer level. Risk-relevant information such as rating classifications and the seniority and maturity of capital investments are included within the calculation. The market price risk is managed using a market value-based asset/liability approach: the Asset Liability Matching Value at Risk (ALM VaR). The ALM VaR takes into account of interest rate change and currency risks and makes the effects of a duration gap on the risk situation of the capital investments transparent.

In addition to stochastic analyses, we perform stress tests. Here, the loss potentials are simulated for the market values and on the basis of extreme events having already occurred or being ficti-tious.

Scenarios of the fair value development of the major capital investment classes

Values in EUR thousand Scenario Inventory change on market value basis 2019 2018 Fixed-interest securities Increase in yields +50 basis points -3,277 -3,459

Increase in yields +100 basis points -6,493 -6,832 Decline in yields -50 basis points 3,338 3,552 Decline in yields -100 basis points 6,739 7,199

The scenarios illustrate the conservative and only a gradually changed investment strategy for HDI Global Specialty.

Further key risk management measures, in addition to the various stress tests, which estimate the loss potential under extreme market conditions, are sensitivity and duration analyses and our Asset Liability Management (ALM). The portfolio of fixed-interest securities is exposed to interest rate change risk. Falling market yields lead to increases in the market value and rising market yields to decreases in the market value of fixed-interest securities portfolio. In addition, there is the credit spread risk. The credit spread is the difference in interest rates between a high-risk bond and a risk-free bond with an identical maturity. Changes to these risk premiums observable in the market lead to market value changes for the corresponding securities analogous to changes to pure market yields.

Currency risks exist in particular when there is a currency imbalance between underwriting liabil-ities and assets. We reduce this risk by mostly matching the currency distribution between the assets and liabilities sides of the balance sheet. We regularly compare the liabilities per currency with the covering assets, and optimise currency coverage by reallocating investments. In this respect, we take into account ancillary conditions, such as different accounting requirements. Remaining currency surpluses are systematically quantified and monitored as part of the eco-nomic modelling.

Our investments include credit risks resulting from the risk of default (interest and/or redemption) or changes in the creditworthiness (rating reduction) of the issuers of securities. A broad level of diversification is just as critical as a creditworthiness assessment on the basis of quality criteria set out in the investment guidelines. We measure credit risks first by using the market-standard credit risk components, in particular the probability of default and the possible amount of loss, any collateral as well as the ranking of individual loans in terms of their effect, are taken into of con-sideration.

Subsequently, we assess the credit risks initially at the level of the individual securities (issues) and in further steps together at issuer level. To limit the counterparty default risk, we define dif-ferent limits at issuer or issue level as well as in the form of distinct rating ratios. Comprehensive risk reporting ensures prompt reporting to the functions entrusted with risk management.


HDI Global Specialty has issued commitments to real estate funds, which can be called up as capital as required.

Furthermore, HDI Global Specialty has paid assets into a vested account in order to ensure that these funds are accounted for when determining the solvency of the Canadian branch.

C.3 Credit risk

The credit risk or bad debt risk primarily consists of the risk of total or partial default by the coun-terparty and the associated payment default. As of 31 December 2019, the risk capital required for bad debts amounted to EUR 64,297 thousand with a confidence level of 99.5%, calculated according to the provisions of the standard formula.

Risk capital required for the credit risk as calculated by using the standard formula Values in EUR thousand 2019 2018 Credit risk 64,297 61,488

The increase in the credit risk is essentially attributable to the increased volume of reinsurance ceded to Hannover Re. This can be explained in turn by higher premiums from the acquisition business. As the vast majority of business accepted by us is reinsured, the bad debt risk in rein-surance is of particular significance to us. In order to keep it as low as possible, our reinsurers are carefully selected and continuously monitored from the point of view of creditworthiness. On the basis of this ongoing monitoring, the ceded reinsurance department decides, if appropriate, measures for the collateralisation of receivables. The risk management procedures used within the Group network support this process by setting cession limits at the Hannover Re and HDI Group level for the individual reinsurers participating in the reinsurance programmes and deter-mining the remaining free capacities for short-, medium- and long-term business. Depending on the type and the expected run-off period of the reinsured business, also internal and external expert assessments (e.g. market information from brokers) are used for the selection of reinsurers in addition to the minimum ratings set by the rating agencies Standard & Poor's and A. M. Best. Overall, reinsurance protects our capital, stabilises and optimises our results and permits us to further exploit market opportunities, e.g. following a major loss event. Regular visits to our rein-surers and the exchange with specialised reinsurance brokers not only give us a reliable market overview, but also enables us to quickly react to capacity changes.

HDI Global Specialty’s business model is designed to give the HDI Group access to profitable specialty insurance business. This is achieved through proportional levies on Talanx/ HDI Group companies, among others. HDI Global Specialty bears the corresponding credit risk in return.

Share of amounts recoverable from reinsurance contracts

Values in % 2019 2018 HDI/ Talanx Group 94.31 94.161

Apart from the considerable receivables from Group companies from the purchase of reinsurance capacities, HDI Global Specialty uses other Group companies to gain access to the market and, moreover, the company also forms part of the infrastructure of HDI/ Talanx, which is documented by numerous outsourcing agreements.

1 Only Hannover Re Group



In addition, credit risks also exist in our relationships with brokers, managing general agencies and claims administrators. Bad debt risks exist as a result of the possibility of a loss of the pre-mium paid by the policyholder to the broker or managing general agent until it is transferred. A loss of a claims payment can occur if the claims administrator does not transfer the claims pay-ment from HDI Global Specialty to the policyholder. We reduce these risks by, for example, by checking brokers, managing general agents and claims administrators against criteria, such as their professional liability insurance policy, payment history and proper performance of contract. In particular, the probability of a default of unrated counterparties is considered during quantifica-tion. As a result, the overall view contains rather smaller fluctuations with greater effects on the required capital.

In summary, the credit risks are continuously monitored and controlled within the framework of the limit and threshold value system.

C.4 Liquidity risk

We define liquidity risk as the risk of not being in a position to meet our financial obligations when they fall due or to achieve lower returns on investments. The liquidity risk consists of the refinanc-ing risk (cash and cash equivalents required could not be procured at all or only at an increased cost) and the market liquidity risk (financial market transactions can only be concluded at a worse than expected price due to a lack of market liquidity). Key elements of the liquidity management of our investments are, on the one hand, the management of the maturity structure of our invest-ments on the basis of the planned pay-out profiles from underwriting liabilities and, on the other hand, regular liquidity planning as well as the investment structure of our investments. Beyond the foreseeable payments, unexpected, extraordinarily high pay-outs as a result of a large loss event pose a liquidity risk. However, large loss events (large losses) in insurance business, are generally payable with a predictable lead time. To ensure daily liquidity, we hold a high share of highly creditworthy and highly liquid government bonds. We also maintain a sufficient level of rolling overnight and term deposits as well as bank balances available at any time. Moreover, we regularly receive liquid funds from ongoing business operations. Our receivables management ensures the collection of outstanding receivables, if any. This effectively reduces the liquidity risk.

The "total amount of Expected Profit Included in Future Premiums (EPIFP)" required under Article. 295 (Para 5) of the Delegated Directive (DVO) can be found in the disclosure form S.23.01.01, item R0790. We do not use this ratio for our liquidity management.

C.5 Operational risk

Operational risks include the risk of losses due to inadequate or faulty internal processes as well as staff-, system- or externally-related incidents. In contrast to underwriting risks (e.g. reserve risk), which we deliberately and carefully enter into in the course of our business activities, oper-ational risks are inseparably linked with our business activities. Hence, the focus is on risk avoid-ance and reduction.

Risk capital required for operational risk as calculated using the standard formula

Values in EUR thousand 2019 2018 Operational risk 49,935 43,356

The operational risk, measured according to the provisions of the Solvency II Standard Formula, is in line with the overall risk of the company. Any expansion of business operations is accompa-nied by a proportional change in operational risks.




With the help of self-assessments for operational risks, we determine our risk management sys-tem’s level of maturity, define areas for improvement and create the basis for quantification with the help of our internal capital model. The evaluation is performed, for example, by assessing the maturity level of the risk management function and determining possible loss events. The system enables us to prioritise operational risks and serves, as previously mentioned, to determine the capital commitment in our internal capital model, among others.

Within the whole framework of operational risks, we pay particular attention to business process risks (including data quality), compliance risks, outsourcing risks (including our distribution chan-nels), fraud risks, personnel risks, information and IT security risks and business interruption risks. Compliance risks, such as breaches of the General Data Protection Regulation and internal fraud risks, are the main operational risks.

Business process risks consist of the risk of inadequate or faulty internal processes which can occur, for example, as a result of inadequate process organisation. We apply a method to docu-ment the processes as a first step and, thereafter, to optimise them by means of a risk-based approach. This also ensures monitoring of these process risks. Together with the parties involved in the process, the process owner assesses the risks of the relevant processes and develops targeted measures for existing, identified risks. Here, data quality is a very critical success factor, in particular in risk management, since, for example, the validity of the results generated by the internal capital model is largely based on the data provided.

Compliance risks primarily consist of the risk of violations of standards and requirements which can result in legal action or official proceedings that can have a significant detrimental effect on the business activities of HDI Global Specialty, if they are not observed. Regulatory compliance, compliance with business principles, data protection and also antitrust and competition law com-pliance were defined as particularly r relevant compliance topics. Compliance risk includes tax and legal risks. With the help of a sanction-screening software, parts of the inventory, in particular at the time of the conclusion of a contract or a cash flow, are filtered by HDI Global Specialty for persons who are the subject of sanctions due to criminal or terrorist background. If such persons are discovered, appropriate measures are taken. Business partners are also subject to such checks. Responsibilities within the compliance function are allocated and documented for all lo-cations. Interfaces with risk management have been established. Regular compliance training programmes supplement the range of tools available.

Outsourcing risks arise from the outsourcing of functions, services and/or organisational units to third parties. In order to limit the risk, there are binding regulations which, for example, require a risk analysis to be conducted before any significant outsourcing. Within the framework of such analysis, among other things, includes which specific risks exist and whether outsourcing is at all possible. HDI Global Specialty uses Group-internal outsourcing to operate effectively within the Group. Moreover, HDI Global Specialty outsources a large number of standard insurance func-tions to underwriting agents, managing general agencies and claims managers as part of its Del-egated Authority business.

The functional and competitive capability of HDI Global Specialty is predominantly attributable to the competence and commitment of our members of staff. In order to reduce staff risks, we pay particular attention to the qualifications, experience and motivation of our staff and promote them through staff development and management work. Regular employee surveys and monitoring of, for example, fluctuation rates allow risks to be identified at an early stage and to create scope for action.

Fraud risks stem from the risk of a deliberate breach of laws or regulations by members of staff (internal fraud) and/or by external parties (external fraud). Elements of the Internal Control System and the line-independent audits conducted by the internal audit reduce such risks.


Information risks or IT security risks consist, among other things, of the risk of inadequate integrity, confidentiality or availability of systems and information. Examples of damage essential to HDI Global Specialty include damage resulting from the unauthorised disclosure of confidential infor-mation, the deliberate overloading of important IT systems or computer viruses. In view of the wide range of these risks, there are a diverse number of control and monitoring measures as well as organisational requirements, such as confidentiality agreements to be completed with service providers. Moreover, our members of staff are made aware of such safety risks through practical support, e.g. on the intranet, by means of training courses and an staff information campaign.

The primary objective in reducing the risks of business interruption is to return to normal operation as quickly as possible after a crisis, e.g. by implementing existing emergency plans. On the basis of internationally recognised standards, the decisive framework conditions were defined and also a crisis unit was formed to serve as a temporary body in the event of a crisis. This system is supplemented by regular exercises and tests. An information sheet is available on how to act in the event of a business interruption, which contains a concise summary of the information that is essential for all staff (such as information channels in the event of a crisis). Furthermore, regular risk reports are submitted to the Executive Board.

C.6 Other material risks

For HDI Global Specialty, other major risks mainly include future risks (emerging risks), strategic risks as well as reputational risks.

C.6.1 Emerging risks

Emerging risks are characterised by the fact that their risk content cannot be reliably assessed, particularly with regard to our underwriting portfolio. Such risks gradually develop from weak sig-nals to clear trends. Therefore, early risk detection and subsequent assessment are of importance. For early detection, Hannover Re Group, with the participation of HDI Global Specialty, has de-veloped an efficient cross-company and cross-divisional process and ensured that it is linked to risk management. Its operational implementation is performed by a working group specially formed to this end and staffed with experts. The analyses of this working group are used across the Group to derive measures that may become necessary (e.g. contractual exclusions or the development of new insurance products). For example, risks associated with possible climate change are analysed within the framework of this working group. Global warming would not only have an impact on natural hazards, but also on human health, the global economy, the agricultural sector and much more. These problem areas can also have an impact on our contract portfolio, not only in terms of risks, but also opportunities, such as an increased demand for insurance products. Emerging risks include, without limitation, technology risks, shortage of raw materials, political risks and supply chain risks.

C.6.2 Strategic risks

Strategic risks arise from a possible disparity between the corporate strategy of HDI Global Spe-cialty and the constantly changing framework conditions of the environment. Such an imbalance may be caused, for example, by incorrect fundamental strategic decisions, the inconsistent im-plementation of the defined strategy and business plans, or the incorrect allocation of resources. We therefore regularly review our corporate strategy and adjust our processes and derived guide-lines as necessary. For the operational implementation of the strategic principles and objectives, we have a defined success criteria and key figures that are decisive for the achievement of the respective objectives. The planning, formulation and management of strategic targets and measures are regularly dealt with at closed meetings and Executive Board meetings, so that an overall view of the company and the strategic risks is ensured.

C.6.3 Reputational risks



Reputational risks relate to the risk that the trust of our customers, staff or also the public in our company may be damaged. This risk can significantly endanger the business fundamentals of HDI Global Specialty. A strong corporate reputation is therefore a fundamental prerequisite for our core business as an insurer. Reputational risks may arise from all business activities of HDI Global Specialty. Reputational damage can be caused, for instance, by a data loss that has be-come public or by a financial discrepancy due to an underwriting risk. HDI Global Specialty is also particularly exposed to the fact that, as an industrial insurer, the economic activities of our clients are subject to changes in public perception. In addition to the risk identification procedures already described, we rely on a large number of different procedures to minimise risk. These include ensuring that HDI Global Specialty is embedded in communication channels (e.g. guideline on crisis communication) of the HDI Group, which have been defined with binding effect. Furthermore, HDI Global Specialty is part of the HDI Group's professional public relations work and has at its disposal tried-and-tested processes for defined crisis scenarios, as well as our established busi-ness principles.

C.7 Any other information

There are no other disclosures that have a material effect on the risk profile.


D. Valuation for Solvency Purposes General Valuation Principles

The valuation of assets and liabilities according to Solvency II is based on economic and market-consistent principles and takes into account inherent risks.

According to this concept, assets and liabilities are valued as follows:

• Assets should be valued according to the amount for which they could be exchanged between knowledgeable, willing parties in an arm's length transaction.

• Liabilities should be valued according to the amount for which they could be transferred or settled between knowledgeable, willing parties in an arm's length transaction.

• The fair value of the money should be reflected, i.e. all cash flows have to be discounted. • For the valuation of liabilities, no value adjustments are made to take into account the

creditworthiness of the insurance company. • The valuation of assets and liabilities is based on the assumption that the company con-

tinues its business activities ("going concern assumption"). • Individual assets and liabilities are valued separately. • Concepts of materiality are applied. Missing or erroneous disclosures of items are re-

garded as significant if they could affect, individually or together, the economic decisions of users.

• Simplifications may be applied if the method is appropriate regarding the nature, extent and complexity of the inherent risk.

The basis for determining the market value of assets and liabilities, except for Technical Provi-sions, is the valuation according to the International Accounting Standards as adopted by the European Commission according to the Directive (EC) No 1606/2002. For example, IFRS 13 serves as a guideline for fair value measurement.

The value of Technical Provisions corresponds to the current amount that an insurance company would have to pay if its insurance and reinsurance obligations were immediately transferred to another insurance or reinsurance company. To this end, the Technical Provisions need to be calculated in a prudent, reliable, objective and market-consistent manner.

The value of the Technical Provisions corresponds, to a major extent, to the sum of a "Best Esti-mate" and a Risk Margin:

• The best estimate liability (BEL) is the present value of all underwriting cash flows. • The risk margin is calculated using a cost of capital approach.

Only a small part of the cash flows from underwriting liabilities can be replicated by financial mar-ket products.

Valuation methods used must always comply with Article 75 or Article 77 to 82 and Article 86 of the Directive 2009/138/EC.


Review of active markets

When valuing assets, a review is necessary whether a market is active or not. Only when a market is active, the market value for determining the market value of assets can be directly taken from these markets or derived from comparable assets traded there. If a market cannot be classified as active, the market value must be determined using valuation models. Whether a market can be regarded as an active market depends on the nature of the financial instruments and local markets. However, at HDI Global Specialty they are based on the following defined parameters.

• Business transactions occur with sufficient frequency and volume such that price infor-mation is always available

• The products traded on the market are homogeneous • It is always possible to find buyers and sellers willing to enter into a contract • Prices are available to the public

A market is no longer active if, due to the complete and longer-term withdrawal of buyers and/or sellers from the market, the market liquidity can no longer be determined. If the transactions de-monstrably result exclusively from forced transactions, forced liquidations or emergency sales, this is likewise indicative of an inactive market; the same applies to high bid-ask spreads.

If the market is demonstrably not an active market, we use valuation models for determining mar-ket values. Refer to Section D.4.

Note

Rounding differences of +/- one unit may occur in the following tables.

Solvency overview as of 31 December 2019

We disclose our solvency overview as of 31 December 2019 on the following pages.

In the headings of the sub-sections of "D.1 Assets" and "D.3 Other liabilities" we use the item designations from EIOPA for improved readability and clear allocation of the sub-sections to the respective items in the solvency overview.

Values in EUR thousand Item 2019 2018 Assets Intangible assets R0030 0 0 Deferred tax assets R0040 18,312 7,001 Property, plant and equipment held for own use R0060 5,753 982 Investments (other than assets held for index-linked and unit-linked contracts) R0070

339,253 255,803

Shares/investments in affiliates, including shareholdings R0090 6,207

135 Bonds R0130 301,006 238,357

Government bonds R0140 127,428 151,806 Corporate bonds R0150 173,578 86,551

Collective investments undertakings R0180 19,531 12,370 Deposits, excluding cash equivalents R0200 12,508 4,940

Amounts recoverable from reinsurance contracts of: R0270 1,741,151 1,376,207

Non-Life insurance excluding Health insurance R0290 1,730,715

1,364,993

Health insurance similar to Non-Life insurance R0300 10,436

11,214 Deposits retained on assumed reinsurance business R0350 2,050 0


Receivables from insurance companies and intermediaries R0360 0 115,060 Receivables from reinsurers R0370 0 71,889 Receivables (trade, not insurance) R0380 7,207 34,457 Cash and cash equivalents R0410 122,241 78,594

Any other assets, not shown elsewhere R0420 847

666 Total assets R0500 2,236,815 1,940,658

Values in EUR thousand Item 2019 2018 Liabilities

Technical Provisions – Non-Life insurance R0510

1,800,420

1,560,049 Technical Provisions – Non-Life insurance (excluding Health) R0520

1,789,879

1,547,318

Best Estimate R0540 1,770,655 1,532,486 Risk Margin R0550 19,224 14,832

Technical provisions – health insurance (similar to non-life insurance) R0560 10,541

12,731

Best Estimate R0580 10,228 12,475 Risk Margin R0590 313 257

Provisions other than Technical Provisions R0750 3,580

3,038 Pension benefit obligations R0760 2,298 1,713 Deposits retained on ceded reinsurance R0770 19,084 0 Deferred tax liabilities R0780 22,677 10,642

Financial liabilities other than debts owed to credit institutions R0810 4,912

209 Receivables / payables from insurance companies and interme-diaries R0820 0

23,447

Liabilities from reinsurers R0830 0 24,163 Payables (trade, not insurance) R0840 7,995 1,457 Subordinated liabilities R0850 85,463 82,730

Subordinated liabilities not in BOF R0870 85,463

82,730

Any other liabilities, not shown elsewhere R0880 35,364

10,258 Total liabilities R0900 1,981,792 1,717,705

Excess of assets over liabilities R1000

255,023 222,953


D.1 Assets

D.1.1 Intangible assets R0030

2019 2018

Values in EUR thousand

Solvency II value

Value in fi-nancial

statements as per the

German Commercial Code (HGB)

Solvency II value

Value in fi-nancial



Intangible assets 0 7,066 0 6,551

Pursuant to the German Commercial Code (HGB), intangible assets are valued in accordance with to the acquisition cost principle at the amortised cost or fair value according to the cost prin-ciple, whichever is lower, taking into account depreciation. The intangible assets amounting to EUR 7,066 thousand mainly comprise the renewal rights transferred by HDI Global.

According to the valuation rules under Solvency II, intangible assets were recognised as zero.

Differences in valuation:

Intangible assets are measured at zero, unless they can be sold individually and there is a fixed market price for them in an active market for identical or similar intangible assets.

D.1.2 Deferred tax assets R0040

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Deferred tax assets 18,312 0 7,001 0

If there are differences between the valuation bases of assets, liabilities and accrued and deferred items according to German GAAP under commercial law and their tax valuation bases that are expected to reverse in subsequent financial years, the tax relief resulting therefrom can be rec-ognised as deferred tax assets and a tax charge must be recognised as deferred tax liabilities in the commercial balance sheet. In the commercial balance sheet of HDI Global Specialty, no de-ferred tax assets are shown for an asset surplus as a result of exercising the option pursuant to Section 274 (2) of the German Commercial Code.

The recognition and measurement of deferred tax assets in the solvency overview are explained under item R0780"Deferred tax liabilities".

Deferred tax assets result primarily from temporary differences in the balance sheet items of in-tangible assets R0030 “Intangible assets”, R0510 “Technical Provisions – Non-Life insurance” and from any recoverable deferred tax assets from tax losses to be carried forward.


The increase in deferred tax assets amounting to EUR 11,312 thousand results from changes in temporary differences in the technical provisions – non-life insurance R0510, as well as from changes in the recoverable deferred tax assets from tax loss which are to be carried forward.

The deferred tax assets of EUR 4,630 thousand resulting from the tax loss which are carried for-ward for the UK branch are to be classified as fully recoverable. The deferred tax assets of the tax loss which are carried forward for the Home Office (Germany) in the amount of EUR 2,099 thousand can be fully offset against existing deferred tax liabilities in the same juris-diction and are therefore fully recoverable.

D.1.3 Property, plant and equipment held for own usage R0060

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Property, plant and equipment held for own us-age 5,753 882 982 1,112

Under German commercial law, operating and office equipment is basically valued at acquisition or production cost less scheduled and, if applicable, unscheduled depreciation. Low-value fixed assets are fully depreciated in the year of acquisition. With regards to operating and office equip-ment, the valuation in the solvency overview is considered to be identical to the valuation in the annual financial statements prepared according to German commercial law. For reasons of ma-teriality no revaluation is performed.

The decline in operating and office equipment compared with the previous year is due to sched-uled depreciation.

Difference in valuation:

The difference between the valuation bases in the solvency overview and the annual financial statements under German commercial law totalling EUR 4,871 thousand results from the appli-cation of IFRS 16, according to which rental agreements with a term of more than 12 months are to be recognised on the balance sheet.

D.1.4 Property (other than for own usage) R0080

HDI Global Specialty has not recognised any property in the balance sheet according to Sol-vency II or the German Commercial Code (HGB).

D.1.5 Shares/investments in affiliates, including shareholdings R0090

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Shares/investments in affiliates, including shareholdings 6,207 71,621 135 135


Under Solvency II, participations are basically valued at fair value. If market values are not avail-able, the "adjusted equity method" can be used to determine the value pursuant to Article 12 of Solvency II Directive.

Participations and shares/investments in related affiliates are recognised in the balance sheet pursuant to Section 255 (Para 1) of the German Commercial Code (HGB) at acquisition cost less depreciation as a lower fair value pursuant to Section 341 b (Para 1) Sentence 2 of the German Commercial Code (HGB) in conjunction with Section 253 (Para 3) Sentence 5 of the German Commercial Code (HGB).

The increase in the shares/investments in affiliates, including shareholdings, results exclusively from the acquisition of shares in affiliated companies.


The difference between the valuation bases in the solvency overview and the annual financial statements under German commercial law amounting to EUR 65,414 thousand mainly results from the application of the “adjusted equity method”. The investment value results from the recog-nition of the excess of assets over liabilities of the respective companies.

D.1.6 Shares R0100

HDI Global Specialty does not hold any shares and, therefore, has not recognised any values according to Solvency II in the balance sheet.

D.1.7 Bonds R0130

Government bonds, corporate bonds, structured products and secured bonds are essentially val-ued on the basis of listed prices in active markets. If no price quotations are publicly available or if the markets from which they originate are not classified as active, the items are valued theoret-ically.

Market quotations come from selected price service agencies, trading information systems or intermediaries (brokers) considered reliable. The potential sources of price information available are ranked by using a hierarchy. As a rule, quotations of price service agencies have the highest priority and those of intermediaries the lowest priority. There may be exceptions, e.g. for selected market segment/currency combinations.

A hierarchy of price types is used independently of the trading venue. The price type "bid" has the highest priority. If this price type is not available, the price types "traded" and "close" are used in the second and third place.

To the extent there are no market quotations for bonds without special structural features, the present value method is used as the valuation method; cf. "D.4 Alternative valuation methods".

All methods and specifications used are reviewed for their topicality and appropriateness at least once a year, and are adjusted if necessary.

In the past calendar year, the valuation system used to theoretically value bonds without publicly available price quotations was further developed. This further development neither resulted in a material change in the valuation models nor in a material change in the market values.

For 91% of the holdings reported here publicly available prices are available and 9% are valued according to the present value method.


D.1.7.1 Government bonds R0140

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Government bonds 127,428 124,746 151,806 149,759

Under Solvency II, investments from the following balance sheet items pursuant to the German Commercial Code (HGB) are allocated to this item:

• Bearer bonds and other fixed-interest securities; and • Promissory notes.

For valuation, refer to the detailed explanations in "D.1.7 R0130 – Bonds".


The difference between the Solvency II value of these holdings and their value in financial state-ments pursuant to the German Commercial Code (HGB) comes to an overall total of EUR 2,682 thousand as at the reporting date.

Here, EUR 1,761 thousand is attributable to hidden reserves from the different valuation bases and EUR 921 thousand to the different reporting of interest accruals. Pursuant Solvency II, this is added to the market value (gross value), whereas according to the German Commercial Code (HGB) the accrued interest is allocated to a balance sheet item outside of the capital investments – the accruals and deferrals.

D.1.7.2 Corporate bonds R0150

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Corporate bonds 173,578 171,034 86,551 85,549

Under Solvency II, investments from the following balance sheet items pursuant to the GCC are allocated to this item:

• Bearer bonds and other fixed-income securities • Registered bonds; and • Promissory notes and loans.

For valuation, refer to the detailed explanations under "D.1.7 R0130 – Bonds".

Differences in valuation


The difference between the Solvency II value of these holdings and their value in financial state-ments pursuant to the German Commercial Code (HGB) comes to an overall total of EUR 2,544 thousand as of the reporting date.

Here, EUR 1,310 thousand are attributable to hidden reserves from the different valuation bases and EUR 1,233 thousand to the different reporting of accrued interest. Pursuant to Solvency II, this is added to the market value (gross value), whereas according to the German Commercial Code (HGB) accrued interest is allocated to a balance sheet item outside of the capital invest-ments – the accruals and deferrals.

D.1.8 Collective Investments Undertakings R0180

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Collective investment undertakings - real estate funds 19,531 18,879 12,370 12,462

This item consists exclusively of shares in real estate funds. A real estate fund is a special fund managed by an investment company for investments in real estate. Valuation is based on the market price, which corresponds to the fair value under IFRS pursuant to IAS 39. Essentially, the fair values are determined using a German income approach.

Real estate funds are recognised in the balance sheet pursuant to Section 255 (Para 1) of the German Commercial Code (HGB) at acquisition cost less, in case of permanent impairment, any write-downs to a lower fair value pursuant to Section 341 b (Para 1) Sentence 2 HGB in conjunc-tion with Section 253 (3) Sentence 5 HGB.

D.1.9 Deposits, excluding cash equivalents R0200

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Deposits, excluding cash equivalents 12,507 12,500 4,940 4,936

Deposits are valued at their nominal values.

Difference in valuation difference

The difference between the Solvency II value of these holdings and their value in the financial statements pursuant to the German Commercial Code (HGB) comes to an overall total of EUR 7 thousand as at the reporting date.

The difference is attributable to the different reporting of the accrued interest. The accrued interest is allocated in accordance with the German Commercial Code (HGB), accrued items, while under Solvency II it is allocated to the respective balance sheet item (gross value).


D.1.10 Recoverables from reinsurance contracts R0270

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Indemnity insurance 1,741,151 2,353,731 1,376,207 1,859,299

The amounts recoverable from reinsurance contracts are valued under Solvency II in the same way as the valuation of the Best Estimate liability of the Technical Provisions, cf. Chapter D.2.1 (Non-Life reinsurance). To the extent a claim exists against the reinsurer, an adjustment is made for the reinsurer's default risk. This adjustment only applies if the recoverable amount (per coun-terparty) is positive.

According to the German Commercial Code (HGB), the amounts recoverable from reinsurance contracts are calculated on the basis of reinsurance contracts.


To a major extent, the valuation differences between the German Commercial Code (HGB) and Solvency II result from the discounting of expected future cash flows and the consideration of future premium cash flows under Solvency II.

The differences in valuation apply analogously to the differences in the valuation of the Best Es-timate liability; refer to Chapter "D.2.1.4 Reconciliation with other provisions" (Non-Life reinsur-ance).

D.1.11 Deposits retained on assumed reinsurance business R0350

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Deposits retained on assumed reinsurance business 2,050 2,050 0 1,965

The accounting for deposits retained on assumed reinsurance business is determined in accord-ance with Section 13 of the Insurance Enterprises Accounting Regulation (RechVersV). The net-ting of deposits retained on assumed reinsurance business with other liabilities to the ceding in-surer is prohibited.

Deposits retained on assumed reinsurance business and deposits retained on ceded reinsurance business are to be shown in the economic valuation. The netting of deposits retained on assumed reinsurance business with the Technical Provisions is not permitted.


There are no differences.


D.1.12 Receivables from insurance companies and intermediaries R0360

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Receivables from insurance companies and in-termediaries 0 613,677 115,060 420,652

Pursuant to Solvency II, receivables in respect of insurance companies and intermediaries are to be valued at the expected present value of future cash flows, i.e. they are discounted using the interest rate applicable under Solvency II. Moreover, the default risk of the counterparty must be considered in the valuation. The Delegated Directive (EU) 2015/2450 defines the following items: “Receivables from insurance companies and intermediaries” and “Receivables from reinsurers” as exclusively overdue cash flows. Accordingly, the amounts that are not overdue are to be taken into account in the Technical Provisions.

Receivables from insurance companies and intermediaries are recognised at their nominal amounts in line with the German Commercial Code (HGB).


According to Solvency II, the cash flows which are not overdue are included in the Technical Provisions and discounted there, resulting in a different valuation in the items R0360 and R0370 compared to the German Commercial Code (HGB).

D.1.13 Receivables from reinsurers R0370

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Receivables from reinsurers 0 5,922 71,889 43,401

Receivables from reinsurers are recognised at their nominal amounts according to the German Commercial Code (HGB). Valuation reserves have been formed for default risks.


The difference in valuation was explained under item R0360.


D.1.14 Receivables (trade, not insurance) R0380

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Receivables (trade, not insurance) 7,207 7,036 34,457 37,862

According to Solvency II, receivables are to be valued at the expected present value of future cash flows, i.e. they are discounted using the interest rate applicable under Solvency II. Moreover, the default risk of the counterparty must be considered in the valuation. Both are omitted for rea-sons of simplification.

Receivables are recognised at their nominal amount pursuant to the German Commercial Code (HGB). Allowances are made for default risks.

The decrease in receivables compared to the previous year is mainly due to the assumption of the deficit under commercial law by implementing the existing profit transfer agreement in the previous year. The profit transfer agreement was cancelled in the financial year 2019.


Receivables (trade, not insurance) are not revalued pursuant to Solvency II. The difference be-tween the items in the solvency overview and in the annual financial statements under commercial law results from reclassifications.

D.1.15 Cash and cash equivalents R0410

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Cash and cash equivalents 122,241 122,241 78,594 78,594

Cash and cash equivalents comprise deposits, current bank balances and cash on hand. Nominal amounts are recognised in accordance with both Solvency II and the German Commercial Code (HGB).




D.1.16 Any other assets, not shown elsewhere R0420

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Any other assets, not shown elsewhere 847 3,011 666 2,263

Other assets must be measured at fair value according to Solvency II. According to the German Commercial Code (HGB), they are measured at amortised cost.


The difference between the items in the solvency overview and in the annual financial statements under commercial law amounting to EUR 2,164 thousand mainly results from accrued interest on investments which must be shown separately in line with the German Commercial Code (HGB).

D.2 Technical provisions

The Technical Provisions (hereinafter referred to as Technical Provisions/TP) are calculated un-der Solvency II as the sum of the Best Estimate Liability (hereinafter referred to as Best Estimate Liability/BEL) and the Risk Margin (RM).

TP are valued using risk-free EIOPA yield curves. No matching or volatility adjustment is carried out. Temporary adjustments to the risk-free interest structure within the meaning of Article 308c of 2009/138/EC Directive are not carried out either; nor is a temporary deduction pursuant to Article 308d of the Directive 2009/138/EC applied.

The approach of calculating the TP as a whole is currently not applied.

Under Solvency II, all contracts must be valued over their entire terms (ultimate view regarding the contract limits).

Generally speaking, a contract limit is reached according to Solvency II if (at least) one of the following criteria applies:

• The policyholder/insurer is unilaterally entitled to terminate the contract at this time. • The insurer is unilaterally entitled at this time to refuse premiums paid under this contract. • The insurer is unilaterally entitled at this time to enforce price adjustments such that, sub-

sequently, the premiums adequately reflect the risks assumed.

The contract portfolio held by HDI Global Specialty predominantly consists of one-year insurance contracts.

Best Estimate Liability (BEL)

The calculation of the BEL is based on projections of the cash flows that represent all future incoming and outgoing payments. The cash flows include premiums, commission claims and claims, among other things. Best estimate assumptions are used in this respect. The costs include all contract-related costs as well as costs attributable to ongoing operations.


There are no financial options and guarantees (FOGs) in the HDI Global Specialty insurance and reinsurance business.

The projections are generated separately for incoming and outgoing business. Here, the same valuation principles, methods and assumptions are applied.

Risk Margin (RM)

For the calculation of the risk margin for the entire portfolio of insurance and reinsurance obliga-tions, HDI Global Specialty uses a cost of capital approach pursuant to Article 37 (Para 1) of Delegated Directive (EU) 2015/35.

A factor of 6% is applied as the capital cost rate, and the Solvency Capital Requirement (SCR) required under Solvency II serves as the required capital, which is calculated by HDI Global Spe-cialty using the standard formula and projected for the future. The allocation to the business fields reflects the respective contribution to the Solvency Capital Ratio (SCR) (Article 37).

D.2.1 Technical Provisions of indemnity insurance

D.2.1.1 Quantitative information on Technical Provisions

Net underwriting Technical Provisions of HDI Global Specialty by lines of business Values in EUR thousand, YE2019

Line of business BEL RM TP (YE2019)

TP (YE2018)

General liability insurance 72,895 10,429 83,324 90,336 Income protection insurance -208 307 99 1,518 Fire and other property insurance -19,602 2,520 -17,083 40,266 Motor third-party liability insurance 3,669 490 4,160 11,096 Credit and collateral insurance 13,521 788 14,309 4,717 Legal protection insurance -2,374 149 -2,225 852 Marine, aviation and transport insurance -25,683 4,335 -21,348 28,074 Other motor vehicle insurance -3,739 328 -3,411 4,246 Miscellaneous financial loss insurance 1,249 180 1,428 2,726 Other insurance 4 11 15 13

Total 39,731 19,537 59,269 183,843

The above table depicts an overview of HDI Global Specialty’s Technical Provisions. “Other in-surance" comprises the lines of occupation accident insurance, medical expenses insurance and assistance.

D.2.1.2 Valuation of the Technical Provisions of Non-Life Primary insurance and reinsurance

Bases

The company's business is broken down into homogeneous risk groups for the calculation of the BEL under Solvency II so that the type, scope and complexity of the business is appropriately considered.

Generally speaking, there are no differences between the individual lines of business regarding the Solvency II valuation approach and, hence, the following valuation methods apply to all lines of business.


Methods

The BEL valuation is based on an estimate of future cash flows. All incoming and outgoing pay-ments anticipated for the future from existing business need to be included under due considera-tion of their fair value. The BEL is shown broken down by premium and claims reserve.

The provision for premiums relates to loss events after the valuation date and, thus, includes all loss, premium, commission and cost payment flows that can be allocated to unearned business, under due consideration of their fair value.

In contrast, the claims provision relates to loss events until the valuation date and, thus, includes all loss, premium, commission and cost payment flows that can be allocated to earned business, under due consideration of their fair value.

The Solvency II calculations for determining all relevant cash flows for the premium and claims reserve represent Best Estimate value. The calculation of the BEL is initially made on a gross basis. The cash flows for premiums, commission, claims and costs are modelled separately. A complete view is adopted in the sense of the contractual relationships entered into, which projects all cash flows at their final status within the contractual limits. The result is the BEL as the sum of the discounted cash flows. The resulting BEL is aggregated from the contract level to the lines of business required under Solvency II.

The division into lines of business for Non-Life insurance obligations is as follows:

• Medical expenses insurance • Income protection insurance • Occupation accident insurance • Motor third-party liability insurance • Other motor vehicle insurance • Marine, aviation and transport insurance • Fire and other property insurance • General liability insurance • Credit and collateral insurance • Legal protection insurance • Emergency assistance • Miscellaneous financial losses

Assumptions

For the calculation of the BEL, settlement patterns and estimated ultimate loss ratios on the ho-mogeneous segments are used. They are determined using run-off triangles by means of recog-nised actuarial methods, which are generated from current and quality-assured data.

Then, the cash flows are discounted using the risk-free yield curve specified by EIOPA and are translated into the reporting currency at a fixed exchange rate on the reporting date.

Overall, the valuation principles, methods and assumptions used ensure that the determination of the BEL adequately reflects the nature, extent and complexity of the underlying risks.

Recoverables from reinsurance contracts

Generally speaking, the amounts recoverable from reinsurance contracts are valued in the same way as the (gross) underwriting provisions.


Recoverables from reinsurance: Values in EUR thousand

Values in EUR thousand Line of business BEL (YE2019) BEL (YE2018) General liability insurance 732,249 642,253 Income protection insurance 10,436 11,214 Fire and other property insurance 437,227 308,947 Motor third-party liability insurance 27,706 72,317 Credit and collateral insurance -12,840 12,715 Legal expenses insurance 17,467 150 Marine, aviation and transport insurance 460,423 297,106 Other motor vehicle insurance 56,652 18,536 Miscellaneous financial loss 11,660 12,892 Other insurance 170 77

Total 1,741,151 1,376,207

A new interpretative decision of the Federal Financial Supervisory Authority (BaFin) was pub-lished in the past financial year. The interpretative decision of 1 January 2019 relates to the val-uation of the amounts recoverable from reinsurance contracts and special purpose entities, and the handling of settlement receivables and liabilities as well as deposits retained and payable on assumed reinsurance business under Solvency II. As a consequence of the implementation, the Technical Provisions have fallen sharply. HDI Global Specialty offsets all receivables and liabili-ties in the Technical Provisions, since the portion of receivables and liabilities that are overdue is assessed as intangible. As a result of the interpretative decision, the deposits retained and pay-able on assumed reinsurance business are not shown separately in the Technical Provisions but on the Solvency II balance sheet.

The amounts recoverable from reinsurance contracts are adjusted for anticipated losses resulting from counterparty default. This adjustment is determined separately and is based on the assess-ment of the probability of default per counterparty – whether due to insolvency or in a legal case – as well as the resulting average loss in the event of default.

According to the German Commercial Code (HGB), the amounts recoverable from reinsurance contracts are calculated on the basis of reinsurance contracts. Allowances are made for default risks.

The differences between a valuation according to the German Commercial Code (HGB) and Sol-vency II apply analogously to the differences in the valuation of the Best Estimate Liability – see Section D.2.1.4.

D.2.1.3 Degree of uncertainty

The economic valuation of loss reserves involves a certain degree of uncertainty. It results from the fact that the actual payment dates of the future cash flows as well as the actual final loss amount are unknown and reinsurers may default. This uncertainty is regularly monitored by vari-ous assessments.

Apart from internal quality assurance and validation, external actuarial and auditing firms provide additional quality assurance and review services for the actuarial calculations used to determine the appropriateness of the loss reserve.

In the context of segmentation and acceptance, it is ensured on this basis that the economic value of the provisions is determined in a prudent, reliable and objective manner within the meaning of


Section 75 of the German Insurance Supervision Act (VAG). The nature and complexity of the insurance business and inherent reserve risks and uncertainties of data are taken into account.

In order to include any possible default of the reinsurers, an adjustment for the counterparty credit risk is determined based on the rating of the reinsurers.

The risk margin allocated to the different lines of business can be regarded as an indicator of the inherent uncertainty in the business.

The calculation of the risk margin involves uncertainty resulting from the value of the Solvency Capital Requirement and the projection of the future development of the Solvency Capital Re-quirement. The Solvency Capital Requirement is calculated using the standard formula. The as-sumptions on the projection of the future development of the Solvency Capital Requirement are coordinated within the company and subject to an external audit by the auditing company as part of the solvency overview.

D.2.1.4 Reconciliation with other provisions

This chapter depicts the reconciliation of the Technical Provisions before recoverables from rein-surance contracts from the German Commercial Code (HGB) pursuant to Solvency II as at 31 December 2019.

Significant revaluation effects

Values in EUR thousand 2019 2018 Net underwriting provisions for Non-Life reinsurance pursuant to the German Commercial Code (HGB) 328,388 260,300

Provisions for outstanding insurance claims under the German Commercial Code (HGB), incl. the equalisation reserve and simi-lar provisions 209,519 175,540 Premium transfers 118,819 84,760

Total revaluation effect from GCC to Solvency II -269,069 -76,457 Revaluation of equalisation reserve -34,369 -22,447 Revaluation to the economic final loss perspective -245,148 -61,182 Discounting of cash flows under Solvency II -9,090 -7,916 Risk margin approach under Solvency II 19,537 15,088

Technical Provisions for Non-Life reinsurance pursuant to Sol-vency II 59,269 183,843

Since the valuation methodology for Technical Provisions is identical for all lines of business, revaluation effects are not allocated to the Solvency II business fields.

Under Solvency II, the BEL valuation does not include safety margins due to the Best Estimate principle, whereas according to the German Commercial Code (HGB) they are implicitly included in the loss reserves due to the prudence principle. Likewise, Solvency II does not include the equalisation reserve, which serves as a Technical Provision according to the German Commercial Code (HGB) to stabilise the result by reconciliation of fluctuations over time.

Instead, a risk margin is formed under Solvency II. It serves to cover the costs of providing own funds in the amount of the future Solvency Capital Requirement required for covering the insur-ance obligations until the end of their term.

Furthermore, there may be differences in the valuation and accounting of contracts under Sol-vency II and the German Commercial Code (HGB) due to, for example, the different interpretation of the contract limits.


HDI Global Specialty has refrained from considering cash flows from insurance obligations having already been underwritten as of the valuation date but the liability period of which does not com-mence until after the valuation date. On the other hand, the realisation principle applies to the valuation of the Technical Provisions pursuant to the German Commercial Code (HGB), the real-isation principle applies whereby only profits already realised may be stated in the balance sheet. Hence, there is no temporal delimitation under Solvency II, such as that for premium transfers pursuant to the German Commercial Code (HGB).

Another material valuation difference is that under Solvency II the cash flows are discounted using a risk-free interest rate, whereas under the German Commercial Code (HGB) it is usually only pension reserves that are discounted.

D.3 Other liabilities

D.3.1 Other Technical Provisions R0730

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Other Technical Provisions 0 34,369 0 22,447

Other Technical Provisions under the German Commercial Code (HGB) include the equalisation reserve and similar provisions.

In the financial statements under commercial law, the equalisation reserve must be formed ac-cording to Section 341 of the German Commercial Code (HGB). Solvency II does not provide for the formation of an equalisation reserve. This results in a difference amounting to EUR 34,369 thousand in the other Technical Provisions.

D.3.2 Provisions other than Technical Provisions R0750

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Provisions other than Technical Provisions 3,580 3,756 3,038 9,306 The following items are shown under non-Technical Provisions in the solvency overview:

• Holiday and overtime pay • Bonus payments and anniversary benefits

In the solvency overview, the fair value is recognised as determined according to the provisions of IAS 37.


Under commercial law, other provisions are formed in the amount of the settlement amount re-quired on the basis of reasonable commercial judgement.


The difference in the Solvency II balance sheet and in the annual financial statements pursuant to commercial law to the amount of EUR 176 thousand is the result of the different discounting of share awards and anniversary provisions.

D.3.3 Pension benefit obligations R0760

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Pension benefit obligations 2,298 1,391 1,713 997

In the solvency overview, pension benefit obligations are valued analogously to IAS 19 "Employee Benefits" using the projected unit credit method, which is described in Chapter "D4. Alternative valuation methods".

According to the German Commercial Code (HGB), the pension benefit obligations are recog-nised at the level of the settlement amount required based on reasonable judgement. They are discounted at 2.71% using the average interest rate of the past ten years and with an assumed remaining term of 15 years, as published by Deutsche Bundesbank according to the Regulation on Discounting of Provisions (RückAbzinsVO). The pension provision is calculated using the pro-jected unit credit method. A salary trend of 2.50% and a pension trend of 1.74% are assumed. Fluctuation probabilities are determined separately depending on age and gender. The benefit adjustment due to profit participation from reinsurance policies was taken into account in the amount of 0.0%. The calculations are based on the 2018G mortality tables. Employee-financed pension commitments, the amount of which is determined exclusively by the fair value of a rein-surance claim, are measured pursuant to Section 253 Para 1 Sentence 3 of the German Com-mercial Code (HGB). For these commitments, the settlement amount corresponds to the fair value of the actuarial reserve plus profit participation. For securities-based employee-financed commit-ments, the settlement amount corresponds to the fair value of the security. In this context, claims under reinsurance policies were netted against the obligations as cover assets eligible for netting. The cover assets are recognised at fair value according to Section 253 Para 1 Sentence 4 of the German Commercial Code (HGB). They correspond to the actuarial reserve of the insurance contract with the calculation bases of the premium calculation plus the profit shares having been allocated already and, hence, the amortised cost.


The difference between the valuation bases in the solvency overview and in the annual financial statements under commercial law totalling EUR 907 thousand results, in particular, stems from the different interest rates used for discounting. Pursuant to Solvency II, a lower interest rate is applied, which leads to a higher valuation of the valued pension benefit obligations.


D.3.4 Deposits retained on ceded reinsurance R0770

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Deposits retained on ceded reinsurance 19,084 19,084 0 14,830

The accounting of deposits retained on ceded reinsurance is defined in accordance with Section 33 of the Insurance Enterprises Accounting Regulation (RechVersV). The netting of deposits re-tained on ceded reinsurance with other liabilities toward the reinsurer and receivables to the re-insurer is prohibited.

Deposits retained on assumed reinsurance business and deposits retained on ceded reinsurance business are to be shown in the economic valuation. The netting of deposits retained on ceded reinsurance with the Technical Provisions is not permitted.



D.3.5 Deferred tax liabilities R0780

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Deferred taxes 22,677 0 10,642 0

No deferred tax liabilities are recognised in the annual financial statements under commercial law of HDI Global Specialty due to an overall asset surplus.

The solvency overview shows a deferred tax liability of EUR 22,677 thousand. The deferred taxes shown in the solvency overview are essentially determined in two steps.

In the first step, deferred taxes are determined on the basis of the valuation differences between the IFRS balance sheet and the tax balance sheet. Deferred tax assets or deferred tax liabilities are recognised in the balance sheet according to IAS 12 (taxes on income). Deferred tax assets or liabilities arise to the extent asset or liability items are to be recognised at a lower or higher amount in the IFRS balance sheet compared to the tax balance sheet and these differences will be reversed in the future (temporary differences). As a rule, temporary differences result from valuation differences between the tax balance sheet and the IFRS balance sheet.

Moreover, deferred tax assets are recognised for tax losses which are to be carried forward and tax credits. Valuation allowances are recognised in respect of deferred tax assets as soon as it does no longer seem possible to realise the deferred tax assets in the future. Deferred taxes are


measured at the ratified tax rates of the respective country that have become applicable or adopted by the balance sheet date.

In the second step, deferred taxes are determined on the basis of the valuation differences be-tween the solvency overview and IFRS. In line with IAS 12, no discount is made in the solvency overview when valuing deferred taxes.

The result of these two steps are the deferred taxes on the basis of the valuation differences between the tax balance sheet and the solvency overview.

When calculating deferred taxes, the calculation steps described above took into account the individual branch tax rates anticipated in view of the development of national tax law at the time of reduction of the differences. Tax rate changes that are already planned or announced are taken into account.

For checking the recoverability of deferred tax assets, it is first examined whether there are suffi-cient deferred tax liabilities. Moreover, recoverability is checked according to the management's five-year earnings planning.

To this end, deferred taxes are calculated separately for each branch being independent for tax purposes. Subsequently, the tax assets and tax liabilities each of the branches are added.

Deferred tax liabilities mainly result from temporary differences in item R0510 “Technical Provi-sions – Non-Life insurance". Regarding the composition of the Technical provisions we refer to the comments made under item D.2.1.

The increase in deferred tax liabilities amounting to EUR 12,035 thousand is mainly due to changes in temporary differences in the underwriting provisions.

D.3.6 Financial liabilities other than liabilities to credit institutions R0810

2019 2018


Solvency II value

Value in fi-nancial



s Solvency II

value

Value in fi-nancial



Financial liabilities other than liabilities owed to credit institutions 4,912 220 209 209

Liabilities are stated at settlement amounts under commercial law.

According to Solvency II, liabilities are to be valued at the expected present value of future cash flows. For reasons of materiality no discounting is performed.


The difference of EUR 4,692 thousand between the valuation bases in the solvency overview and the annual financial statements under commercial law results from the application of IFRS 16, according to which rental obligations with a term of more than 12 months are to be recog-nised on the balance sheet.


The reporting of accrued interest on subordinated loans differs between German Commercial Code (HGB) and Solvency II. In the solvency overview, the accrued interest is shown under the subordinated liabilities.

D.3.7 Liabilities from insurance companies and intermediaries R0820

2019 2018


Solvency II value

financial statements as per the

German Commercial Code (HGB) Solvency II

value

Value in fi-nancial



Liabilities from insurance companies and inter-mediaries 0 18,433

23,447

9,815


According to Solvency II, liabilities are to be valued at the expected present value of future cash flows. The Delegated Directive (EU) 2015/2450 defines the following items: “Liabilities to insur-ance companies and intermediaries” and “Liabilities to reinsurers” as exclusively overdue cash flows. Accordingly, the amounts that are not overdue are to be taken into account in the Tech-nical Provisions.


According to Solvency II, the cash flows which are not overdue are included in the Technical Provisions and discounted there, resulting in a different valuation in the items R0820 and R0830 compared to the German Commercial Code (HGB).

D.3.8 Payables from reinsurers R0830

2019 2018


Solvency II value

Value in fi-nancial



value

Value in fi-nancial


German Commercial

Code (HGB)

Payables from reinsurers 0 424,426 24,163 291,468



The valuation difference was explained under item R0820.


D.3.9 Payables (trade, not insurance) R0840

2019 2018


Solvency II value

Value in fi-nancial



Solvency II value

Value in fi-nancial



Payables (trade, not insurance) 7,995 7,995 1,457 3,850


According to Solvency II, liabilities are to be valued at the expected present value of future cash flows. For reasons of materiality, no discounting is made.


There is no difference in valuation.

D.3.10 Subordinated liabilities not in basic own funds (BOF) R0870

2019 2018


Solvency II value

Value in fi-nancial



value

Value in fi-nancial


German Commercial

Code (HGB)

Subordinated liabilities not in BOF 85,463 83,332 82,730 78,645

Subordinated liabilities represent financial, contractual obligations subordinated to all other loan payables and obligations. Lenders have subordinated rights compared to all other outside credi-tors. In particular in the event of insolvency, the subordinated capital has subordinate claims to the other debt capital. Under Solvency II, subordinated liabilities can be classified as basic own funds (BOF).

The economic valuation for the solvency overview can be derived from the fair value approach according to IAS39, with adjustments due to changes in own creditworthiness not being consid-ered under Solvency II.


According to Solvency II, liabilities – including subordinated liabilities – are to be valued at the expected net present value of future cash flows and are discounted as a matter of principle. Under commercial law, liabilities are stated at settlement amounts and are not discounted. This results in the difference between the items in the solvency overview and in the annual financial state-ments under commercial law of EUR 2,130 thousand.


D.3.11 Any other liabilities, not shown elsewhere R0880

2019 2018


Solvency II value

Value in fi-nancial



value

Value in fi-nancial


German Commercial

Code (HGB)

Any other liabilities, not shown elsewhere 35,364 35,364 10,258 6,977

According to Solvency II, liabilities are to be valued at the expected present value of future cash flows. For reasons of materiality, no discounting is made. Liabilities are stated at settlement amounts under commercial law.


There is no valuation difference.

D.4 Alternative methods for valuation

The valuation principles according to Solvency II are applied. In addition to the general valuation principles, the following valuation hierarchy is applied to the recognition and measurement of assets and other liabilities.

A. As a standard valuation method, the market prices observable on active markets are used. The use of exchange prices should be based on the criteria for an active market as defined in the International Accounting Standards.

B. If no exchange prices on active markets are available for the measurement of the assets and liabilities, exchange prices of similar assets and liabilities are used. Adjustments are made to reflect the differences.

C. In cases where the criteria for the use of exchange prices are not met, alternative valuation methods are used (other than those described under point 2). If alternative valuation meth-ods are used, they should be based, to the extent possible, on market data and contain as few company-specific influencing factors as possible.

HDI Global Specialty applies alternative valuation methods to several balance sheet items, which are explained in more detail below:

D.4.1 Projected unit credit method

This method is used for calculating pension benefit obligations. They are calculated according to actuarial principles and are based on the commitments made by HDI Global Specialty for retire-ment, disability and widow's pensions. The commitments are based on the duration of employ-ment with the company and the amount of salary. They are exclusively defined benefit plans. The valuation is based on the anticipated future salary development of the pension beneficiaries. The benefit claims are discounted using the capital market interest rate for securities with the best credit rating.


D.4.2 Market value determination for unlisted assets

To determine the fair values of assets that are not listed on a stock exchange or the relevant markets of which are considered to be inactive at the date of valuation (refer to Section D "Review of active markets"), we alternatively use the valuation models and methods described below. They represent the current and recognised methods for the respective assets on the market and are used to determine a market price despite unavailable valuations of active markets.

Alternative valuation methods for unlisted assets

Financial instruments Parameters Valuation models/methods

Unlisted bonds Interest structure curves Present value method

Unlisted shareholdings Acquisition costs, cash flows, EBIT multiples, book value if applicable

Capitalised earnings method, DCF method, multiple approaches

The overwhelming majority of portfolios valued by applying alternative valuation methods is meas-ured on the basis of the present value method. It is a largely assumption-free method in which the future payments of the securities are discounted using suitable interest structure curves. These interest structure curves are derived from appropriate market data observable on public markets. The interest rates used for discounting consist of a maturity-dependent basic component (derived from the risk-free interest rate) and an issuer and issue-specific risk premium to take account of spread, migration and default risks. In very general terms, this approach is based on the generally accepted assumption in the market that price differences for securities that are com-parable in terms of risk, maturity and creditworthiness and listed in transparent markets essen-tially result from issue-specific characteristics and lower liquidity and are therefore rather insignif-icant in terms of their influence on the market value.

The use of models involves various model risks that can lead to valuation uncertainty:

• Modelling risk (appropriateness and suitability of the model) • Data quality risk (incomplete or obsolete data for model calibration or parameterisation) • Risk in the validity of assumptions and estimates • Risks in model implementation

The model risks are limited by a process of regular validation in which a systematic, quantitative and qualitative review of the appropriateness of the valuation models and procedures is per-formed. Moreover, the model results (for items that are mainly valued using alternative valuation methods) are continuously checked for plausibility as part of daily quality assurance processes.

D.5 Any other information

There are no other disclosures that have a material impact on the valuation for solvency purposes.


E. Capital Management E.1 Own funds

E.1.1 Management of own funds

Capital management processes include a classification of all own fund items in terms of Solvency II tiering requirements, whether they are basic own funds (BOF) or supplementary own funds and how effectively they are available. The results of these processes are taken into account for the ORSA process and also included in the medium-term capital plan.

The Solvency II balance sheet contains subordinated loans from Hannover Re SE, which are counted as tier 2 BOF.

The economic capital model of HDI Global Specialty is used to assess both the quantitatively measurable individual risks and the overall risk position. The assumptions and calculation meth-ods used to determine the risk-bearing capacity of the company are recorded in the documenta-tion of the risk model and in regular reports. HDI Global Specialty uses the provisions of the Solvency II standard formula for determining the Solvency Capital Requirement and the Minimum Capital Requirement.

E.1.2 Tiering

The classification of own funds in terms of their ability to offset losses is a key component of the regulatory capital requirements according to Solvency II. In this context, the individual own fund items are allocated to one of the three quality classes ("tiers") according to certain criteria.

The quality level of tier 1 own fund items is the highest since they are permanently available. They demonstrably offset losses, both in ongoing business operations and in the event of liquidation. Tier 2 generally refers to basic own funds and supplementary own funds which have the capacity to absorb losses in the event of the liquidation of the company. Tier 3 includes the net tax claims and other items, unless they can be allocated to tier 2.

In the reporting year, HDI Global Specialty did not hold any supplementary own funds requiring regulatory approval. There were no Tier 3 own fund items as of 31 December 2019.

E.1.3 Basic own funds

The following table depicts the composition of the basic own funds:

Composition of basic own funds

Values in EUR thousand Total Tier 1 unrestricted

Tier 1 restricted Tier 2

Subscribed capital 121,600 121,600 - - Equalisation reserve 53,141 53,141 - - Capital reserve 80,282 80,282 Subordinated own funds 85,463 - - 85,463

Total 340,485 255,023 0 85,463

The different quality classes are based on legal limitations in the ability to absorb losses. Against this background, the available basic own funds are not fully available to cover the overall risk


position of HDI Global Specialty. The share of basic own funds which can be used to cover the overall risk position according to SCR and MCR is hereinafter referred to as eligible own funds.

Comparison of the available and eligible own funds

As a result of the Solvency Capital Requirements (SCR) and Minimum Capital Requirement (MCR) rules and the resulting eligibility rules, available own funds are reduced. As eligible own funds for the SCR, a maximum of 50% of the SCR is allocated for Tier 2. If the value in tier 2 is below this limit, the total value will be recognised. For the MCR, 20% of the MCR in tier 2 is recognised.

The basic own funds (BOF) of HDI Global Specialty can be derived from the German Commercial Code (HGB) equity capital. To this end, the HGB equity capital is adjusted for recognition and valuation differences and supplemented by deferred tax effects between the two accounting standards.

Reconciliation of GCC equity to Solvency II own funds

Values in EUR thousand 2019 2018 Shareholders’ capital (HGB) 238,327 168,845 Recognition and valuation differences between Solvency II to HGB: 16,696 54,108

Equalisation reserve 34,369 22,447 Intangible assets -7,066 -6,551 Fixed-interest securities and other investments -59,528 2,963 Underwriting assets and liabilities (incl. receivables and liabilities from the insurance business) 57,959 43,443

Subordinated loans -2,130 -4,085 Other non-underwriting assets and liabilities -2,544 -468

Deferred taxes on tax differences between Solvency II and GCC -4,364 -3,641

Excess of assets over liabilities (Solvency II) 255,023 222,953

E.1.3.1 Subscribed capital

The paid-in capital stock is the highest-quality equity capital that can be relied upon to compen-sate for losses in the ordinary course of business.

Capital Stock

The capital stock of HDI Global Specialty amounts to EUR 121,600 thousand as at the balance sheet date. The shares are fully paid up. The capital stock is divided into 95,000,000 no-par value registered shares with voting rights and dividend rights. Each share grants the same voting right and dividend entitlement. As of the balance sheet date, the company held no treasury shares.

No new shares were issued in the reporting period.

Values in EUR thousand 2019 2018 Available own fund items 340,485 305,683 Eligible own fund items SCR 340,485 305,683 Eligible own fund items MCR 265,517 231,740

Values in EUR thousand 2019 2018 Capital stock 121,600 121,600

Total 121,600 121,600


E.1.3.2 Equalisation reserve

The Solvency II reconciliation reserve as a component of tier 1 (unrestricted) is allocated to the basic own funds (BOF). It mainly consists of the excess of assets over liabilities, adjusted for the subscribed capital.

Reconciliation reserve

The equalisation reserve includes reserves (in particular retained earnings); however, it also in-cludes the differences between the balance sheet valuation according to the German Commercial Code (HGB) and the valuation according to Directive 2009/138/EC.

As of the balance sheet date the equalisation reserve is EUR 53,141 thousand.

The equalisation reserve decreased by EUR 48,212 thousand in the reporting period (previous year: EUR 101,353 thousand). The reduction is mainly attributable to the different balance sheet valuation in the German Commercial Code and Solvency II.

E.1.3.3 Subordinated own funds

To strengthen the company’s own funds in line with applicable regulatory provisions, Hannover Re granted HDI Global Specialty two subordinated loans amounting to GBP 54,300 thousand and GBP 16,700 thousand respectively. Both loans are fully paid into the account of HDI Global Spe-cialty.

The remaining term of the subordinated loans as at the reporting date is 26 and 28 years respec-tively. The fixed interest rate of 3.2% and 3.5% ends after 10 years for both subordinated loans respectively.

The increase of EUR 2,733 thousand is based on changes in the exchange rate and swap rates underlying the economic valuation.

E.1.3.4 Capital Reserve

The capital reserve pursuant to Section 272 (2) No. 4 of the German Commercial Code amounts to EUR 80,282 thousand.

Capital Reserve

Values in EUR thousand 2019 2018 Equalisation reserve 53,141 101,353

Total 53,141 101,353

As at the balance sheet date, HDI Global Specialty had two subordinated loans in its portfolio which meet the criteria for subordinated tier 2 liabilities under Solvency II.

Subordinated own funds

Values in EUR thousand 2019 2018 Subordinated loans 85,463 82,730

Total 85,463 82,730

Values in EUR thousand 2019 2018 Capital reserve 80,282 0

Total 80,282 0


In the financial year 2019, an amount of EUR 82,300 thousand was transferred to the capital reserve. The withdrawal amounted to EUR 2,018 thousand.

E.2 Solvency Capital Requirement and Minimum Capital Requirement

E.2.1 Solvency Capital Requirement (SCR)

E.2.1.1 Solvency Capital Requirement (SCR) contingent on risk category

The total regulatory Solvency Capital Requirement (SCR) for HDI Global Specialty is shown be-low. This total amount is broken down by various risk categories. These categories are the main risk categories calculated according to the standard formula of HDI Global Specialty.

However, the final amount of the Solvency Capital Requirement is still subject to the regulatory review.

Solvency Capital Requirement – breakdown by risk categories Values in EUR thousand

HDI Global Specialty does not use any company-specific parameters for calculating the standard formula.

When calculating the counterparty credit risk, HDI Global Specialty uses the simplified calculation of the risk-mitigating effect of reinsurance agreements pursuant to Article 107 of Commission Delegated Directive 2015/35.

Regarding the standard deviation, HDI Global Specialty uses the correction factor of 80% for the Non-Life insurance premium risk and the Non-Life insurance provision risk in the insurances lines of fire and other property insurance as well as motor third-party liability insurance according to Article 117 (Para 3). In these lines of business, there is non-proportional reinsurance.

The total amount of the SCR increased by 19.4% in the reporting period. Various effects can be observed in the individual risk categories, which are explained below.

The increase in the underwriting risk (Non-Life primary insurance and reinsurance) is attributable above all to strong premium growth. As a result, both the premium risk (excluding the disaster risk) as well as the natural hazard risk and the man-made catastrophe risk increase sharply.

The increase in the underwriting risk (health insurance) is mainly attributable to changes in the disaster risk due to changes in the specifications of the largest contract and new business.

The market risk increased in all sub-modules. The exchange rate risk remains the main driver.

Increases in the counterparty credit risk were due to the increased volume of type 1 receivables.


In accordance with Section 341 VAG the option provided for in Article 51 (Para 2) subparagraph 3 of Directive 2009/138/EC was utilised in Germany.

Solvency Capital Requirement – Breakdown according to Risk Categories Values in EUR thousand

Solvency Capital Requirement 2019 2018 Underwriting risk – Non-Life insurance and reinsurance 86,061 67,446

Underwriting risk – Non-Life insurance and reinsurance (Health insurance) 11,031 4,182

Market risk 68,201 63,525 Counterparty credit risk 64,297 61,488 Diversification 63,141 52,120 Basic total risk 166,448 144,522 Operational risk 49,935 43,356

Total risk (pre-taxes) 216,383 187,878 Deferred tax 6,490 12,156

Total risk (post-taxes) 209,893 175,722

For calculating the Minimum Capital Requirement (MCR), weighted volumes of net premiums and net Technical Provisions are used.

The MCR for HDI Global Specialty is determined by the lower limit of 25% of the SCR.

The table below shows the current SCR and the MCR as well as the corresponding eligible own funds. They are subject to the so-called tiering restrictions under Solvency II. Moreover, the ratio of eligible own funds to the respective capital requirement is shown.

Ratio of available own funds to the Minimum Capital Requirement and Solvency Capital Requirement

Values in EUR thousand / percent SCR MCR Eligible own funds 340,485 265,517 SCR/MCR 209,893 52,473

Ratio of eligible own funds to SCR/MCR 162% 506%

E.3 Use of the duration-based equity risk sub-module in when calculating the Solvency Capital Requirement

Germany has not made use of the option of permitting the use of a duration-based equity risk sub-module. Therefore, HDI Global Specialty does not use any duration-based equity risk sub-module.

E.4 Differences between the Standard Formula and any internal model used

HDI Global Specialty confirms that the standard formula conservatively reflects the risk profile, whereas the internal capital model of HDI Global Specialty, which is used for corporate manage-ment and risk management, covers all material and quantifiable risks and operational activities. Hence, we are of the opinion that the internal model results are more suitable for appropriately presenting the risk profile of HDI Global Specialty.

The Solvency II Solvency Capital Requirement is measured using the standard formula.


E.5 Non-compliance with the Minimum Capital Requirement and non-compli-ance with the Solvency Capital Requirement

Both the SCR and the MCR were complied with at all times during the reporting period.

E.6 Any other information

There are no other disclosures that have a material effect on capital management.


Glossary of abbreviations and terms AktG: German Stock Corporation Act

AO: German Fiscal Code

BaFin: German Federal Financial Supervisory Authority

Best Estimate: Best Estimate, without safety margins

BEL: Best Estimate Liability, Best Estimate of Technical Provisions, without safety margins

DCF: Discounted cash flows

DVO: Delegated Directive (EU) 2015/35 of the European Commission 10 October 2014

EBIT: Earnings before interest and taxes, operating result

EIOPA: European Insurance and Occupational Pensions Authority

EPIFP: Expected Profit included in Future Premiums

EEA: European Economic Area

FOG: Financial Options and Guarantees

GA: Group Auditing, internal auditing department of the Hannover Re Group

GPB: Group Performance Bonus

GuV: Gewinn- und Verlustrechnung = Income statement

Hannover Re: Hannover Rück SE, Hannover

HDI: HDI Haftpflichtverband der Deutschen Industrie V.a.G., Hannover

HDI Global Specialty: HDI Global Specialty SE, Hannover

HGB (GCC): German Commercial Code

IAS: International Accounting Standards

IFRS: International Financial Reporting Standards

ICS: Internal Control System

MCR: Minimum Capital Requirement

NAV: Net asset value

ORSA: Own Risk and Solvency Assessment

RechVersV: Insurance Accounting Decree (Versicherungsunternehmens-Rechnungslegungs-verordnung)

Risk appetite: Denotes the level of risk a company is prepared to assume in order to achieve its goals. Determining a company’s risk appetite is an important part of risk strategy.

RM: Risk Margin


RückAbzinsVO: Regulation on the Discounting of Provisions (Verordnung über die Ermittlung und Bekanntgabe der Sätze zur Abzinsung von Rückstellungen)

SCR: Solvency Capital Requirement

SFCR: Solvency and Financial Condition Report

Talanx: Talanx AG, Hannover

TP: Technical Provisions

UK: United Kingdom

VAG: German Insurance Supervision Act (Versicherungsaufsichtsgesetz)

VaR: Value at risk; risk measure

AF: Actuarial Function

WHO: World Health Organization

WpHG: German Securities Trading Act (Wertpapierhandelsgesetz)

WpÜG: German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und Übernahme-gesetz)


Disclosure forms to be published All values in EUR thousand, unless indicated otherwise.

If a value is less than EUR 0.5 thousand, or if HDI Global Specialty has no value to report at this point, "0" is indicated in the following disclosure forms.

For mathematical reasons, rounding differences of +/- one unit may occur in the tables.

HDI Global Specialty does not apply transitional measures, volatility adjustment and matching adjustment. Hence, the disclosure form "S.22.01.21 Effects of long-term guarantees and transi-tional measures" is not prepared by HDI Global Specialty.


S.02.01.02

Balance sheet Solvency II value Assets C0010 Intangible assets R0030 0 Deferred tax assets R0040 18,312 Pension benefit surplus R0050 0 Property, plant and equipment held for own usage R0060 5,753 Investments (other than assets held for index-linked and unit-linked contracts) R0070 339,253 Property (other than for own usage) R0080 0

Holdings in affiliates, including shareholdings R0090 6,207 Shares R0100 0 Shares – listed R0110 0

Shares – unlisted R0120 0 Bonds R0130 301,006

Government bonds R0140 127,428 Corporate bonds R0150 173,578 Structured debt instrument R0160 0 Collateralised securities R0170 0 Collective investments undertakings R0180 19,531

Derivatives R0190 0 Deposits, other than cash equivalents R0200 12,508 Other assets R0210 0 Assets held for index- and unit-linked contracts R0220 0

Loans and mortgages R0230 0 Policy loan R0240 0

Loans and mortgages to private individuals R0250 0 Other loans and mortgages R0260 0 Recoverables from reinsurers: R0270 1,741,151

Non-Life and Health insurance similar to Non-Life insurance R0280 1,741,151 Non-Life excluding Health insurance R0290 1,730,715

Health similar to Non-Life insurance R0300 10,436 Life and Health similar to Life, excluding Health and unit-linked and index-linked R0310 0

Health insurance similar to Non-Life insurance R0320 0 Life excluding Health and unit-linked and index-linked R0330 0 Life unit-linked and index-linked R0340 0

Funds withheld from assumed reinsurance business R0350 2,050 Receivables from insurance companies and intermediaries R0360 0 Receivables from reinsurers R0370 0 Receivables (trade, not insurance) R0380 7,207 Treasury shares (held directly) R0390 0 In relation to own funds components, amounts due or funds called up subject to re-covery but not yet paid in R0400 0

Cash and cash equivalents R0410 122,241 Any other assets, not shown elsewhere R0420 847 Total assets R0500 2,236,815

Solvency II value Liabilities C0010 Technical Provisions – Non-Life insurance R0510 1,800,420


Technical Provisions – Non-Life insurance (excluding Health insurance) R0520 1,789,879

Technical Provisions calculated as a whole R0530 0 Best Estimate R0540 1,770,655 Risk Margin R0550 19,224

Technical Provisions – Health insurance (similar to Non-Life insurance) R0560 10,541

Technical Provisions calculated as a whole R0570 0 Best Estimate R0580 10,228 Risk Margin R0590 313

Technical Provisions – Life insurance (excluding unit-linked and index-linked insur-ance) R0600 0

Technical Provisions – Health insurance (similar to Life insurance) R0610 0

Technical Provisions calculated as a whole R0620 0 Best Estimate R0630 0 Risk Margin R0640 0

Technical Provisions – Life insurance (except Health insurance and unit-linked and index-linked insurance) R0650 0

Technical Provisions calculated as a whole R0660 0 Best Estimate R0670 0 Risk Margin R0680 0

Technical Provisions – unit-linked and index-linked insurance R0690 0 Technical Provisions calculated as a whole R0700 0 Best Estimate R0710 0 Risk Margin R0720 0

Contingent liabilities R0740 0 Other provisions than Technical Provisions R0750 3,580 Pension benefit obligations R0760 2,298 Funds withheld on ceded reinsurance R0770 19,084 Deferred tax liabilities R0780 22,677 Derivatives R0790 0 Debts owed to credit institutions R0800 0 Financial liabilities other than debts owed to credit institutions R0810 4,912 Receivables / payable from insurance companies and intermediaries R0820 0 Liabilities from reinsurers R0830 0 Payables (trade, not insurance) R0840 7,995 Subordinated liabilities R0850 85,463

Subordinated liabilities in BOF R0860 0 Subordinated liabilities not in BOF R0870 85,463

Any other liabilities, not shown elsewhere R0880 35,364 Total liabilities R0900 1,981,792 Excess of assets over liabilities R1000 255,023


S.05.01.01 Premiums, claims and expenses by line of business Line of business for: Non-Life insurance and reinsurance obligations (direct insurance business and accepted proportional reinsurance)

Medical ex-penses in-surance

Income pro-tection insur-

ance

Occupation accident in-

surance

Motor vehicle liability insur-

ance

Other motor insurance

Marine, avia-tion and

transport in-surance

Fire and other prop-erty insur-

ance

General Third-Party Liability In-

surance

Credit and col-lateral insurance

C0010 C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 Written premiums Gross – direct insurance business R0110 0 14,350 0 26,757 141,853 211,835 402,945 431,220 31,354

Gross – accepted propor-tional reinsurance business R0120 0 5,506 0 6,960 0 65,534 24,776 7,074 0

Gross – accepted non-pro-portional reinsurance busi-ness

R0130

Share of reinsurers R0140 0 17,730 0 29,204 127,047 254,282 394,709 394,696 28,991 Net R0200 0 2,126 0 4,512 14,806 23,087 33,012 43,598 2,364 Earned premiums Gross – direct insurance business R0210 0 14,535 0 26,524 127,189 185,647 343,075 339,600 21,478

Gross – accepted propor-tional reinsurance business R0220 0 5,272 0 6,775 0 63,346 20,829 12,058 4


R0230

Share of reinsurers R0240 0 17,501 0 28,595 114,487 229,651 339,604 324,228 20,332 Net R0300 0 2,306 0 4,704 12,702 19,342 24,299 27,430 1,151 Expenses for insurance claims

Gross – direct insurance business R0310 0 2,154 0 9,073 70,684 189,270 285,685 190,243 6,511

Gross – accepted propor-tional reinsurance business R0320 0 -1,313 0 4,243 0 72,702 9,871 17,210 23

Line of business for: Non-Life insurance and reinsurance obligations (direct insurance business and accepted proportional reinsurance)


Medical ex-

penses insur-ance

Income pro-tection insur-

ance

Occupation accident in-

surance

Motor vehicle liability insur-

ance

Other motor insurance

Marine, avia-tion and

transport in-surance


ance

General Third-Party Liability In-

surance

Credit and collateral in-

surance

C0010 C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 Gross – accepted non-pro-portional reinsurance busi-ness

R0330

Share of reinsurers R0340 0 868 0 10,928 64,051 244,443 278,080 211,109 6,280

Net R0400 0 -26 0 2,388 6,633 17,529 17,476 -3,657 254

Change in other Technical Provisions

Gross – direct insurance business R0410 0 0 0 0 0 0 0 0 0

Gross – accepted propor-tional reinsurance business R0420 0 0 0 0 0 0 0 0 0


R0430

Share of reinsurers R0440 0 0 0 0 0 0 0 0 0

Net R0500 0 0 0 0 0 0 0 0 0

Expenses incurred R0550 0 735 0 4,493 -1,473 4,236 19,841 31,589 1,357

Other expenses R1200

Total expenses R1300


Line of business for: Non-Life insurance and reinsur-ance obligations (direct insurance business and ac-

cepted proportional reinsurance business)

Line of business for:

Total accepted non-proportional reinsurance business

Legal expenses insurance

Emergency as-sistance

Miscellaneous financial losses

Health Casualty Marine, avia-

tion and transport

Property

C0100 C0110 C0120 C0130 C0140 C0150 C0160 C0200 Written premiums Gross – direct insurance business R0110 25,519 415 28,805 1,315,053

Gross – accepted propor-tional reinsurance business R0120 934 636 111,420


R0130 0 0 0 0 0

Share of reinsurers R0140 24,031 374 26,257 0 0 0 0 1,297,321

Net R0200 2,422 42 3,184 0 0 0 0 129,152

Earned premiums Gross – direct insurance business R0210 25,659 420 25,184 1,109,314

Gross – accepted propor-tional reinsurance business R0220 843 0 984 110,111


R0230 0 0 0 0 0

Share of reinsurers R0240 23,944 375 23,391 0 0 0 0 1,122,109

Net R0300 2,558 45 2,777 0 0 0 0 97,316


Line of business for: Non-Life insurance and reinsur-ance obligations (direct insurance business and ac-

cepted proportional reinsurance business)

Line of business for:

Total accepted non-proportional reinsurance business

Legal expenses insurance

Emergency as-sistance

Miscellaneous financial losses

Health Casualty Marine, avia-

tion and transport

Property

C0100 C0110 C0120 C0130 C0140 C0150 C0160 C0200 Expenses for insurance claims

Gross – direct insurance business R0310 33,235 198 12,853 799,907

Gross – accepted propor-tional reinsurance business R0320 493 0 625 103,854


R0330 0 0 0 0 0

Share of reinsurers R0340 30,093 177 12,108 0 0 0 0 858,138 Net R0400 3,635 21 1,369 0 0 0 0 45,623

Change in other Technical Provisions

Gross – direct insurance business R0410 0 0 0 0

Gross – accepted propor-tional reinsurance business R0420 0 0 0 0


R0430 0 0 0 0 0

Share of reinsurers R0440 0 0 0 0 0 0 0 0 Net R0500 0 0 0 0 0 0 0 0 Expenses incurred R0550 2,588 -12 59 0 0 0 0 63,413 Other expenses R1200 1,958 Total expenses R1300 65,371


S.05.02.01 Premiums, claims and expenses by country Country of

origin Top 5 countries (by amount of gross written premiums) – Non-Life obliga-

tions Total Top 5 and home coun-

try C0010 C0020 C0030 C0040 C0050 C0060 C0070

R0010 AU CA GB SE US C0080 C0090 C0100 C0110 C0120 C0130 C0140 Written premiums Gross – direct insurance business R0110 35,537 159,541 98,967 246,594 132,847 443,224 1,116,711 Gross – accepted proportional re-

insurance business R0120 8,437 480 263 18,691 862 13,140 41,873

Gross – accepted non-proportional reinsurance business R0130 0 0 0 0 0 0 0

Share of reinsurers R0140 31,249 143,180 86,100 240,115 230,919 387,497 1,119,059 Net R0200 12,726 16,842 13,131 25,169 -97,210 68,867 39,525

Earned premiums earned Gross – direct insurance business R0210 33,195 117,749 82,950 213,027 112,180 383,066 942,168 Gross – accepted proportional re-

insurance business R0220 8,084 332 184 19,035 821 11,566 40,022


Share of reinsurers R0240 29,663 107,778 73,448 208,533 205,827 343,853 969,103 Net R0300 11,616 10,303 9,686 23,528 -92,826 50,779 13,086

Expenses for insurance claims Gross – direct insurance business R0310 9,037 120,810 48,791 90,205 60,163 349,294 678,300 Gross – accepted proportional re-

insurance business R0320 3,657 94 76 11,604 1,337 27,845 44,613


Share of reinsurers R0340 9,125 110,451 41,994 79,196 150,179 352,541 743,487 Net R0400 3,569 10,452 6,873 22,613 -88,679 24,598 -20,574


Top 5 countries (by amount of gross premiums written) – non-life insur-ance obligations

Total Top 5 countries and home country

C0020 C0030 C0040 C0050 C0060 C0070 R0010 AU CA GB SE US C0090 C0100 C0110 C0120 C0130 C0140 Change in other Technical Provi-sions

Gross – direct insurance business R0410 0 0 0 0 0 0 0 Gross – accepted proportional rein-surance business R0420 0 0 0 0 0 0 0


Share of reinsurers R0440 0 0 0 0 0 0 0 Net R0500 0 0 0 0 0 0 0 Expenses incurred R0550 41 -3,578 2,553 59,817 -25,368 24,520 57,986 Other expenses R1200 1,958 Total expenses R1300 59,944


S.17.01.01

Technical Provisions Non-Life insurance Direct insurance business and accepted proportional reinsurance business


Income protection insurance

Occupa-tion acci-

dent insur-ance

Motor vehi-cle liability insurance

Other mo-tor insur-

ance

Marine, aviation

and transport insurance

Fire and other Prop-erty Insur-

ance

General Li-ability In-surance

Credit and surety in-surance

C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100

Technical Provisions calculated as a whole R0010 0 0 0 0 0 0 0 0 0

Total amounts recoverable from reinsurance / spe-cial purpose entities and Finite Re after the adjust-ment for expected losses due to counterparty de-fault associated to TP calculated as a whole

R0050

Technical provisions calculated as a sum of BE and RM

Best Estimate Unearned premium reserve Gross R0060 0 -1,051 0 3,615 15,067 51,531 5,717 77,660 4,850

Total recoverables from reinsurance / SPV and Fi-nite Re after the adjustment for expected losses due to counterparty default

R0140 0 -664 0 2,876 12,786 51,386 29,206 77,763 5,088

Net Best Estimate for unearned premium reserve R0150 0 -388 0 739 2,281 145 -23,489 -103 -238


Direct insurance business and accepted proportional reinsurance business



Occupa-tion acci-

dent insur-ance


Other mo-tor insur-

ance

Marine, aviation

and transport insurance


ance

General li-ability in-surance


C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100 Loss reserves Gross R0160 0 11,279 0 27,760 37,847 383,208 411,907 727,484 -4,169 Total recoverables from reinsurance / SPV and Fi-nite Re after the adjustment for expected losses due to counterparty default

R0240 0 11,100 0 24,830 43,867 409,037 408,021 654,486 -17,928

Net Best Estimate of claims provisions R0250 0 180 0 2,931 -6,020 -25,828 3,886 72,998 13,759 Total Best Estimate – gross R0260 0 10,228 0 31,376 52,914 434,739 417,625 805,144 681 Total Best Estimate – net R0270 0 -208 0 3,669 -3,739 -25,683 -19,602 72,895 13,521 Risk Margin R0280 0 307 6 490 328 4,335 2,520 10,429 788 Scope of the transitional measure with Tech-nical Provisions

Technical Provisions calculated as a whole R0290 Best Estimate R0300 Risk Margin R0310

Direct insurance business and accepted proportional reinsurance business




Occupation accident

insurance


Other mo-tor insur-

ance

Marine, avi-ation and transport insurance


ance

General lia-bility insur-

ance


C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100

Technical Provisions – total

Technical Provisions – total R0320 0 10,535 6 31,866 53,242 439,074 420,144 815,573 1,469

Total recoverables from reinsurance / SPV and Fi-nite Re after the adjustment for expected losses due to counterparty default

R0330 0 10,436 0 27,706 56,652 460,423 437,227 732,249 -12,840

Total Technical Provisions less recoverables from reinsurance / SPV and Finite Re R0340 0 99 6 4,160 -3,411 -21,348 -17,083 83,324 14,309


Direct insurance business and accepted proportional reinsurance business Accepted non-proportional reinsurance business

Total Non-Life insur-ance obli-gations

Legal ex-penses in-surance

Emergency assistance

Miscellane-ous financial

losses

Non-pro-portional health re-insurance

Non-pro-portional

casualty re-insurance

Non-pro-portional marine, aviation

and trans-port reinsu-

rance

Non-pro-portional

property re-insurance

C0110 C0120 C0130 C0140 C0150 C0160 C0170 C0180

Technical Provisions calculated as a whole R0010 0 0 0 0 0 0 0 0

Total recoverables from reinsurance / SPV and Finite Re after the adjustment for expected losses due to counterparty de-fault associated to TP calculated as a whole

R0050

Technical Provisions calculated as a sum of BE and risk margin

Best Estimate

Unearned premium reserve

Gross R0060 -6,800 489 0 0 0 0 151,078

Total recoverables from reinsurance / SPV and Finite Re after the adjustment for expected losses due to counterparty de-fault

R0140 -10,118 8 952 0 0 0 0 169,282

Net Best Estimate for unearned premium reserve R0150 3,319 -8 -463 0 0 0 0 -18,204


Direct insurance business and ac-cepted proportional reinsurance

business Accepted non-proportional reinsurance business

Total Non-Life insur-

ance obliga-tions

Legal ex-penses in-surance

Emer-gency as-sistance

Various fi-nancial losses

Non-pro-portional health re-insurance

Non-pro-portional casualty reinsur-

ance

Non-pro-portional marine, aviation

and trans-port rein-surance

Non-pro-portional property reinsur-

ance

C0110 C0120 C0130 C0140 C0150 C0160 C0170 C0180 Loss reserves Gross R0160 21,893 174 12,420 0 0 0 0 1,629,805 Total recoverables from reinsurance / SPV and Finite Re after the adjustment for expected losses due to counterparty default R0240 27,586 162 10,709 0 0 0 0 1,571,869

Net Best Estimate of loss reserves R0250 -5,693 12 1,711 0 0 0 0 57,935 Best Estimate Total– gross R0260 15,093 174 12,909 0 0 0 0 1,780,883 Best Estimate Total– net R0270 -2,374 4 1,249 0 0 0 0 39,731 Risk Margin R0280 149 5 180 0 0 0 0 19,537 Scope of the transitional measure with Technical Provisions Technical Provisions calculated as a whole R0290 Best Estimate R0300 Risk Margin R0310 Technical Provisions – total Technical Provisions – total R0320 15,243 180 13,089 0 0 0 0 1,800,420 Total recoverables from reinsurance / SPV and Finite Re after the adjustment for expected losses due to counterparty default R0330 17,467 170 11,660 0 0 0 0 1,741,151

Total Technical Provisions less recoverables from reinsurance / SPV and Finite Re R0340 -2,225 9 1,428 0 0 0 0 59,269


S.19.01.21 Claims from Non-Life insurance

Claim year/Underwriting year Z0010 2 Gross claims paid (non-cumulative) (absolute amount)

Development year

Year 0 1 2 3 4 5 6 7 8 9 10&+ In the current year

Total years (accu-mulated)

C0010 C0020 C0030 C0040 C0050 C0060 C0070 C0080 C0090 C0100 C0110 C0170 C0180 Be-fore R0100 3,878

R0100 3,878 3,878

N-9 R0160 15,991 113,454 118,174 72,635 78,263 63,956 30,440 15,567 5,833 4,152 -

R0160 4,152 518,465

N-8 R0170 27,413 126,252 134,637 107,597 70,400 51,812 29,273 19,229 11,975 -

-

R0170 11,975 578,589

N-7 R0180 17,709 139,537 107,361 83,203 55,957 44,629 24,217 35,614 -

-

-

R0180 35,614 508,225

N-6 R0190 44,505 185,561 172,481 78,872 43,486 43,674 27,845 -

-

-

-

R0190 27,845 596,424

N-5 R0200 22,727 179,973 98,109 36,166 33,879 31,578 -

-

-

-

-

R0200 31,578 402,432

N-4 R0210 32,939 164,732 83,994 61,489 46,946 -

-

-

-

-

-

R0210 46,946 390,098

N-3 R0220 29,417 183,206 119,634 55,394

-

-

-

-

-

-

- R0220 55,394 387,651

N-2 R0230 33,341 227,475 153,992

-

-

-

-

-

-

-

- R0230 153,992 414,808

N-1 R0240 42,833 241,735 -

-

-

-

-

-

-

-

-

R0240 241,735 284,569

N R0250 63,625 -

-

-

-

-

-

-

-

-

-

R0250 63,625 63,625

Total R0260 676,732 4,148,764


Best Estimate (gross) for non-discounted loss reserves

(absolute amount)

Development year

Year 0 1 2 3 4 5 6 7 8 9 10&+ Year-end (dis-counted data)

C0200 C0210 C0220 C0230 C0240 C0250 C0260 C0270 C0280 C0290 C0300 C0360 Be-fore R0100

59,825 R0100 56,722

N-9 R0160 - - - - - - 76,978 49,608

30,102

18,551

-

R0160 17,078

N-8 R0170 - - - - - 126,122 101,766 83,023

50,093 -

-

R0170 52,512

N-7 R0180 - - - - 191,755 161,756 106,420 86,525 - -

-

R0180 81,834

N-6 R0190 - - - 256,208 188,040 142,227 98,013 - - - -

R0190 92,451

N-5 R0200 - - 225,058 152,463 126,995 110,007 - - - - -

R0200 105,620

N-4 R0210 - 314,346 212,933 163,352 116,032 - - - - - -

R0210 112,015

N-3 R0220 214,594 308,220 225,139 161,638 - - - - - - -

R0220 155,284

N-2 R0230 274,406 409,353 290,000 - - - - - - - -

R0230 274,094

N-1 R0240 302,079 472,396 - - - - - - - - -

R0240 452,954

N R0250 241,012 - - - - - - - - - -

R0250 229,241 Total R0260 1,629,805

S.23.01.01


Own Funds Total Tier 1 – unre-

stricted Tier 1 – re-

stricted Tier 2 Tier 3

C0010 C0020 C0030 C0040 C0050

Basic own funds before deducting shareholdings and other financial sectors within the meaning of Article 68 of Delegated Directive (EU) 2015/35

Ordinary share capital (gross of own shares) R0010 121,600 121,600

Issue premium applicable to ordinary share capital R0030 80,282 80,282

Initial funds, members' contributions or the equivalent basic own fund item for mutual and mutual-type undertakings R0040 0

Subordinated member mutual accounts R0050 0

Surplus funds R0070 0

Preference shares R0090 0

Issue premium account applicable to preference shares R0110 0

Reconciliation reserve R0130 53,141 53,141

Subordinated liabilities R0140 85,463 85,463

An amount equal to the value of net deferred tax assets R0160 0 Other own fund items approved by the supervisory authority as basic own funds not specified above R0180 0

Own funds from the financial statements that should not be represented by the reconciliation reserve and do not meet the criteria to be classified as Solvency II own funds

Own funds from the financial statements that should not be represented by the rec-onciliation reserve and do not meet the criteria to be classified as Solvency II own funds

R0220

Deductions

Deductions for shareholdings in financial and credit institutions R0230 0

Total amount of basic own funds after deductions R0290 340,485 255,023 0 85,463 0


Total Tier 1 – unre-stricted

Tier 1 – re-stricted Tier 2 Tier 3

Supplementary own funds

Unpaid and uncalled ordinary share capital callable on demand R0300

Initial fund, members' contribution or equivalent basic own fund item of mutual and mutual-type undertakings which have not been paid up and not called up, but which can be recovered on demand

R0310 0

Unpaid and uncalled preference shares callable on demand R0320 0

A legally binding obligation to write and settle subordinated liabilities upon demand R0330 0

Letters of credit and guarantees under Article 96 Para 2 of the Directive 2009/138/EC R0340 0

Other letters of credit and guarantees as such pursuant to Article 96 Para 2 of the Directive 2009/138/EC R0350 0

Requests issued to members for back payment pursuant to Article 96 Para 3, Sub-para 1 of the Directive 2009/138/EC R0360 0

Requests issued to members for back payment – other than those pursuant to Arti-cle 96 Para 3, Sub-para 1of the Directive 2009/138/EC R0370 0

Other supplementary own funds R0390 0 Total supplementary own funds R0400 0 Available and eligible own funds

Total available own funds to meet the SCR R0500 340,485 255,023 0 85,463

Total available own funds to meet the MCR R0510 340,485 255,023 0 85,463

Total eligible own funds to meet the SCR R0540 340,485 255,023 0 85,463 0

Total eligible own funds to meet the MCR R0550 265,517 255,023 0 10,495

Solvency Capital Requirement (SCR) R0580 209,893 Minimum Capital Requirement (MCR) R0600 52,473 Ratio of eligible own funds to SCR R0620 1.6222 Ratio of eligible own funds to MCR R0640 5.0601

C0060


Reconciliation reserve

Excess of assets over liabilities R0700 255,023

Treasury shares (held directly and indirectly) R0710

Foreseeable dividends, distributions and charges R0720

Other basic own fund items R0730 201,882 Adjustment for restricted own fund components in matching adjustment portfo-lios and specialised entities R0740

Reconciliation reserve R0760 53,141

Expected profits

Expected profits included in future premiums (EPIFP) – Life insurance R0770

Expected profits included in future premiums (EPIFP) – Non-Life insurance R0780 5,679

Total expected profits included in future premiums (EPIFP) R0790 5,679


S.25.01.01

Solvency Capital Requirement – for companies that use the standard formula

Gross Solvency Capital Require-

ment USP Simplifications

C0040 C0090 C0100 Market risk R0010 68,201 Counterparty credit risk R0020 64,297 Life underwriting risk R0030 0 Health underwriting risk R0040 11,031 Non-Life underwriting risk R0050 86,061 Diversification R0060 -63,141 Risk intangible assets R0070 0 Basic Solvency Capital Requirement R0100 166,448 Calculation of Solvency Capital Requirement C0100 Operational risk R0130 49,935 Loss-absorption capacity of Technical Provisions R0140 0 Loss-absorption capacity of deferred taxes R0150 -6,490 Capital requirement for business operated according to Art. 4 of Directive 2003/41/EC R0160 0 Solvency Capital Requirement without capital add-on R0200 209,893 Capital add-on already set R0210 0 Solvency Capital Requirement (SCR) R0220 209,893 Other information on SCR Capital requirement for duration-based equity risk sub-module R0400 Total amount of Notional Solvency Capital Requirement for remaining part R0410 Total amount of Notional Solvency Capital Requirements for specialised entities R0420 Total amount of Notional Solvency Capital Requirements for matching adjustment portfolios R0430 Diversification effects due to the aggregation of the fictitious Solvency Capital Requirement for ring-fenced funds under Article 304 R0440


S.28.01.01 Minimum Capital Requirement – Only Life or only Non-Life insurance or reinsurance activity Component of the linear formula for Non-Life insurance and reinsurance obligations C0010 MCRNL result R0010 24,399

Best Estimated (of reinsur-ance/ SPV)

and TP calcu-lated as a

whole

Written premi-ums (after the deduction of

reinsurance) in the last 12

months C0020 C0030

Medical expenses insurance and proportional reinsurance

R0020 0 0

Income protection insurance and proportional reinsurance

R0030 0 2,156

Worker’s compensation insurance and propor-tional reinsurance

R0040 0 0

Motor vehicle liability insurance and proportional reinsurance

R0050 3,669 4,512

Other motor insurance and proportional reinsur-ance

R0060 0 14,806

Marine, aviation and transport insurance and proportional reinsurance

R0070 1,790 23,087

Fire and other property insurance and propor-tional reinsurance

R0080 0 33,020

General liability insurance and proportional rein-surance

R0090 72,895 43,598

Credit and surety insurance and proportional re-insurance

R0100 13,521 2,364

Legal protection insurance and proportional re-insurance

R0110 0 2,422

Emergency assistance and proportional reinsur-ance

R0120 4 42

Miscellaneous financial loss insurance and pro-portional reinsurance

R0130 1,249 3,153

Non-proportional health reinsurance R0140 0 0 Non-proportional casualty reinsurance R0150 0 0 Non-proportional marine, aviation and transport reinsurance

R0160 0 0

Non-proportional property reinsurance R0170 0 0


A component part of the linear formula for life insurance and reinsurance obligations

C0040 MCRL result R0200 0

Best Estimate (of reinsur-ance/ SPV)

and TP calcu-lated as a

whole

Net (after de-duction of rein-surance/ SPV) total capital at

risk C0050 C0060

Obligations with profit participation – guaranteed benefits

R0210 0

Obligations with profit participation – future dis-cretionary benefits

R0220 0

Index-linked and unit-linked insurance obliga-tions

R0230 0

Other Life (re)insurance and Health (re)insur-ance obligations

R0240 0

Total risk capital for all Life (re)insurance obliga-tions

R0250 0

Total MCR calculation C0070 Linear MCR R0300 24,399 SCR R0310 209,893 MCR cap R0320 94,452 MCR floor R0330 52,473 Combined MCR R0340 52,473 Absolute MCR floor R0350 3,700

Minimum Capital Requirement R0400 52,473

HDI Global Specialty SE - Solvency and Financial Condition Report … · 2020. 10. 5. · 3 HDI...

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Transcript of HDI Global Specialty SE - Solvency and Financial Condition Report … · 2020. 10. 5. · 3 HDI...