E.10. Capital management
- To guarantee the accomplishment of solvency requirements as defined by the specific laws of the sector where the participated companies operate (insurance, pension funds and financial sector).
- To safeguard the going concern and the capacity to develop own activities.
- To continue to guarantee an adequate remuneration of the shareholder’s capital.
- To determine adequate pricing policies that are suitable for the risk level of each sectors’ activity.
E.10.1. Solvency I
The Parent Company carries out business in the insurance sector, which is a regulated industry. The Parent Company has to comply with all regulations set in the Insurance Act No 277/2009 Coll. and regulation No 434/2009 Coll., fully harmonised with EU regulation, including prudential rules relating to the capital. The prudential rules set the method for calculating Required solvency margin (minimum regulatory capital) and Available solvency margin (actual regulatory capital) which are both calculated separately for life and non-life insurance.
The industry’s lead regulator is the Czech National Bank which sets and monitors the capital requirements for the Parent Company.
The Group undertakes insurance business which is a regulated industry. In every country in which the Group operates, local law and or local supervisory authorities have minimum capital requirements for insurance companies.
The minimum capital should be maintained by each business unit to face its insurance obligations and operational risks.
The following table summarises the minimum capital requirements prescribed by different local supervisory authorities and the available capital for each company:
| (CZK million) | Required solvency margin | Available solvency margin | ||
|---|---|---|---|---|
| 2015 | 2014 | 2015 | 2014 | |
| Česká pojišťovna a.s. | 4,143 | 4,752 | 21,746 | 20,297 |
| Česká pojišťovna Zdraví, a.s. | 58 | 58 | 321 | 302 |
| Total | 4,201 | 4,810 | 22,067 | 20,599 |
The Group closely monitors its compliance with regulatory capital requirements. The current approach for calculating capital requirements is based on Solvency I principles which are to be replaced by a new system of regulatory capital calculation – Solvency II. The Group is gradually implementing the Solvency II standards into its own risk capital management procedures.
E.10.2. Solvency II
The Generali Group makes use of an internal approach to determine the available financial resources and the capital requirements for risks which it is exposed to (Group Internal Model), while maintaining consistency with the basic framework of Solvency II, which comes effective from 2016. During 2015 activities aimed at enhancing the Risk Management System have continued, in accordance with the project aimed at fulfilling Solvency II requirements. The application for the regulatory approval of Group Internal Model was also finalized and submitted to the College of Supervisors representing the Supervisory Authorities from all the countries in scope of the Group Internal Model.
The Group Internal Model was approved on 7 March 2016 and it will be effective for the Group and Parent company as Solvency II comes to force in the Czech Republic.
This development was linked to a refinement of the methodology concerning the assessment of available financial resources and the variety of associated risks, consistently with an economic approach. Within risk assessment and monitoring enhancement activities, focus has been given to improve the overall validation activity of the overall risk assessment process, in order to fulfil the tests and standard requirements of the forthcoming regulatory regime. Finally, activities aimed at a wider and more transparent disclosure of risks have been carried out, in light of Solvency II Pillar II (Own Risk and Solvency Assessment) and Pillar III requirements (regulatory and market disclosure).
The Group follows the Generali Group approach, being a part of it. In this phase of legislative and market changes, the capital management policy integrates the internal economic logic with the necessary considerations about existing capital constraints, with reference in particular to current local and the Group solvency requirements and Rating Agency requirements.