Notes to the Financial Statements
total funds under management, as well as reputational risks from poor investment returns. The investment of the Policyholder assets is undertaken in accordance with the Investment Policy and Guidelines approved by the Board, which inter alia stipulates the investment allocation mix, the portfolio’s risk characteristics, management response plans and the use of derivatives. To the extent required, capital reserves are held in accordance with the ICAAP with respect to the Group’s residual fee risk exposure. c) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. Credit risk exposures arising from investment activities are assessed by the Group’s internal investment management committee (the ClearView Investment Committee ( CIC )) prior to investing ClearView assets into any significant financial asset. The ongoing credit standing of material investments are monitored by the CIC. The large majority of debt assets invested in by the Group and on behalf of policyholders and clients (including Policyholder assets) are managed under mandates with appointed fund managers. Those mandates include credit rating, diversification and maximum counterparty exposure rules and standards that are to be met. The fund managers adherence to those requirements are subject to ongoing monitoring by the fund managers, and are separately monitored by the Group’s custodian. The CIC also receives reporting on mandate compliance on a periodic basis. Credit risk arising from other third party transactions, such as reinsurance recovery exposures and exposure to outsource service providers, are assessed prior to entering into transactions with those parties, approved by the Board where material, and are monitored on an ongoing basis. ClearView does have a concentration risk with Swiss Re and this is managed as outlined in section 6.6. Specific capital reserves are held against credit risk under the regulatory capital requirements of ClearView Life and credit risk is considered within the Company’s ICAAP.
on those assets is passed through, in full, to these policyholders (referred to below as Policyholder assets). Nonetheless, the Group has a secondary exposure to the Policyholder assets, via the impact on the fees charged by the Group which vary with the level of Policyholder funds under management, as well as related reputational exposure. b) Market risk Market risk is the risk that (re)insurance contract assets and liabilities will be affected by the changes in interest rates and financial assets will be affected by changes in interest rates, foreign exchange rates and equity prices. Interest rate risk Interest rate risk arises on ClearView’s assets which are invested in floating rate investments and cash. Fixed interest rate instruments expose the Group to fair value interest rate risk. Interest rate risk is managed by the Group through: • Investing ClearView’s assets in accordance with the Board approved Investment Policy and Guidelines; • Monitoring the investments at the ClearView Investment Committee (CIC); and • By holding capital reserves in accordance with the Company’s ICAAP with respect to the residual interest rate risk exposure retained, in addition to the regulatory capital reserves held within ClearView Life in respect of interest rate risk. Equity price risk Equity price risk is the risk that the fair value of investments in equities decreases or increases as a result of changes in market prices, whether those changes are caused by factors specific to the individual share price or factors affecting all equity instruments in the market. As at 30 June 2024, ClearView’s shareholder related assets were not invested in equities and therefore not exposed to equity price risk. In contrast to this, the Policyholder assets involve significant investment in equities. As noted above, the Policyholder asset risks are borne by the policyholders. The Group is exposed to secondary risks on its investment management fees that are driven by the
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ClearView Annual Report 2024
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