Euler Hermes Reinsurance AG Financial Condition Report Based on 31/12/2019 figures Financial Condition Report of Euler Hermes Re AG 2019 Contents Contents ........................................................................................................................... 1 Executive Summary .......................................................................................................... 1 Business activities (A) ............................................................................................................... 1 Company success (B) ................................................................................................................ 2 Governance and risk management (C) ...................................................................................... 2 Risk profile (D) ......................................................................................................................... 3 Valuation (E) ............................................................................................................................ 3 Capital management & Solvency requirements (F&G) ............................................................... 3 Business activities ...................................................................................................... 4 A.1. Business overview ......................................................................................................... 4 Business overview ........................................................................................................................ 4 Business outlook ........................................................................................................................... 4 A.2. Legal Entity & Group Structure and Related Party Transactions ...................................... 5 Legal Entity & Group structure ..................................................................................................... 5 Related Party Transactions ........................................................................................................... 6 A.3. External auditor ............................................................................................................ 6 A.4. Supervisory authority .................................................................................................... 7 A.5. Significant events in 2019 and subsequent events ......................................................... 7 Company success ....................................................................................................... 8 B.1. Underwriting performance ............................................................................................ 8 B.2. Financial performance ................................................................................................... 9 Analysis per nature of income and expenses ............................................................................... 9 Analysis per class of assets ........................................................................................................... 9 B.3. Performance of other activities ................................................................................... 11 Governance and risk management ........................................................................... 12 C.1. Governance framework ............................................................................................... 12 Overview .................................................................................................................................... 12 Board of Directors (BoD) ............................................................................................................ 12 Board of Management (BoM) .................................................................................................... 14 Key functions .............................................................................................................................. 15 Fit & Proper policy ...................................................................................................................... 16 C.2. Risk management system ............................................................................................ 17 Risk management framework .................................................................................................... 17 Risk strategy and risk appetite ................................................................................................... 18 C.3. Internal control system ............................................................................................... 19 Internal Control Framework principles ...................................................................................... 19 Financial Condition Report of Euler Hermes Re AG 2019 General elements of the internal control system framework .................................................... 20 Specific control areas ................................................................................................................. 21 Risk profile .............................................................................................................. 22 D.1. Risk profile overview ................................................................................................... 22 D.2. Current risk profile ...................................................................................................... 22 Top risks ...................................................................................................................................... 22 Target Capital ............................................................................................................................. 24 Stress tests.................................................................................................................................. 30 Liquidity ratios ............................................................................................................................ 30 Quantitative limits ...................................................................................................................... 32 Risk management policies, standards and guidelines ................................................................ 34 D.3. Other risk management processes ............................................................................... 35 Operational Risk ......................................................................................................................... 35 Reputational Risk and Issues management ................................................................................ 37 Concentration ............................................................................................................................. 39 D.4. Future risk profile ........................................................................................................ 39 General description .................................................................................................................... 39 Impact of the sale of EH Ré SA ................................................................................................... 40 D.5. Off balance sheet items ............................................................................................... 41 Valuation ................................................................................................................ 42 E.1. Assets ......................................................................................................................... 42 Real estate .................................................................................................................................. 43 Participations .............................................................................................................................. 43 Fixed-income securities .............................................................................................................. 43 Loans .......................................................................................................................................... 43 Equities ....................................................................................................................................... 43 Collective investment schemes .................................................................................................. 44 Alternative Investments ............................................................................................................. 44 Deposits made under assumed reinsurance .............................................................................. 44 Cash and cash equivalents.......................................................................................................... 44 Ceding of Best Estimate provisions for insurance liabilities ....................................................... 44 Intangible Assets ........................................................................................................................ 44 Receivables from insurance business ......................................................................................... 44 Other Receivables ....................................................................................................................... 45 Accrued Assets ..........................................................................................................................