Euler Hermes Ré SA Solvency and Financial Condition Report (SFCR) Based on 31/12/2018 figures Contents Contents ...................................................................................................................................... 2 Executive Summary ...................................................................................................................... 5 Business and performance (A) ................................................................................................... 5 System of governance (B) ......................................................................................................... 5 Risk profile (C) .......................................................................................................................... 6 Valuation for solvency purposes (D) .......................................................................................... 6 Capital management (E) ............................................................................................................ 6 Business and performance .................................................................................................... 7 A.1. Business ........................................................................................................................ 7 Legal entity, auditor and supervisor ................................................................................ 7 Group structure and qualified holdings .......................................................................... 7 Material lines of business and geographical areas.......................................................... 8 Significant events ............................................................................................................ 9 A.2. Underwriting Performance ............................................................................................ 9 Aggregated underwriting performance .......................................................................... 9 Underwriting performance by material geographical area........................................... 10 A.3. Investment Performance ............................................................................................. 10 Income and expenses arising from investments ........................................................... 11 Gains and losses recognized directly in equity .............................................................. 11 Investments in securitization ........................................................................................ 11 A.4. Performance of other activities .................................................................................... 12 A.5. Any other information ................................................................................................. 12 System of governance ......................................................................................................... 13 B.1. General information on the system of governance ....................................................... 13 Structure of the system of governance ......................................................................... 13 Remuneration policy ..................................................................................................... 17 Material transactions .................................................................................................... 17 B.2. Fit and Proper requirements ........................................................................................ 17 Description of requirements for « Fit & Proper » ......................................................... 17 Description of processes and procedures in place ........................................................ 19 B.3. Risk management system including the own risk and solvency assessment ................... 21 Description of Risk Management .................................................................................. 21 Governance of the Internal Model ................................................................................ 24 Description of ORSA process ......................................................................................... 27 B.4. Internal control system ................................................................................................ 29 Description of internal control system .......................................................................... 29 Implementation of Compliance Function ...................................................................... 30 B.5. Internal Audit Function ................................................................................................ 31 Internal Audit Function implementation....................................................................... 31 Internal Audit Function activities .................................................................................. 32 Independence and objectivity of the Internal Audit Function ...................................... 32 B.6. Actuarial Function ....................................................................................................... 33 Implementation of the Actuarial Function .................................................................... 33 EH Ré SA 2018 Solvency and Financial Condition Report page 2 of 74 Actuarial function activities ........................................................................................... 34 B.7. Outsourcing ................................................................................................................. 34 Roles and responsibilities .............................................................................................. 34 Implementation of the outsourcing policy .................................................................... 35 Outsourcing of critical or important operational functions .......................................... 36 B.8. Any other information ................................................................................................. 36 Risk profile ......................................................................................................................... 37 C.1. Underwriting Risk ........................................................................................................ 37 Description of the measures used ................................................................................. 37 Description of the risk exposure ................................................................................... 37 Risk concentration ......................................................................................................... 37 Risk mitigation ............................................................................................................... 37 C.2. Market Risk ................................................................................................................. 37 Description of the measures used ................................................................................. 37 Description of the risk exposure ................................................................................... 37 Description of assets investment .................................................................................. 38 Risk concentration ......................................................................................................... 39 Risk mitigation ............................................................................................................... 40 Risk sensitivity ............................................................................................................... 41 C.3. Counterparty default Risk ............................................................................................ 42 Description of the measures used ................................................................................. 42 Description of the risk exposure ................................................................................... 42 Risk concentration ......................................................................................................... 42 Risk mitigation ............................................................................................................... 43 C.4. Liquidity Risk ............................................................................................................... 43 Description of the measures used ................................................................................. 43 Description of the risk exposure ................................................................................... 44 Risk concentration ......................................................................................................... 45 Risk mitigation ............................................................................................................... 45 Expected profit included in future premiums ............................................................... 45 Risk sensitivity ............................................................................................................... 45 C.5. Operational Risk .......................................................................................................... 46 Description of the measures used ................................................................................. 46 Description of the risk exposure ..................................................................................