Risk in the insurance business is defined as insurance underwriting risk, market risk, credit risk, and liquidity risk in respect of the wholly owned insurance companies in the Group. The companies are also exposed to operational risk.
Insurance underwriting risk is defined as the risk to value, earnings, or capital, arising from a deviation between actual and anticipated insurance costs (claims and expenses). In other words, the risk that actual outcomes will deviate from projections e.g. in terms of longevity, mortality, morbidity or claim frequency.
Swedbank conducts insurance operations in Sweden, Estonia, Latvia and Lithuania, with Sweden as its largest market. Through Swedbank Försäkring AB, Swedbank and the savings banks offer a comprehensive range of savings insurances and security solutions for private individuals and companies in Sweden. For private individuals, life and health insurance are included, as well as pension savings and endowment. For companies, pension plans including health insurance, life insurance, and health and accident insurance.
The largest risks in these operations are market risk and insurance underwriting risk. Market risk is limited since the large part of the life insurance portfolio consists of products where the risk is borne by customers.
Insurance underwriting risk is managed by basing premiums on statistical assumptions and close monitoring e.g. to identify new trends. To further limit the company’s risk exposure, portions of its insurance underwriting risk are reinsured.