Review

Risk categories

Amlin categorises risk closely to that laid out by the FSA. The risk categories are as follows:

Underwriting risk: The risk of loss arising from the inherent uncertainties in the occurrence, amount and timing of insurance liabilities and premiums. The scope of insurance risk covers underwriting, reserving, claims and reinsurance (excluding credit risk). The Underwriting Director is the primary risk owner but underwriting is delegated through senior management to class underwriters in Syndicate 2001 and Amlin Bermuda. Risk management is exercised through careful planning and monitoring, the setting of maximum risk liability and catastrophe exposure limits and through the day to day pricing and risk selection activities of our underwriters.

Credit risk: The risk of loss if a counterparty fails to perform its obligations or fails to perform them in a timely fashion. These counterparties include reinsurers, brokers, insured and reinsured clients, coverholders and investments. Credit risk falls under the ownership of the Finance Director and is managed by the Broker Committee through the Credit Risk team, Reinsurance Security Committee, Reinsurance collection team and Investments team.

Market risk: The risk arising from fluctuations in values of, or income from, assets, in interest rates or in exchange rates. The Finance Director is responsible for market risk and day to day management is delegated to the Chief Investment Officer. From March 2008 market risk will be monitored by a newly appointed Head of Investment Risk reporting to the Chief Risk Officer.

Liquidity risk: The risk arising from insufficient financial resources being available to meet liabilities as they fall due. The scope of liquidity risk includes managing unexpected changes in funding sources, market conditions and cash flow planning. Liquidity risk is owned by the Finance Director and is managed within the Finance and Treasury teams.

Operational risk: Risk resulting from inadequate or failed internal processes, people and systems, or from external events, including regulatory control failures. Our approach is to split operational risk into (a) the control failure part of risk, which is covered within each specific risk area and (b) external risk events or internal generic risk such as fraud, which are handled as a separate risk category. Operational risk is owned by the Chief Operating Officer and managed by operational managers and the Human Resources Director. There are regular operational management reports on the status of key controls. Business continuity risk and planning is regularly reviewed and tested.

Strategic risk: Risk associated with the appropriateness of business strategy in the face of the current and future political, legislative and economic environment. Strategic risk is owned by the Chief Executive and is discussed and reviewed by the Executive Management Group and by the Amlin plc and operating subsidiary boards.

The detailed risk disclosures for underwriting, credit and market risk are set out in detail here

© Copyright Amlin 2007