E.10. Capital management

The objectives of Generali Group’s as well as the individual business unit’s capital management policy are:

to guarantee the accomplishment of solvency requirements as defined by the specific laws of the sector where the participated companies operate (insurance, pension funds and financial sector);
to safeguard the going concern and the capacity to develop own activities;
to continue to guarantee an adequate remuneration of the shareholder’s capital; and
to determine adequate pricing policies that are suitable for the risk level of each sectors’ activity.

E.10.1. Solvency

The Parent Company carries out business in the insurance sector, which is a regulated industry. The Parent Company has to comply with all regulations set in the Insurance Act No. 277/2009 Coll. and regulation No. 306/2016 Coll., fully harmonised with EU regulation, including prudential rules relating to the capital. The Generali Group uses an internal approach to determine the available financial resources and the capital requirements for risks to which it is exposed to (Group Internal Model), while maintaining consistency with the basic framework of Solvency II, which came effective in 2016. On 7 March 2016, the Parent Company received the regulatory approval to use the Group Internal Model for regulatory solvency capital requirement calculations.

During 2016, activities aimed at enhancing the Risk Management System have continued, mainly in terms of advanced risk and solvency analysis and embedding the risk management in the business decisions. In minor areas, the yet remaining Solvency II requirements were implemented. This development was linked to the refinement of the methodology concerning the assessment of available financial resources and the variety of associated risks, consistently with an economic approach. Within risk assessment and monitoring enhancement activities, focus has been given to improve the overall validation activity of the overall risk assessment process, in order to fulfil the tests and standard requirements of the regulatory regime. Finally, activities aimed at a wider and more transparent disclosure of risks have been carried out, in light of Solvency II Pillar II (Own Risk and Solvency Assessment) and Pillar III requirements (regulatory and market disclosure).

The Parent Company regularly assesses its statutory solvency position, which is derived from the ratio of its available capital and the capital requirement.

Shareholder’s funds per financial statements of Parent company are further adjusted for revaluation of assets and liabilities to market value according to Solvency II rules for inclusion in the regulatory available capital.

Based on preliminary calculations, all insurance companies in the Group fulfil the regulatory capital requirements in respect of Solvency position as of 31 December 2016. The final solvency position according to the Solvency II requirements will be available after the date the financial statements are approved for issue and will be published as a part of the Solvency and Financial Condition Report (SFCR) at the end of the May 2017.