Unipol Gruppo S p A : 2023 Solvency and Financial Condition Report

2023

Solvency and Financial Condition Report

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Mercurio GP Srl

Unipol Group

Solvency and Financial Condition Report

2023

Translation from the Italian original solely for the convenience of international readers

CONTENTS

Introduction	5
Definitions and glossary	6
Summary	9
A. Business and Performance	19
A.1 Business	20
A.2 Underwriting performance	34
A.3 Investment performance	39
A.4 Performance of other activities	42
A.5 Any other information	42
B. System of governance	45
B.1 General information on the system of of governance	46
B.1.1 Tasks and responsibilities of Board of Directors	46
B.1.3 Tasks and responsibilities of Key Functions	56
B.1.4 Remuneration policies	57
B.2 Fit and proper requirements	59

B.3 Risk management system, including the own risk and solvency

assessment	62
B.3.1 Risk management system	62
B.3.2 Own risk and solvency assessment (ORSA)	65
B.3.3 Internal model governance	66
B.3.4 Procedures that ensure consistency within the Group of the
internal control and risk management systems and reporting	68
B.4 Internal control system	68
B.5 Internal Audit Function	71
B.6 Actuarial function	72
B.7 Outsourcing	73
B.8 Any other information	76

C. Risk profile	79
C.1 Underwriting risk	80
C.2 Market risk	84
C.3 Credit risk	87
C.4 Liquidity risk	89
C.5 Operational Risk	90
C.6 Other material risks	92
C.7 Any other information	94
C.7.1 Sensitivity analysis	94

D. Valuation for solvency purposes	99
D.1 Assets	105
D.1.1 Valuation criteria	105
D.1.2 Quantitative information on asset valuation	109
D.2 Technical provisions	112
D.2.1 Valuation criteria	112
D.2.2 Quantitative information on the valuation of the technical
provisions	118
D.2.3 Information on the effects of the application of volatility
adjustment	120
D.3 Other liabilities	121
D.3.1 Valuation criteria	121

D.3.2 Quantitative information on the valuation of other liabilities 121

D.4 Alternative methods for valuation	122
D.5 Any other information	122

E. Capital management	125
E.1 Own funds	126
E.1.1 Introduction	126
E.1.2 Capital management policy	127
E.1.3 Information on available and eligible own funds	128
E.2	Solvency Capital Requirement and Minimum Capital
Requirement	135
E.3	Use of the duration-based equity risk sub-module in the
calculation of the Solvency Capital Requirement	136

E.4 Differences between the standard formula and any internal

model used	136
E.5 Non-compliance with the Minimum Capital Requirement and non-
compliance with the Solvency Capital Requirement	139
E.6 Any other information	139
QRT models	141
Independent Auditors' Report	163

Unipol Group Solvency and Financial Condition Report 2023

INTRODUCTION

This "Solvency and Financial Condition Report" was prepared in application:

• of the provisions on disclosure to the public set forth in Articles 290-303 of Title I, Ch. XII, and Articles 359-364 of Delegated regulation EU No. 35/2015 ("Regulation"), supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of Insurance and Reinsurance ("Directive");
• of Implementing Regulation (EU) 2023/895 of 4 April 2023, laying down implementing technical standards for the application of the Directive with regard to the procedures, formats and templates for the disclosure by insurance and reinsurance undertakings of their report on their solvency and financial condition and repealing Implementing Regulation (EU) 2015/2452;
• of IVASS Regulation No. 33, 6 December 2016, concerning the disclosure to the public and IVASS, carrying provisions integrating the contents of the "Solvency and Financial Condition Report" and the regular report to IVASS ("Regular Supervisory Report"), ("Regulation 33");
• of IVASS Letter to the Market Prot. No. 0093309/18 of 28 March 2018 concerning the "Results of comparative analyses on solvency and financial condition reports (SFCR)";
• of IVASS Regulation No. 46 of 17 November 2020 containing provisions on the transparency of the commitment policy and the elements of the equity investment strategy of insurance or reinsurance companies ("Regulation 46").

Unless otherwise specified, data are expressed in thousands of euros.

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Definitions and glossary

The meaning of the main acronyms and expressions used in this document is summarised below.

Term	Meaning
Capital adequacy	Observance by the company/Group of regulatory solvency capital requirements.
	"Building Block Approach": General accounting model for all contracts without direct participation
BBA	required by the accounting standard IFRS 17.
BEL	"Best estimate of liabilities" deriving from insurance contracts.
CAP	Private Insurance Code (Legislative Decree No. 209 of 7 September 2005, as amended).
	Total capital requirement relating to a specific risk that the company/Group deems necessary to
Capital at Risk	cover losses exceeding a given expected level.
	"Contractual Service Margin" - Insurance liability suspending the expected profit overtime,
CSM	recognising it in the P&L consistently with the insurance service provided.
EIOPA	European supervisory authority for occupational pensions and insurance.
	The Audit Function, the Chief Risk Officer, the Compliance and Anti-Money Laundering Function, as
Key Functions	part of compliance activities, and the Actuarial Function.
LIC	Liability for Incurred Claims.
LoB	Line of Business of insurance activities as defined in annex I of the Regulation.
LRC	"Liability for Remaining Coverage" - Liability for covered events relating to future insurance services
Market Consistent Balance	MCBS to be drafted on the basis of the appropriate criteria specified by the Solvency II provisions
Sheet (or also "MCBS")	that are based on the concept of fair value.
	Minimum Capital Requirement as defined by Title I - chapter VII of the Regulation. It corresponds to
	the amount of eligible own funds below which policyholders and beneficiaries would be exposed to
MCR	an unacceptable level of risk if the insurance companies were allowed to continue their activities.
PIM	Partial Internal Model used to determine the solvency capital requirement.
	Own Funds as defined by Title I Chapter IV and Title II Chapters I and II of the Regulation. They
	represent the financial resources steadily acquired by the company/Group and available to it to
OF	absorb losses and to overcome risks generated by business activities on a going concern basis.
	"Premium Allocation Approach" - Simplified accounting model required by the accounting standard
	IFRS 17 for one-year contracts, or contracts deemed as eligible based on a negligible fulfilment cash
	flows volatility throughout
PAA	the coverage
ORSA	Own Risk and Solvency Assessment Report to the Authorities.
	Insurance liability reflecting the remuneration requested by the issuer to bear the uncertainty in the
	cash flows amount and timing deriving from
RA	non-financial risks
	Risk Appetite Framework - reference framework which defines - in line with the maximum risk that
	may be assumed, the business model and the Strategic Plan - the Risk Appetite, any tolerance
	thresholds, the operational risk limits, specific risk management policies and the reference
RAF	processes required to define and implement them.
	Level of risk (overall and by type) that the Group and/or the Company intends to assume for the
Risk Appetite	pursuit of its strategic objectives.
	The Risk Margin corresponding to the cost of holding an amount of eligible own funds equal to the
	SCR needed to support insurance and reinsurance obligations assumed throughout their contractual
RM	life.
	Solvency Capital Requirement as set forth in Title I - chapters V and VI of the Regulation. The amount
	of that requirement is determined so as to enable insurance companies or groups to be capable, with
	a likelihood of at least 99.5%, of honouring their obligations to policyholders and beneficiaries in the
SCR	next twelve months.
Market Wide Standard	Methodology for the calculation of the solvency capital requirement which calls for the application of
Formula	the standard parameters defined by the Regulation.

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		Unipol Group Solvency and Financial Condition Report 2023
	TCM	Temporary insurance in the event of death.
		Technical provisions determined according to Solvency II criteria, to the extent equal to the amount
		that an insurance or reinsurance company would have to pay if its contractual rights and obligations
	Technical Provisions (TP)	were immediately transferred to another company. They correspond to the sum of BEL and RM.
		"UndertakingSpecific Parameters"or"Group SpecificParameters"- parameters ofcalculation ofthe
		insurance company or group specific solvency capital requirements, to be used as a replacement of
		those defined by the Market Wide Standard Formula. The use of specific parameters is subject to
	USP or GSP	authorisation by the Supervisory Authority.
		Volatility Adjustment corresponding to an optional adjustment to the risk-free interest rate curve
	VA	(published by EIOPA) to be applied to determine the BELs.
		"Variable Fee Approach" - Accounting model for contracts with direct participation required by the
	VFA	accounting standard IFRS 17.

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