Risk categories

The LLB Group is exposed to various types of risks. It differentiates between the risk categories shown in the diagram.

Risk categories

 

 

 

 

 

Market risk

 
 

Liquidity and refinancing risk

 

Credit risk

 

 

 

 

 

Operational risk

 
 

Insurance risk

 

Strategic risk

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reputation risk

Market risk

The risk of losses arises from unfavourable changes in interest rates, exchange rates, securities prices and other relevant market parameters.

Liquidity and refinancing risk

Represents the risk of not being able to fulfil payment obligations on time or not being able to obtain refinancing funds on the market at a reasonable price to meet current or future payment obligations.

Credit risk

The potential loss is inherent in the partial or complete default of expected payment flows as well as in the impairment of open credit balances on account of the downgrading of borrower’s credit- worthiness.

Operational risk

Is the danger of losses due to the unsuitability or failure of internal procedures, people or systems or as a result of external events.

Strategic risk

Arises as a result of decisions taken by the Group Executive Board, which have a negative influence on the survival, development ability or independence of the LLB Group.

Reputation risk

If risks are not recognised, reasonably controlled and monitored, this can lead not only to substantial financial losses, but also to damage to the Group’s reputation.

Underwriting risk

With respect to the effects of the risks involved with insurance business, a primary differentiation has to be made between performance risks, which apply to the level of success of the insurance business, and liquidity risks, which apply to its payment level. Basically, the income from the sale of policies should be invested with the aim of being able to cover future claims.

Performance is achieved primarily in two areas, the actuarial area (liabilities) and the capital investment area (assets). Actuarial risks occur, on the one hand, if the calculated risk premiums of a period are not sufficient to finance the damages arising in the period. And on the other, if the provisions set aside for damages are not adequate to cover the liabilities from earlier business periods. A range of investment risks are involved in the area of capital investments. These include market losses with assets (see market risks) and further the attainment of inadequate income (interest, dividends, realized price gains) in order to finance existing liabilities. There are also creditworthiness risks in the area of capital investments, i.e. counterparty default risks (see credit risks).

top of page