ii. Claims management and provisioning
Initial claims determination is managed by claims officers with the requisite degree of experience and competence with the assistance,
where appropriate, of a loss adjustor or other party with specialist knowledge. It is the Group's intention to respond to and settle all
genuine claims quickly whenever possible and to pay claims fairly, based on policyholders' full entitlements.
Claims provisions are established using actuarial valuation models and include a risk margin for uncertainty (refer to the claims note).
iii. Reinsurance
Refer to reinsurance risk section III below for further details.
b. CONCENTRATIONS OF INSURANCE RISK
The exposure to concentrations of insurance risk is mitigated by a portfolio diversified into many classes of business across different
regions and by the utilisation of reinsurance.
Concentration risk is particularly relevant in the case of catastrophes, usually natural disasters, which generally result in a
concentration of affected policyholders over and above the norm and which constitutes the largest individual potential financial loss.
Catastrophe losses are an inherent risk of the general insurance industry that have contributed, and will continue to contribute, to
potentially material year-to-year fluctuations in the results of operations and financial position. Catastrophes are caused by various
natural events including earthquakes, bushfires, hailstorms, tropical storms and high winds. The Group is also exposed to certain
large human-made catastrophic events such as industrial accidents and building collapses. The nature and level of catastrophes in
any period cannot be predicted accurately but can be estimated through the utilisation of predictive models. The Group actively limits
the aggregate insurance exposure to catastrophe losses in regions that are subject to high levels of natural catastrophes.
Each year, the Group sets its tolerance for concentration risk and purchases reinsurance in excess of these tolerances. Various
models are used to estimate the impact of different potential natural disasters and other catastrophes. The tolerance for
concentration risk is used to determine the Insurance Concentration Risk Charge (ICRC) which is the maximum net exposure to
insurance risk determined appropriate for any single event with a given probability. The selected ICRC is also determined based on
the cost of purchasing the reinsurance and capital efficiency.
The tables below demonstrate the diversity of the Group’s operations by both region (noting that the insurance risks underwritten in
Australia are written in all states and territories) and product, demonstrating the limited exposure to additional risks associated with
long-tail classes of business. The table below provides an analysis of gross written premium by region:
CONSOLIDATED
2015
2014
%
%
Australia
77
78
New Zealand
20
19
Asia
3
3
100
100
The following table provides a percentage analysis of gross written premium by product:
CONSOLIDATED
2015
2014
%
%
Motor
30
32
Home
26
27
Short-tail commercial
24
19
CTP (motor liability)
8
9
Liability
6
5
Other short-tail
3
4
Workers' compensation
3
4
100
100
Specific processes for monitoring identified key concentrations are set out below.
RISK
SOURCE OF CONCENTRATION
RISK MANAGEMENT MEASURES
An accumulation of risks arising from a
natural peril
Insured property concentrations
Accumulation risk modelling, reinsurance
protection
A large property loss
Fire or collapse affecting one building or a
group of adjacent buildings
Maximum acceptance limits, property risk
grading, reinsurance protection
Multiple liability retentions being
involved in the same event
Response by a multitude of policies to the
one event
Purchase of reinsurance clash protection
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