Our risk appetite is the amount of risk that we are willing to accept in order to achieve an optimal balance between risk, return, and resilience. That balance is vital for achieving our goals and generating value for members and policyholders.

The aim of the strategic risks that we take is to find a good balance between growth, efficient business operations, and business continuity. Every year, we formulate specific annual targets for achieving our strategic objectives. Progress on the annual targets is monitored on a monthly basis, with the necessary adjustments.

The aim of taking financial risks is to achieve an optimal balance between healthy solvency, sufficient equity levels, and controllable premium increases for our policyholders. For funeral insurance, we seek to guarantee an affordable and dignified funeral for our policyholders. Therefore, we accept investment risks in this sense to achieve a return that we can preferably share with our policyholders through profit sharing to cover the service costs associated with the rising cost of funerals due to inflation. To monitor these risks and returns, we have a system of risk appetite statements that is aimed at guaranteeing the desired optimal balance.

The aim of controlling operational and integrity risks is to have controlled business operations and to comply with laws and regulations. We have defined the main risks and established internal controls for them, which are regularly assessed. We have a system of operational risk appetite statements in place to monitor the risks. These statements act as an early warning system. If a limit is exceeded, it can be a sign that risks are not adequately controlled and that remedial action is required or that the internal controls need to be tightened up.

Risk mitigation actions are taken to ensure the risks remain within the desired bandwidths. In most situations we use a mix of:

• terminating or outsourcing activities;
• reducing risks by taking preventative action or by increasing our internal controls;
• transferring risks via insurance/reinsurance and/or contract management;
• accepting risks that can be borne by the organisation itself.

We take extra measures if the risks exceed the limits and/or are larger than desired. Limits may only be deliberately exceeded – temporarily – if approved by the Executive Board.

We test the effectiveness of the internal controls every six months. That gives us a picture of our net risk positions, so we can assess whether the risks remain within the limits of our risk appetite. Every three months as well, we test whether the risk limits and tolerances (KRIs) have been exceeded.

As part of Solvency II, we achieve a proper balance between risk, capital, and strategy. The own risk and solvency assessment (ORSA) covers that process. This involves reviewing our company objectives, risk appetite, and available capital buffers in relation to various scenarios (stress scenarios). These scenarios are defined by the Executive Board prior to the ORSA, with advice from the second line. We record the findings in an ORSA report.

• Our solvency is robust.
• The coverage ratio in the basic scenario shows a gradual increase.
• Adjustment is necessary in environments with low interest rates and low inflation.
• Climate stress scenarios show that the sensitivity of our financial position to physical and transition risks is limited.

In short: our capital and our risk structure are solid, with an emphasis on future vulnerabilities.