Quantitative and qualitative risk management
Hannover Re's risk management draws on quantitative simulation models. The purpose of risk quantification is to calculate – with the aid of the internal risk capital model – the risk capital on the basis of a Value at Risk (VaR) with a confidence level of 99.97% for an observation period of one year. This consciously high confidence level ensures – as a vital subsidiary condition – that future regulatory capital requirements (confidence level of 99.5%) will also be exceeded. Our qualitative processes and controls for risk identification, quantification and steering are based upon recognised, advanced methods. Centrally defined guidelines, methods and processes as well as systems of limits and thresholds provide the framework for decentralised implementation, monitoring and reporting. In addition, the central risk monitoring function quantifies and aggregates all risks on the Group level. It performs central reporting and monitors measures taken across the organisation to control risks that could potentially jeopardise the Group's existence.