The Group's risk profile as at the 2019 year-end shows that the Group reduced its exposure to market risks last year (by 3 percentage points to 32%), as well as maintained and strengthened its underwriting discipline with respect to the underwriting risks, which represented as much as 49% of the risk profile.
As part of a somewhat conservative investment policy and active capital management, the Group improved the credit quality of bond investments in its investment portfolio (increasing high quality government bonds and reducing corporate bonds) and extended the duration of the investment portfolio in order to match it to the duration of its liabilities as much as possible.
By applying such management approach, the Group reduced interest rate risks and spread risks, to which only assets are exposed, as liabilities are valued based on the risk-free interest rate term structure.
In the context of the regular own risk and solvency assessment (ORSA) process, the Group conducted stress scenarios, i.e. sensitivity tests, in 2019 and took their findings into account when determining existing and future capital needs. The stress tests tested the sensitivity of capital adequacy to extreme changes in specific parameters, including the situation on the financial markets. According to the results, the Group would remain adequately capitalised even after stressful events.
In the current conditions, the Group comprehensively manages increased risks associated with the current situation. Due to the many unknowns, it is not yet possible to fully assess the effects of the pandemic. Nevertheless, the Group assesses that its insurance and investment portfolios are sufficiently resilient and that the capital position is appropriate to cope with the increased risks arising from the COVID-19 pandemic situation and the financial markets.