Allianz Russia

1. Allianz Russia Minimum Standards for Corporate Risk Management System Implementation in Industrial Enterprises MINIMUM STANDARTS | RISK GRADING | RISK SURVEY

2. Russian Risk Consultants Market Minimum Standards Customers A B C D “A risk management process, such as a standard, can give risk managers a method of working, but must be aligned with the culture of the company and the countries in which it operates” • Marie-Gemma Dequae, President of Europe’s risk management association (FERMA) Industrial sector Financial sector Operational risks Financial risks Non-financial risks International Standards “Support” level Brokerage, audit, consultant companies Companies have to obtain access to a standard risk management approach

3. Internal standards Corporate Governance Implication and State Regulation in Europe and Russia/CIS Russian experience European experience State standards and doctrines Government standards Facultative Rules and Norms Obligatory State Rules Construction norms and specifications Facultative safety principals Industry-specific standards Internal standards Risk Management

4. Appraisal value Economic value Value of future business The risk definition addresses both the in-force and the future business Risk – resulting from the company`s activities as driver for capital needs Allianz Group’s risk definition • The risk definition focuses on the company value Risk = Unexpected, negative change in the appraisal value of Allianz • or in the economic position of stakeholders such as policy holders (as far as this results from fiduciary and/or regulatory requirements) • The appraisal value concept implies a broad definition of risk: • a) Risks to the economic value (reflecting the in-force-business) • b) Risks to the value of the future business Risk definition needed to determine the minimum capital basis

5. Risk Portfolio Risk Probability Uncovered area Value

6. Risk is uncertainty about the future development of the economic value of the business Available capital after one year Market value of assets Fair value of liabilities Availablecapital Liability volatility Economic insolvency 0 Economic value Probability Asset volatility Need to quantify the minimum required amount of capital

7. Common risk framework allows for consistent translation of risk taking into capital requirement One year value at risk (VaR) approach Solvency standard Probability AAA AA A Worst case Expectation= Best estimate Change in economic value Required risk capital Risk capital is the minimum amount of capital required to ensure solvency over the course of one year with a certain probability which is linked to our rating ambition

8. Dimension for Risk Financing Risk Insurability Non-insurable Insurable Large Risks Self retention, Alternative investment concept Insurance Risk Size Medium Risks Small Risks Cashflow-finance (NAV) Investment Strategy

9. Economic Optimum Safety Level Expenses Total Expenses Optimum Safety Level Preventing measures costs Expenses related to materialized risk Safety level

10. Integrated Risk Management Financial risk management (market, credit, liquidity) Operational/technological risk management Non-financial riskmanagement (reputation, political, regulatory, social, ecological) Assessment, control, monitoring system Policy and Documentation Group Risk Policy Risk Guidelines Risk Profile Enterprise Risk Management Framework

11. Risk Categories – General Overview Appraisal value risks Market / ALM risk Credit risk Actuarial risk Business risk Liquidity risk* Reputational risk* Strategic risk* • Equity risk • Interest rate risk • Real estate risk • Foreign exchange risk • Other market risks • Issuer/ Investment risk • Counterparty Credit risk • Country transfer risk • Settlement risk • Premium riskNon-CAT CAT risk risk • Loss Reserve Risk • Life Reserve Risk (Mortality / Longevity) • Cost risk • Operational risk In general off the balance sheet Impact on Liabilities Impact on Assets * Currently these risks are not capitalized. Risk categories can differ individually – depending on the company’s structure.

12. Allianz Risk Audit Minimum Standards for Enterprises Solution Current Status Problem Background for risk management system: • External factors (Legislation, investors’ requirements, market competition) • Internal factors Operational (industrial) risks Delivery of efficient tool adapted to enterprise’s conditions that is called to be the core of corporate risk management system able to comply with minimum essential requirements (Minimum Standards) for management and control over risks in all levels of management Minimum Standards as Risk Navigator in the process of implementation of efficient and universal risk management system for enterprise (company): • raising of risk management culture • support of necessary communications in the area of risk management within the whole enterprise. Establishment of strategic advantages of the company by means of risk management system implementation and realization of practical targets in all levels of management

13. Key Elements of Minimum Standards • Risk Management Fundamental Principles • Risk Management Organization Structure • Risk Management Corporate Calendar • Risk Management Strategy • Risk Management Policy • Risk Management Process • Risk Management Methodologies and Tools • Reporting • Risk Management Glossary Document standards used for risk management system Implementation Group Risk Policy Risk Management and Controlling Manual Allianz Group Minimum Standards Operational Risk Manual Risk Management Framework Allianz Risk Grading System Manual Top 20 Risk Assessment (TRA) User Manual Operational Risk Management Operational Risk Policy Appendix Document standards used for Audit • Group Audit Policy • Standard Audit Manual • Internal Audit Plan • Detailed Audit Program • Risk Management Assessment Framework

14. Organization and Communication Chart of RM Process Technical risk assessment and Insurance survey Risk assessment and control systems based on Allianz Risk Grading System Identification Assessment Allianz Risk Custody Service Monitoring Management • Total Risk Profile (TRP) • Preventive measures program • Insurance program • Claims handling standards

15. Six Stages of Risk Management System Implementation Analysis of the Insurance Program Risk Grading System Risk Survey Audit a current situation of risk control system Technical survey of objects and the equipment Risk identification of business processes Risk identification of interaction with an environment (excl. political and financial risks) I Program The analysis is realized on the basis of the provided documents II Program The analysis is realizednot only on the basis of the provided documents, but on the results of Risk Survey Quantitative risk valuation Processing the recommendations to reduce risks Detailed elaboration of insurance protection’s parameters Evaluation of the effectiveness recommended measures to reduce risks (evaluation risk level «AS IS»and«TO BE»)

16. Six Stages of Risk Management System Implementation Risk Management Framework Claim Control Total Risk Profile Creation consolidated company’s Risk Profile Systematization and prioritization detected risks Organizational, informational and technical support in risk management implementation Training on monitoring risks, conducting corporate Risk Profile and united reports based on Risk Grading System Guidance and standards support • Development risk management procedures (Loss Control Management) • Preventive measures program • Claim control procedures • Insurance program

17. Investment Process Defining alternative investment strategies Planning Control 1) Minimum target value 2) Maximum risk capital Strategic allocation Operational allocation Budget Solution Investment risk management Implementation

18. Allianz Risk Audit Approach Risk management and insurance in Allianz are represented with list of standards and Allianz Risk Audit Program, aimed on implementation and audit of corporate risk management systems with use of own factor-by-factor analysis and quantitative assessment Allianz Risk Grading System. Risk Audit allows: • Test and adjust current organizational structure of management and risk control system in accordance with International Standards • Build up corporate risk profile (Total Risk Profile (TRP) in order to monitor risks and reporting for all levels of management • Use quantitative methods for minimization of risks and control over risks on the basis of original system for risk assessment (Allianz Risk Grading System) • Raise an efficiency of insurance cover and claims control

19. The Power On Your Side. Allianz Russia 127473, RUSSIA, Moscow 3, 3rd Samotechny per, t. +7.495. 937 69 96 (ext.: 930, 907, 994) f. +7.495. 937 69 80 www.allianz.ru