C _ Group Management Report not intend to make vaccination compulsory. Renewed or modified containment (lockdown) measures risk delaying economic recovery, The management feels comfortable with the Group’s overall risk with significant credit implications in some industries. The pace and profile, and confident that the effectiveness of its risk management timing of recovery, the overall economic cost, and credit implications framework meets both the challenges of a rapidly changing will depend on an effective transition to post-COVID policies, as less environment and day-to-day business needs. This confidence is based supportive fiscal packages could hurt employment and the solvency on several factors: of small or more exposed businesses. Therefore, we continue to closely monitor political and financial − Due to its effective capital management, the Allianz Group is well developments as well as the global trade situation to manage our capitalized and has met its internal, rating agency, and regulatory overall risk profile to specific event risks. solvency targets as of 31 December 2021. Allianz remains one of the most highly rated insurance groups in the world, as reflected by our external ratings. Our approved internal model has been applied since the beginning of − The Group has a conservative investment profile and disciplined 2016 when Solvency II became effective. There is some uncertainty business practices in the Property-Casualty, Life/Health, and Asset about future regulatory requirements resulting from the potential Management business segments, leading to sustainable introduction of future global capital requirements and from the operating earnings with a well-balanced risk-return profile. current Solvency II review. − Allianz is well positioned to deal with potentially adverse future The frameworks for potential future capital requirements for events such as the ongoing COVID-19 pandemic – due to our Internationally Active Insurance Groups (IAIGs) and Global strong internal limit framework, stress testing, internal model, and Systemically Important Insurers (G-SIIs) are yet to be finalized by the risk management practices. International Association of Insurance Supervisors (IAIS) and the − Finally, the Group has the additional advantage of being well- Financial Stability Board (FSB).In addition, the European Commission diversified, both geographically and across a broad range of is conducting a review of the Solvency II directive as foreseen in businesses and products. European legislation. The review covers an extensive list of topics from − As a matter of course, the pending AllianzGI U.S. Structured Alpha a wide variety of areas, from capital requirements to reporting, to matter will be constantly monitored and will be covered by our proportionality and to insurance recovery and resolution, for regular risk reassessments. Any learnings from this matter will also which EIOPA provided technical advice to the European be reflected in the continuous improvement of our risk Commission in December 2020, suggesting amendments in each management processes. area. Based on this and further input from stakeholders, the European Commission published its legislative proposal in September 2021. Based on the information available to us at the moment of report While following the EIOPA advice in general, the European completion, we expect the Group to continue to be sufficiently commission introduced some changes. In particular, the proposal capitalized and compliant with both the regulatory Solvency Capital includes a phase-in until year 2032 for the new interest rates Requirement and minimum consolidated Group Solvency Capital extrapolation, and a less conservative approach for calculating the Requirement. However, we are carefully monitoring the further risk margin of the technical provisions. The legislative proposal is development of the COVID-19 pandemic and managing our subject to trilogue negotiations at the European level before changes portfolios to ensure that the Group and its entities have sufficient to the directive become effective. A further transposition into national resources to meet their solvency capital needs. law will be required, so that final implementation is expected for 2025. In this context, the Allianz Group is actively participating in discussions with the European Commission, EIOPA, local regulators, Insurance The Allianz Group’s Own Funds and capital requirements are based on Europe, and the GDV. the market value balance sheet approach, which is consistent with the Therefore, future Solvency II capital requirements are expected to economic principles of Solvency II1. Our regulatory capitalization is change as result of the review of the Solvency II framework. Concrete shown in the following table. effects of the Solvency II review for the Group, however, can only be assessed after final results have been made available. 1 Allianz Group: Solvency II regulatory capitalization Finally, the potential for a multiplicity of different regulatory regimes, capital standards, and reporting requirements will increase As of 31 December 2021 2020 operational complexity and costs. Own Funds € bn 86.0 84.9 Capital requirement € bn 41.2 40.9 Capitalization ratio % 209 207 1_Excluding the application of transitional measures for technical provisions 1_Own Funds and capital requirement are calculated under consideration of volatility adjustment and yield curve extension, as described in section “Risk-free rate and volatility adjustment”. Annual Report 2021 − Allianz Group 109