Sustainability Report 2021 04.5 Risk and opportunity management 01 Introduction In underwriting, a thorough rules-based risk Investment-related processes Measures to manage our risks are based on two assessment is performed prior to any underwriting Comprehensive climate risk management major levers: 02 Measuring and decision, either automated (mostly in retail processes cover all major asset classes: 1. Adapt asset allocation: managing sustainability business) or individually (mostly in commercial business). Risk information is captured and stored • Climate scenarios are analyzed by inter- • Shift volumes towards zero carbon assets 03 Strengthening in our database and linked to all relevant business departmental teams under the joint lead of (mid-term). our foundation processes. For Nat Cats, our Group Global the AIM Risk and Investment Analytics and AIM • Increase exposure to companies leading the Geographic Information System (GIS) combines ESG teams. transition (all sectors). 04 Climate-related single risk information with global natural hazard • Both physical and transition risks are assessed • Increase of blended finance volumes. financial disclosure maps. This is key to managing risk exposure and based to a large extent on quantitative KPIs, 04.1 Highlights accumulation risk. We have established a limit making use of the climate stress-tests discussed. • Reduce exposure to climate laggards 04.2 Governance system for each Nat Cat loss type at all levels of • Risks are actively managed for the total per sector. 04.3 Strategy the organization, including Nat Cat limits at Group portfolio, supported by our ESG-scoring • Fossil fuel policy. 04.4 Strategy resilience, stress-tests and and operating entity levels. In the commercial approach (see section 02.2). 2. Enhance climate change readiness of climate scenario analysis business, underwriters and risk engineers consult 04.5 Risk and opportunity management and advise customers on prevention measures • On physical risks, we seek to identify potential existing assets: 04.6 Targets and metrics and support them in adapting to changing risk impacts on physical assets we own, as well • Broad engagement, bilateral dialogue and patterns. Our re-insurance structure protects our as impacts on client or investee level and participation in global initiatives like CA100+ 05 Our universal principles capital base against volatility and impact beyond associated portfolios (see section 04.4.5). or IIGCC. defined thresholds. • Maintaining active dialogue with asset • Real Estate: Steer and align real estate portfolio In portfolio management, regular performance managers and investee companies on with CRREM pathways (1.5˚C pathway). assessments are conducted by operating entities climate strategies integrates into risk • Reduce emissions in line with IPCC pathways and at least twice per year for all relevant management framework. for infrastructure portfolio. portfolios together with the responsible Group Center of Allianz SE. Any departure from • For physical assets with direct material projected plans – including claims frequency and ownership like real estate and infrastructure, severity – is identified and action immediately dedicated asset-level adaptation plans are taken. As our policies are renewed on a yearly implemented based on thorough location- basis, actions can be implemented annually if sharp physical risk assessments. necessary. Adaptation measures with regards to • The Allianz Climate Change Risk Score climate change risks comprise re-pricing actions, (ACCRiS) tool (see section 04.4.5) will deductibles, changes in terms and conditions and be used for new acquisitions and for even cancellation of policies where a sufficient portfolio assessment. premium for the risk cannot be obtained. • The energy sector is covered by the AOA- For further details, please refer to the Risk related sector targets for Utilities and Oil and Opportunity report page 97 to 115 of our and Gas. Group Annual Report 2021. • Dedicated asset manager engagement is in place. 84