SFCR - Solvency and Financial Condition Report1Contents
Summary ......................................................... 3
A.

Business and performance......... 5
A-1
A-2
A-3
A-4
A-5

B.

Business .............................................. 5
Underwriting performance .........11
Investment performance ............ 16
Performance of other activities 17
Any other information ................. 17
System of governance ................18

B-1
General information on thesystem of governance ................................. 18
B-2
Fit and proper requirements .... 23
B-3
Risk management system
including the own risk and solvency
assessment .................................................... 27
B-4Internal control system .............. 30
B-5Internal audit function................ 33
B-6
Actuarial function......................... 33
B-7
Outsourcing .................................... 34
B-8
Any other information ................ 36
C.
Risk profile .................................. 37
C-0
Contribution of the risk types
to the Solvency Capital Requirement ... 37
C-1
Underwriting risk ......................... 38
C-2
Market risk...................................... 43

C-3
C-4
C-5
C-6
C-7

Credit risk ........................................44
Liquidity risk ..................................46
Operational risk .............................46
Other material risks .....................48
Any other information................. 51
D.
Valuation for solvency
purposes ....................................................... 56
D-0
Introduction .................................... 56
D-1
Assets valuation ............................ 58
D-2
Technical provisions .................... 59
D-3
Other liabilities valuation...........64
D-4
Alternative methods forvaluation.........................................................64
D-5
Valuation techniques used on
the basis of model approach ....................64
E.
Capital management ................. 65

E-5
Non-compliance with theminimum capital requirement andnon-compliance with the solvency
capital requirement .................................... 70
E-6
Any other information ................ 70
F.

Annexes........................................ 72
F-1
All relevant QRTs ...........................73
F-2
Overview of subsidiaries andminority shareholdings ............................ 84
F-3
Solvency II Valuation
principles ....................................................... 85

E-0
Introduction .................................... 65
E-1.
Own funds ....................................... 66
E-2
Solvency capital requirement
and minimum capital requirement........ 67
E-3
Use of the duration-based
equity risk sub-module in thecalculation of the solvency capitalrequirement................................................... 69
E-4
Differences between thestandard formula and the partial
internal model used .................................... 692

Summary

Key figures 2020

For the preparation of the Solvency IIreporting as at 31 December 2020, theCompany has applied the following rules:

The Company
Atradius Crédito y Caución S.A. de Seguros y
Reaseguros (referred to as ‘ACyC’ or the‘Company’), with its office at Paseo de laCastellana 4, 28046 Madrid, Spain, is a
global credit insurer and aims to support its
customers’ growth by strengthening their
credit and cash management through a wide
range of products, which include credit
insurance, bonding and instalment credit
protection, and services as commercial
information, debt collections and credit
management solutions.
The main shareholder of ACyC is AtradiusInsurance Holding N.V., a Company
incorporated and domiciled in Amsterdam,
the Netherlands. The parent Company ofAtradius Insurance Holding N.V. is Atradius
N.V. (together with its subsidiaries referred
to as Atradius), incorporated and domiciledin Amsterdam, the Netherlands as well. The
ultimate parent and the ultimate controlling
party of Atradius is Grupo Catalana
Occidente, S.A. (referred to as ‘GCO’ or ‘Grupo
Catalana Occidente’)

Regulation

•

•
•
•

Strong capital position (EUR million)

Solvency II laws and regulations(Directive 2009/138/EC, DelegatedActs (EU) 2015/35);
The Implementing TechnicalStandards and EIOPA Guidelines;
Guidelines on reporting and public
disclosure EIOPA – BoS-15/109;
Delegated Acts (EU) 2019/981.

The following table summarizes theSolvency II position of ACyC as at 31
December 2020.

3

Eur Million
Excess of assets over liabilities
Foreseeable Dividends

31.12.2020

31.12.2019

1.271

1.366

0

Eligible Own Funds Solvency II

1.271

(103)
1.263

Solvency Capital Requirement

617

642

Minimum Capital Requirement

154

160

Surplus at 31 December before foreseeable dividends

653,96724

Surplus at 31 December

653,96

621

Cover Ratio before foreseeable Dividends

206%

213%

Cover Ratio Eligible Own Funds

206%

197%

Solvency II requires that own funds areclassified into three tiers, based on whether
they are basic or ancillary own fund items
and to the extent to which they possess thefollowing characteristics:a) Loss-absorbing capacity;b) Subordination;c) Sufficient duration;d) Freedom from requirements andincentives to redeem;e) Freedom from mandatory costs;f) Absence of encumbrances.

ACyC basic own funds has a Tier 1classification and ACyC does not haveancillary own funds.
In July 2017, ACyC received the approval
from the Spanish regulator, DGSFP, forapplying a Partial Internal Model (with aninternal model for non-life underwritingrisk). By applying a tailored internal model,
the risk profile is adequately quantified inparticular through using risk parameterssuch as probability of default (PD) and lossgiven-default (LGD) along with exposureamounts. Atradius has been using theinternal model, formerly called the ECAP
model, since 2004. Atradius adapted thepreviously existing

ECAP model, to make it Solvency IIcompliant, in line with the regulation inforce.
ACyC has a strong solvency ratio.

4

A.

Business and performance

A-1
Business
A-1 a) Name and legal form of theundertaking
A-1 b) Supervisory authority & groupsupervisor
A-1 c) External auditor
A-1 d) Holders of qualifying holdings in theundertaking
A-1 e) Details of the undertaking's position
within the legal structure of the group
A-1 f) Material product lines and material
geographical areas of business
A-1 g) Any significant business or otherevents that have occurred over the reporting
period that have had a material impact on
the undertaking
A-2
Underwriting performance
A-3
Investment performance
A-4
Performance of other activities
A-5
Any other information

A-1

Business

A-1 a) Name and legal form of theundertaking

A-1 c) External auditor
External auditing services are performedby:Atradius Crédito y Caución S.A. de Seguros y
Reaseguros
Paseo de la Castellana 428046 Madrid
Spain

PRICEWATERHOUSECOOPERS
AUDITORES, S.L
Paseo de la Castellana 259B
Torre PWC
28020 MadridSpain

A-1 b) Supervisory authority & groupsupervisor

A-1 d) Holders of qualifying holdings in theundertaking

Dirección General de Seguros y Fondos dePensiones (DGSFP)
Paseo de la Castellana 4428046 Madrid
Spain

The main shareholder of ACyC is AtradiusInsurance Holding N.V. which is a Company
incorporated and domiciled in Amsterdam,
the Netherlands. The parent Company ofAtradius Insurance Holding N.V. is Atradius
N.V., which is a Company incorporated anddomiciled in Amsterdam, the Netherlands.
The ultimate parent and the ultimate
controlling party of Atradius is Grupo
Catalana Occidente, S.A.

The Company is authorised by the DGSFP to
carry out the business of credit and bonding(re)insurance. The DGSFP also acts as thegroup supervisor of the ultimate parent ofACyC, Grupo Catalana Occidente, S.A.

A-1 e) Details of the undertaking's position
within the legal structure of the group
ACyC is an indirect subsidiary of Grupo
Catalana Occidente, S.A. GCO is the main
shareholder of Atradius N.V., holding an
5

economic stake of 83.2% (35.77% directly
and 47.43% indirectly through the holding)Company Grupo Compañía Española deCrédito y Caución, S.L.
Percentageof Shares

Shareholder structure of Atradius N.V.
Grupo Catalana Occidente, S.A.

35.77%

Grupo Companía Española de Crédito y Caución, S.L.

64.23%

Grupo Catalana Occidente, S.A.

73.84%

Consorcio de Compensación de Seguros

9.88%

Nacional de Reaseguros, S.A.

7.78%

España, S.A. Compañía Nacional de Seguros

5.00%

Ges Seguros y Reaseguros, S.A.

3.50%

Total

100.00%The shares of Grupo Catalana Occidente arelisted on the Continuous Market of theBarcelona and Madrid Stock Exchanges. Asof 31 December 2020, the main shareholder
is INOC, S.A., controlling approximately
61.95% of the capital of Grupo Catalana
Occidente, 32.42% of the capital is floating,
1.70% of its shares are treasury stock, and3.92% of its shares are owned by themembers of the board of directors, andrelated parties, of Grupo Catalana Occidente(not considered floating).

Grupo Catalana Occidente
One of the leaders in the Spanish insurance
sector and in global credit insurance.
Founded more than 150 years ago, it has
experienced constant growth, thanks to its
capacity to adapt to change and remain loyal
to its principles, which are truly insurance
oriented.
GCO is committed to the professional
development of its employees andinsurance agents, its personalised customer
service and the trust its shareholders havein the organisation.
Strategic goal
To be leaders in the field of risk protection
and long-term savings of families and SMEs,
and to be international leaders incommercial risk coverage.
Thanks to the stability of the results and theprudent investment policy, GCO has a solid
solvency position.

6

Grupo Catalana Occidente
Spain

Note: Atradius N.V has 1 share in ACyC.

Key figures Grupo Catalana Occidente
Key figures

Grupo Compañía Española de Crédito y Caución, S.L.
Spain

Atradius N.V.
The Netherlands
Atradius Insurance Holding N.V.
The Netherlands
Atradius Crédito y Caución S.A. de Seguros y
Reaseguros
Spain

Atradius Crédito y Caución Seguradora S.A.
Brazil2020

2019

2019/2020(EUR million)

Branches:

Sucursales:

Australia
Austria
Belgium
Bulgaria
CanadaCzech Republic
Denmark
FinlandFranceGermany
GreeceHong Kong
Hungary
Ireland
Italy

Japan
Luxembourg
Netherlands
New Zealand
NorwayPolandPortugal
Romania
Singapore
Slovakia
SwedenSwitzerland
TurkeyUnited Kingdom

Long-term capital market value
EquitySubordinated debt
Return on long-term capitalFunds under management
Total revenue
Consolidated result% change

4,663.40
4,138.20
200.7
7.30%
14,758.90
4,559.50
270.1

4,584.80
3,851.20
200.5
11.10%
14,377.30
4,547.70
424.5

1.7%
7.5%
0.1%
2.7%
0.3%
(36.4%)

Iberinform Internacional S.A.U.
Spain

Branch:Portugal7

Fundación Jesús Serra
Fundación Jesús Serra was established in2006 with the goal of channelling
philanthropic action and promoting thehuman and professional values thatcharacterized the founder of Grupo Catalana
Occidente, Jesús Serra Santamans, fromwhom it receives its name. It is currently
involved in projects in the fields of research,business, education, social action, sport, andpromotion of the arts. In this way, we aim tocontribute to the construction of a fairer,
more united, and developed society inwhich values such as initiative, effort, andcontinuous improvement prevail.

/The brands of the Group in the traditional
business are:

The brands of the Group for credit insurance
business are:

The Foundation acts as a link between the
different companies that make up Grupo
Catalana Occidente. For this reason, one ofits goals is to support the development of acommon culture, by facilitating gatheringsand participation from the employees andbrokers who form the Company through theorganization of different programs andactivities.

8Atradius N.V.
Atradius is a world-leading provider of
trade credit insurance, bonding and debt
collection services with a presence in every
continent. Atradius operates through 160
offices in more than 50 countries around theworld, with a commitment to simplifying
and improving our customers’ credit
management.
The main figures of Atradius N.V for 2020
and 2019 are:

The main figures for Atradius Crédito y
Caución, S.A. de Seguros y Reaseguros for2020 and 2019 are:A-1 f) Material product lines and material
geographical areas of business
PRODUCT LINES
Credit insurance (89.5% of total grossrevenue). ACyC’s core product - credit
insurance - provides cover against financial
losses arising when a buyer of our customer
is unable to pay for goods and services
bought on credit. We focus on a range ofbusiness segments: offering variations ofcredit insurance targeted at small andmedium sized enterprises (SMEs) and large
local
companies
andmultinational
corporations. For multinationals we offer asophisticatedandtailoredcreditmanagement solution in the form of our
Global policy. As a market leader andpioneer with 20 years of experience in thissegment, ACyC Global has developed an
excellent understanding of the needs ofmultinationals. The Special Products unit
offers solutions for customers outside theframework of the Company’s wholeturnover policies, to cover trade but also to
support trade financing.
Bonding products (8.2% of total grossrevenue). A bond protects a beneficiary if
the supplier - our customer - fails to meet its

contractual obligations. Our range ofbonding products puts customers in astronger financial position when dealing
with their business partners. ACyC offers
two main groups of bonds: contract bonds(bid, performance, advance payment,
maintenance) and commercial bonds (tax,excise, custom and authorization bonds) intraditional sectors like construction,engineering and travel. There is a growing
demand for bonds in new sectors such asenvironmental services. ACyC holds a
leading position in the French, Italian,
Nordic (Denmark, Finland, Norway andSweden) and Spanish bonding markets.
In 2016 the unit expanded into Germany,
Belgium, the Netherlands and Luxembourg
and, in 2018, into Portugal as well.
Instalment Credit Protection (2.3% of total
gross revenue). Instalment Credit Protection(ICP) covers short- and medium-term risks
involved in instalment-based credit
agreements with private individuals andbusinesses. Consumer credit, leasing andrenting have always been part of our
product offering. In 2017 we added
residential real estate insurance products
for co-ownerships and for rental guarantee.
Instalment Credit Protection products are9

offered to financial and corporate
policyholders in Belgium and Luxembourg.
GEOGRAPHICAL AREAS OF BUSINESS
ACyC is incorporated in Spain and has
branches in 20 countries in the European
Economic Area (‘EEA’). It also conducts its
insurance business in all the other EEA
countries, making use of the so called‘European Single Passport’ as well as inMonaco and San Marino. ACyC also acts inAndorra with special authorization as
Spanish insurance Company.

A-1 g) Any significant business or otherevents that have occurred over thereporting period that have had a material
impact on the undertaking
Please, see section A-2 Underwriting
Performance, specific sections for Change in
Reinsurance and Changes in income
statement due to COVID-19.
Reference is made to C-1 Underwriting Risk
for COVID-19 and C-7.2 for Brexit.

In the EEA it has offices in: Austria, Belgium,
Bulgaria, Czech Republic, Denmark,Finland, France, Germany, Greece, Hungary,
Ireland,
Italy,
Luxembourg,
theNetherlands, Norway, Poland, Portugal,
Romania, Slovakia, Spain (registered office),and Sweden.
Outside the EEA, ACyC has branches in the
United Kingdom (‘UK’), Switzerland,
Turkey, Canada, Hong Kong, Japan,
Singapore, Australia and New Zealand.
ACyC also conducts business through cooperation agreements with local partners inother regions such as China, Dubai, India
and Russia.
10A-2 Underwriting performance
Stable result and profitable growth11Premiums earned (direct and assumed)

2020

Net premiums
Premiums earned direct
Premiums earned assumed
Insurance premium ceded to reinsurers
Total premiums

Operations declared in:
Spain &
Portugal

Other EEA (*)

Rest of theWorld (**)

Total

309
0
(209)
100

957
13
(740)
229

90
68
(97)
60

1.355
81
(1.046)390(*) Mainly UK, France Netherland, Italy & Germany(**) Mainly Hong Kong & Australia

In which material geographical areas are:2019

Net premiums
Premiums earned direct
Premiums earned assumed
Insurance premium ceded to reinsurers
Total premiums

Operations declared in:
Spain &
Portugal

Other EEA (*)

Rest of theWorld (**)

Total

332
5
(206)
131

1.001
10
(610)
402

82
68
(93)
57

1.414
84
(908)
590

(*) Mainly UK, France Netherland, Italy & Germany(**) Mainly Hong Kong & Australia

Geographical Area information

12

Credit Insurance & Instalment Credit
Protection
In 2020 premium earned for ACyC
increased by 0.7% despite the challenging
economic environment of the year and a
decline in insurable business transactions.
This, along with savings measures taken
whenpandemic-related
lockdowns
commenced,
allowed the continued
investment in ACyC’s digital strategy,
including a range of measures to support
customers while marginally decreasing therecurring expense ratio compared to 2019.
Gross claims ended at EUR 851 million, an
increase of 20.4% due to an economic
environment that prompted for the increasein loss reserves, leading to a gross claims
ratio of 63.1%.
The outbreak of the coronavirus ushered ina global pandemic with unprecedented
economic consequences. World GDP isestimated to have contracted by 3.7% in
2020, a higher contraction than occurred in
2009, after the 2008 financial crisis.
There was a big decline in the output ofadvanced markets in the second quarter of
2020, following containment measures tolimit the spread of COVID-19. The Eurozone

witnessed a second wave of infections
towards the end of 2020, leading to tighter
restrictions and a GDP decrease of 7.1% in
2020.
Many emerging market economies remain
at a critical stage in the public health crisis.
This lead to a sharp downward effect on
economic growth from stringent lockdowns
and indirect negative effects from lower
world trade. Additionally, the plunge intourism income and commodity prices
negatively impacted markets that are
dependent on these sectors.
Countries in Latin America remain severely
affected by the pandemic and thegovernment response has often been slow
or not had the desired impact. Two of theregion’s largest economies, Mexico andArgentina, were in deep recession in 2020.
In Brazil, the recession was less deep due tosubstantial government support. Argentina
faced the combined impact of a confidence
crisis and the negative spill over effects
from the pandemic. Mexico also witnessed a
deep recession in 2020, driven by steep
contractions
inconsumption
andinvestment, and with the government only
providing modest support.

In 2020, the competitive environment
proved to be increasingly challenging andfew of our credit insurance units achieved
growth compared to the previous year. Asia
maintained a growth trend in 2020 of 12.3%
as we continue to pursue our ambition inthis region. Our markets in the UK & Ireland,
and Oceania also showed growththroughout the year (4.4% and 2.9%
respectively), while France grew 2.5% andBelgium & Luxembourg by 0.9%. The rest of
our European markets showed negative
growth mainly due to the reduction ininsurable business.
The growth of Atradius’ Global unit
compared to past years also receded.
Despite an excellent retention rate,
reductions in insurable turnover andpremium revenue reflect decreased sales, aconsequence of the current economic
environment on our customers since theonset of the COVID-19 pandemic. While
many customers were impacted negatively,
some did however observe increased sales.
Total operating expenses (and other net
technical expenses) observed an increase in2020 though this was largely impacted by areduction in reinsurance commissions.
While this was in part due to lower overall
13

premium volumes and lower sliding scalecommissions compared to 2019, it was also
largely influenced by the government
reinsurance arrangements, see the section
Changes in Reinsurance.
Bonding
ACyC Bonding works with different
industries and maintains relationships witha large range of companies. Building astrong portfolio and maintaining good
customer relationships are key priorities for
ACyC Bonding. After expanding in different
countries during recent year, Bonding is
consolidating its strong presence within 12
markets (Italy, France, Spain, Portugal,
Denmark, Finland, Norway, Sweden,
Germany, Netherlands, Belgium andLuxembourg), offering tailor made products
and solutions to our customers.
Earned premium in 2020 was EUR 119.9
million, a 1.1% increase on 2019. The overall
growth was contributed mainly by Spain &Portugal, Germany, Finland and Sweden
while other markets such as France,
Netherlands, Denmark and Norway showednegative growth.

Administrative expenses decreased in 2020by 18%, driven by multiple savings produced
during the periods of confinement andrestrictions during the pandemic which
affected most of the year. Additionally there
was a reduction in internal development
expenses compared to the previous year
although the development of a common
Bonding platform for our customers,
business partners and staff (the Bonding
Business Transformation programme)
continued. This common platform will help
us sustain and improve our market position
through the use of new technologies andmodern customer and user journeys. It will
support our ambition to enable geographicalexpansion to countries where Atradius has
a footprint, support the further expansion of
our bonding service portfolio andstrengthen our value proposition in the
Bonding business.
Despite the global impact of the pandemic in
2020, Atradius Bonding has been able toadvise and support our customers on their
specific needs throughout the year.
Furthermore, despite the challenges of2020, our tailored risk underwriting
approach allowed Bonding to record a grossclaims ratio of 32% compared to 39% in 2019.

Changes in Reinsurance
For the underwriting year 2020 quota sharereinsurance treaties remained in place
covering the majority of ACyC’s business.
Under these treaties the retention is 41%(2019: 40%), with a 37% cession to external
quota share reinsurers (2019: 38%) and 22%
cession to Atradius Reinsurance DAC (2019:22%).
In addition to this, as a support to national
economies in light of how the COVID-19
pandemic crisis has strongly affected theworld economy, the main countries where
ACyC operates have supported the businessof credit insurance in the form of specificgovernment reinsurance schemes. For
details reference is made to chapter C-1.
Changes in income statement due to COVID19
In this environment, the global economy
entered a sharp recession, with thecontainment measures restricting economic
activity and the outlook for corporate
insolvencies having worsened notably. This
lead to a substantial decline in insurable
business transactions on which premium isgenerated, which subsequently impacted
14the premium earned for the year.
Nonetheless, fiscal stimulus packages andother temporary measures implemented bygovernments provided some relief. In
addition to this, government reinsurance
agreements in many countries also helped
preserve the continuity of economic activity
during the year. Furthermore, ACyC
maintained its growth trend in a few larger
markets such as Asia (where a steady
growth ambition continues) and the market
in UK & Ireland, as well as Oceania.
Combined, these helped to support thepremium earned for the year, despite notachieving the revenue development
forecasted prior to the outbreak.

costs related to the implementation of theCompany´s digital strategy, including a
range of measures to support customers.
As governments of many of the largest
European countries have relied on credit
insurance to support their economies,
government reinsurance agreements were
implemented during the year, leading to anincreased proportion of premium in thesecountries to be ceded, along with theirlosses. This had a negative impact on thereinsurance result of the Company of EUR
44.9 million.

With the global recession and restrictedtrade, the subsequent deterioration of
corporate insolvencies lead to an
environment of greater risk.
Additionally,
lockdowns,
confinement
measures and mobility restrictions changed
the way in which employees worked andcollaborated together, as well as how ACyC
engaged with its customers. Together withsavings measures implemented whenlockdowns commenced, this lead to various
savings in Operating Expenses which offset
15

A-3 Investment performance
The net investment result amounts to EUR
11 million. The table shows the breakdown
into the main components.
Gains and losses recognised in revaluation
reserve
The revaluation reserve on financial
investments decreased to EUR 71 million per
the end of 2020 from EUR 80 in 2019. Thisdecline of the revaluation reserve wasmainly driven by the high volatility on theequity markets driven by the uncertainty of
COVID 19.

P&L
Eur Million
Interest income from Bonds
Dividend income Shares
Other Incomes
Financial & Properties Investments Incomes

2020

2019

6
6
2
14

6
7
4
17

Eur Million
Asset Management Expenses
Other Interest expenses
Financial Investment Expenses

2020

2019

(3)
(4)
(6)

(2)
(2)
(4)

Eur Million
Realised Gains & losses from Bonds
Realised Gains & losses from Shares
Total Realized Gains and losses

2020

2019

1
3
4

1
(1)
0

2020

2019

20
51
71

14
66
80

Information about any investments insecuritization

Revaluation Reserve

The undertaking has no direct nor indirect
exposure to securitized investments.

Eur Million
Bonds available for sale
Shares available for sale
Revaluation reserve gross of tax

16

environment, the reaffirmation of ourrating is an endorsement of our financial
strength, approach to managing risks andresilience to cope with the market
uncertainty caused by the COVID-19
pandemic.

A-4 Performance of otheractivities
Other income and expenses
Services(EUR Millions)

2020

2019

vs 2019

Services Income and Expenses

4

2

85.0%

Service result *

4

2

85.0%

* Overview includes inter-segment revenue and claims expenses

Other income and expenses correspond toservices supplied and received by ACyC toother units within Atradius.

The ratings reflect the strength of ourbalance sheet, which AM Best categorises asvery strong, as well as our strong operating
performance, favourable business profile
andappropriate
enterpriseriskmanagement.

A-5 Any other information
AM Best has affirmed ACyC financial
strength rating as A (Excellent) and theLong-Term Issuer Credit Rating of a+, also
confirming the outlook as stable.
Moody’s has affirmed ACyC A2 financial
strength rating with a stable outlook since
February 2021 (after a temporary reduction
to negative outlook in March 2020 reflecting
market uncertainty).
In the current circumstances, where most of
the World economies have been plunged
into recession added to a rising insolvencies
17

B.

System of governance

B-1

General information on the systemof governanceCorporate governance framework
Key functions
Remuneration
Fit and proper requirements
Fitness requirements
Proper requirements
Evaluation of what constitutes fit
and proper
Strategic personnel
Risk management system including
the own risk and solvency
assessment
Internal control system
Internal audit function
Actuarial function
Outsourcing
Any other information

B-1.1
B-1.2
B-1.3
B-2
B-2.1
B-2.2
B-2.3
B-2.4
B-3

B-4
B-5
B-6
B-7
B-8

B-1 General information on thesystem of governance
B-1.1 Corporate governance framework
ACyC Consejo de Administración (Board of
Directors)
ACyC is a public limited Company organised
under the laws of Spain with a (one tier)Consejo de Administración (Board of
Directors (‘BoD’)), that currently consists of
9 members.
The BoD supervises the general affairs of
the Company, taking into account theinterests of
the Company and its
stakeholders. The primary responsibility forcorporate governance within the Company
rests with the BoD. The BoD ensures theproper organisation of the Company, theimplementation of the internal control
system and the definition and formalisationof suitable internal policies and procedures.
The BoD provides direction concerning therunning of the business in line with theCompany strategy.

Composition BoD
The BoD of ACyC currently consists of 9
members at 31 December 2020:
•
•
•
•
•
•
•
•
•

Ignacio Álvarez – Chairman
Francisco Arregui
Xavier Freixes
Désirée van Gorp
Carlos Halpern
John Hourican
Bernd Hinrich Meyer
Hugo Serra
José María Sunyer

The BoD meets at least four times in any
calendar year. To enable proper discussionof the items on the agenda for each meeting,the BoD is provided with all relevant
information and documentation in advanceof those meetings.
The BoD is, amongst others, supported in its
role by:• The Director General (General Manager):David Capdevila• The Executive Committee;• The Audit Committee; and• The key functions of the Company and
the GCO/Atradius and ACyC group18

functions, which report directly into the
BoD and/or the (members of the)Executive Committee, as necessary.
Executive Committee
The Executive Committee has been
established by the BoD and assists the
Director General (General Manager) in
performing the day-to-day management of
the Company.
Composition Executive Committee
The Executive Committee currently consistsof:• The Director General (General Manager):David Capdevila• Andreas Tesch• Christian van Lint
• Claus Gramlich-Eicher• Marc Henstridge
Audit Committee
The BoD has established an Audit
Committee. This committee shall consist of
at least three members. The Audit
Committee meets at least three times in any
calendar year.

Composition Audit Committee
The Audit Committee currently consists of:• Xavier Freixes• Francisco Arregui• Bernd Hinrich Meyer
The role of the Audit Committee is mainly ofan advisory nature and refers to thesupervision of auditing practices, therelationship with the external and internal
auditors, the monitoring of the effectivenessof the risk management systems, and thereview of the financial information that theCompany has to make public.
Internal Audit function
Internal audit fulfils an important role inassessing and testing the internal risk
management and control system. The
Director of Atradius Group Internal Audit
reports to the Chairman of the Audit
Committee and, with respect to day-to-day
activities, to the Director General (General
Manager) of ACyC.
Corporate governance framework
Atradius N.V.
Atradius endorses the importance of soundcorporate governance. Key elements of
independence,accountability
andtransparency create a relationship of trust
between Atradius and all of its stakeholders.
As the Company is part of Atradius the same
framework is applied for ACyC.
Atradius N.V. (‘ANV’) is a limited liability
Company, organized under the laws of theNetherlands, with a Management Board anda Supervisory Board. The Management
Board is responsible for achieving theCompany’s objectives, strategy, policy andresults and is guided by the interests of ANV
and the business connected with it. The
Supervisory Board supervises ANV’sgeneral affairs and the policy pursued by
the Management Board as well as theperformance of the management duties by
the Management Board members, taking
into account the interests of the Company
and the business connected with it.
The Management Board as a whole is
responsible for the management and thegeneral affairs of Atradius and is supervisedby the Supervisory Board. The Management
Board determines Atradius operational andfinancial objectives, and the strategy
designed to achieve these objectives, andensures that Atradius has in place aneffective risk management system, internal
19control system and internal audit function.
The annual business plan and budget of
Atradius are submitted to the Supervisory
Board for approval. The Management Board
rules describe the (allocation of) duties andthe decision making process of theManagement Board.
The General Meeting has the authority to
appoint the members of the Management
Board on the recommendation of theRemuneration, Selection and Appointment
Committee of the Supervisory Board. A
Management Board member may besuspended or dismissed by the General
Meeting at any time. The Management
Board shall consist of at least threemembers. Management Board members areappointed for an undefined term. In theevent of a vacancy, the management of ANVwill be conducted by the remaining
members or sole remaining member of theManagement Board.
Composition Management Board of ANV••••David Capdevila - Chairman and Chief
Executive Officer
Andreas Tesch - Chief Market Officer
Christian van Lint - Chief Risk Officer
Claus Gramlich-Eicher – Chief Financial•

Officer
Marc Henstridge - Chief Insurance
Operations Officer

CVs of each of the Management Board
members, showing their roles, backgroundand experience are available on the
Atradius website.
The Supervisory Board supervises theCompany’s general affairs and the policy
pursued by the Management Board. The
responsibilities of the Supervisory Board
include, among others, supervising,monitoring and advising the Management
Board on the Company’s strategy,
performance and risks inherent to its
business activities; the design andeffectivenessoftheinternalrisk
management and control systems and thefinancialreportingprocess.
The
Supervisory Board rules describe thedecision-making
process
andthecomposition and committees of theSupervisory Board.
The General Meeting has the authority to
appoint the members of the Supervisory
Board on the recommendation of theRemuneration, Selection and Appointment
Committee of the Supervisory Board. A
Supervisory Board member may besuspended or dismissed by the General
Meeting at any time. The Supervisory Board
shall consist of at least five members.
Supervisory Board members shall resign
according to a rotation scheme determinedby the Supervisory Board pursuant to which
each Supervisory Board member shallresign after a maximum period of four
years, after the date of appointment. A
resigning Supervisory Board member may
be reappointed. A Supervisory Board
member will resign early in the event of
inadequate performance or in othercircumstances in which resignation isdeemed necessary by the other members of
the Supervisory Board.
Composition Supervisory Board of ANV
•
•
•
•
•
•
•
•
•

Ignacio Álvarez, Chairman
Francisco Arregui, Vice-Chairman
Xavier Freixes
Désirée van Gorp
Carlos Halpern
John Hourican
Bernd Hinrich Meyer
Hugo Serra
José María Sunyer20B-1.2 Key functions
Four key functions are established at theCompany, all of which support the BoD in
discharging its obligations. Article 13 of theSolvency II Directive defines a function,
within a system of governance, as “aninternal capacity to undertake practicaltasks”. These four key functions are
Compliance, Risk Management, Actuarial
and Internal Audit. All these functions aredescribed below. Internal Audit andActuarial Functions are described in moredetail in sections B-5 and B-6 as well.

AtradiusGroup
Risk
department as necessary.

Management

Actuarial function
The ACyC Actuarial function supports the
BoD and the ACyC organization in ensuring
the appropriateness of methodologies,
underlying models and assumptions used in
calculation of technical provisions, assesses
the quality of data used in the calculation oftechnical
provisions
andcapitalrequirements related to risk and regulations
and ensures the adequacy of reinsurance
arrangements.

Compliance function
Internal Audit function
The ACyC Compliance function supports the
BoD and the ACyC organization in meeting
its objective of complying with all applicablelaws and regulations and draws support
from the Group Compliance function asnecessary.

The ACyC Internal Audit function, which isan independent function, evaluates,
amongst other things, the adequacy andeffectiveness of the internal control systemand other elements of the system ofgovernance.

Risk Management function
B-1.3 Remuneration policy
The ACyC Risk Management function
supports the BoD and the ACyC organization
in meeting its objective of effectively
managing its risk profile relative to its risk
appetite and draws support from the

The Atradius remuneration policy, which isalso applicable to ACyC, lays down theprinciples and key elements of sound andcontrolled remuneration of employees

belonging to Atradius. The Atradius
remuneration policy supports Atradius’
business strategy, objectives, values andlong-term interest and is aligned with thesize, organisational set-up, nature andcomplexity of the business activities ofAtradius. The remuneration policy isdesigned to improve the performance andthe value of Atradius, to motivate, retain andattract qualified employees and tocontribute to sound and efficient risk
management within Atradius and not to
encourage the taking of more risk than is
acceptable to Atradius.
The design principles underlying the
remuneration policy applicable to Atradius
staff consist of, amongst other things:• Fixed and variable remuneration shall
be
used
to
align
individual
performance with both short and longterm corporate strategy and objectives;• Remuneration shall reward according
to performance at group and individuallevel as appropriate. Individual
objectives shall include a combinationof financial and non- financial targets
as appropriate to the role, taking into
account
ethicalbehaviourandcorporate responsibility;21•Performance criteria for employees
will be objective, measurable andlinked to individual, department andgroup performance as appropriate.

Typical elements of total compensation for
employees of Atradius are annual basesalary, annual variable remuneration andother benefits. Stock options or sharepurchasing programs are not applicable in
Atradius. Supplementary pension schemes
do exist in the form of a Defined Benefit
scheme or a Defined Contribution scheme.
The variable remuneration components arefurther based on the following designprinciples:• Performance targets are split between
individual targets, unit targets andgroup targets for each employee.
Individual targets are set on individuallevel agreed between manager andemployee. Unit targets are set on abusiness unit level, group targets are
set at group level and apply to all
employees;• Atradius ensures that the total variable
remuneration does not limit its ability
to strengthen the regulatory capital,
solvency margin or equity capital of theentities that are considered to befinancial institutions;

•

•

•

•

An employee may not make use of
personal hedging or any insurance
linked to remuneration and liability inorder to undermine the risk control
effects that have been embedded in his
or her variable remuneration plan;
Atradius does not award guaranteed
variable remuneration other than upon
the entry into employment of new
employees for at most the first year.
When granting such guaranteed
variable remuneration this is in linewith the long-term objectives ofAtradius. The variable remuneration,
including the conditionally awardedpart, is paid or acquired only when thisis consistent with the financial
condition of the Atradius Group as awhole and is justified by theperformance of the Atradius Group, theindividual Atradius Company, thebusiness unit and the relevant
employee;
Atradius shall only award a severance
payment if it is related to performancerealised over the course of time and isshaped such that failure is not
rewarded;
Remuneration plans will include
adjustments and claw-back provisions
in line with any prevailing legislation.

Non-financial criteria
For staff of Atradius, variable remuneration
is at least for 50% based on non-financial
criteria. The non-financial criteria are wellestablished in the Atradius competency
framework and are based on technicalexpertise,client/businessorientation,
creating and delivering solutions andworking relationships.
Strategic staff
Certain senior management roles in
Atradius and also in ACyC are classified as
strategic staff. Strategic staff are entitled tovariable remuneration components as apercentage of their fixed salary. In line withthe applicable legislation, the relationshipbetween fixed and variable remuneration
has been carefully considered, with asufficiently high fixed component to allow
for the non-payment of the variable
component if performance criteria are notmet. Furthermore, part of the pay out ofvariable remuneration for strategic staff isdeferred in time.
There have been no material transactions
with shareholders, nor with persons who
exercise a significant influence on theundertaking.
22

B-2 Fit and proper requirements
B-2.1 Fitness requirements
The Company ensures that all strategic
personnel (as defined in the ACyC Fit andProper Policy) are ‘competent’ and, taking
into account the obligations which areassigned to each particular individual, thatthey possess the proper mix of
qualifications, skills and experience, toensure that the Company is managed andsupervised in a professional manner.
‘Qualifications’ shall be understood as theofficial certificates, diplomas or degrees
issued by the competent authorities
formally recognising the successful
completion of a course of study by a person(knowledge, expertise or competency), afterthecorresponding evaluation.
Suchacknowledgment shows a certain level of
education and in some cases may signal thatthe relevant individual possesses the skills
required to practice a certain profession.
More specifically, and depending on thefunction to be performed, the skills thatmust be proven are in the fields of
insurance, finance, accounting, actuarial
science and management.
‘Knowledge’ is the result of assimilating theinformation acquired through learning,
while competency and expertise enable theindividual to apply the acquired knowledge
in the task has been assigned. ‘Professional
experience’ is the practical knowledge thatis relevant to the performance of one’s
current responsibilities.
With regard to the members of the BoD of
ACyC, it must be ensured that the BoD as awhole and these persons individually aresuitable for such position. This means that
they, as individual substantially, and if
applicable, as a collective body jointly
possess the necessary qualifications,experience and skills in the following areas:
•
•
•
•
•

Insurance and financial markets;
Business model and Company strategy;
Governance system;
Financial and actuarial analysis;
Regulatory
frameworkandrequirements.

B-2.2 Proper requirements
According to the ‘proper’ requirement, an
individual who performs key functions
must be a person of integrity with a good
reputation. An assessment whether such
person is ‘proper’ should include anevaluation of his or her financial soundness
and honesty based on the pertinent
evidence of his or her reputation, personal
and professional conduct, including
criminal background, financial history andsupervisory history, regardless of thejurisdiction.
Being proper professionally means that theperson has throughout his or her life upheld
the law and adhered to good commercial
and financial practices. More specifically,
individuals who find themselves in any of
the following situations are deemed to notmeet the proper requirements:• Criminal record for crimes involving
fraud or gross negligence• Court conviction in bankruptcy matters(disqualification under bankruptcy
laws, due to status of undischarged
bankrupts or similar situations under
the laws of other countries);• Serious or very serious administrative
sanctions in relation to insurance
operations, banking and financial
operations, taxes, social security, labourorcommercial
matters,
unfaircompetition, market abuse, capital
movements, cross-border economictransactions,money-laundering,terrorism financing and protection ofusers and consumers. This includes
23•

being barred from holding public orgovernment office or directing financial
institutions;
Corrective or disciplinary measures
imposed by the regulatory authorities of
insurance companies and financial
institutions or those responsible formoney
launderingorterrorism
financing.

The following information is evaluated inorder to determine whether a person isproper:• Whether the person is involved in any
judicial, bankruptcy or governmental
disciplinary proceedings in connection
with any insurance, banking, finance,tax,socialsecurity,
labourorcommercial matter, unfair competition,market abuse, capital movements,
cross-border economic transactions,money laundering, terrorism financing
and/or protection of users andconsumers. This includes being barredfrom holding public or government
office or directing financial institutions.
Cases involving fraud, gross negligenceor bankruptcy.
• Denial, withdrawal or revocation of any
license or authorisation to practice afinancial profession or activity or•

expulsion by an administrative or
regulatorybody
responsibleforoverseeing the profession in question.
Dismissal or request for resignation as
an employee, agent or manager of an
insurance Company.

•••

The above notwithstanding, to evaluate allof the available information on the strategic
personnel bound by the obligation of
professional properness, the person’s entire
professional background is taken into
account, including:••

The person’s past experiences withregulatory and supervisory authorities;
such as the reasons why he/she may
have been dismissed or relieved ofhis/her previous duties or positions;personal
solvency
history
andfulfilment of financial obligations; if theperson has occupied positions ofresponsibility in credit institutions thathave undergone a restructuring or
insolvency (or similar) procedure; if theperson has been declared insolvent
under applicable bankruptcy (orsimilar) legislation;
conviction for a crime or offense andpenalties imposed for administrative
violations, considering:••

the fraudulent or negligent nature of thecrime, offence, or administrative
violation; whether or not the conviction
or ruling is final;
the seriousness of the sentence or
penalty imposed;
the criminal classification of the events
that led to the conviction or penalty,
especially if they involve property
crimes, money laundering, crimes
against the socioeconomic order, thepublic treasury and/or the social
security administration or if the crimes
involved the violation of the rules
governing the banking, insurance orstock market sectors or consumer
protection laws; whether the conductthat led to the conviction or penalty wasfor the person’s own benefit or harmed
the interests of third parties and, whereappropriate, the relevance of the events
that led to the conviction or penalty inrelation to the functions which areassigned or are going to be assigned tothe post in question in the Company;
the prescription of the criminal oradministrative misconduct or the
possible extinguishment of criminal
liability;
the person’s conduct after the crime orviolation was committed;
24the repetition of convictions or penalties
for crimes, offences or infractions.

•

Strategic personnel who are aware that they
are affected by any of the circumstances
described in this section must report it to theCompany’s Director General (General
Manager) or the Group Human Resources
Director and at all times the Head of Group
Legal and Compliance.

••

B-2.3 Evaluation of what constitutes fit andproperIn the process of evaluating the ‘fit andproper’characteristics
ofstrategic
personnel, all of the requirements indicatedabove will be reviewed individually for eachmember and for the Board as a whole,bearing in mind the obligations assigned toeach one to guarantee the proper mix of
qualifications, knowledge and experiences
to ensure that the Company is managed andsupervised in a professional manner.
Situations that trigger a fit and proper
evaluation
An evaluation of the fitness and propernessof strategic personnel is conducted when:• people are newly appointed;•

there are significant changes in
responsibility (promotions, internalreorganisations, etc.);
there may be a conflict of interest. The
following situations constitute a conflictof interest:
Transactions with the Company.
However, ordinary transactions carriedout for clients under standard conditions
that are of limited relevance, i.e. if theinformation on such transactions is not
required to express a true image of theCompany’s equity, financial situation
and results, do not constitute a conflict ofinterest;• Using the Company’s name or one’s
position as a director, manager orsupervisor to have an undue
influence on private transactions;• Using the Company’s assets,
including confidential information,
for private purposes;• Taking advantage of the Company’sbusiness opportunities;• Obtaining benefits or compensationfrom third parties other than the
Company and the Group for thedischarge of his/her duties, otherthan gestures of professional
courtesy;• Taking part in activities, directly or

on behalf of third parties thatcompete or could compete with theCompany or that otherwise place theperson in a situation of permanent
conflictwiththeCompany’s
interests.
The foregoing provisions also apply in thosecases where the beneficiary of theprohibited conduct or activity is a related
party of the strategic personnel member.
In such cases, the strategic personnel
member must notify the Director General(General Manager) and the Group Human
Resources Director of the direct or indirectconflict between the Company’s interest andthose of the strategic personnel member or
the persons related to him or her.
Procedure for the fit and proper evaluationof strategic personnel
Procedure for evaluating the fitness ofstrategic personnel
Strategic personnel are understood to besuitable,i.e.
possessing
adequateknowledge and experience for the
performance of their functions, when they
have the right education level andprofessional profile to perform the assigned
25

functions as well as practical experience
gained from previously occupied positionsin other companies or entities with similarfunctions. The experience criterion will be
determined based on the nature, scale andcomplexity of the activities and the specificfunctions and responsibilities of theposition (to be) occupied.
Furthermore, the members of the BoD
considered as a whole, must have enoughprofessional experience to ensure theirability to make decisions independently andautonomously on the Company’s behalf.
In this way, since the Company defines astandard profile of the qualifications,knowledge and experience required foreach position, the Group Human Resources
Department is able to evaluate the fitness ofeach strategic personnel member by meansof the supporting documentation (copies of
diplomas,
checkingofprofessional
background, curriculum vitae, etc.) thatshould be commensurate with the
responsibilities assumed.
Procedure for evaluating whether strategic
personnel is proper
The evaluation whether strategic personnel

is proper includes an assessment of theirfinancial solvency and honesty based onreliable information about their reputationand their personal and professional
conduct, including any criminal, financial orsupervisory aspect that is germane to theevaluation.
In the first place, with regard to proper
requirements, it is important to emphasizethat the Company is part of Atradius, andAtradius has a Code of Conduct that
stipulates the general guidelines thatgovern the conduct of Atradius, its directors,
employees, agents and associates, in theperformance of their functions and in theircommercial and professional relationships,
acting in accordance with the law andrespecting ethical principles. It is therefore
important that the individual who is being
evaluated to hold a high-level position
agrees to be bound by the principles andvalues contained in the abovementioned
code.
Likewise, it is required that such individual
declares in writing that he or she does nothave a criminal record and must consent to
the Company doing a criminal backgroundcheck to verify such fact. The purpose of thisanalysis is to establish whether the
proposed candidate for a position meets thenecessary requirements.
Once the information referred to in theparagraphs above has been collected, alongwith any other information required on acase-by-case basis, it is analysed todetermine whether or not the individual
proposed for the position meets thenecessary requirements.
Procedure for evaluating the fit and properof strategic personnel who have alreadyundergone the evaluation process inanother entity of GCO
In those cases where certain members ofstrategic personnel have been evaluated for
professional fit and proper purposes byanother member Company of GCO, a new
evaluation will not be required if theposition to be held by strategic personnel
member is analogous to the one for which
he/shewaspreviously
evaluated,notwithstanding the fact that:Group Human Resources must obtain any
information that is deemed necessary fromthe group Company that conducted theevaluation and a statement from thestrategic personnel member in question that
his or her circumstances have not changed;
26

and The notification obligations as includedin the Fit & Proper Policy still apply.

••

B-2.4 Strategic personnel

These persons are referred to jointly as‘strategic personnel’.

The Fit & Proper Policy of ACyC applies tothe persons appointed in the following
positions in the Company:• Member BoD ACyC
• Members of the Executive Committee• Persons responsible for key functions
for the daily management of theCompany’s business. This relates tothose who:• are employed by the Company,
and• are in a senior management
position, and• report directly to a member ofthe Executive Committee, and• are responsible for individuals
whose tasks / activities may
have a material influence on therisk profile of the Company.
• Currently staff that falls within thisdefinition hold the following key
functions:• Director of Group Finance (alsoassuming
theresponsibility
foroverseeing the actuarial function)• Director of Group Risk Management

Director of Internal Audit
Head of Group Legal and Compliance.

B-3 Risk management system
including the own risk andsolvency assessment
The main components
management system are:
•
•
•
•
•
•
•

of

the

risk

Risk strategy;
Risk governance;
Riskmanagement
policiesandguidelines;
Risk boundaries;
Measurement / monitoring / reporting;
Risk Management function;
Own Risk and Solvency Assessment.

Risk strategy
The risk strategy is the Company’s risk
appetite framework. It is aligned with therisk strategy of the ultimate parent, GCO,
and consists of the following main
components:

•

•

•

Risk appetite is the aggregate level ofrisk that ACyC is willing to assume andmanage within a determined period oftime;
Risk tolerance is the maximum levelof risk that ACyC is willing to assume
in relation to a specific risk;
Risk limits are operational limits
established to facilitate control of risktaking.

Next to capital-related risk appetite,
tolerances and limits, the Company (inalignment with other companies ofAtradius) has also established various
operational tolerances and limits fordifferent types of risk, which are used in the
day-to-day operations and embedded in the
Company through its risk governancestructure (see below). These tolerances
include, among others:• Strategic asset allocation forinvestments;• Limitations on exposure or cover terms
for countries and industry sectors;• Group and individual buyer exposure
limits;• Credit risk limits (e.g. for reinsurance,
deposits); and• Policy and Risk Underwriting Authority
levels.
27

Risk governance
The Company has established several risk
governance committees to make decisions
involving material risks, including thefollowing:• The Group Credit Committee and five
Local Credit Committees underwrite themost material credit limits• The Country Committee rates the credit
risk of specific countries and outlines
the associated risk underwriting
strategy regarding those countries• The Quantitative Model Committee
approves quantitative models usedwithin the Company. This includes bothinternally developed and purchasedmodels• The Group Investment Committee
decides on the tactical allocation ofassets within the investment portfolio• The Outward Reinsurance Committee
recommends appropriate reinsurance
arrangements• The Group Product Committee approves
proposals for new insurance products,
related service offerings, and material
modifications to existing products• The Transaction Review Committee
accepts business transactions thatcomprise the issuing of individual

insurance policies,
insurance contracts.

bonds

or

re-

Risk management policies and guidelines

These committees are overseen by the Risk
Strategy Management Board (‘RSMB’). The
RSMB members consist of the Management
Board of ANV, the Director of Group
Finance, the Director of Strategy andCorporate Development and the Director ofGroup Risk Management.

A framework of risk management policies
and guidelines ensure alignment with theCompany’s objectives and (risk) strategy.
Policies and guidelines cover areas such as
Risk and Policy Underwriting, Reinsurance,
FX, Investments, Operational Risk, BusinessContinuity,
Information
Security,Compliance, etc.

In addition to the committees that report to
the RSMB, the Provisioning Committee
assesses and decides on the appropriate
amount of claims provisions on both a
Solvency II and IFRS basis.

The risk management policies of theCompany are aligned with the policies of
GCO. As the ultimate parent, GCO hasestablished a common framework ofpolicies for all companies within the Group.

As well as the committee structure, theCompany uses a framework of individual
authorities to facilitate approval of lessmaterial risk exposures. In each productline, staff members are assigned welldefined underwriting authorities specifying
the levels of risk they can take within theframework of the Company’s risk
governance. The authority matrices specify
2-eyes, 4-eyes and 6-eyes requirements
based on the levels of risk involved andindividual authorities are assigned based on
the level of expertise of the underwriter.

Risk boundaries
Risk boundaries give a clear and Companywide aligned understanding of whatbusiness the Company wants to underwrite
and the lines that it does not want to cross.
Risk boundaries are used to govern thebusiness and to enable communication withstakeholders.
Measurement / monitoring / reporting
To support the operation of the governancestructure, the Company applies a system of28

measurement and monitoring of risks aswell as reporting which enables thecommunication of relevant information to
the appropriate decision-makers. Examplesof the focus areas in this system are:• Buyerandlimit
underwriting
performance reporting: provisions,
underwriting targets, notifications of
non-payment,
claims paid
andreceived, recovery success rate,
premium earned, acceptance rates,
market developments;• Exposure distribution information :distributionsofbuyer
rating,concentrations in industry sectors,
buyer countries, and buyer groups; and• Economic capital consumption
For measurement of economic capitalrelated aspects of underwriting risk, theCompany employs a proprietary internal
model. For measurement of economic
capital-related aspects of other risk types,
the Company uses the Standard Formula
under Solvency II. This “Partial Internal
Model” has been assessed and approved foruse by the College of Supervisors.
Risk Management function
The Risk Management function assists

senior management of the Company withthe effective operation of the Risk
Management System, including the use ofthe (partial) internal model. This function is
fulfilled by the Group Risk Management
department (GRM), supported by designatedrisk functions within various parts of theCompany.
The Risk Management function identifies,
measures, monitors, reports and takes anaggregated view of risks for the purpose of:• Monitoring and reporting the risk profile
relative to risk strategies in place;• Monitoring and reporting risk profiles
for different risk types and theircontributions to the overall risk profile;• Analysing the performance with regard
to the risk strategies in place.
The Risk Management function cooperates
closely with central functions such as Group
Buyer Underwriting, Corporate Finance,
Group Finance, Strategy & Corporate
Development, Group Legal and Compliance,
Internal
Audit,
and
with
other
organizational units within the Company.
One of the tasks of the Risk Management
function is to obtain an independentvalidation of the Company’s (partial)
internal model. The independent validation

is outsourced to the independent validationteam within the Risk Management
Department of Grupo Catalana Occidente.
This department provides a comprehensive
andindependent
technical
opinionregarding the development and operation of
the model and the appropriateness of its
results, considering the different uses in the
management of the Company and thequantification of the solvency capitalrequirement under Solvency II. The
independent validation team operates
according to an approved Validation Policy,
which describes the methodology andcriteria applied. The validation team shares
its findings with the Quantitative Model
Committee.
The
Quantitative
Model
Committee ensures that model owners takeappropriate actions to remediate any
findings. This ensures the ongoing quality
and appropriateness of the internal model.
Own Risk and Solvency Assessment
The Company has been producing a
supervisory ORSA Report since 2013. It hasanestablishedpolicy,governance,
methodology and team of resources
dedicated to the execution of its ORSA
process.
The Company executes a full ORSA process29

on an annual basis, but also runs all or partof the process in the event of a significant
change in risk profile, Business Plan,internal model parameters or if required bymanagement.
The ORSA is an integral part of the business,risk management and decision-making
processes within the Company. The
execution of the ORSA is linked to the
preparation of the Company’s Long-Term
Plan and includes evaluation of risk andsolvency positions, assuming both normal
and adverse market conditions.
The ORSA includes analyses and reports ofthe main risks to which the Company is
exposed,theirresultingcapitalrequirements, and an evaluation of thefeasibility of the business plan over thenormal planning horizon (5 years).
To determine and assess solvency positions,the various risks to which the Company is
exposed are quantified and aggregatedusing the Partial Internal Model. The results
are taken into consideration for capitalmanagement decisions.
Additional information per risk category
In sections C0 to C7 below (Risk Profile) we

provide more information on how risks are
identified, measured, monitored, managed
and reported for each risk category.

B-4 Internal control system
The Company has established a frameworkof internal controls to assist in following theCompany’s strategy and achieving its
objectives. The framework consists ofnumerous components that together
comprise:• Control environment - the foundation
for the internal control systemcomprises the employees and theenvironment in which they operate.
Aspectstoconsiderincludeorganisational
valuesandthestandards, processes and structuresthat provide the basis for internal
control.
• Risk assessment – as part of theinternal control system, risks must be
identified, assessed and responded to.
• Control activities – specific tasks thatmust be executed on an on-going basis
to ensure that risks are managed;• Information
andcommunication
systems - to enable the Company tocaptureanddisseminate
theinformation necessary to conduct,•

monitor and control the business; andMonitoring – the entire internal control
framework is monitored to ensure that
it is operating as intended and reflects
thecurrent
objectives
andenvironment.

The Internal Audit and Compliancefunctions are important parts of the internal
control system. The Internal Audit function
is discussed in B-5, the Compliance function
is described below.
Control environment
The control environment is based uponorganizational values and standards ofconduct. To facilitate adherence tostandards,
seniormanagement
has
established structures, standard practices
and policies.
The
professional
competencies
andpractices are outlined in the Atradius’
policies regarding conduct, recruitment,
remuneration, appraisal and developmentof employees. The most important
employment practices are outlined in
specific codes, such as:• Code of Conduct• Speak up procedure – Policy on Whistle
30

•
•
•
•
•
•
•
•
•
•
•
•
•

blowing
Policy on Fraud Risk Management
Policy on Customer Due Diligence
Policy on Trading in Securities
Policy on Employee Background
Screening
Policy on Complaint Management
Policy on Auditor Independence
Policy on Anti-Trust and Fair
Competition
Policy on Business in Accordance with
Licences
Policy on External Authorisation
Policy on Insurance Distribution
Policy on Outsourcing
Policy on Anti-Bribery and Corruption
Policy on Sanctions.

The Company has established various
controlmechanisms
which
are
implemented
throughpolicies
andprocedures.
Organisational structures define roles,
responsibilities, authorities and reportinglines. Within the Company, two mainorganisational
structures
exist:
themanagerial structure and the risk
governance structure. Both structures
outline the levels of authority delegated totheCompany’s
employees
when

underwriting or transacting. This authority
depends on an employee’s function andcompetency.
Risk assessment
Key mechanisms to ensure that theCompany identifies, understands andresponds to the risks it faces include (but are
not limited to):• Strategy setting and long-term businessplanning;• Periodic business review meetings
between the Management Board andbusiness units; and• Risk Management System (see Section
B-3 for further detail). This includes
items such as the ORSA process, risk
strategy setting and review, risk
governance, and the risk management
function.
Control activities
The Company implemented various control
mechanisms. These mechanisms are
established through policies and procedures
embedding segregation of duties, approvals,
verifications, management reviews, andreconciliations.

Segregation of duties is embedded in the
Company’s underwriting process and in its
financial transactions. The underwriting
process is segregated by splitting theunderwriting function into a policy
underwriting function and a risk
underwriting function (Note: the exact
terminology used may vary among productlines, but the concept is the same). Thissegregation prevents commercial interests
influencing the amount of credit limits to beunderwritten.
A financial transaction is commonly
segregated by splitting the roles into an
initiator, an approver, a verifier, a recorderand a reconciler. Each role is in principle
held by a different employee. This reduces
the risk of erroneous or inappropriate
payments.
Approvals are embedded in the Company’s
underwriting and financial transactions
processes. For example, a risk underwriter
requires the approval of another moresenior underwriter to underwrite a credit
limit above his/her authority level. Larger
amounts require the approval of more
underwriters and the largest limits require
Local or Group Credit Committee approval.
The same principle applies in the policy
31underwriting and financial transactions
processes.
Management regularly receives reports(financial and other key performance andrisk indicators) to monitor performanceversus budgeted, forecasted, prior period,
etc. to assess the extent to which theCompany’s objectives are being achieved,
and to gain insight into risk profile
developments. Examples are:
• Monthly
Management
Reports,
detailing the financial performance of
the Company, its divisions and its
functions• Risk Services Performance Overviews,
detailingthecreditlimitsunderwritten, notifications of nonpayment received, claims ratios,
acceptance rates, etc.
• Competitor analyses, detailing andcomparing the financial performance
between the Company and its maincompetitors• Economic Cycle Management Report,
detailingthepremium
rates,
cancellation rates, etc.
• Investment Reports, detailing theinvestment
performanceandinvestment position in terms of returns
and allocation, credit ratings of debt
instruments, splits per currency, etc.

•

Risk reports, management information
giving an overview of the Company’srisk profile for different risk categories.

Information and Communication Systems
Information and communication systems
enable the Company to capture anddisseminate the information required to
conduct, manage and control the business
Internally, the Company communicatesthrough formal channels such as policies
and procedures, but also through less formal
communication channels such as intranet,emails and newsletters.
In
certaincircumstances,formalorganizational structures may hinder
communication of negative information
upward through the managerial or risk
governance structure. To ensure thatnegative information can also be
communicated upward, the Company has
established a Speak up procedure – Policy
on Whistleblowing. This policy establishes
an alternative communication channel tothe director of Internal Audit which
employees can use to communicate
negative information.

Monitoring
The entire internal control framework must
be monitored to ensure that it is operating as
intended and reflects the current objectives
and environment. The Company has
implemented various mechanisms, such as
control self- assessments, incident reportingand internal audit exercises.
Control-self assessments are performed tomonitor the effectiveness and efficiency ofboth financial reporting controls and nonfinancial controls.
Financialreportingcontrolselfassessments are performed on a quarterly
basis to ensure that the Company’s financial
statements do not contain material errors by
preventing errors occurring or detecting
errors that have occurred.
Control overviews are stored in an online
system that details:• what controls are in place;• why the control is performed;• which functions and employees
perform the control;• when and what frequency; and• who is responsible for the control?
In addition, evidence of performance of32controls is stored for review if necessary.
Compliance Function
The Compliance function consists of thegroup compliance function, the local
compliance functions, including the local
compliance function of ACyC. The local
compliance function reports to the Country
Manager with functional reporting to the
Atradius Group compliance function. The
ACyC compliance function reports to the
BoD of the Company.
The Compliance function is responsible formanaging relations with regulators,
maintaining compliance policies, educating
employees regarding compliance anddrafting reports detailling relevant areas
within the Company, and its branches, thatare susceptible to compliance risk.

B-5 Internal audit function
The Internal Audit (‘IA’) function has been
established at ACyC level. The IA function
is an independent function and all audit
work undertaken is carried out freely,
objectively and independent of theactivity being audited/reviewed. The IA
function has developed an Internal Audit
charter, approved by the Audit Committee(‘AC’), which outlines the authority,
responsibility and governance over
Atradius Internal Audit. The IA function is
responsible for advising the BoD, throughits AC on the Company’s system ofinternal control and provides regular
reporting to the BoD via the AC.
The AC supports the BoD of ACyC in
fulfilling its supervisory and monitoring
duties with respect to the assurance of theintegrity of the Company’s financial
statements, the quality of the Company’s
risk
management
andcontrols,
governance and compliance processes,
the external auditor’s qualifications, andthe performance of internal and external
auditors. The IA function has independent
access to the Chairman of the AC, reports

to the BoD of ACyC and reports –functionally- to the Director of GCO
Corporate Internal Audit.

B-6 Actuarial function
The ACyC Actuarial Function, which is anindependent function, supports the BoD
and the ACyC organization in ensuring theappropriatenessofmethodologies,
underlying models and assumptions usedin calculation of technical provisions,assesses the quality of data used in thecalculation of technical provisions andcapital requirements related to risk andregulations and the adequacy ofreinsurance
arrangements
andunderwriting policy. It also contributes tothe effective implementation of the risk
management system by ensuring thecontinuous compliance of technicalprovisions within the ORSA process.
Within ACyC the Director of Group
Finance is appointed as key function,
assuming
theresponsibility
foroverseeing the Actuarial Function, which
is outsourced to GCO via an intra-groupoutsourcing agreement. The ACyC
33

Actuarial function is, amongst others,
supported by a team of technical experts(actuaries/statisticians).

Coordinate Technical provisioncalculations

Report to the management or
supervisory board on thereliability and adequacy of thecalculation of technical provisions

Actuarial function

Give opinion about the general
underwriting policy

B-7

Give opinion about reinsurance
agreements

Outsourcing

Introduction
The Company has a process in place thatmust be followed when considering
outsourcing of critical or material functions.
The detailed description is laid down in the
ACyC Policy on Outsourcing. This policy
applies only in case of (possible)
outsourcing of critical or material
functions/activities to a provider. It
describes the approach and process foroutsourcing from the start to the end of thecontract.

Preparation and (risk) assessment(s)For any new outsourcing contract, or for the
renewal of an existing outsourcing contract,
the preparation, relevant assessments, due
diligence and selection is performed by therelevant business area/unit.
The preparation starts with an assessmentof whether the outsourced function/activity
is considered to be critical or material for theCompany.
The preparation must include:• An assessment (in relation to theCompany) on possiblea) material impairment of thegovernance system;b) increase in operational risk;c) impairment of the regulator’sability to monitor compliance;d) undermining of the continuousand satisfactory service topolicyholders;• Business
contingency
planning(including exit strategies for outsourced
activities).

Executive Committee. Overall responsibility
for the outsourced activity/function
remains with ACyC itself.
Due diligence and selection process, tender
process
A tender process applies for any material
outsourcing contract. Several service
providers are approached to tender for thecontract. The tender document clearly
describes the services and performancestandards required, amongst other things toensure that a provider of suitable quality is
selected.
The due diligence and selection of(applicant) provider(s) enables ACyC tounderstand the main risks that may arise
from the outsourcing, to identify the mostsuitable strategies for the mitigation or
management of these risks and to ensurethat the provider has the ability, capacity
and authorisation required by law (ifapplicable) to perform the outsourcing
reliably and professionally.
Outsourcing key functions

Approvals
Outsourcing requires prior approval by the

If the Company intends to outsource a key
function, it must address the following
34

issues:• Applying fit and proper procedures inassessing those employed by theservice provider that will perform an
outsourced key function for theCompany. This requires the provider tocheck the fitness and propriety of all
those working on the key function;• Ensuring that those within the
Company designated with overall
responsibility for overseeing theoutsourced key function possess
sufficient knowledge and experience ofthe outsourced key function so as to beable to challenge the performance andresults of the provider. The responsible
person must be notified to theregulator.
Critical or material functions and activities
According to the Policy on Outsourcing
critical or material functions and activities
relate to the core business of ACyC thatwould otherwise be performed by ACyC
itself and are essential to the operation of
ACyC as it would be unable to deliver its
services to policyholders without thefunction or activity.
The following can be considered critical orimportant functions/activities:a) Key functions, which are the risk
management, compliance, internal
audit and the actuarial function within
ACyC.
b) The design and pricing of (re)insurance
products;c) The investment of assets and portfolio
management;d) Claims handling;e) Providing regular, or constant,compliance, internal audit, accounting,risk management or actuarial support;f) Providing data storage in relation to thecore activities of ACyC;g) Providing
ongoing,
day-to-day
systems maintenance or support in
relation to the core activities of ACyC;h) The ORSA process;i) Underwriting activities.
The outsourcing contract
The policy on Outsourcing describes several
subjects (not limitative) that are to beaddressed in an outsourcing contract.
The relevant Atradius Country Manager, orunit Director, who outsources will ensurethat effective oversight of the provider canbe performed by the Company bymaintaining relevant competence andability within ACyC
For each proposed or existing outsourcing
contract, the business continuity plans for
Atradius offices/units impacted by nonperformance of the provider must consider:• Remedial action and processes to be
invoked in the event of businessdisruption;• Clear allocation of responsibility andaccountability within Atradius tooversee and manage the period of
disruption. If a major businessdisruption occurs at any time as aresult of the failure of a provider toperform under an outsourcing contract,
the Atradius business continuity plan
will be invoked by the Company.
Internal (intragroup) outsourcing
When outsourcing by the Company is to a
provider within the GCO Group, thefollowing applies:• in relation to outsourcing of a key
function, the GCO Group entity that
performs
theoutsourcing(a)documents which function/activity
relates to which legal entity in the GCOGroup and (b) ensures that theperformance of the function/activity at
35

•

•

•

the level of the outsourcing entity (theCompany) is not impaired;
the Company makes an assessment as
to whether and to what extent it should
rely on outsourcing provided by aprovider in the GCO Group;
the due diligence and selection processof the provider may be less detailed if
the ACyC BoD/ Executive Committee
has greater familiarity with theprovider, the Company has sufficient
control over, or can influence theactions of, the provider;a written agreement must exist,
stipulating
the
roles
and
responsibilities of both parties. Thisagreement may be in the form of a lessdetailed service level agreement.

Romania.

B-8 Any other information
Not applicable

Currently, the actuarial function is
outsourced to a provider at Group level(GCO). The Director of Group Finance is
responsible for overseeing the outcome ofthat outsourced function.
ACyC outsources some of its IT functions /activities. These activities are; Application
Development Support, which is conductedfrom the UK, the Netherlands, Germany andIndia; and, Desktop Managed Services,which is undertaken in the UK and
36

C.
C-0

Risk profile

Contribution of the risk types to thesolvency capital requirement
C-1
Underwriting risk
C-2
Market risk
C-3
Credit risk
C-4
Liquidity risk
C-5
Operational risk
C-6
Other material risksC-6.1 Concentration Risk
C-6.2 Strategic risk
C-6.3 Cyber risk
C-6.4 Emerging risk
C-7
Any other information
C-7.1 Stress testing and sensitivity
analysisC-7.2 Brexit
C-7.3 Environmental,
Social,and
Governance Risk (ESG)

C-0 Contribution of the risk
types to the Solvency Capital
Requirement
In 2017 ACyC’s ultimate parent, GCO, wasgranted regulatory approval to use a Partial
Internal Model to calculate regulatory
capital requirements. ACyC uses its
internally developed economic capitalmodel for most of the non-life underwriting
risk module and the Standard Formula forthe market, counterparty and operationalrisk modules – hence the “Partial” Internal
Model.
The table below illustrates the contributionof the risk types described in this section to
the Basic Solvency Capital Requirement(BSCR), calculated using the Partial Internal
Model.

in EUR million

Q4 2020

Q4 2019

Basic Solvency Capital Requirement
Market Risk

327

315

Non-Life UW Risk

458

503
105

Counterparty Risk

101

Intangible Asset Risk00

Total undiversified

886

923

Diversification

(204)

(208)

Total diversified

682

715

Operational Risk

44

45

Solvency Capital Requirement
Total before tax adjustment

726

760

Tax adjustment

(109)

(118)

Solvency Capital Requirement

617

642

Minimum Capital Requirement

154

160

37

C-1

due to portfolio improvements and risk
mitigation effect of COVID-19 related
government schemes. The risk mitigation
benefit of government schemes waspartially compensated by the decrease in
cession to the reinsurers.

Underwriting risk

Furthermore, the Company’s reinsurance
structure imposes checks on the largest
exposures. Exposures beyond a certain
threshold are subject to special acceptanceby our leading reinsurers.
COVID-19

The Company incurs underwriting risk by
issuing
insurance
contracts
andsubsequently approving credit limits andbonds under those contracts.

Risk identification / management

The Company operates two main direct
insurance product lines: credit insurance
and bonding. Credit insurance is divided
into three subcategories: traditional credit
insurance, special products and instalment
credit protection. Each of these subcategories
has
particularriskcharacteristics. This section describes thedifferent risk characteristics as well as someof the methods used to manage the risks.

Underwriting risk is the largest contributor
to the Solvency Capital Requirement. It
represents 52% of the Company’s Basic
Solvency Capital Requirement, before
diversification and tax adjustments with acharge of EUR 458 million. Largest
contribution to this risk category comesfrom the Internal Model, which declined 12%

The starting point for the management ofunderwriting risk is:• All staff have well-defined authorities
specifying the level of risk they canaccept; and• All risk acceptance must take place
within the framework of the risk
governance structure.

in EUR million

Q4 2020

Q4 2019

403

456

Non-Life UW Risk
Internal Model
Premium and Reserve risk

41

33

Catastrophe Risk

28

26

Lapse Risk

4

5

Diversification

476
(18)

520
(17)

Total diversified

458

503

Total undiversified

In 2020, the most significant developmentsin the risk landscape are related to theworldwide effects of the COVID-19
pandemic. The pandemic has affected allrisk areas – from underwriting risk (impact
on buyers (credit insurance) and customers(bonding)) to financial risk to operationalrisk (impact on Atradius’ ability to maintainits standard of service and to ensure that theneeds of employees are adequately
addressed). Atradius has taken steps tomanage its exposure to the effects of thepandemic.
A key part of the Company’s underwriting
strategy during the COVID-19 crisis has been
supporting customers in insuring theirreceivables, and, at the same time,
protecting them against losses in aheightened risk environment in an
explainable and comprehensible way.
While COVID-19 risks were spread broadly,
the risks were not uniform across all38

countries, sectors and portfolios. We
analysed the nature and sources of the risks
and how they constantly shifted, e.g. fromsupply chain to liquidity-related. We
continually analysed all trade sectors forrelevant risk factors, such as how theymight be influenced by governmental
response and readiness, and changing
infection rates in different countries andregions.
Using
segmentation
tools,
extensive data and analytics, dedicated
COVID-19 response teams coordinated theCompany’s worldwide risk and commercialorganisations to rigorously review and takeaction on portfolios. Most of ourunderwriting
algorithms
werereparameterised
inthe
COVID-19
environment.
These
continuous
underwriting actions were performed inalignment with commercial strategies on(re)pricing, policy restructuring andprudent sales, underpinned by a deliberate
and transparent communication with themarket.
Traditional credit insurance and special
products
In traditional credit insurance, the Company
insures its customers against the risk of
non-payment of trade receivables. The

causes of loss covered differ by policy andusually include all forms of legal insolvency
and protracted default. Policies can also
cover so-called ‘political’ causes of loss
which include, but are not limited to, the riskof non-payment due to payment transfer
problems, cancellation of export/importlicenses and contract frustration. Eachpolicy stipulates a maximum credit periodthat the policyholder can offer to theirbuyers without prior approval from theCompany. ‘Buyers’ are the customers of theCompany’s insured customers, i.e., theparties on which the Company covers thecredit risk. To mitigate the risk of adverse
selection, the traditional credit insurance
products of the Company usually cover theentire portfolio of buyers of a policyholder.
For traditional credit insurance, there are
twounderwriting
processes:
policyunderwriting and risk (or buyer)
underwriting. Policy underwriting is theprocess by which the Company decides
which customers to accept as policyholders
and the terms and conditions of cover thatare offered. Buyer underwriting is theprocess by which the Company sets risk
limits for each buyer and issues credit
limits, thus managing risk on existing
policies. Both processes are subject toAtradius´ Governance as referred in Section
B and below.
In general, a policy is issued for a year.
Customers must retain some of the risk fortheir own account to protect the Company
from the risk of moral hazard. That selfretention can take the form of an uninsured
percentage, a deductible on each claim, anaggregate first loss amount or a
combination of these. Almost all policies
stipulate the Company’s maximum liability.
A customer is only covered for the credit
risk on a buyer when a credit limit on thebuyer has been established. Most policies
allow customers to establish credit limits
themselves for smaller amounts, understrict conditions specified in the policy.
Larger credit limits must be decided bydedicated risk underwriting functions andissued by the Company. Credit limits are an
important risk management instrument for
the Company as they cap the amount that
ACyC would have to pay out to a customer inthe event of a claim. Moreover, the Company
has, in principle, the right to immediately
withdraw the credit limit of a buyer at any
time if circumstances demand. Credit limits
may be subject to specific conditions. The
Company can also set conditions for cover39

on a country or withdraw cover on a country
altogether. These are important conditions
and parameters for managing theCompany’s risk exposure.
Staff in Commercial units have well-defined
authorities specifying what terms andconditions may be included in a policy.
Authorities typically require the approval of
two pairs of eyes and conditions become
stricter as policy amounts increase. The
pricing of credit insurance policies is also
subject to governance within Commercial
units. In addition, the methodologies
applied to establish a benchmark pricerequire the approval of the Quantitative
Model Committee.
Staff in Risk Services have well-defined
authorities for setting capacity on buyers
and for approving credit limits.
The Company’s Special Products business
offers a range of bespoke policies to insure
against various credit and political risks;
this product line includes policies that cover
singletransactions,
singletrade
relationships and asset confiscation. Unlike
traditional credit insurance, credit limits inSpecial Products polices usually cannot be
immediately withdrawn. However, theconditions of Special Products policies tend

to place a greater onus of risk monitoringand diligence on the insured.
All policies are bound within clearly defined
authorities
issuedtothepolicyunderwriters. All buyer risk is signed off bydedicated Risk Services teams.

Bonding
Surety bonds insure beneficiaries against
the risk of our customer not meeting
contractual, legal, or tax obligations.
Beneficiaries include national, regional andlocal governments and tax authorities aswell as companies.

Instalment Credit Protection (ICP)
Policies are generally issued for a fixed
period with automatic renewal. The
indemnification rate can rise to 100% andrecoveries are for the benefit of theCompany. Recovery rates are significantly
higher for ICP than for credit insurance andbonding.
Risk underwriting is performed by the risk
underwriting teams. Credit decisions areprimarily made based on an automateddecision model; however, if required a casecan be referred to an underwriter for
manual assessment. Authorities are granted
to underwriters according to theirexperience and expertise. Larger exposuresaredecided upon byappropriate
committees according to pre-determinedthresholds.

While a customer may fail to meet its
obligations, either because it is unable toperform to the agreed or required level or
because it is insolvent, there is also the riskthat the customer may intentionally fail tomeet its obligations. Therefore, assessmentof both the customer’s financial strengthand its ability to perform plays an importantpart in the underwriting process. Unlike
traditional credit insurance, exposure
related to issued bonds cannot be
unilaterally cancelled by the Company.
When a bond is called by the beneficiary,
ACyC might mediate to resolve conflicts byworking with both the customer and thebeneficiary. If a payment is made by ACyC
to the beneficiary, recovery action is taken
against the customer which remains
ultimately liable. If ACyC incurs an
irrecoverable loss, it is always due to thecustomer’s financial distress.
40

A sizeable portion of the bonding portfolio
relates to the construction sector, while
different legal and market environments inthe various countries also translates into
bonding customers active in other sectors.
In addition, the types of bonds issued range
from bid bonds, performance bonds,
maintenance bonds and advance payment
bonds to various types of administrative
bonds. These are issued with tenors ranging
from a few weeks to years.
Given the two dimensions of bonding risk –the technical risk and the financial risk –two separately organized underwriting
streams exist. When establishing or
renewing a bonding facility and/or issuing
an individual bond the Technical
Underwriting is performed by members of
the Commercial units. They assess the riskof non-performance as well as bondwordings and other aspects. Financial
Underwriting is performed separately fromthe Commercial staff, and focusses on thecreditworthiness of the customer. Financial
Underwriting staff sets the limits within
which the bonding facilities and individual
bonds can be provided to the customer.
There is an authority structure in which
decisions are escalated depending on theamount involved. The last two steps in thisauthority structure are the Local Credit
Committee and the Group Credit Committee.
Measurement / monitoring
The Company monitors exposure bycounterparty, sector and country across all
product lines. It holds records of all policies,
credit limits and buyers in various
connected systems. These systems enable
the Company to set system specific limits bybuyer or buyer group (including bonding
customers) and to monitor aggregate
exposure along various dimensions.
All significant exposures are reviewed atleast annually. The Company receives
continuous information on buyers throughonlineconnections
withbusiness
information providers and from customers
reporting negative payment experiences.
Buyers are reviewed whenever pertinent
new information is received. The Company
assigns an internal rating to buyers and thereview process takes into account all
sources of exposure on a buyer, including
exposure for Special Products and Bonding.
For ICP, consumer credit risk underwriting
utilizes databases maintained by national
authorities as well as its own internal
consumer credit database.

Partial Internal model
The relationship between risk and capital isfundamental;
risk-taking
requires(regulatory) capital to be held. For many
years, the Company has been using aninternally developed economic capitalmodel as a best practice measure ofunderwriting risk exposure. In 2017, ACyC
obtained regulatory approval to use thismodel for calculation of regulatory capitalrequirements. ACyC combines this internal
model with Standard Formula components
and thus uses a “Partial Internal Model” as ameasure of risk, which allows calculation of
overall regulatory (but also economic)
capital requirements.
The Company takes the results of the Partial
Internal Model into consideration for risk
and capital management and strategic
decisions. In addition to overall risk profile
quantification, the model contributes to a
multitude of risk assessment activities andhelps management to better monitor andmanage risk levels within the organization
through the allocation of risk-based capital.
For more information on the economic
capital model, please see section E-4.

41

Risk mitigation
The Company transfers a significant portionof its underwriting risk to external
reinsurers,
throughanumberofreinsurance arrangements that include
quota share and excess of loss treaties
covering either the entire portfolio of theCompany or specific risks.
The reinsurance treaties are renewed
annually. However in order to ensurestability of capacity and pricing, theCompany renews its reinsurance a year inadvance.
At time of renewal, the Company assesses
the optimal structure of the treaties for theforthcoming period. A number of items aretaken into consideration during this review,
including the cost of the synthetic capitalthat reinsurance provides as measured by
the internal economic capital model.

share treaties. This excess of loss treaty also
provides protection for all the insurance
entities within Atradius. The top of theexcess of loss layers is chosen so that, in thejudgement of management, there remains
only a very remote possibility that failure ofany single buyer group would exceed theexcess of loss coverage purchased. The
attachment point of the excess of loss
treaties has been set such that the net
retention for business ceded under thequota share treaties and excess of loss
structure for any buyer group does notexceed EUR 26 million at the level ofAtradius.

in the market, to counteract the damage
inflicted on companies affected by theoutbreak and to preserve the continuity of
economic activity during and after theoutbreak. In particular, they aim to ensurethat trade credit insurance services
continue to be available to businesses. All
contracts apply to direct business (grossreinsurance).

For the underwriting year 2021 a quota
share reinsurance treaty is in place covering
the majority of the Company’s business.
Own retention under this treaty is 52%(compared to 41% in 2020).

In view of this situation and, as a support tothe national economy, 10 main countries
where ACyC operates have supported thebusiness of credit insurance in the form ofspecific government reinsurance schemeswith high cession rates.

Atradius entered into agreements withGermany, Denmark, Norway, Belgium,
France, Luxembourg, the Netherlands,
United Kingdom, Italy and Spain. In generalterms, all government schemes cover Credit
Insurance with policyholders from thecountry and all their buyers (domestic andexport credit).
In Europe, all agreements were approved by
the European Union. These agreements
apply before private reinsurance in placewith exception of Spain. In Spain theagreement provides an additional cession(works in addition to the current private
cession to the market). All government
schemes are risk attaching. Cession rates forpremium and claims are country specific.

There is also an excess of loss program on a
per buyer/buyer group basis, covering theCompany’s retention under all these quota

The government schemes are part of an
overall package of measures and aim toensure that sufficient liquidity is available

The contents of the programs differ fromeach other but they were typically in theform of a quota-share agreement with a2020 Government agreements
The COVID-19 pandemic crisis has strongly
affected the world economy.

42

Identification

cession between 50% and 100%. Close to 50%
of exposure was/is covered by these
programs.

C-2

Market risk

in EUR million

Q4 2020

Q4 2019

Market Risk
Interest rate risk

16

32

Equity risk

183

177

Property Risk

40

39

Spread Risk

87

74

Concentration Risk

7

6

Currency Risk

85

75

Total undiversified

418

402

Diversification

(90)

(88)

Total diversified

327

315

The Company exposes itself to market risk
by obtaining assets and incurring liabilities
whose value is sensitive to movements inmarket prices. This risk represents 37% of
the Company’s undiversified BSCR, before
diversification and tax adjustments. With acharge of EUR 327 million, this implies anincrease of EUR 12 million compared withprevious year. This risk is incurred by:• investing in debt instruments;• investing in equity instruments;• investing in real estate;• underwriting
insurance
contracts
generating provisions for future claims
payments; and• holding assets and incurring liabilities
denominated in foreign currencies.
The increase in 2020 is mainly driven byincreased market value of investments andsymmetric adjustment due to positive
developments in markets.
Measurement
Market risk is measured by using several
risk metrics, including:• value-at-risk;• capital models of external credit
assessment institutions; and• interest rate duration.

Value-at-risk and capital models fromexternal credit assessment institutions areboth used to determine potential maximum
loss for a given confidence level on the
Company’s financial instruments due toadverse movements in market prices orcounterparties’ creditworthiness. Interest
rate duration assists in determining
sensitivity of debt instruments and claims
provisions to movements in interest rates.
Management/prudent person principle
Market risk is managed in several ways,
such as:• restriction on investment types, e.g.
widely traded capital market
instruments vs. derivatives;• diversification of the investment
portfolio; and• restrictions on the interest rate
duration of the debt instruments
portfolio• and implementation of a strategic
asset allocation.
The Company uses an asset liability
management (ALM) approach to analyse theimpact of market risk on its assets andliabilities. Additionally, through the use of
Solvency II constrains the Company aims to43

define the strategic asset allocation (SAA), sothat the commitments resulting from theexposure to purchased assets andCompany’s insurance liabilities can be met
while maximizing the expected investment
return within given risk and capitalconstrains.

•
•
•

•
The policy of the Company is to invest only
in investment grade, liquid investments
taking into account the short interest rate
duration of the claims provisions.
Furthermore, the policy regarding financial
instruments is to invest only in capital
market instruments and refrain frominvesting in derivative instruments.
The investment process complies with the‘prudent person’ principles:• all assets covering technical provisions
are invested in a manner appropriate to
the nature and duration of theCompany’s liabilities;• investments are only made in assets
which risks can be properly identified,measured, monitored, managed andcontrolled and reported;• all assets are invested in such a manneras to ensure the security, quality,
liquidity and profitability of theportfolio as a whole;non-traded investments are kept toprudent levels;
exposure to speculative grade assets isprudent;
derivatives can be used only to reducerisks or facilitate efficient portfolio
management;
assets are properly diversified (asset
type, issuer, group, region) to avoid
excessive accumulation of risk in theportfolio as a whole.

Market risk is monitored by and reported to
the Group Investment Committee and the
RSMB. The Group Investment Committee
meets on a monthly basis and reviews
metrics such as value-at- risk, interest rate
duration,anddegreeofdiversification/concentrationoftheinvestment portfolio while the RSMB also
reviews similar management information
on a quarterly basis.
Under the umbrella of market risk, thelargest type of risk exposure is equity risk;
it contributes: EUR 183 million of the EUR
418 million total diversified market risk.
Risk mitigation
Market risk is mitigated on several layers in

the Company. Firstly, constraints are set in
the Group Investment Policy. This policy
sets parameters within which investment
risk can be taken. Investment decision
making and monitoring of compliance isundertaken by the Group Investment
Committee. In addition, governance bodies
such as the FX Committee, Group
Investment Committee and RSMB regularly
review investment decisions and portfolio
developments.

C-3

Credit risk

Identification
The Company exposes itself to credit risk
(also referred to as counterparty defaultrisk) by obtaining assets whose value
depends on counterparties’ ability to repay
their obligations when due. This risk
represents
11%
of
the
Company’s
undiversified BSCR, before diversificationand tax adjustments with a charge of EUR
101 million (2019: EUR 105 million). Thisrisk is incurred by:• investing in debt instruments;• depositing cash at credit institutions;• underwriting insurance contracts
which generate premium receivablesfrom insurance contract-holders, and44

•

insurance intermediaries such as
brokers and agents; andentering into reinsurance contracts
generating reinsurance recoverables
and receivables from reinsurers.

Measurement / assessment
Counterparty default risk is measured using
several risk metrics, such as:• capital models developed by external
credit assessment institutions;• credit ratings issued by external credit
assessment institutions;• payment history of insurance contractholders; and• delinquency reports (credit control
reports).
Developments in these main risk metrics (aswell as other information) are monitored
and assessed to ensure that the exposure tocredit risk is maintained within acceptableboundaries.
Counterparty default risk is monitored andreported to the relevant risk committees:Group Investment Committee in the case ofinvestment assets or deposits; Outward
Reinsurance Committee in the case of risk
on reinsurers; the RSMB as the committeewith the most holistic view of risk exposure.

The Group Investment Committee meets
monthly and reviews the distribution of
credit ratings within the investment
portfolio while the RSMB performs the same
review of the investment portfolio on aquarterlybasis.
The
ReinsuranceCommittee meets quarterly and, among
others, reviews the quality of thereinsurance panel.
Management / mitigation
Counterparty default risk is managed andmitigated in several ways, such as:••••

deployment of credit ratings issued byexternal credit assessment institutions;setting risk exposure limits;
inclusion of contingent collateralclauses in reinsurance contracts; andwithholding premiums due toreinsurers to offset occurred claims.

Credit ratings issued by external credit
assessment institutions are used to ensurethat the Company invests only in debt
instruments or enters into reinsurance
contracts with an acceptable likelihood of
being settled. Currently, the policy is toinvest in debt instruments with a credit
rating of ‘A-‘ or higher and to enter into

reinsurance contracts with reinsurers witha credit rating of ‘A-‘ or higher.
If the credit rating of a debt instrument falls
below the minimum rating mentioned
above, the Group Investment Committee
discusses whether the Company should
divest the instrument. If the credit rating ofa reinsurer falls below the minimum, thereinsurance contract allows the Company toterminate the reinsurer’s subscription to thereinsurance treaty. In this way, a decision to
avoid the increased risk may be taken.
The inclusion of a contingent collateralclause in a reinsurance contract requires a
reinsurer that is downgraded below ‘A-‘ toprovide collateral by pledging assets with,or providing an irrevocable letter of credit
from a credit institution. As a result theincreased risk is mitigated.
The inclusion of offset clauses in a
reinsurance contract ensures that theCompany can offset the receivables fromand payables towards a reinsurer if any
reinsurer defaults on its payables. This
reduces the size of the risk exposure.

45

C-4

Liquidity risk

Identification
Liquidity risk may arise due to insufficient
funds being available to meet cash flow
requirements (funding liquidity risk), butalso due to illiquidity of the assets held tomeet the cash flow requirements (asset
liquidity risk).
Risk mitigating measures
Liquidity risk is managed centrally, in close
coordination with local business units. The
primary risk mitigating practice is themonitoring of ongoing cash flow patterns
combined with the maintenance of levels of
cash and highly marketable securities thatreflect expected cash needs.
The
Company
employs
severalsupplementary measures:•••

Cash-pooling (enabling the Company toinstantly
transfer cash between
branches participating in the cash-pool);
Inclusion of a simultaneous settlement
clause in reinsurance contracts;
Daily pricing of financial instrumentswith the ability to liquidate those
instruments in a reasonable time -period•(the Company’s investment policy limits
investments in financial instruments to
those that can be sold in less than threebusiness days).
Uncommitted lines of credit to cover
infrequent peaks in short-term liquidity
requirements while also permitting theCompany to reduce its cash balances andto benefit from a more substantial andstable investment portfolio.

Expected Profit in Future Premium.
Expected profit in future premium is
calculated as per Article 260(2), Article
260(3) and Article 260(4) of the DelegatedRegulation.
Methods used for the calculation of technicalprovisions remain the same in accordancewith Article 77 of the Directive and isspecified in detail within section D.2 of thisdocument. Assumptions used within the
EPIFP calculations are consistent with ones
used to calculate the best estimate. The
calculation to estimate expected profit in
future premium is performed at the level ofhomogeneous risk group.
The expected profit included in futurepremiums calculated in accordance with

Article 260 (2) of the Delegated Regulationfor Q4 2020 is EUR 68.9 million (2019: 108.5
million).

C-5

Operational risk

Operational risk is the “risk of loss arisingfrom inadequate or failed internal
processes, or from people and systems, orfrom external events”. The Solvency II
Directive also states that operational risk
“shall include legal risks, and exclude risks
arising from strategic decisions, as well as
reputation risks.”
Using the Standard Formula for calculation,
operational risk represents 7% of theCompany’s SCR, with a charge of EUR 44
million (2019: EUR 45 million).
The Company uses a framework for
identifying, assessing, responding to andmonitoring operational risk, which is basedin part on the Committee of Sponsoring
Organizations’Enterprise
Risk
Management (COSO ERM) Integrated
Framework. The framework ensures that
operational risks are considered in all partsof the Company and that objectives are more
likely to be met with fewer surprises along
the way.
46

To provide oversight and assurance in anauditable and efficient manner, theCompany employs a dedicated governance,risk and compliance software platform (the’GRC Portal‘) that integrates existing risk
management activities across the business.
Identification
Operational risk is inherent in all the
Company’s key activities. The Company has
developed a number of methods and tools to
support identification, assessment andmanagement of operational risk, such as:• risk registers;• risk and control self-assessments;• business impact analyses;• training (such as fraud awarenesstraining to assist in the identification of
fraudulent customers or buyers);• monitoring of indicators of risk in thevarious sub-categories of operationalrisk.
Measurement
Atradius Leadership Team members,
assisted by designated ‘risk champions’across the Company, maintain local risk
registers that are updated on a quarterly
basis. The risk registers contain topics thatmanagement identify as significant risks
for achieving objectives. Risks arequantified based on assessments ofpotential impact and the likelihood of a riskmaterialising.
The local risk registers are consolidated intoa central risk register and a risk map. The
highest priority risks (according to impact
and likelihood) are reviewed against a risk
tolerance, while mitigating actions areevaluated.
Monitoring and reporting
The performance of internal controls ismonitored in a number of ways including:••••risk and control self-assessments;
quarterly review and sign-off offinancial reporting controls;
business continuity tests; andincident
reporting(High-level
information on crystalized risks has
been captured for several years. Due totheiruniquecharacteristics,
information technology risk events arerecorded separately).

Risk indicators are reported quarterly to the
Operational
Risk
Committee.
The

Operational Risk Committee comprises
senior management representatives from across-section of departments. It meets on aquarterly basis to discuss risk indicatorsand developments in the Group's assurance
methods.
Management / mitigation
Once identified and assessed, risks may be
accepted or mitigating actions may be taken
to bring them to an acceptable target level.
Risks, the related controls, and risk
mitigating actions are discussed at all levels,
locations and units across the Company.
Operational risk is managed and mitigatedthrough a framework of internal controlsthat address the different areas where suchrisk is present. This internal control system
includes:• policies, procedures and standards;• Business Continuity Plans;• manual and automated operational
controls such as the segregation ofduties, the application of signingauthorities and role-based system
privileges;• ongoing education.

47

COVID-19

C-6

Following the initial ‘lockdowns’ in mostcountries and travel bans, actions weretaken to ensure human resource and IT
capabilities were sufficient to maintain the
expected level of customer service and to
manage the risk exposure. Many staff are
working remotely and will continue to do so
as necessary. IT systems have remained
stable and collaboration tools have beenenhanced for the whole workforce. Overall
service to customers and all othercounterparties is being maintained.

C-6.1 Concentration risk

As subsequent lockdowns occur in various
geographies, the arrangements establishedin the first half of the year ensure that theCompany is prepared for all eventualities.
The Group Incident Management Team(comprised of the Management Board andadditional senior management fromrelevant departments) meets regularly,
monitors the situation globally and locallyand takes action where required.

Management / Mitigation

Other material risks

Identification
The
Company
exposes
itselftoconcentration
risk
primarilybyaccumulating assets with a debtor and by
underwriting credit limits on a buyer, on agroup of buyers under common control, in acountry or in a trade sector. If Atradius has
underwritten bonds for a buyer, thiscontributes to the concentration.

Concentration risk is managed using
various methods:• Concentration is a driver in the
Company’s economic capital model,
therefore capital decisions takeconcentration risk into account;• Concentration risk on underwriting
exposures is typically analysed withrespect to individual buyer, customer,
trade/industry sector, country and/or
product;•
Credit concentration limits are
assigned on an aggregated level (e.g.
name / group, country) in order tomanage exposure concentration on
portfolio level.
•
For concentration on the largest
individual buyer exposures, special
excess-of-loss reinsurance treaties are
established to mitigate liability in caseof large claims;•
For concentration in assets, theCompany limits investments with one
counterparty to less than 5% of theinvestment portfolio (this applies to
non-government counterparties only).
Similarly, the policy is to maintain no
more than 5% of reinsurance contracts
with one reinsurer, unless thereinsurer is considered a lead or a
strategic reinsurer.
Monitoring and reporting
Concentration risk is, depending on thetype, monitored and reported to the Group
Investment
Committee,
OutwardReinsurance Committee and the RSMB. The
Group Investment Committee meets
monthly and reviews adherence to thepolicy on concentration limits for theinvestment portfolio while the RSMB
performs a similar review of the investment
portfolio on a quarterly basis. Furthermore,
the RSMB reviews the concentration of48

credit limits underwritten per country andtrade sector and for the top 50 buyers. As
part of the process of renewal of theCompany’s reinsurance treaty, the Outward
Reinsurance Committee reviews theadherence to the concentration limits forreinsurance treaties.
The Total Potential Exposure (TPE) details
show TPE gross of reinsurance; due to thenon-linear nature of the excess of loss coverin ACyC’s reinsurance program, which has afinite number of reinstatements for eachlayer, there is no natural way to show TPE
net of reinsurance.

Buyer country

TPE 2020(EUR million)%

TPE 2019(EUR million)%

Spain, Portugal

78,89414.2%

98,302

16.4%

Germany

93,112

16.8%

92,20815.4%

Central and Eastern Europe

58,89910.6%

61,682

10.3%

France44,8808.1%

47,9408.0%

United Kingdom

41,3887.5%

45,129

7.5%

Italy

40,634

7.3%

42,215

7.1%

The Netherlands

29,543

5.3%

29,974

5.0%

Nordic28,026

5.0%

28,797

4.8%

USA, Canada, Mexico

27,9795.0%

28,185

4.7%

Other

111,68820.1%

123,615

20.7%

Total

555,043100%

598,046

100%

In the following table, the TPE has been
aggregated and shows the exposure for
ACyC credit insurance (including special
products), non-consolidated.

49

Exposures for Bonding and for ICP are notincluded in this table. The bonding exposurein 2020 is EUR 24.1 billion (2019: EUR 25
billion). Exposure for ICP amounts to EUR 3
billion (2019: EUR 3 billion).
C-6.2 Strategic risk
Strategic risk is the risk arising fromchanges in the business environment andfrom adverse business decisions, improper
implementation of decisions or lack of
responsiveness to changes in the businessenvironment. It is the risk related to
strategic planning, market developments
and reputation.

Strategic risks are identified and assessed
quarterly at board level. The Company
identifies and analyses strategic risks
through various internal channels such as:
the Strategy Forum (an internal discussionof strategic initiatives), the Strategic Risk
Platform (comprised of senior managementfrom various parts of the business toevaluate identified risks), Economic
Research Department’s overview of longterm macro-economic risks, megatrends
analyses, Risk Registers of individual
business units, and quantifications ofrequired and available capital in the Long
Term Planning and ORSA processes.
C-6.3 Cyber risk

Strategic risk categories are used tostructure the process of identifying andassessing strategic risks. The maincategories used within the Company are:• allocation of resources: risks linked
to an inadequate strategic planningand budgeting process;• market developments: risks linked
to market developments, economic
environment, clients, competition;• reputation: risks linked to an adversechange in the reputation or image ofAtradius.

Risk of financial loss, disruption or damage
to reputation due to failure of IT systems orloss of data. This would typically materialise
due to attacks over networks and could
result in theft and misuse of information,
service outages, changes in operating
systems, among events.
ACyC has a suite of policies and proceduresin place which address, among other things,
personal data protection, privacy, andsecurity measures. An Information Security

team actively monitors and addresses
threats. In addition, training ensuresawareness of cyber risk among all
employees and internal and external audits
take place regularly.
C-6.4 Emerging risk
Emerging risks are newly developing orchanging risks, which may arise due toincreased exposure or sensitivity to
unknown factors or to an already known
threat.
Emerging risks are identified through thesurveillance and assessment of theexternal(regulatory,
geopolitical,
technologicalchanges,marketdevelopments,
etc.)
and
internal(development of new products, enteringin new markets, etc.) environment.
Among the risks defined in ACyC’s risk
map, the following emerging risks are
identified as principal emerging risks, asthese could have a major impact on thestrategy of ACyC:• Financial volatility• Continued low interest rates
50

•
•
•

Extended economic recession
Regulatory developments
Cyber risks.

Considering the circumstances of thecurrent pandemic crisis, ACyC considers thepossibility of a continued economic
recession as a risk that could impact ACyC’s
future. The first three emerging risks above
are included in the scenario analysis in
ACyC’s latest Own Risk and Solvency
Assessment. The analysis shows that ACyC’s
strong solvency ratio ensures satisfaction of
the interests of customers and policyholders
throughout the period forecasted.

C-7

Any other information

process and serve the purpose of examining
the business’ resilience.
This section exemplifies sensitivity tests fordifferent risk categories and overall
scenario analyses and quantifies the impact
on the Solvency Ratio. The Solvency Ratio is
the key metric for ACyC to measure its
ability to meet its obligations.
C-7.1.a Sensitivity analyses
As at 31 December 2020, the impact ofexternal factors related to various risk types
on ACyC has been assessed. For several
sensitivity tests the impact on Solvency
Ratio (as percentage point change) is shownin the following table.

C-7.1 Scenario and sensitivity analyses
Sensitivities of the risk profile are regularly
explored by sensitivity tests as well as stresstests/scenario analyses. In the first,
individual risk parameters and/or volume
measures are being shocked while in thesecond the combined effect of several
adverse developments is considered.
Scenario analysis and stress testing
activities are executed firm wide, embedded
into the company’s risk management
51

.

52

C-7.1b Scenario Analyses

Scenario Analysis

Stress test Underwriting Risk – Increase
Claim Ratio to 104%

The interplay and simultaneous occurrenceof adverse developments are considered aspart of the annual Own Risk and Solvency
Assessment (ORSA) process. These analyses
take a holistic approach and consider the
impact of scenarios on the balance sheet,profit and loss statements, and ultimately
on the solvency needs. Various scenarios
are investigated to study the Solvency Ratio
development over a multi-year time
horizon – including expected (base case)and adverse developments.

This severe stress test examines the ceterisparibus effect of stressed economic
conditions with an elevated claim ratio of
104% as at 31 December 2020. The
assessment assumes an immediate impact
on Solvency II Eligible Own Funds without achange in SCR, e.g. resulting frommanagement actions or the Company’s
exposure management activities. Thisrenders the assessment conservative. The
following table summarizes the results of
this
test
on
ACyC
level.

Even though, in such a scenario, theSolvency Ratio would decrease byapproximately 22% – driven by decreases in
Eligible Own Funds – the overall solvency
position would stay at acceptable levels well
above 175%.

The scenario and its assumptions are basedon 2020 information, so that year t
represents a hypothetical year 2021 under
the assumptions above. The following tablesummarizes the year t impact of the
scenario on the Solvency Ratio.

The most recent ORSA has consideredamong others a prolonged global recession
scenario with simultaneous adverse
developments on revenues, claims, and thevalue of the investment portfolio. The
scenario assumes that insurance exposures
are rapidly reduced in year t and increaseagain in years t+1 and t+2. Here, “year t”
refers to the first full year after the scenario
materializes.
The following tablescenario assumptions:summarizes

the

53

C-7.2 Brexit
Another notable development this year is
Brexit. The UK left the European Union(‘EU’) on Friday 31-January 2020 enabledby the Withdrawal Agreement agreed
between the EU and the UK Government.
The Company’s activities are continuing
without interruption post-Brexit as it had
prepared itself well for the regulatorychanges. Atradius had applied to the UK’s
Prudential Regulatory Authority (‘PRA’) for
authorisation as a Third Country Branch(‘TCB’) and is now operating ‘as if’
authorised as a TCB, under the Bank ofEngland’s Temporary Permissions Regime
which will be in place for up to three years.
With branches across the EEA and in the UK,
Atradius continues to issue policies in all
EU27 countries and in the UK.
C-7.3
Environmental,
Governance risk (ESG)

Social,andEnvironmental, social, and governance(ESG) risks are concerned with the threemain factors in measuring the sustainability
and societal impact of a company.
Considerations include aspects such as
climate-change, social pressures andcorporate governance.

Among the risks identified in ACyC’s risk
map, the following ESG risks are included as
principal sustainability risks. The risks areclassified as physical, transition andresponsibility risks:••

Physical risks: arising from climatechange, i.e. a series of specificmeteorological events that could havefinancial
implications
fortheorganisation. This could be direct
damage to assets, or indirect impacts
due to an interruption in supply chains,e.g. the impact of an increase in claims
and payments of insured goods due toan increase in natural catastrophes;
Transition risks: arising while society
transitions to a low-carbon economy.
There are several factors that influence
the adjustment towards a moresustainable economy, such as theevolution of public policies, regulations,
new technologies and business models,changes in personal sensitivities andsocial preferences, and the evolution ofthejudicial
systemandlegalinterpretations (e.g. the economic
impact of new sustainability regulations
that could affect investment portfolios,or the economic impact of socialpressure on certain investments due to•their sustainable or non-sustainable
components);
Responsibility risks: risks due toclimate-related claims through civil
liability insurance policies and legal
complaints
againstinsurancecompanies for not managing climate
risks appropriately.

Since ESG risks could impact ACyC directly
or indirectly, they are being considered
across all ACyC risk policies. For this reason
ACyC participates in a Sustainability
Committee that has been created at GCO
Group level.

54

The
measurement,
monitoring
andmanagement of ESG risks is defined in the
Climate Change and Environmental policy,
as well as in governance policies, that
require:••The impact of the risks, as far as they are
relevant, are analysed in the financial
plan with the purpose of adapting thestrategic plan, if necessary;
Metrics must be implemented that allow
measuring and managing the risks andopportunities derived from climatechange.

A periodic report covers the identification ofthese risks and their impact on the business.

55

D.

Valuation for solvency purposes

D-0
D-1
D-2
D-3
D.4
D-5

Introduction
Assets valuation
Technical provisions
Other liabilities valuation
Alternative methods for valuation
Valuation techniques used on the basis of model approach

D-0 Introduction
The economic assets of ACyC under Solvency II at the end of 2020
amount to EUR 3,604 million, EUR 88 million lower than Statutory
Financial Statements, performed according to Spanish Local
accounting standards (hereinafter 'PCEA').
The tables below show the total difference in valuation per category.
PCEA figures are already reclassified under the equivalent SII items.
The following table shows balance sheet items under SII and Statutory
Accounts:
ACyC
Eur million
AssetsGoodwill
Intangible assets
Deferred acquisition costs
Deferred income tax assets
Pension Benefit Surplus
Property, plant and equipment for own use
Property (other than own use)
Participations
Other Financial investments
Deposits other than cash equivalents
Reins. Recoverables
Deposit to Cedant
Reinsurance Receivables
Receivables (Insurance, intermediaries and trade
Cash and cash equivalents
Any other assets, not elsewhere shown
Total

2020

2020

Solvency II(Statutory Acc)

Difference

0

23

(23)

0

102

(102)

0

54

(54)

424

184

240

62

62

(0)

201

73

128

22

3

19

33

18

15

1,372

1,372

(0)

28

28

0

671

1,082

(411)

3

3

0

186

151

35
(5)

259

264

266

266

0

76

8

69

3,604

3,692

(88)

56

Investments: represent 40% of the total assets, of which theinvestment in Debt securities is the main item;

ACyC
Eur million
Liabilities

In addition, when analysing valuation differences, it is necessary toconsider reclassifications, according to the asset QRT (CIC CODE
classifications).
Such reclassifications have no economic impact.
The following graph shows the assets bridge between statutory
accounts and SII.

2020
Solvency II

2020(Statutory Acc)

Difference

Technical Provisions
Provisions other than technical provisions
Pension benefit obligations
Deposits from reinsurers
Deferred tax liabilities
Insurance & intermediaries payables(Re)insurance accounts payable
Payables (trade, not insurance)
Any other liabilities, not elsewhere shown

870

1,521

(651)

3

3

0

137

137

0

66

66

0

514

211

303

55

54

1

279

257

22

288

216

72

122

137

(16)

Total

2,334

2,601

(268)

Liabilities Bridge between PCEA and Solvency II is as follows:

Solvency II Total liabilities balances EUR 2,334 million, EUR 268
million lower than PCEA. Being technical provision and deferred tax
liabilities the more significant items as shown in the following table.
Annex F 3 details the valuation differences between PCEA and
Solvency II.

57

D-1

Assets valuation

At the end of 2020, ACyC has assets with a
total value of EUR 3,604 million under
Solvency II (EUR 3,692 million under PCEA).
The main differences are as follows:• Goodwill: in the economic balance thisis valued at zero (EUR 23 million
PCEA);• Intangibles: in the economic balance
sheet these assets are valued at zero
(EUR 102 million under PCEA);• Recoverables from reinsurance: in theeconomic balance sheet these arevalued in accordance with thevaluation criteria of the technicalsolvency provisions (see section D.2)
and considering the probability ofdefault by the reinsurers;• Deferred acquisition costs: theeconomic
value
ofdeferredacquisition costs is nil. (EUR 54
million under PCEA);• Property, plant & equipment for own
use: in the economic balance sheet arevalued at their market value,
determined by approved appraisal
companies.
In 2019 IFRS 16 was adopted and

•

•

•

•

appliedfor
SolvencyII,inconsideration of art. 75 of the
Directive, with an impact both inassets and liabilities.
Therefore, difference in this item, with
PCEA is:+ EUR 70 million due to market value;+ EUR 58 million corresponding to
IFRS 16 Right of use assets. See further
details in F-3 Solvency II Valuation
principles;
Property (other than for own use): inthe economic balance sheet are valued
at their market value, determined byapproved appraisal companies. (+ EUR
19 million);
Participation under PCEA are valued
at cost value while under Solvency II
are valued according to their economic
value which for ACyC is participatedown funds valued applying SII rules (+EUR 15 million).
Any other asset not elsewhere shown:Technical items considered ascustomer deposit given contracts
boundaries
andreinsurance
commissions. (+ EUR 69 million).
Deferred tax assets: + EUR 240
million, records the tax effect of thevaluation differences between PCEA
and Solvency II.

Other differences are reclassification
between assets and liabilities.
Comparison with the previous year
The movement in this item is mainly driven
by PCEA Balance Sheet movements acrossperiods.
Main movements have been produced in
Investment with an increment of EUR 138
million and reinsurance recoverable.

58D-2 Technical provisions
Valuation principles
As prescribed by the Solvency II Directive(DIR), the technical provisions are madeup of three components:••

Provisions for claims outstanding(PCO): The PCO is the best estimate of
cash flows relating to claim events
that have already occurred, regardlessof whether the claims arising fromthose events have been reported ornot;• Premium provisions (PP): The PP isthe best estimate relating to future
claim events covered by insurance
and reinsurance obligations fallingwithin the contract boundary. Cashflow projections for the calculation of
the PP include claims, expenses andpremiums;
Risk Margin (RM): The Risk Margin is
intended to be the amount of capital that
another (re)insurer taking on theliabilities at the valuation date would
require over and above the best estimate.
It is calculated using a cost-of-capital
approach as prescribed within the

Solvency II Directive.

(CI), Special Products (SP), Bonding (BO),and Instalment Credit Protection (ICP).

For the purposes of this report, the best
estimate, unless otherwise specified isgross, without deduction of the amounts
recoverable from reinsurance contracts
and special purpose vehicles.
The calculation of the technical provisions
includes cash flows associated withexisting contracts, for obligations up to
the contract boundary.
For all products the best estimate isdetermined by relevant actuarial andstatistical methods in combination withrealistic assumptions.
The methods used and the choice of loss
occurrence definition determines the split
between PCO and PP. This methodology is
specific to the different products within
the ACyC Credit & Suretyship (C&S)
business.
Choice of contract boundary
The Company has chosen the following
contract boundaries. The choices are
specified by product: Credit Insurance

The Company has a unilateral right toterminate future cover (shipments) to bebrought under the credit insurance policies
because the Company can amend i.e. vary,
review or withdraw credit limit decisions
under the policy. Without a credit limit
decision on a buyer, no new business will be
insured on that buyer.
For credit insurance, the contract
boundary is chosen such that allcontractual obligations for insured risks(shipments) at reporting date areprovisioned for within Solvency IItechnical provisions.
The choice of contract boundary hence
reflects the credit insurance business’
ability to continually re-underwrite risks as59

it may at any time reduce or withdraw
credit limit decisions.
Valuation methodologies
The Solvency II best estimate is valued
using methodologies consistent withprinciples and bases used for financial
reporting.
A short description of the methodologies
used to determine provisions by productis provided below.
• Traditional
creditinsurance:
provisions are calculated based on
statistical methods. These are used toproject claim counts for each month ofrisk taken on and an average claim
severity to estimate ultimate claim
cost. For large cases, individual
assessments of provisions are made.
In addition, reserves are carried for
future large losses and losses resulting
from reporting on specific events.
• Special Products: provisions forreported claims are calculated on acase by case basis. Provisions for
future claims are based on an
expected premium / expected loss
ratio approach.

•

Bonding: provisions for reported
claims are calculated on a case-bycase basis. Provisions for future
claims are based on an expected
premium / expected loss ratio
approach.
• ICP: claims reserves for reported but
not settled claims are determined on acase by case basis. Salvage andsubrogation dominate the ICP
provisions due to the nature of the
product: claims paid are in the order ofthree times premium. Claims paid are
typically recovered in full over a
period of over ten years. Provisions
for salvage and subrogation for ICP
are estimated using a chain laddermethod.
Future premiums are estimated based on
methods that project premiums to bereceived in the future at a policy level.
For all products the best estimate isdetermined by relevant actuarial methods
incombination
withrealistic
assumptions.
There are no future management actions
assumed in the calculation of theCompany’s gross of reinsurance best

estimate liabilities. The valuation ofreinsurance recoverables assumes that
future reinsurance contracts will be in linewith the most recent outward reinsurance
treaties in place.
Reinsurance recoverables
The ACyC C&S business’ reinsurance
protection derives from its reinsurance
program. The main program consists of a
Quota share (QS) treaty, and an Excess ofLoss (XoL) program.
The ACyC C&S business main proportional
reinsurance covers 59% for UWY 2020 of
all technical amounts: premiums andclaims.
Main proportional reinsurance treaty
above, includes an internal cession with
Atradius Reinsurance DAC for alltechnical amounts (22% for underwriting
year 2020).
Parts of the ACyC C&S business are
additionally protected by reinsurance

60arrangements supported by governments.
Reference is made to Chapter C-1.
The
amounts
recoverable
fromreinsurance contracts are estimatedconsistently with the boundaries of theunderlying contracts to which they relate.
The
reinsurance
recoverables arecalculated directly, treaty by treaty inessence without approximation.
An adjustment for expected losses due tocounterparty default is included in theestimate of reinsurance recoverables. The
reinsurance panel predominantly has aStandard and Poor’s rating of A- or better.
Risk margin
The risk margin is defined as the costneeded to cover all future capitalrequirements until the final settlement ofexisting business.
The solvency capital requirement (SCR) is
the risk capital required for one year only.
Hence the SCR for individual points oftime in the future needs to be estimated.

The Company follows the generalguidance given under Method 1 within the
EIOPA Solvency II Guideline 62 (EIOPABoS-14/166 EN). This assumes that therisk margin is based on a cost of capital
approach for business that is considered‘existing’. For the cost-of-capital, a rate of
6% is used according to the DelegatedRegulation (Article 39).
The overall approach used to calculate therisk margin is to perform a full calculationof the SCR at each future point in timeusing the Standard Formula with certain
simplifications. The simplifications areused for the counterparty default andoperational risk modules.
The method used to calculate the risk
margin is based on the formula below
which is prescribed in DR: Article 37(1),where the cost–of-capital (CoC) rate used
is 6% as is prescribed in DR: Article 39 andSCR(t) denotes the Solvency Capital
Requirement referred to in DR: Article
38(2) at year (t). It is a formula similar tothat which is used to calculate the Actual
SF SCR as outlined in DIR: Article 103.

Overview of technical provisions
The table below shows the Solvency IIgross best estimate, risk margin and theshare of reinsurance recoverables as of 31
December 2020 for the Credit &Suretyship business:
Solvency II Technical Provision
by SII LOB and Product31.12.2020
Eur Million

SII B/S Component/BE Split

Direct, Accepted Proportionaland Non proportional C&S
PCO

Total

PP

Gross BE Split by Product
CI

252

602

SP

43

9

52

BO

137

(45)

92

ICP

(183)

5

(179)

Gross BE Split by Product

248

571

819

CI

168

411

578

SP

35

5

40

BO

90

(38)

52

ICP

(3)

4

1

Reins Recov. Split by Product

289

382

671

Implied Net Best Estimate

(41)

189

148

854

Reinsurance Recoverable

Risk Margin51

61

Comparison with financial statements

asset not else where shown” (gross
and
ceded
respectively).
Net
reclassification for this concept is EUR
22 million (EUR 81 million gross and
EUR 59 million ceded).

The following table shows a Technical
Provision comparison between PCEA,IFRS and SII.
SII calculation are based on IFRS figures.
The most material differences between
the SII and PCEA valuations of TP are:
PCEA (*)

IFRS (**)

SII (***)

Gross Technical provisions

1,521

1,375

870

Ceded Technical provisions

1,082

991

671

Eur million(*) Includes UPR and Return
Premium accrual(**) Includes UPR(***) Includes Risk Margin

PCEA to IFRS••

Spain and Portugal estimated claims
recoveries are shown under PCEA in
the assets split in reinsurance
recoverables and Receivables (trade,
not insurance). This reclassification
amounts to EUR 35 million.
Under PCEA, Return Premium accrual(gross and ceded) are shown as part oftechnical provisions (gross and ceded
respectively) when under IFRS are
shown in “any other liabilities or other

IFRS to SII•

Change in bases of moving from IFRS
to SII, as profit is recognised on IFRS
UPR;
Change in assumptions for the traditional
credit insurance product that determines
the Solvency II best estimate. In principle,
underlying methodologies to arrive at a best
estimate do not differ from current financial
statements but calibrated parameters andassumptions reflect a probability weighted
average. Overall impact (Net of Reinsurance
including Risk margin) of these changes isfavorable by EUR 115 million

Comparison with the previous year
The Solvency II Best Estimate (gross ofreinsurance and undiscounted) increases by
EUR 333 million mainly driven by theincrease in claims due to effect of thecurrent environment (including COVID-19
impact). However, this impact has been

partially offset by the Government Support
Schemes (see Reinsurance recoverables),ending up with an increase of Solvency II
Best estimate net of reinsurance of EUR 28
million.
The Risk Margin has increased by EUR 4
million as a consequence of the increase in
the technical provisions.
For further information about the COVID-19
impact in ACyC, please refer to chapter A
and C.
No other material assumption changes weremade compared to the previous reporting
period.
Level of uncertainty
The status of the economy is a major driverof the frequency and severity of claims forthe credit and suretyship line of business. Allforms of credit insurance and bonding bear
the risk that changes in legislation, inparticular of insolvency law, may affect theamount and timing of claims payments orrecoveries.
In the case of traditional credit insurance,
the main sources of uncertainty for62

estimates of future claim payments
include:• the amounts that will be paid out as apercentage of the claim amount;• the speed with which customers
submit claims, as measured from themoment that the insured shipment
took place, the expected averageclaims payment and the expected
percentage of cases that do not lead toa payment;• the expected number of claims forrisks taken on during the most recent
months since very few claims will
have been reported for the most recent
five to seven months (depending on
the country of the customer);• the inflow by number and size of largecase; and• the estimation of the expected
recovery percentages.
As result of COVID-19, the state of theeconomy in the near future is significantly
more uncertain than usual. This, in turn,impacts uncertainty related to thefrequency and severity of claims. In lightof COVID-19, governments all around theworld have taken measures to support theeconomy. The uncertainty with respect tothe timing and speed with which thosemeasures are rolled back is also a factor.

would materially affect the Best Estimate
on this product.

Estimates for future claims payments forbonding have a greater uncertainty thanestimates for future claims payments for
credit insurance. Bonding is a ‘longer tail’
business: i.e., the time between issuanceof the bond and receipt of the bond calltends to be much longer than that of
traditional credit insurance. For example,
most credit insurance covers credit
periods up to 180 days, while around half
the bonds written have tenors of over two
years. After receipt of a bond call, it willtake longer to settle the claim andlitigation is not uncommon, either
following the bond call or when trying torealise recoveries. Especially in Italy,
litigation tends to be a lengthy process.
Outcomes of litigation cannot be predictedwith certainty.

ACyC does not apply:
•
•
•

•

Matching adjustment referred to in
Article 77b of Directive 2009/138/EC
Volatility adjustment referred to in
Article 77d of Directive 2009/138/EC
Transitional risk-free interest rateterm structure referred to Article 308cof Directive 2009/138/EC
Transitional deduction referred to in
Article 308d of Directive 2009/138/EC

For the Instalment Credit Protection
business, legislative changes in Belgium
may bring significant uncertainty to theestimates of salvage and subrogation held
as best estimate. The C&S business is notaware of any changes in legislation that63

D-3 Other liabilities valuation
Economic liabilities excluding technicalprovisions, amount to EUR 1,464 million(EUR 1,081 million under PCEA).
As shown in D-0, the main differences
between Solvency II and PCEA is:••Deferred tax liability: + EUR 303 million,
records the tax effect of the valuationdifferences between PCEA and Solvency
II.
Payables (trade, not insurance): In 2019
IFRS 16 has been adopted, thus in thisitem is included the lease + EUR 58
million. See further details in F-3
Solvency II Valuation principles.

Subordinated liabilities as part of theeligible own funds
ACyC does not have any subordinated loans.

D-4 Alternative methods forvaluation
Not applicable.

D-5 Valuation techniques usedon the basis of model approach
Not applicable.

Comparison with the previous year
The movement in this item is mainly driven
by PCEA Balance Sheet movements acrossperiods, where main variation incomparison with 2019 is in Reinsurance
account payables which has increased EUR
216 million due to the government schemes.

64

E.

Capital management

E-0 Introduction

E-0

Introduction: principles, processes,
reinsurance
program,
capitalfungibility and transferability
Own funds
Solvency capital requirement andminimum capital requirement
Use of the duration-based equity risk
sub-module in the calculation of thesolvency capital requirement
Differences between the standard
formula and any internal model used
Non-compliance with the minimum
capital requirement and noncompliance with the solvency capitalrequirement
Any other information

Atradius, including ACyC, manages its
capital with the goal of maximising
shareholders value in the long run, while
maintaining the necessary financial
strength at entity and Group level to develop
the business strategy. The capital ismanaged taking into account internallydeveloped risk appetite framework as wellas the solvency requirements of the relevant
regulatory authorities and credit rating
agencies. No material changes have been
introduced throughout 2020 in the policies
andprocesses
regardingcapitalmanagement.

E-1
E-2
E-3

E-4
E-5

E-6

Principles
Capital management is guided by thefollowing principles:• To ensure that ACyC is sufficiently
capitalised to have the ability to survive
by maintaining sufficient available
capital after meeting its financial
obligations;• To meet the local regulatory capitalrequirements of all ACyC branches
worldwide;• To manage the capital adequacy of ACyC••

and its entities, taking into account theeconomic and accounting views alongwith the external rating agencies andregulatory capital requirements;
To optimise capital structure by
allocating funds across ACyC’s entities;
andTo minimise the overall cost of funding
while preserving financial flexibility.

In addition to the internally developed
economic capital model, ACyC considers thesolvency calculation models of the relevant
regulatory authorities and credit rating
agencies in its processes of managing
capital to ensure capital adequacy.
Processes
ACyC has embedded processes
procedures for:• capital planning;• capital monitoring; and• capital management.

andThose processes and procedures aim toensure compliance with compulsory
regulations and internally self-imposed
requirements for capital adequacy.

65Such compliance is ensured by:• regular assessment of solvency needs,
taking into account the businessstrategy, actual and desired risk profile
and applied risk appetite levels;• incorporating a view on expected future
investments in new
businesses,
revenues,
claims,reinsurance
expectations and dividends as these
impact both available and required
capital;• monitoring duration of assets; andtaking into consideration capital market
expectations such as expected returns,
volatilities and correlations as these
may impact earnings and theshareholder equity reserves.
To ensure capital adequacy, a capital buffer
above the regulatory solvency capitalrequired is maintained, such that large loss
events would not impair the ability of ACyC
to carry on its normal course of business.
Reinsurance program
ACyC transfers a significant portion of its
underwriting risk to a very strong panel ofexternal reinsurers, through a number ofreinsurance arrangements. Reference ismade to Chapter C-1.

Capital fungibility and transferability
In managing its capital ACyC takes into
account the risk limits defined in theinternallydeveloped
risk
appetite
framework as well as the solvency
thresholds set by the relevant regulatory
authorities and credit rating agencies. In
certain countries in which ACyC has
insurance operations, the local insurance
regulators may specify the minimum
amount and type of capital that must be held
locally. In such cases, the minimum
required capital is to be maintained at all
times throughout the year and, in addition,
the local insurance regulators may have thediscretionary right to impose additional
capital requirements in excess of therequired minimum.

E-1. Own funds
The structure of available capital follows theregulatory requirements for quality ofcapital (tiering) and coverage limits. Under
Solvency II the own funds are classified into
three categories ranked Tier I, II and III, with
Tier I being the highest quality.

The following table shows the Own funds
for ACyC as at 31 December 2020:
31.12.2020
Tier 1

31.12.2019
Tier 1

Ordinary Share Capital

25

25

Share Premium

11Reconciliation Reserve

1.244

1.237

Reserve and Retained earnings from financial Statements

Eur Million

1.065

1.104

Adjustment to assets

(88)

(134)

Adjustment to Technical Prov

651

819

Adjustments to other liabilities

(383)

(449)

Foreseeable Dividends
Total Basic Own funds

0

(103)

1.271

1.263

Tier I represents the share capital, sharepremium and other reserves based on theaccounting balance sheet plus thereconciliation reserve. The reconciliation
reserve comprises, among others thedifferences between accounting valuationand Solvency II valuation, and includes
adjustments/deductions for items such as
foreseeable dividends.
The Company has no Tier 2 and Tier 3 basic
own funds nor any ancillary own funds.
Material differences between equity as
shown in the ACyC's financial statements
and the excess of assets over liabilities ascalculated for solvency purpose have been
explained in Section D.
The level of eligible own funds as at
December 2020 has remained largely stable66

in comparison to 2019 as the decision of notdistributing dividend compensated thedecrease in net assets.
Main variations with +/- according to theimpact in own funds:
•

•
•
•
•

(+) Increase financial investments(excluding cash and cash equivalents)
by EUR 95 million(+) Cash and Cash equivalents by EUR
43 million(+) Foreseeable Dividends EUR 103
million(-) Increase in net technical provisions
EUR 29 million(-) decrease in reinsurance payables
EUR 216 million

E-2 Solvency capitalrequirement and minimum
capital requirement
In 2020, SCR has declined by EUR 25m (4%)
in line with business and market
developments:• Market risk increase of EUR 13m (4%) is
mainly explained by the increase in
spread risk (EUR 13m) driven by new
investments (other changes mainly
explained by market developments);• Non-Life UW risk decrease of EUR 45m(9%) is explained by portfolio
improvements and risk mitigation effectof COVID-19 government schemes. The
decreases are partially compensated bya decrease in cession to reinsurers andan increase in premium and reserve risk
for Instalment Credit Protection
business (not covered by internal
model) because of EIOPA’s parameterchanges as part of updates to Solvency II
Delegated Acts effective per Q1 2020.
• Tax adjustment reduction of EUR 9m(8%) is due to lower BSCR and
restrictions to profit recognition horizon
implied by the updates to Solvency II
Delegated Acts.

The following table shows the solvency
capital requirement, calculated under theapproved partial internal model, and thevarious risk components. The calculation
uses no simplified calculation, undertakingspecific parameter or the duration-based
equity risk sub-module.

67

Q4 2020

Q4 2019

16
183
40
87
7
85
418
(90)
327

32
177
39
74
6
75
402
(88)
315

Market Risk
Interest rate risk
Equity risk
Property Risk
Spread Risk
Concentration Risk
Currency Risk
Total undiversified
Diversification
Total diversified

Non-Life UW Risk
Internal Model

403

456

Premium and Reserve risk

41

33

Catastrophe Risk
CAT recession scenario
CAT default scenario
CAT other scenario
Total undiversified
Diversification
Total diversified

28
0
0
28
(0)
28

26
0
0
26
(0)
26

4

5

Total undiversified
Diversification
Total diversified

476
(18)
458

520
(17)
503

Counterparty Risk

101

105

Total undiversified
Diversification
Total diversified

886
(204)
682

923
(208)
715

Operational Risk

44

45

Lapse Risk

Solvency Capital Requirement
Total before tax adjustment
Tax adjustment
Solvency Capital Requirement
Eligible own funds
SCR Cover Ratio

726
(109)
617
1.271
206%

760
(118)
642
1.263
197%

Minimum Capital Requirement
TPnl , 9148

122Premium 9

447

592

MCRlinear

77

89

MCRcombined
AMCR
Minimum Capital Requirement

154
4
154

160
4
160

Basic Solvency Capital Requirement68E-3 Use of the duration-based
equity risk sub-module in thecalculation of the solvency capitalrequirement
Not applicable.

E-4 Differences between thestandard formula and the partial
internal model used
In order to align regulatory capitalrequirements with economic capital andwith the risk profile of each insurance
undertaking, the Solvency II regulation
allows (re)insurers to calculate solvency
capital requirements with internal models.
This provides the opportunity to model anundertaking’s specific risks more accurately
than using the Standard Formula.
GCO uses an internal model to calculate thesolvency capital requirement for the entities
within its C&S line of business, which
includes ACyC. In 2017, GCO was granted
regulatory approval to use its internal
model to calculate regulatory capitalrequirements; however, GCO has been using

the internal model, formerly called the
ECAP model, since 2004. GCO has notcreated an internal model to calculate thesolvency capital requirement of ACyC due tothe entry into force of Solvency II, but has
adapted its formerly existing ECAP model tomake it Solvency II compliant with the aimof aligning capital management, risk
management and overall solvency needs
with the strategy of the business.
The Standard Formula, as defined in the
Solvency II regulation, is a one-size-fits-all
methodology, which is applied in the same
way to all lines of business of the non-life
segment, by means of the following risk
sub-models:• premium and reserve risk
• lapse risk
• catastrophe risk
The solvency capital requirement (SCR) is
derived from the capital charges linked toeach of the three modules above. This isdone by aggregating these charges using acorrelation matrix stipulated in theregulation, in a similar way for allcompanies and lines of business in non- life
insurance.
The specific features of the C&S line ofbusiness prevents it from being able to be
managed or measured by the Standard
Formula. Risk within C&S is adequately
quantified using drivers such as probabilityof default (PD) and loss given default (LGD)
from counterparties along with exposureamounts.
The internal model is a sophisticatedmathematical and statistical model used toderive a loss distribution that fits the risk
profile of the Company. Following theSolvency II regulation, the internal model isused to derive the 99.5 percentile of thelosses stemming from ACyC’s risk
exposures on a one-year time horizon.
The main inputs of the internal model are
the total potential exposure (TPE), theprobabilities of default (PD), default
correlations, and the losses given default(LGD).
To obtain the aforementioned distributionof losses the internal model makes use of aMonte Carlo simulation. Up to one million
scenarios are simulated in order to reach aresult based on the respective convergencecriterion.
The internal model is applied to all productsegments within ACyC except for
69

Instalment Credit Protection, which
represents less than 1% of the business interms of TPE.
The internal model is not used exclusively
for SCR calculation purposes. It is widelyused within the Company for decisionmaking and risk management, including:• Underwriting strategy - use of themodel output in combination withother risk evaluation measures togeneratebuyer
underwriting
strategies.
• Pricing - including an internal modelbased calculation of capital costs in thepricing model.
• Business planning - this use of themodel includes the annual long-termplanning and budgeting processes.
• Reinsurance analysis - the model
output is used in the evaluation processof different reinsurance program
scenarios for capital management
purposes and for deriving anappropriate risk mitigation strategy.
• Product development - use of themodel for calculation and evaluation of
the impact of a new product on SCR.
In the context of the risk management
function, the internal model is used in the

ORSA process, the ongoing assessment or
redevelopment of the risk strategy and risk
appetite framework, and in risk reporting.
In 2020, the Company continued its efforts
on further elaborating its risk appetite andrisk tolerance levels.
The Company operates with a system ofgovernance specific to the internal model toensure appropriate control over, among
other things, statistical quality, data quality,
validation and the calculation processes
themselves.

E-6 Any other information

E-5 Non-compliance with theminimum capital requirement
and non-compliance with thesolvency capital requirement

Temporary differences may be either:taxabletemporarydifferences,which are temporary differences that will
result in taxable amounts in determining
taxable profit (tax loss) of future periods
when the carrying amount of the asset or
liability is recovered or settled; or
deductible temporary differences,which are temporary differences that will
result in amounts that are deductible indetermining taxable profit (tax loss) offuture periods when the carrying amount of
the asset or liability is recovered or settled.
In general, for all differences between the
tax valuation method and the Solvency IIvaluation requirement the impact ondeferred tax should be taken into account

There is no foreseeable risk of noncompliance with ACyC’s Minimum Capital
Requirement
orSolvency
CapitalRequirement. The risk profile and solvency
positions are monitored continuously and incase of an increase of the risk of a capital
shortfall, management will take appropriate
action.

Loss-absorbing Capacity (LACDT)
Deferred tax assets: are the amounts ofincome taxes recoverable in future periods
in respect of:• deductible temporary differences;• the carry forward of unused tax losses;
and• the carry forward of unused tax credits.

70and accounted for. In practice, this meansthat since the deferred tax between tax
accounts and PCEA (Spanish Local
accounting
standards)
arealready
processed, any difference between Solvency
II and PCEA a deferred tax has to be
calculated.
Deferred income tax assets are recognised
to the extent that it is probable that futuretaxable profit will be available against
which the temporary differences can beutilised. If the deferred income tax arises
from initial recognition of an asset or
liability in a transaction other than abusiness combination that at the time of thetransaction affects neither the accounting
nor the taxable profit or loss, it is considerednil.
The tax base of an asset is the amount thatwill be deductible for tax purposes against
any taxable economic benefits that will flow
to an entity when it recovers the carrying
amount of the asset. If those economic
benefits will not be taxable, the tax base of
the asset is equal to its carrying amount.
Time horizons for reversal of temporary
differences Taxable future profit isidentified considering the different tax-

authorities’ legislation and limitations. See
more details in F-3 Solvency II Valuation
principles.
The LACDT calculation is carried out at
branch level, taking into account theapproved five years business plan as thebasis for the probable (stressed) futuretaxable profit forecast for each of the
branches. Loss carry forward and carryback rules are applied in accordance withthe respective tax jurisdictions. Existing net
DTAs and net DTLs in the SII balance sheet(except for those relating to pensions andintangibles) are limiting and (potentially)
extending the support of the Tax
Adjustment for LACDT respectively.
Net DTAs that have been recognised in the
SII balance sheet are deducted from theforecasted probable (stressed) futuretaxable profit amounts (times tax rate) thatare available to support the Tax Adjustment
for LACDT purposes, i.e. the DTA
corresponding with the loss caused by the
SCR shock. Net DTLs that have beenrecognised in the SII balance sheet are taken
into account to support the Tax Adjustment
for LACDT purposes, to the extent that these

relate to the same nature and to the same
taxation authority and taxable entity as theassets that are impacted by the SCR shock.
Pensions and intangibles are not taken into
account given the longer term reversal
period of these balance sheet items.
The following table shows the amount withwhich the Solvency Capital Requirement
has been adjusted for the loss-absorbing
capacity of deferred taxes and it how it isjustified:
Eur Million
Amount/estimate of the overall loss-absorbing
capacity of deferred taxes
Amount/estimate of LAC DT justified by reversionof deferred tax liabilities
Amount/estimate of LAC DT justified by reference
to probable future taxable economic profit
Amount/estimate of AC DT justified by carry back,current year

LAC DT
(109)
48
58
3

71

F.

Annexes

F-1
F-2
F-3

All relevant QRTs
Overview of subsidiaries and minority shareholdings
Solvency II Valuation principles

72

F-1

All relevant QRTs (all amount in EUR thousand)S.02.01.02
Balance sheet73

S.05.01.02
Premiums, claims and expenses by line of businessS.05.01.02.01
Non-Life (direct business/accepted proportional reinsurance and accepted non-proportional reinsurance)74

S.05.02.01.03
Total Top 5 and home country - non-life obligations
S.05.02.01.01;02;03
Home Country - non-life obligations and Top 5 countries (by amount of gross premiums written) - non-life obligations

Premiums written
Gross - Direct Business
Gross - Proportional reinsurance accepted
Gross - Non-proportional reinsurance accepted
Reinsurers' share
Net
Premiums earned
Gross - Direct Business
Gross - Proportional reinsurance accepted
Gross - Non-proportional reinsurance accepted
Reinsurers' share
Net
Claims incurred
Gross - Direct Business
Gross - Proportional reinsurance accepted
Gross - Non-proportional reinsurance accepted
Reinsurers' share
Net
Changes in other technical provisions
Gross - Direct Business
Gross - Proportional reinsurance accepted
Gross - Non-proportional reinsurance accepted
Reinsurers' share
Net
Expenses incurred
Other expenses
Total expenses

Home country

GERMANYFRANCE

C0080

C0090

C0090

UNITED
KINGDOM
C0090

NETHERLANDS

ITALY

C0090

C0090

Total Top 5 andhome country
C0140

R0110
R0120
R0130
R0140
R0200

291.097489
0197.32994.257173.361924
0121.40752.878136.48900
98.99537.494127.207425
0115.280
12.352110.501
10.1180126.184-5.565102.82612
077.94824.891

941.48111.9690737.143
216.307

R0210
R0220
R0230
R0240
R0300

298.101
4.728
0
186.067
116.761

175.073-38
0108.969
66.066135.82600102.847
32.979125.761-90111.139
14.613121.5627
0123.868-2.300108.5627
070.09938.471964.8844.695
0702.990266.589

R0310
R0320
R0330
R0340
R0400

240.5421.975
0157.33785.17969.464973
062.8287.608

35.8610037.325-1.464111.73499
092.21219.62141.447484
042.194-263

52.481-103
032.40519.972551.5283.427
0424.303130.652

36.32656.54719.2786.531

987

11.629131.299

R0410
R0420
R0430
R0440
R0500
R0550
R1200
R1300

75

S.17.01.02
Non-Life Technical Provisions76

S.19.01.21.01

S.19.01.21.02

77

S.19.01.21.03

S.19.01.21.04

78

S.23.01.01.01
Own Funds

79S.23.01.01.02
Reconciliation reserve
S.23.01.01.02
Reconciliation reserve

C0060
Reconciliation reserve
Excess of assets over liabilities
Own shares (held directly and indirectly)
Foreseeable dividends, distributions and charges
Other basic own fund items
Adjustment for restricted own fund items in respect of matching adjustment portfolios
and ring fenced funds
Reconciliation reserve
Expected profits
Expected profits included in future premiums (EPIFP) - Life business
Expected profits included in future premiums (EPIFP) - Non-life businessTotal Expected profits included in future premiums (EPIFP)

R0700
R0710
R0720
R0730

1.270.553
0026.101

R0740
R0760

1.244.452

R0770
R0780
R0790

68.88268.882

S.25.02.01
Solvency Capital Requirement - for undertakings using the standard formula and partial internal model80

S.25.02.01.02
Calculation of Solvency Capital Requirement

S.25.02.21.03
Approach to tax rate81

S.25.02.21.05
Calculation of loss-absorbing capacity of deferred taxes

S.28.01.01
Minimum Capital Requirement - Only life or only non-life insurance or reinsurance activity
S.28.01.01.01
Linear formula component for non-life insurance and reinsurance obligations82

S.28.01.01.02
Background information

S.28.01.01.05
Overall MCR calculation83

F-2 Overview of subsidiaries
and minority shareholdings
The following table sets forth, as at 31
December 2020, the name and jurisdictionof establishment of the subsidiaries,
branches, associated companies andminority shareholdings of Atradius
Crédito y Caución S.A. de Seguros y
Reaseguros. All companies are, directly or
indirectly, wholly owned unless otherwise
indicated. The companies are listed inalphabetical order.

84

F-3 Solvency II Valuation
principles
Valuation for solvency Purposes
The Solvency II valuation principles are inaccordance with articles 75-86 of theSolvency II Directive, articles 7-16 of theDelegated Acts and the secondary
Solvency II laws and regulations.
Functional and presentation currencies
Items included in the financial statementsof each of the Company’s branches aremeasured using the currency of the
primary economic environment in which
the branch operates (the ‘functional
currency’). The Solvency II balance sheet ispresented in Euro (EUR).
Transactions and balances
Foreign currencytransactions aretranslated into the functional currency
using the exchange rates prevailing at thedates of the transactions. Foreignexchange gains and losses, that result fromthe settlement of foreign transactions andfrom the translation at year-end exchange
rates of monetary assets and liabilities

denominated in foreign currencies, arerecognised in the income statement under
Spanish Local accounting standards(hereinafter 'PCEA') and is part of theeligible capital in the Solvency II balance
sheet.
Non-monetary assets and liabilities whose
valuation criterion is their fair value andare denominated in a foreign currency areconverted in accordance with theexchange rates in force on the date when
their fair value was established. Any profit
or losses found are allocated to equity or to
the income statement under PCEA
following the same criteria as for therecording of variations in the fair value,
being part of the eligible capital in the
Solvency II balance sheet.
Goodwill
Goodwill under PCEA represents theexcess, on the acquisition date, of the costof the business combination over the fairvalue of the identifiable net assets
identifiedinthetransaction.
Consequently, the goodwill is only statedwhen it was acquired on an onerous basis
and corresponds to the future financial
profits from assets that could not be
individually identified and separately

stated.
The goodwill is allocated to each of the cash
generating units on which the profits fromthe synergies of the business combination
are expected to fall. After the initialrecognition, the goodwill is valuated at its
acquisition price minus the accumulated
depreciation, and, if applicable, theaccumulated amount of the impairment
valuation adjustments recognised. Under
the applicable regulations, the useful life of
the goodwill has been established at 10
years, and its depreciation is linear.
Moreover, at least on a yearly basis, it isexamined whether there are signs of
impairment in the value of the cash
generating units, and should there be any,
they are subject to an “impairment test”.
Impairment
valuation
adjustments
recognised in the goodwill cannot bereversed in later financial years.
The base valuation principle for Solvency
II purposes is that the economic value / fairvalue of goodwill is nil.
Goodwill is not an identifiable andseparable asset in the market place. As aresult, it does not represent an 'economic
value' under Solvency II that can be85

separately sold or transferred if necessary
to a third party.
Insurance Portfolios
Represents the difference between the fairvalue of the contractual insurance rights
acquired and insurance obligations
assumed and the liability measured inaccordance with the insurer’s accounting
policies for insurance contracts that it
issues. For Solvency II purposes ACyC
applies the definition as defined for PCEA
purposes.
For Solvency II purposes insurance
portfolios are part of the best estimate
calculation of the technical provisions.
Insurance portfolios as a separate(intangible) asset must be valued to nil.
Software
Computer software acquired is treated as
an intangible asset.
For ACyC annual reporting initiallyacquired computer software licenses arecapitalised on the basis of costs incurred toacquire and to bring to use the specificsoftware. These costs are amortised on thebasis of the expected useful life between

three and five years. Article 75 of theSolvency II Directive sets out the valuationof assets for Solvency II purposes: ‘assets
shall be valued at the amount for which
they
could
exchange
betweenknowledgeable willing parties in an arm’s
length transaction’.

Property, Plant & Equipment General
The Property Plant and Equipment (PP&E)
asset group consists of Land and buildings,
Fixtures and fittings, IT hardware and‘Other fixed assets’.
Land and buildings

Pre-designed
purchased
softwareapplications (i.e. ‘off the shelf’ software
licenses) cannot be sold to another user.
Therefore the fair value for Solvency II
purposes must be stated at nil.
Computer software self-developed istreated as an intangible asset.
Article 75 of the Solvency II Directive sets
out the valuation of assets for Solvency II
purposes: ‘assets shall be valued at theamount for which they could exchange
between knowledgeable willing parties inan arm’s length transaction’.
Self-developed software is tailoredspecially for ACyC’s needs and cannot be
resold to another entity.
Therefore the fair value for Solvency II
purposes must be stated at nil.

Under PCEA, real estate investments aredefined as investments on lands orbuildings that are owned to obtain rents,
capital gains or both. Any other land or
buildings owned for the provision ofservices or for administrative purposes areregistered as tangible fixed assets.
For ACYC annual reporting purposes landis stated at cost of acquisition (nodepreciation is allowed). In the sameannual report buildings are stated at costof acquisition or construction, less any
subsequent accumulated depreciation andsubsequent accumulated impairment
losses.
The Solvency II directive 2009/138/EC,
article 75, and the EIOPA ‘Guidelines onrecognition and valuation of assets andliabilities other than technical provisions’state that under Solvency II property
assets must be valued at the most86

representative estimate of the amount for
which the assets could be exchanged
between knowledgeable willing parties inan arm´s length transaction. The economic
valuation is based on market conditions at
the reporting date.

using fair value at the end of the reporting
period. External valuations on property
must take place when significant changes
occur in the real estate market orassumptions change on which previous
valuations were based.

In articles 9 and 10 of the DelegatedRegulation (EU) 2015/35, EIOPA sets out avaluation methodology and fair value
hierarchy. The main principle is to apply avaluation method for Land and buildingsthat is consistent with the valuation
approach set out in Article 75 of Directive
2009/138/EC (fair value) as well as the fairvalue requirements of international
accounting standards.

In ACyC’s opinion, the Solvency II fairvalue needs to be assessed reflecting
market conditions at the reporting date. A‘mark to market1’ (re)valuation approach isapplied by the use of external valuations.
Frequency of external valuation of the fairvalue should fit for probable volatilities ofland and buildings. ACyC assesses a 2 year
valuation cycle appropriate for his landand buildings and applies accordingly.

The fair value of land and buildings is
usually determined from market based
evidence by appraisal that is normally
undertaken by professionally qualified
persons / companies. In particular and forproperties located in Spain, the appraisal
value needs to be established bycompanies authorized to value assets inthe mortgage market, pursuant to theprovision in order ECO2011/2007 of
October 4. Revaluations shall be made with
sufficient regularity to ensure that thecarrying amount does not differ materiallyfrom that which would be determined

The fair value valuation of Land andbuildings is subject to the approval of theInvestments Committee.
Attention must be given to the valuation ofproperties concerning the valuation
approach used by the external valuator.
The valuation of buildings is performed
excluding fixtures and fittings. The fairvalue of fixtures and fittings is anadditional value to be accounted for to thefair value of Land and buildings.
1 Mark to market approach: the valuation of the asset

Fixtures and fittings, IT hardware andother fixed assets
Fixtures and fittings are part of theProperty, plant and equipment (PP&E)
asset group and as such the samedefinition
appliesasmentioned
previously.
ACyC uses the following definition for
assets that are classified under ‘Fixturesand fittings’: Items that form part of thebuilding and would not be removed (ifACyC left) are coded to this category.
Article 75 of the Solvency II directive
2009/138/EC states that assets shall bevalued at the amount for which they could
be exchanged between knowledgeable
willing parties in an arm’s lengthtransaction. ACyC applies the cost model
for Fixtures and fittings.
In terms of Solvency II, the fair value of
Fixtures and fittings is prudently
approximated by its book value. For thisopinion ACyC has also considered themarginal materiality of fixtures andfittings for each of the regulated entities.
ACyC will measure fixtures and fittings for
Solvency II purposes as it does for PCEA.
The cost model applied for Fixtures andas if it was traded on an open active market.

87fittings as per the ACyC PCEA, except for
the application of IFRS16 (as explained
below), deems to reflect the fair value of
Fixtures and fittings.
Specific attention should be in place toprevent double counting within thevaluation of fixtures and fittings and landand buildings.

value definition (described for Land andBuilding, described in the Property, Plant& Equipment item).
For ACyC annual reporting purposes
investment property is stated at cost of
acquisition or construction, less any
subsequent accumulated depreciation andsubsequent accumulated impairment
losses.

IFRS 16IFRS 16 sets out the principles for therecognition, measurement, presentationand disclosure of leases. At thecommencement date of a lease, a lessee
will recognise a liability to make lease
payments and an asset representing theright of use (“ROU”) of the underlying asset
during the lease term.
Investment property
In accordance with PCEA, an Investment
property is a property held to earn rentals,
or for capital appreciation, or both.
This principle is considered to be in linewith EIOPA’s Solvency II Directive
2009/138/EC of 25 November 2009.
For Solvency II purposes, ACyC applies fair

The Solvency II directive 2009/138/EC,
article 75, and the EIOPA ‘Guidelines onrecognition and valuation of assets andliabilities other than technical provisions’state that ‘under Solvency II property
assets must be valued at the mostrepresentative estimate of the amount for
which the assets could be exchanged
between knowledgeable willing parties inan arm´s length transaction. The economic
valuation is based on market conditions at
the reporting date’.
In articles 9 and 10 of the DelegatedRegulation (EU) 2015/35, EIOPA sets out avaluation methodology and fair value
hierarchy. The main principle is to apply avaluation method for Investment Property
that is consistent with the valuation
approach set out in Article 75 of Directive
2009/138/EC (fair value) as well as the fairvalue requirements
accounting standards.

ofinternational

In ACyC’s opinion the Solvency II fair value
needs to be assessed reflecting market
conditions at the reporting date. A ‘mark tomarket’ (re)valuation approach is appliedby the use of external valuations.
Frequency of external valuation of the fairvalue should fit for probable volatilities.
ACyC assesses a 2 year valuation cycle
appropriate and applies accordingly.
Attention must be given on the valuation of
investment properties concerning thevaluation approach used by the externalvaluator. If in the valuation of investment
properties the valuation of fixtures andfitting is included this should be taken into
account in calculating the Solvency II
adjustments.
Financial investments
ACyC’s financial investments are classified
as Available-for-Sale, as Loans andreceivables and as investment in
subsidiaries and associates under the
PCEA.

88

Available-for-sale instruments.
For the annual report purposes ACyC uses
IAS 39.9 as the basis for the definition ofavailable-for-sale financial instruments.
IAS 39.9 defines fair value as “the amountfor which an asset could be exchanged, ora liability settled between knowledgeable,
willing parties in an arm’s lengthtransaction”. This definition corresponds
to Article 75 of the Solvency II Directive forthe valuation of assets and liabilities. All
financial assets shall be measured at fairvalue.
The fair values of financial instruments
traded in active markets are based onquoted market prices at the end of thereporting period. The quoted market priceused for financial investments held by theGroup is the current bid price. Transaction
costs on initial recognition of financial
investments are expensed as incurred.
The fair values correspond with the pricethat would be received to sell an asset or
paid to transfer a liability in an orderlytransaction between market participantsat the measurement date. Wheneverpossible, the fair values are based onquoted market prices. If no quoted market

price is available, we use valuation
techniques which are based on market
prices of comparable instruments orparameters from comparable active
markets (market observable data).
Loans and receivables
The Company states the financial assets in
its balance sheet when it is a mandatory
part of the contract or legal business under
its provisions.
Recoveries of claims are only stated when
theirperformanceissufficiently
guaranteed on the date when the annual
statements are prepared, and thus
financial profits are expected to beobtained from them. In the case of theSpain and Portugal business, for specific
recoveries in the credit insurance, by
virtue of the provisions in article 43 of theRegulations for the Regulation andSupervision of Private Insurance and in
Order EHA/339/2007 of February 16,
implementing certain specific aspects ofprivate insurance, the Company activates
recoveries, using statistical methods,
executing certain requirements andperiodically subjecting the calculations
made to the valuation of independent
experts. In this case, the Company

calculates the estimated recoveries bymeans of a statistical method developed
for this purpose, which examines thehistorical evolution of the settlements for
all the claims declared, including settled
and ended claims under a recovery
perspective, and makes it possible toestablish future behavior trends, in order
to apply them in a real way, estimating therecoveries in a reasonable way to bereceived by means of the relevant
projections. For the other entities, theestimated recovery is implicit in thecalculation of the technical provisions.
The amount of the estimated recoveries for
the Spain and Portugal business, net of thereinsurance share, is stated in the "Loans
and receivables - Other Receivables – otherreceivables" section in the balance sheet.
For Solvency II purposes, the estimatedrecoveries are included in the BEL
calculations.
Financial all other assets classified underthe "Loans and receivables category" arevaluated at their depreciated cost.
Investment in subsidiaries, associated,and multi-group companies.
They are valued at their cost, minus, if
89

applicable, the accumulated amount of thevaluation adjustments from deterioration.
Under Solvency II they are registered at
economic value.
Accounts receivable on (re)insurance
business
As per IAS 32 Accounts receivables (on(re)insurance business) is a financial asset
defined as: it represents the contractual
right to obtain cash from another party. In
each case one party’s contractual right toreceive cash is matched by the otherparty’s corresponding obligation to pay.
For Solvency II valuation purposes the IAS
32 definition is assumed to be a good proxyfor ‘the amount for which an asset could beexchanged […] between knowledgeable,
willing parties in an arm’s lengthtransaction’ (article 75 of the Solvency II
Directive).
ACyC recognises its Accounts receivables
on (re)insurance business when due. These
include amounts due to and from agents,
brokers and (re)insurance contract
holders. The carrying amount as per ACyC
periodic financial statements reflects thefair value for Solvency II basis.

The
outstanding
receivables
on(re)insurance business are substantially
all current and consequently their fairvalues do not materially differ from thebook value. Therefore, the balances do notneed to be adjusted for Solvency II
purposes.

accordance with their CIC codes.

Miscellaneous assets and accruals

Cash

Based on the annual report of ACyC several
different
assetsareincludedin‘miscellaneous assets and accruals’.
Therefore, no specific definition isavailable. The asset items included in
miscellaneous assets and accruals are:Comprises cash on hands (including
borrowings) and demand deposits (= anaccount from which deposited funds canbe withdrawn at any time without any
notice to the depository institution).

Cash and cash equivalents
For Cash and cash equivalents thedefinitions are used as per the IAS 7
definitions:

Cash equivalents
Prepayments• Accrued income investments• Accrued interest• Staff loans• Other
The items included in miscellaneous assets
and accruals are substantially all current
and consequently the fair values of theseassets do not materially differ from thebook value.
For the purposes of Solvency II, accrued
investment interests are reclassified to thecorresponding item of the list of assets in

Are short-term, highly liquid investmentsthat are readily convertible to known
amounts of cash and which are subject toan insignificant risk in change of value.
For Solvency II purposes cash and cash
equivalent (including borrowings) should
be valued at an amount not less than theamount payable on demand. The cash andcash equivalent balances on the PCEA
based annual report of ACyC are all current
and short term.
The cash and cash equivalent (including90

borrowings) balances on the balance sheet
are all current and short term (less than
three months) based. Therefore the PCEA
based carrying amount reflects the fairvalue and no additional adjustments areneeded.
Current and deferred income tax
For Solvency II purposes IAS 12 is used as
basis for the definition of deferred tax
assets and liabilities:
Deferred tax liabilities: Are the amounts ofincome taxes payable in future periods inrespect of taxable temporary differences.
Deferred tax assets: Are the amounts ofincome taxes recoverable in future periods
in respect of:• deductible temporary differences;• the carry forward of unused tax
losses; and• the carry forward of unused tax
credits.
Temporary differences are differences
between the carrying amount of an asset
or liability in the statement of financial
position and its tax base. Temporary
differences may be either:• taxable temporary differences, which•

are temporary differences that will
result in taxable amounts indetermining taxable profit (tax loss) offuture periods when the carrying
amount of the asset or liability isrecovered or settled; or
deductible temporary differences,which are temporary differences thatwill result in amounts that are
deductible in determining taxable
profit (tax loss) of future periods
when the carrying amount of theasset or liability is recovered or
settled.

The valuation principles for current
income tax receivable and payable are
identical to the valuation principles as forother receivables (not reinsurance
receivables) and other trade payables (notreinsurance payables). Therefore for thevaluation method of current income tax
receivable and payable for Solvency see II
purposes. See section “Miscellaneous
assets and accruals” respectively section“Trade and other payables ”.
In general, for all differences between the
tax valuation method and the Solvency IIvaluation requirement the impact ondeferred tax should be taken into accountand accounted for. In practice, this meansthat since the deferred tax between tax
accounts and PCEA are already processed,
any difference between Solvency II and
PCEA a deferred tax has to be calculated.
For Solvency II purposes the recognition
and measurement of deferred tax assets
and liabilities follows the same principles
as stated in IAS 12. For items that are notallowed to be recognised and measured asper Solvency II but are recognised for tax
purposes a deferred tax must be
calculated.
While measuring deferred tax assets thetime horizon of profit and losses must be
taken into account for the reversal period.
Non-underwriting provisions
The Company, when preparing the annual
statements, differentiate between:••

Provisions: creditor balances covering
current obligations derived from past
events, the cancellation of which islikely to generate an outflow ofresources, but the amount and/or timeof cancellation of which are not fixed;
Contingent
liabilities:
potential
obligations generated as a result of past
events, whose future materialization is91

conditional upon the occurrence or
non-occurrence of one or more future
eventsindependentfromtheCompany's will.
The annual statements include all theprovisions with a higher likelihood of
having to fulfill the obligation than the
opposite.
Provisions are stated at the current valueof the best estimate possible of the amountrequired to cancel or transfer the
obligation, taking into account the
information available on the event and its
consequences at year's end, recording theadjustments made for the updating of
those provisions as a financial expense as
they are accrued.
Provisions for restructuring, onerous
contracts, and lawsuits are recognizedwhen ACyC has a legal or implicit
obligation, as a result of past events, andthere is a high likelihood of an unfruitfulresult entailing a loss for the Company
derived from its settlement, and that loss isreasonably quantifiable.
For
SolvencyIIvaluationandclassification
purposesthe
PCEA
definitions for the items included in thebalance of non-underwriting provisions
are assumed to be a good proxy.
Employeegeneralbenefits

assets/liabilities

Post-employment benefit plans are
determinedbyperiodic
actuarial
calculations and are generally fundedthrough payments to state plans,
insurancecompaniesortrusteeadministered funds.

compensation. In a defined benefit plan
the Company may pay contributions into aseparate entity or fund. The Company, andin some cases the employees who areparticipating, fund a defined benefit planand the Company has a legal orconstructive obligation to pay further
contributions if the fund does not holdsufficient assets to pay all employees thebenefits relating to employee service in thecurrent and prior periods.

Defined benefit plans

The amount recognised as a defined
benefit liability is the net total of thepresent value of the defined benefit
obligation at the end of the reporting
period minus the fair value at the end of
the reporting period of plan assets (if any)out of which the obligations are to besettled directly. The recognition of assetsthat arise by over-funding of the defined
benefit plan is limited to cover future
deficits.
The defined benefit obligation is calculated
annually by independent actuaries using
the projected unit credit method.

A defined benefit plan is a pension planthat defines an amount of pension benefit
that an employee will receive on
retirement, dependent on one or morefactors such as age, years of service and

The present value of the defined benefit
obligation is determined by discounting
the estimated future cash outflows using
applicable interest rates that are
denominated in the currency in which the

For Solvency II purposes the valuation of
employee benefits (assets – including
reimbursement rights and liabilities) isbased on IAS 19. For ACyC annual report /financial statement purpose the valuationof employee benefits (assets – including
reimbursement rights- and liabilities) arealso based on IAS 19 with actuarial gain
and losses directly recognised in OCI.
Therefore no Solvency II related
adjustments are required.

92

benefits will be paid and that have terms of
maturity that approximate the terms of therelated pension liability.
Other long-term employee benefits
The main plans are lump sum payment
plans and pre-pension plans. A lump sum
payment plan is a plan where theemployees are entitled to a lump sum
payment at the date their employment isterminated. A pre-pension plan is a plan
where the employees are entitled toreceive payments if they stop working
before their actual retirement date.
The net obligation in respect of long-term
service benefits, other than pension plans,is the amount of future benefit that
employees have earned in return for theirservice in the current and prior periods.
The net obligation is calculated annually
by independent actuaries using actuarial
techniques.

Termination benefits are recognised when
the Company is demonstrably committed
to either terminating the employment of
current employees according to a detailed
formal plan without possibility ofwithdrawal or providing termination
benefits as a result of an offer made toencourage voluntary redundancy. Whentermination benefits are related to an
overall restructuring plan, the liability is
included as part of the provisions.
Profit sharing and bonus plans
A liability for bonuses and profit sharing is
recognised based on a formula that takes
into consideration, amongst other things,
individual targets and the profit
attributable
totheCompany´sshareholders. A liability is recognised
where contractually obliged or where
there is a past practice that has created aconstructive obligation.

Termination benefits

Accounts
businesspayableon(re)insurance

Termination benefits are payable whenemployment is terminated before thenormal retirement date, or whenever an
employee accepts voluntary redundancyinexchangefor
these
benefits.

For ACyC annual report purposes otherliabilities are defined as: a liability is apresent obligation of the entity arisingfrom past events, the settlement of whichis expected to result in an outflow from theentity of resources embodying economic
benefits.
For Solvency II purposes the definitions
used in the annual report is assumed to bea good proxy.
Trade and other payables
For
SolvencyIIvaluationandclassification purposes PCEA is used as
basis for the definition of trade and otherpayables: trade payables are liabilities topay for goods or services that have been
received or supplied and have been
invoiced or formally agreed with the
supplier.
Other liabilities
For Solvency II purposes the measurementof other liabilities follows the PCEA
approach. Since the balances as per PCEA
are substantially all current the balancesreflect the fair value as for Solvency II
purposes and no additional adjustments
are needed.
Contingent liabilities
Contingent liabilities are not stated in theannual statements under PCEA. For
Solvency II purposes, the IFRS (IAS 37)
93

definition of a contingent liability is used:‘A possible obligation that arises from past
events and whose existence will be
confirmed only by the occurrence or nonoccurrence of one or more uncertain future
events not wholly within the control of theundertaking; or a present obligation thatarise from past events but is notrecognised because: it is not probable thatan outflow of resources embodying
economic benefits will be required to settle
the obligation; or the amount of theobligation cannot be measured with
sufficient reliability.’
For Solvency II purposes the contingent
liabilities have to be valued based on: theprobability of the occurrence of future cash
outflow, and the expected present value ofpossible future cash outflows.

The Secretary non-Director of the Board of
Directors of Atradius Crédito y Caución S.A.
de Seguros y Reaseguros, Mr. David
Casanueva certifies that the members of
the Board of Directors have formulated theSolvency and Financial Condition Report(SFCR) corresponding to the fiscal year
ended 31 December 2020, consisting of 94
pages numbered from 1 to 94.
Madrid, 6th of April, 2021
THE SECRETARY OF THE BOARD OF
DIRECTORS__________________
Mr. David Casanueva

Only if the possible obligation is material it
has to be included in the Solvency IIbalance sheet, in all other cases theobligation is to be included in a separate
Solvency II disclosure.

94