Solvency and Financial Condition Report(SFCR)

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 ............ 15
Performance of other activities 16
Any other information ................. 16
System of governance ................18

B-1
General information on thesystem of governance ................................. 18
B-2
Fit and proper requirements .... 22
B-3
Risk management system
including the own risk and solvency
assessment .................................................... 25
B-4Internal control system .............. 28
B-5Internal audit function................. 31
B-6
Actuarial function.......................... 31
B-7
Outsourcing .................................... 32
B-8
Any other information ................ 34
C.
Risk profile .................................. 35
C-0
Contribution of the risk types
to the Solvency Capital Requirement ... 35
C-1
Underwriting risk ......................... 36

C-2
C-3
C-4
C-5
C-6
C-7

Market risk ...................................... 41
Credit risk ........................................43
Liquidity risk ................................. 44
Operational risk .............................45
Other material risks .....................46
Any other information.................49
D.
Valuation for solvency
purposes 53
D-0
Introduction .................................... 53
D-1
Assets valuation ............................ 55
D-2
Technical provisions .................... 56
D-3
Other liabilities valuation.......... 60
D-4
Alternative methods forvaluation........................................................ 60
D-5
Valuation techniques used on
the basis of model approach ................... 60
E.
Capital management ................. 61

E-4
Differences between thestandard formula and the partial
internal model used ................................... 65
E-5
Non-compliance with theminimum capital requirement andnon-compliance with the solvency
capital requirement .................................... 66
E-6
Any other information ................ 66
F.
Annexes........................................68
F-1
Details of the governance andprocess for the execution of the ORSA . 69
F-2
All relevant QRTs ........................... 71
F-3
Overview of subsidiaries andminority shareholdings ............................ 82
F-4
Solvency II Valuation
principles ....................................................... 83

E-0
Introduction .................................... 61
E-1.
Own funds .......................................62
E-2
Solvency capital requirement
and minimum capital requirement........63
E-3
Use of the duration-based
equity risk sub-module in thecalculation of the solvency capitalrequirement................................................... 652

Regulation

Summary

For the preparation of the Solvency IIreporting as at 31 December 2021, 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, 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 ANV or Atradius), incorporated anddomiciled in Amsterdam, the Netherlands.
The ultimate parent and controlling party ofAtradius is Grupo Catalana Occidente, S.A.
(referred to as ‘GCO’ or ‘Grupo Catalana
Occidente’), a company incorporated anddomiciled in Madrid, Spain.

•

•
•
•

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

Strong capital position (EUR million)

3

The following table summarizes theSolvency II position of ACyC as at 31
December 2021.
31.12.2021

31.12.2020

1,593
0

1,271
0

Eligible Own Funds Solvency II

1,593

1,271

Solvency Capital Requirement

839

617

Minimum Capital Requirement

210

154

Surplus at 31 December

754

654

Cover Ratio Eligible Own Funds

190%

206%

Eur Million
Excess of assets over liabilities
Foreseeable Dividends

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 capacityb) subordinationc) sufficient durationd) freedom from requirements andincentives to redeeme) freedom from mandatory costsf) absence of encumbrances.

an internal model for non-life underwritingrisk). By applying the tailored internal
model, the risk profile is adequately
quantified in particular through using risk
parameters such as probability of default(PD) and loss-given-default (LGD) alongwith exposure amounts. Atradius has beenusing the internal model, formerly called the
ECAP model, since 2004. Atradius adapted
the previously existing ECAP model, tomake it Solvency II-compliant, in line withthe regulation in force.
ACyC has a strong solvency ratio.

ACyC basic own funds have a Tier 1classification and ACyC does not haveancillary own funds.
ACyC applies a Partial Internal Model (with4

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.

5

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. GCO is the main
shareholder of Atradius, holding an
economic stake of 83.2%: 35.77% directly and47.43% indirectly through the holding
company Grupo Compañía Española deCrédito y Caución, S.L.

Grupo Catalana Occidente
Grupo Catalana Occidente is one of theleaders in the Spanish insurance sector andin global credit insurance. Founded morethan 150 years ago, it has experienced
constant growth, thanks to its capacity toadapt to change and remain loyal to its
principles, which are truly insurance
oriented.
Grupo Catalana Occidente is committed tothe professional development of its
employees and insurance agents, its
personalised customer service and the trust
its shareholders have in the organisation.

The shares of Grupo Catalana Occidente arelisted on the Continuous Market of theBarcelona and Madrid Stock Exchanges. Asof 31 December 2021, the main shareholder
is INOC, S.A., controlling approximately
61.94% of the capital of Grupo Catalana
Occidente, 32.43% of the capital is floating,
1.68% of its shares are treasury stock, and3.94% of its shares are owned by themembers of the board of directors, andrelated parties, of Grupo Catalana Occidente(not considered floating).

Strategic goal
Grupo Catalana Occidente’s strategic goal is
to be leaders in the field of risk protection
and long-term savings of families and SMEs,
and to be international leader in commercial
risk coverage.
Thanks to the stability of the results and theprudent investment policy, GCO has a solid
solvency position.

6

Key figures Grupo Catalana Occidente

Grupo Catalana Occidente
Spain

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.
Brazil

Key figures

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

2020% change

5,192

4,663

2020/2021
11.3%

4,668

4,138

12.8%

195
10.5%

201
7.3%

-2.9%

Funds under management

15,712

14,759

6.5%

Total revenue

4,883

4,560

7.1%

468

270

73.4%

(EUR million)
Long-term capital market value
EquitySubordinated debt
Return on long-term capital

Consolidated result

2021

Iberinform Internacional S.A.U.
Spain

Branch:Portugal

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

7

The brands of the Group in the traditional
business are:

The brands of the Group in Credit insurance
are:Fundación Jesús Serra
Fundación Jesús Serra (the ‘Foundation’)was established in 2006 with the goal ofchannelling philanthropic action andpromoting the human and professional
values that characterized the founder of
Grupo Catalana Occidente, Jesús Serra
Santamans, from whom it receives its name.
It is currently involved in projects in thefields of research, business, education,social action, sport, and promotion of thearts. In this way, we aim to contribute to theconstruction of a fairer, more united, anddeveloped society in which values such as
initiative,
effort,andcontinuous
improvement prevail.
The Foundation acts as a link between the
different companies that make up the GCOGroup. For this reason, one of its goals is tosupport the development of a common
culture, by facilitating gatherings for theemployees, agents and brokers of the group.

8A-1 f) Material product lines and material
geographical areas of business

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 over
160 offices in more than 50 countries
around the world, with a commitment tosimplifying and improving its customers’
credit management.
The main figures of Atradius for 2021 and2020 are:Atradius N.V.
(EUR million)

2021

2020

Gross Insurance revenue

2,036

1,860

vs 2020
9.4%

Gross insurance claims and loss adjustment expenses*(566)(1,090)48.0%

Gross insurance operating expenses
Result Before Reinsurance
Reinsurance result
Result after reinsurance

(757)
712
(420)
293

(665)
105
(28)
77

(13.9%)
575.3%(1,391.4%)
278.3%* Overview includes inter-segment revenue and (claims) expenses

The main figures for ACyC for 2021 and2020 are:for customers outside the framework of theCompany’s whole turnover policies, to covertrade but also to support trade financing.

PRODUCT LINES
Credit insurance (90.3% 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 a sophisticatedand tailor-made credit management
solution in the form of our Global policy. Asa market leader and pioneer with 25 yearsof experience in this segment, Atradius
Global has developed an excellent
understanding of the needs, structure, andgeographiesofmultinationals.
Thestructure of our modular cover and service
footprint is uniquely designed to mirror therequirements of our customers, whether
they have centralised or local credit
management.
The Special Products unit offers solutions

Bonding products (7.7% 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.
The bonding unit also operates in Germany,
Belgium, the Netherlands, Luxembourg andPortugal.
Instalment Credit Protection (2.0% of total
gross revenue). Instalment Credit Protection(ICP) products cover short- and mediumterm risks involved in instalment-based9credit agreements with private individuals
and businesses. Consumer credit, leasing
and renting have always been part of our
product offering. In addition we added
residential real estate insurance products
for co-ownerships and for rental guarantee.
Instalment Credit Protection products areoffered 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 a
Spanish insurance company.
In the EEA ACyC has branches in: Austria,
Belgium,
Bulgaria,
Czech
Republic,
Denmark, Finland, France, Germany,
Greece,Hungary,
Ireland,
Italy,
Luxembourg, the Netherlands, Norway,
Poland, Portugal, Romania, Slovakia, Spain(registered office), and Sweden.

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 andIndia.
A-1 g) Any significant business or otherevents that have occurred over thereporting period that have had a material
impact on the undertaking
Reference is made to section A-2,
Underwriting
Performance,
specific
sections for Change in Reinsurance andChanges in income statement.
On 21 December 2021 the Company hasreceived from UK’s Prudential Regulatory
Authority the authorisation to continue its
activity in UK as a Third Country Branch(‘TCB’). (See chapter C-7.2).

Outside the EEA, ACyC has branches in the10A-2 Underwriting performance
Stable result and profitable growth
Eur Million

Credit insurance
2021
2020

Bonding
2021
2020

Premiums earned (direct and assumed)
Premiums earned net of Return Prov.
+/- Change in provision of unearned premiums

1,458
1,509
(48)

1,348
1,328
20

120
136
(16)

120
108
12

Variation
CreditBonding
insurance
8.1%(0.0%)
13.6%
26.4%(335.6%)(235.3%)+/- Change in provision of premiums outstanding recovery
Premiums earned ceded and retroceded

(3)
(989)

(0)
(920)

(0)
(70)

(0)
(75)

2622.2%
7.5%

Premiums earned ceded and retroceded net of Return Prov.
+/- Change in provision of unearned premiums
Net premiums earned
Claims (direct and assumed)
Insurance claims and loss adjustment expenses+/- Change claims and recoveries provision direct
Claims (Ceded and Retroceded)
Claims payments+/- Change claims and recoveries provision ceded
Net Insurance Claims

(919)
(70)
469
(377)
(286)
(91)
181
186
(5)
(196)

(982)
63
429
(851)
(650)
(201)
572
394
179
(279)

(70)
(0)
50
(41)
(33)
(8)
23
21
2
(18)

(64)
(12)
44
(38)
(32)
(6)
23
21
2
(15)

+/- Change in other technical provisions net of reinsurance
Acquisition Cost (Direct and Assumed)
Administrative expenses (Direct and Assumed)
Broker and reinsurance commissions
Other technical income
Total operating expenses and other net technical expenses

(21)
(181)
(343)
375
49
(122)

(14)
(167)
(305)
373
52
(62)

(0)
(9)
(46)
32
5
(18)

(0)
(9)
(33)
38
4
0

Total
2021

2020

Var.

1,577
1,645
(64)

1,468
1,436
33

7.4%
14.5%
(298.1%)(96.4%)(6.9%)(3)(1,059)(0)(995)

1661.8%6.4%(6.5%)(211.2%)
9.4%(55.7%)(56.0%)(54.8%)(68.4%)(52.8%)(102.9%)(29.7%)

10.0%(97.6%)
11.6%
7.5%
2.3%
35.7%
1.3%
1.8%
(3.4%)
17.0%

(989)
(70)
519
(418)
(319)
(99)
204
207
(3)
(214)

(1,046)
51
473
(889)
(682)
(207)
595
414
181
(294)

(5.5%)(237.8%)9.7%(53.0%)(53.3%)(52.2%)(65.7%)(50.0%)(101.6%)(27.3%)

45.4%
8.3%
12.6%
0.5%
(5.8%)
95.9%(56.5%)(1.6%)
37.5%(18.1%)
23.5%(4565.9%)

(21)
(190)
(389)
406
54
(140)

(14)
(176)
(338)
411
56
(62)

45.3%
7.8%
15.0%
(1.2%)(3.7%)
126.1%

11

Premiums earned (direct and assumed)

In which material geographical areas are:Geographical Area information(*) Includes UK and Switzerland

Credit Insurance & Instalment Credit
Protection
In 2021 premium earned by ACyC increasedby 8.1% following the uniquely challenging
year that was 2020. In 2021, our credit
insurancebusinessshowedrobustrecovery, and a return of insurable businessvolumes following the reactivation of mucheconomic activity. Gross claims ended at
EUR 376.8 million and a gross claims ratioof 25%, with decreases in overall claims
inflow and claims expenses (notable in allunits except in ICP a very moderate increase
was observed) which can be largely
attributed to the extension of fiscal
measures in many countries and thecontinuationofinsolvency
lawamendments.
Global GDP growth in 2021 saw a return toover 5% coming from -3.5% in 2020. China’s
GDP returned to its pre-Covid-19 levels
already last year and was forecast to grow
8.0% in 2021. As supply chains were
progressively restored and vaccination
campaigns gained inertia, there was asignificant reopening of the economy andsolid growth momentum.
Global insolvencies declined 14% in 2020,

despite deep recession triggered by the
Covid-19 pandemic. The level of businessfailures and insolvencies reached nearly 1%
in 2021, largely due to the extension of fiscal
measures in many countries, and in somecases also due to the continuation of
insolvency law amendments (such as
bankruptcy moratoriums). Many fiscal
support measures however are being
progressively retired.
While the economic recovery observed
during 2021 was very notable and global
trade growth in year-on-year terms was
substantial and continued throughout the
year,
the
momentumprogressively
decelerated towards the end of the year.
Coming from 2020, a year burdened by the
Covid-19 pandemic, 2021 saw economic
recovery and increased trade in most ACyC
markets. While Covid-19 still remained an
important factor influencing many aspectsof life in 2021, insurable business volumes
increased and trade activity appeared to be
on a path to recovery.
Our Credit Insurance business, while
strained by the impacts on global trade in2020, rebounded quickly in 2021 showing
growth in all geographic regions and12markets. In general 2021 showed a much
improved economic environment withtrade less impeded and approachingfamiliar levels, although this was notobserved equally in all markets.
Total operating expenses (and other net
technical expenses) increased in 2021, withbrokerage fees increasing in line withrevenue growth along with continued
investment in developing systems that
innovate the way we do business.
We continue to pursue our growth ambitionin Asia which maintained a growth trend in
2021 of 6.7%. North America showed agrowth of 13.3%, driven by new businessand strong contributions from renewing
policies. All countries in Europe showed
positive revenue developments. Our
markets in Italy and Germany, which weremore
impactedbytheeconomic
environment in 2020, showed a strong
recovery (growing at 19.0% and 18.9%
respectively), along with Central andEastern Europe (13.8%) and Oceania (14.0%).
Spain, our largest market showed moderate
growth of 2.6%. Atradius’ Global unit
maintained strong performance andgrowth, supported by the excellent
customer base retention of the unit.

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 years, 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.
The improvement of the Covid-19 situation
during 2021 helped relaunch many trade
sectors, further supported by both public
and private investments. This created manybusiness opportunities with a special
attention to ESG projects (renewable energy,
infrastructure and construction projects).
Earned premium in 2021 was EUR 119.9
million, an overall performance very muchin line with 2020. Growth was achieved
within the period in Spain & Portugal,
Belgium
andLuxembourg,
France,Germany, Denmark, Norway and mostnotably
Finland,reflecting
ourunderwriting and high quality customer

service. Other markets such as Italy, theNetherlands and Sweden did notdemonstrate the same economic recovery in
2021 and underperformed compared to theprevious year.
Administrative expenses increased in 2021
by 37.5%, driven by internal development
expenses relating to the development of acommon Bonding platform for ourcustomers, business partners and staff (theBonding
Business
Transformation
programme). This common platform will
help us sustain and improve our market
position through the use of newtechnologies. It will support our ambition to
enable geographical expansion to countries
where Atradius has a footprint, support thefurther expansion of our bonding service
portfolio and strengthen our value
proposition in the Bonding business.
Additionally, there was a minor increase instaff and related expenses during theperiod.
Atradius Bonding has continued to support
its customers on their specific needs
throughout the year. Business practices
were successfully adapted to cope with thechallenges of the pandemic. Overall revenue
was maintained while protecting our13

portfolio with a selective, and disciplined
risk approach. This has allowed the bonding
business to record a claims ratio of 34.2%, amoderate increase of 2.4%pts compared toprevious year, a very moderate increase
considering the difficulties brought by the
pandemic.
Changes in Reinsurance
ACyC continues, as in previous years, tomaintain quota share treaties forunderwriting year 2021 which provide
coverage for the majority of business. The
cession to external quota share reinsurers
remained at 37% (2020: 37%) while thecession to Atradius Reinsurance DAC forunderwriting year 2021 was reduced to 11%(2020: 22%). With an overall cession of 48%,
retention under the quota share reinsurance
treaty was 52% for the underwriting year
(2020: 41%). Reference is made to chapter A5.
During the previous year, and in response to
the COVID-19 pandemic, governments in 10
countries where ACyC operates cooperated
with credit insurers by offering specificgovernment reinsurance schemes with highcession rates. Atradius entered into such
schemes in Germany, Denmark, Norway,

Belgium,
France,Luxemburg,
theNetherlands, United Kingdom, Italy andSpain.
These
agreements,
which
commenced in 2020, almost all concludedin June 2021. For details reference is madeto chapter C-1.
Changes in income statement due to COVID19
With the support of government funded
stimulus,
supportprogrammes
andbankruptcy moratoriums, a reduction inbusiness
failuresandcorporate
insolvencies helped maintain claims inflow
at the low levels already observed towards
the end of 2020. This contributed to the low
claims expenses for the period, of which theless favourable reinsurance result for theyear is also a by-product (reduction inclaims ceded to reinsurers).

indications of logistics, supply chains andcommodity prices being affected adversely
in many markets during the fourth quarterof the year, these did not impact businesslines in 2021 in a substantive manner.
Although 2021 saw a return to normality insome regards, working from homeremained during much of the year. This
contributed
tolow
travelandcommunication expenses (as in 2020,
though to a lesser degree).

These measures however have been
progressively concluding throughout theyear, including the government reinsurance
programmes that began in 2020 to support
economies, of which almost all are no longer
in effect.
While the effects of these measures being
progressively withdrawn, as well as
14

A-3 Investment performance
The net investment result amounts to EUR
29 million. The table shows the breakdown
into the main components.
Gains and losses recognised in revaluation
reserve
The revaluation reserve on financial
investments increased to EUR 106 million
per the end of 2021 from EUR 71 in 2020.
This growth of the revaluation reserve wasmainly driven by the positive performanceof the equity markets during 2021, only
partially offset by a decline in revaluation
reserve on bonds.
Information about any investments insecuritization
The undertaking has no direct nor indirect
exposure to securitized investments.

P&L
2021

2020

Interest income from Bonds

4

6

Dividend income Shares
Dividends of associated companies

10
19

6
-

Eur Million

Other Incomes

1

2

Financial & Properties Investments Incomes

34

14

2,021

2020

(3)

(3)

Eur Million
Asset Management Expenses
Impairment associated companies(2)-

Other Interest expenses
Financial Investment Expenses

(2)
(7)

(4)
(6)

Eur Million
Realised Gains & Losses from Bonds

2,021

2020

2

1

Realised Gains & Losses from Shares(0)3

Total Realized Gains and losses

2

4

Revaluation Reserve
2021

2020

Bonds available for sale
Shares available for sale

7
99

20
51

Revaluation reserve gross of tax

106

71

Eur Million

15A-4 Performance of otheractivities
Other income and expenses correspond toservices supplied and received by ACyC
to/from other units within Atradius.
Services(EUR Millions)

2021

2020

vs 2020

Services Income and Expenses

84

107.3%

Service result *8

4

107.3%* Overview includes inter-segment revenue and claims expenses

A-5 Any other information
In 2021 A.M. Best reaffirmed the Financial
Strength Rating of A (Excellent), outlook
stable and the Long-Term Issuer Credit
Ratings (Long-Term ICRs) of the Atradius
rated entities as “a+”.
Moody’s affirmed the A2 financial strength
rating of the Atradius rated entities with astable outlook since February 2021 (after a
temporary reduction to negative outlook in
March 2020 reflecting market uncertainty).

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.
ACyC is closely monitoring the situation in
Ukraine and taking actions where needed.
The company is engaging with its customers
to assess the current assets & exposure
profile and to identify areas of attention. In
addition, ACyC is communicating with otherstakeholders such as brokers, reinsurers
and regulatory bodies.
The large number of restrictions on Russia
and Belarus, being imposed by authorities
in the EU, UK and US, continue to be closely
reviewed by the organization to analyse
their impact on the business.
In line with its sanctions complianceprogramme, ACyC continues to review thepotential
exposureofbusinesscounterparties and other entities tosanctions in close coordination between theGroup Legal & Compliance, Risk Services

and Commercial teams, based both on its
regular screening tools as well as on ad hoc
review initiatives.
From an underwriting strategy point ofview, all limits have been reduced to
outstanding amounts and will not allow
new deliveries (for customers outside
Russia exporting to Russian buyers). Ourcurrent total exposure is lower than 1% of
the overall exposure.
In section C-7 Scenario and sensitivity
analyses, it is included the potential impact
on SCR ratio for different components that
could be part of this adverse scenario.
Although it is not capturing specifically
Ukraine-Russia conflict assumptions, it issufficiently severe and includes all thedifferent components that could be
impacted due to this specific situation:
claims ratio, TPE reduction due tomitigating actions and volatility of thefinancial markets.
It is currently being analysed the possibilityof Atradius Reinsurance DAC (hereinafterAtre) merging into ACyC through a cross16

border merger that would be completed in
2022. The transaction remains subject to thenecessary board, shareholder, court andregulatory approvals. Upon effectiveness ofthe merger, Atre’s assets and liabilities,
including all of its reinsurance obligations,would be transferred to ACyC, through its
Irish branch, which would conduct Atre’s
reinsurance business as its legal successor,
with Atre being dissolved without going into
liquidation.

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 Board of Directors (Consejo deAdministración)
ACyC is a public limited company organised
under the laws of Spain with a one tierBoardofDirectors(ConsejodeAdministración, hereinafter referred to as‘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.

•

•
•
•
•
•

Xavier Freixes - Chairman (effective as
per 1 January 2022)
Ignacio Álvarez (Chairman and member
until 31 December 2021)
Francisco Arregui
Désirée van Gorp
Juan Ignacio Guerrero (effective as per 1
January 2022)
Carlos Halpern
John Hourican
Bernd Hinrich Meyer
Hugo Serra
José María Sunyer

The BoD meets at least four times in any
calendar year.
The BoD is, amongst others, supported in its
role by:• The General Manager (Director General),David Capdevila• The Executive Committee• The Audit Committee• The key functions of the Company and
the GCO/Atradius and ACyC groupfunctions, which report directly into the
BoD and/or the (members of the)Executive Committee, as necessary.

The BoD of ACyC currently consists of 9
members:
18

Executive Committee
The Executive Committee has been
established by the BoD and assists theGeneral Manager in performing the day-today management of the Company.

auditors. In addition, it monitors theeffectiveness of the risk management
systems and reviews the financial
information that the Company has to makepublic.
Internal Audit function

The Executive Committee consists of:• The 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 consists of threemembers and convenes at least three times
in any calendar year.
Composition Audit Committee
The Audit Committee consists of:• Bernd Hinrich Meyer• Francisco Arregui• Juan Ignacio Guerrero
The Audit Committee has an advisory role,and supervises auditing practices and therelationship with the external and internalInternal 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 General Manager.
Corporate governance framework
Atradius (ANV)
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.
ANV is a limited liability company,
organized under the laws of theNetherlands, with a two tier board: aManagement Board and a Supervisory
Board.

Management Board
The Management Board is responsible forachieving ANV’s objectives, strategy, policy
and results and is guided by the interests of
ANV 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
control system and internal audit function.
The Management Board rules describe the(allocation of) duties and the decision
making process of the Management Board
The Management Board consists of:
•
•
•
•
•

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
19CVs of each of the Management Board
members, showing their roles, backgroundand experience are available on the
Atradius website.
Supervisory Board

•
•
•
•
•

1 January 2022)
Carlos Halpern
John Hourican
Bernd Hinrich Meyer
Hugo Serra
José María Sunyer

The Supervisory Board supervises ANV’sgeneral affairs and the policy pursued by
the Management Board. The responsibilitiesof the Supervisory Board include, among
others, supervising, monitoring andadvising the Management Board on thecompany’s strategy, performance and risks
inherent to its business activities; the designand effectiveness of the internal risk
management and control systems and thefinancialreportingprocess.
The
Supervisory Board rules describe thedecision-making
process
andthecomposition and committees of theSupervisory Board.

B-1.2 Key functions

The Supervisory Board consists of:• Xavier Freixes - Chairman (effective as
per 1 January 2022)• Ignacio Álvarez (Chairman and member
until 31 December 2021)• Francisco Arregui, Vice-Chairman• Désirée van Gorp
• Juan Ignacio Guerrero (effective as per

Risk Management function

Four key functions support the ACyC BoD in
discharging its obligations. These key
functionsareCompliance,
Risk
Management, Actuarial and Internal Audit.
All these functions are described below.
Compliance function
The ACyC Compliance function supports theCompany in meeting its objective ofcomplying with all applicable laws andregulations and draws support from theGroup Compliance function as necessary.

The ACyC Risk Management function
supports the Company in meeting its
objective of effectively managing its risk
profile relative to its risk appetite and draws
support from the Atradius Group Risk
Management department as necessary.

Actuarial function
The ACyC Actuarial function supports theCompany in ensuring the appropriatenessof methodologies, underlying models andassumptions used in calculation of technicalprovisions, assesses the quality of data usedin the calculation of technical provisions
and capital requirements related to risk andregulations and ensures the adequacy ofreinsurance arrangements.
Internal Audit function
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.
B-1.3 Remuneration policy
The Atradius remuneration policy, which isapplicable to ACyC, lays down the principles
and key elements of sound and controlled
remuneration of Atradius employees. The
Atradius remuneration policy supports
Atradius’ business strategy, objectives,
values and long-term interest and is alignedwith the size, organisational set-up, nature
20and complexity 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 principles underlying the Atradius
remuneration policy 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• performance criteria for employees
will be objective, measurable andlinked to individual, department andgroup performance as appropriate.
Typical elements of total compensation for

employees are annual base salary, annual
variable remuneration and other benefits.
Stock options or share purchasing programs
arenotapplicableinAtradius.
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 principles:• 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
rewardedremuneration 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
21

framework and are based on technicalexpertise,client/businessorientation,
creating and delivering solutions andworking relationships.
Strategic staff
Certain senior management roles in
Atradius and ACyC are classified as strategic
staff. Strategic staff are entitled to variable
remuneration components as a percentageof their fixed salary. In line with theapplicable 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.

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’ are official certificates,
diplomas or degrees issued by thecompetent authorities formally recognising
the successful completion of a course of
study by a person (knowledge, expertise orcompetency), after the corresponding
evaluation. Such acknowledgment shows acertain level of education and in some cases
may signal that the relevant individual
possesses the skills required to practice a
certain profession. More specifically, anddepending on the function to be performed,
the skills that must be proven are in thefields 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 the members 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 systemfinancial and actuarial analysis
regulatory
frameworkandrequirements.

B-2.2 Proper requirements
According to the ‘proper’ requirement, an
individual who performs a key function
must be a person of integrity with a good
reputation. An assessment whether such
person is ‘proper’ includes an evaluation of22his or her financial soundness and honesty
based on the evidence of his or her
reputation, personal and professional
conduct, including any criminal, financial orsupervisory aspect that is germane to theevaluation.
• Being proper professionally means thatthe person has throughout his or her life
upheld the law and adhered to goodcommercial and financial practices.
The Fit and Proper Policy provides forfurther guidance to determine whether aperson is considered proper.
B-2.3 Evaluation of what constitutes fit andproperIn the process of evaluating the ‘fit andproper’characteristics
ofstrategic
personnel, the requirements included in the
Fit and Proper Policy will be reviewed
individually for each member and for the
BoD as a whole to ensure that the propermix of qualifications, knowledge andexperiences exist.
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.
Using the Company’s name or one’s
position to have an undue influenceon private transactions• usingtheCompany’s
assets,including confidential information,
for private purposes• taking advantage of the Company’sbusiness opportunities• obtaining benefits or compensationfrom third parties.
Taking part in activities that compete or
could compete with the Company. A moreelaborate description of situations that may
be a conflict of interest is included in the
ACyC Fit and Proper Policy.
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.
B-2.4 Strategic personnel
The ACyC Fit & Proper Policy applies to thepersons appointed in the following
positions in the Company:• members of the BoD• 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:
23

•

•
•
•

Director of Group Finance (alsoassuming the responsibility foroverseeing
theactuarial
function)
Director
of
Group
Risk
Management
Director of Internal Audit
Head/Director of Group Legaland Compliance.

These persons are referred to jointly as‘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
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.
24Procedure for evaluating the fit and properof strategic personnel who have alreadyundergone the evaluation process inanother entity of GCO

B-3 Risk management system
including the own risk andsolvency assessment

In those cases where certain members ofstrategic personnel have been evaluated for
professional fit and proper purposes byanother group company of GCO Group, 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 thatis deemed necessary from the groupcompany that conducted the evaluation anda statement from the strategic personnel
member in question that his or her
circumstances have not changed; and thenotification obligations towards theSupervisory Authorities as included in the
Fit & Proper Policy still apply to the extent
relevant.

The main components
management system are:
•
•
•
•
•
•
•

of

the

risk

risk strategy
risk governancerisk
management
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 oftimerisk tolerance is the maximum level of•risk that ACyC is willing to assume inrelation 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)• policy and risk underwriting authority
levels.
Risk governanceAtradius has established several risk
governance committees to make decisions
25

involving material risks, including thefollowing:• the Group Credit Committee and five
Local Credit Committees underwrite themost material credit limits• the Country Committee monitors theprevailing level of country risk in aparticular market and evaluates theimpact of country events to set theunderwriting strategy for each market• 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, bonds or reinsurance contracts.

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.

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, business
continuity,
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 GCOGroup.

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 management policies and guidelines
A framework of risk management policies

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 ofmeasurement and monitoring of risks aswell as reporting which enables the26communication 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• 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” was assessed and approved for use
by the College of Supervisors and theCompany regularly liaises with the College
to ensure ongoing acceptability of themodel.

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 placemonitoring 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.

Risk Management function
The Risk Management function assists

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
27

process.
The Company executes a full ORSA process
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. [See Section
C-7.1b for additional information on the useof scenario analyses within the ORSA
process.]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.

•

For additional details on the ORSA
governance and process, see Annex F-1.

•

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

controlrisk assessment – as part of the internal
control system, risks must be
identified, assessed and responded tocontrol 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 businessmonitoring – 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
28and policies.
The
professional
competencies
andpractices are outlined in the Atradius’
policies regarding conduct, recruitment,
remuneration, appraisal and developmentof employees. The most important practices
are outlined in specific policies, such as:• Code of Conduct• Speak up procedure – Policy on Whistle
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,
Gifts and Hospitality• Policy on Sanctions• Policy on Personal Data Retention• Policy on Anti-Money Laundering andCounter Terrorism Financing

The Company has established various
controlmechanisms
which
are
implemented
throughpolicies
andprocedures.

items such as the ORSA process, risk
strategy setting and review, risk
governance, and the risk management
function.
Control activities

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• Risk Management System (see Section
B-3 for further detail). This includes

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
29

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
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.
30

Financial
reportingcontrolselfassessments 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• who is responsible for the control?
In addition, evidence of performance ofcontrols is stored for review if necessary.
Compliance Function
The Compliance function consists of the
Atradius group compliance function, thelocal 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 detailing 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
advises the BoD on the Company’s system
of internal 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 the31continuous 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
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 possible:a) material impairment of thegovernance systemb) increase in operational riskc) 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).

Approvals
Outsourcing requires prior approval by the
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 ensure
32

that the provider has the ability, capacity
and authorisation required by law (ifapplicable) to perform the outsourcing
reliably and professionally.
Outsourcing key functions
If the Company intends to outsource a key
function, it must address the following
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

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
ACyCb) the design and pricing of (re)insurance
productsc) the investment of assets and portfolio
managementd) claims handlinge) providing
regular,or
constant,
compliance, internal audit, accounting,risk management or actuarial supportf) providing data storage in relation to thecore activities of ACyCg) providing ongoing, day-to-day systems
maintenance or support in relation to
the core activities of ACyCh) the ORSA processi) 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

According to the Policy on Outsourcing
critical or material functions and activities

When outsourcing by the Company is to a33

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
the level of the Company 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.

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
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
34

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 theinternally 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 2021

Q4 2020

Basic Solvency Capital Requirement
Market Risk

327

327

Non-Life UW Risk

725

458

Counterparty Risk

104

101

Intangible Asset Risk00

Total undiversified

1,156

886

Diversification

(232)

(204)

Total diversified

924

682

Operational Risk

48

44

Solvency Capital Requirement
Total before tax adjustment

972

726

Tax adjustment

(134)

(109)

Solvency Capital Requirement

839

617

Minimum Capital Requirement

210

154

35

C-1

government schemes in combination with
exposure growth and the decrease in
cession to the reinsurers.

Underwriting risk

5%

4%
1%

COVID-19
The Company incurs underwriting risk by
issuing
insurance
contracts
andsubsequently approving credit limits andbonds under those contracts.

Internal Model
Premium and Reserve risk
Catastrophe Risk
Lapse Risk

Diversification

-18

-18

Total diversified

725

458

The Company operates two main direct
insurance product lines: credit insurance
and bonding. Credit insurance is divided
into three sub-categories: 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 these risks.

Underwriting risk is the largest contributor
to the Solvency Capital Requirement. It
represents 63% of the Company’s Basic
Solvency Capital Requirement, before
diversification with a charge of EUR 725
million. The largest contribution to this risk
category comes from the Internal Model,
which increased 66% due to the diminishedrisk mitigation effect of COVID-19 related

The starting point for the management ofunderwriting risk is:• all staff have well-defined authorities
specifying the level of risk they canaccept• all risk acceptance must take place
within the framework of the risk
governance structure.
Furthermore, the Company’s reinsurance
structure imposes checks on the largest
exposures. Exposures beyond a certain

90%

in EUR million

Q4 2021

Q4 2020

669

403

Non-Life UW Risk
Internal Model
Premium and Reserve risk

41

41

Catastrophe Risk

29

28

Lapse Risk
Total undiversified

threshold are subject to special acceptanceby our leading reinsurers.

4

4

743

476

Risk identification / management

In 2021, as in 2020, the most significant
developments in the risk landscape are
related to the worldwide effects of the
COVID-19 pandemic. The pandemic has
affected all risk areas – from underwriting
risk (impact on buyers - credit insurance and customers -bonding) to financial risk tooperational risk (impact on Atradius’ ability
to maintain its standard of service and toensure that the needs of employees areadequately addressed). Atradius has taken
steps to manage its exposure to the effects ofthe pandemic.
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 all
countries, sectors and portfolios. We
analysed the nature and sources of the risks
and how they constantly shifted, e.g. from36

supply 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 coveron a country or withdraw cover on a country
altogether. These are important conditions
and parameters for managing theCompany’s risk exposure.
37

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.

Beneficiaries include national, regional andlocal governments and tax authorities aswell as companies.

Instalment Credit Protection (ICP)

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.

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.

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 who remains
ultimately liable. If ACyC incurs an
irrecoverable loss, it is always due to thecustomer’s financial distress.

Bonding
Surety bonds insure beneficiaries against
the risk of our customer not meeting
contractual, legal, or tax obligations.

A sizeable portion of the bonding portfolio
relates to the construction sector, while
different legal and market environments inthe various countries also translates into
38

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 set 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

Partial Internal model

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.

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.

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.

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.
39

Risk mitigation
The Company transfers a significant portionof its underwriting risk to reinsurers,
through a number of reinsurance
arrangements that include quota share andexcess of loss treaties covering either theentire portfolio of the Company or specificrisks.
The reinsurance treaties are renewed
annually. However in order to ensurestability of capacity and pricing, theCompany renews its reinsurance a year inadvance.
At the time of renewal, the Company
assesses the optimal structure of the treaties
for the forthcoming period. A number of
items are taken into consideration during
this review, including the cost of thesynthetic capital that reinsurance provides
as measured by the internal economic
capital model.
Atradius Re was a member of reinsurance
panel for UWY 2021 with 11% cession (22%for UWY 2020). For UWY 2022, ACyC is notceding to Atradius Re following expecteddevelopments described in section A-5.

For the underwriting year 2022 a quota
share reinsurance treaty is in place covering
the majority of the Company’s business.
Own retention under this treaty is 63%(compared to standard 52% in 2021,
excluding the impact of COVID-19 related
government schemes).
There is also an excess of loss program on a
per buyer/buyer group basis, covering theCompany’s retention under all these quota
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 view of this situation and, as a support tothe national economy, 10 main countries
where ACyC operates have continued tosupport the credit insurance business in theform of specific government reinsurance
schemes.
The government schemes are part of an
overall package of measures and aim toensure that sufficient liquidity is available
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).

2021 Government agreements

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).

The COVID-19 pandemic crisis has strongly
affected the world economy.

In Europe, all agreements were approved by
the European Union. These agreements
40

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.
The contents of the programs differ fromeach other but they were typically in theform of a quota-share agreement with acession between 50% and 100%. Close to 50%
of exposure was covered by these programs.

C-2

Market risk
8%25%Interest rate risk
Equity risk
Property Risk

2%

37%

Currency Risk

8%

Q4 2021

Q4 2020

Market Risk
Interest rate risk

38

16

Equity risk

170

183

Property Risk

36

40

Spread Risk

90

87

Concentration Risk

10

7

Currency Risk

114

85

Total undiversified

458

418

Diversification

-130

-90

Total diversified

327

327

Identification
The Company exposes itself to market risk
by obtaining assets and incurring liabilities
whose value is sensitive to movements inmarket prices. This risk represents 28% of
the Company’s undiversified BSCR, before
diversification and tax adjustments. With acharge of EUR 327 million, remaining at thesame level compared with previous year.
This risk is incurred by:

Spread Risk
Concentration Risk

20%

in EUR million

•
•
•
•

•

investing in debt instruments
investing in equity instruments
investing in real estate
underwriting
insurance
contracts
generating provisions for future claims
payments
holding assets and incurring liabilities
denominated in foreign currencies.

Despite the market risk remained
unchanged compared to previous year, theunderlying risk components have changed,
where the transfer of the Dutch pension
fund to a third party resulted in a larger
mismatch between assets and liabilities,
and therefore to a higher interest rate risk
and where secondly the increased exposure
towards USD and GBP resulted in a higher
currency risk. The higher risk of thesemarket risk components were offset by ahigher diversification effect, resulting in an
unchanged market risk compared to lastyear.
Measurement
Market risk is measured by using several
risk metrics, including:• value-at-risk• capital models of external credit
assessment institutions• 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
41

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• restrictions on the interest rate
duration of the debt instruments
portfolio• 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 todefine 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 170 million of the EUR
458 million total undiversified 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, Group42

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
9%
of
the
Company’s
undiversified BSCR, before diversificationand tax adjustments with a charge of EUR
104 million (2020: EUR 101 million). Thisrisk is incurred by:
•
•
•

•

investing in debt instruments
depositing cash at credit institutions
underwriting insurance contracts
which generate premium receivablesfrom insurance contract-holders, andinsurance intermediaries such as
brokers and agents
entering 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• 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• withholding 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 ‘BBB-‘ 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
43

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.

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).

to benefit from a more substantial andstable investment portfolio.

Risk mitigating measures

Expected Profit in Future Premium.

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.

Expected profit in future premium is
calculated as per Article 260(2), Article
260(3) and Article 260(4) of the DelegatedRegulation.

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 andMethods 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 Regulation,
before tax and before reinsurance for Q42021 is EUR 109.1 million (2020: 66.1
million).

44

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 6% of theCompany’s SCR, with a charge of EUR 48
million (2020: EUR 44 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.
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
incident
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 a45

cross-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.

C-6

Other material risksC-6.1 Concentration risk•

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.
Management / Mitigation
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• creditconcentration
limitsareassigned on an aggregated level (e.g.

•name / group, country) in order tomanage exposure concentration on
portfolio levelfor 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,46

the RSMB reviews the concentration of
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.
In the following table, the TPE has been
aggregated and shows the exposure for
ACyC credit insurance (including special
products), non-consolidated.
Exposures for Bonding and for ICP are notincluded in the table. The bonding exposurein 2021 is EUR 25.6 billion (2020: EUR 24.1
billion). Exposure for ICP amounts to EUR 3
billion (2020: EUR 3 billion).

Buyer country

TPE 2021(EUR million)%

Spain, Portugal
Germany

86,55670,334

15.6%
12.7%

Central and Eastern Europe

107,239

FranceUnited Kingdom

48,86049,674Italy
The Netherlands% TPE 2020
(EUR million)%

78,894
93,112

14.2%
16.8%

19.3%

58,899

10.6%

8.8%
8.9%

44,88041,3888.1%
7.5%

50,030
75

9.0%
0.0%

40,63429,543

7.3%
5.3%

NordicUSA, Canada, Mexico

31,916
37,6885.8%
6.8%

28,02627,979

5.0%
5.0%

Other
Total

162,589
644,96129.3%
100.0%

111,688555,04320.1%
100.0%

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.

adverse change in the reputation or
image of Atradius.
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

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.
Cyber risk is an area in which increased
focus is warranted.
The
Atradius
47

Information Security team monitors andaddresses threats and coordinates the
management of cyber risk across theCompany. The growing threat landscape,including malware (viruses), highlights theimportance of education for end users on
topics such as, phishing, maintaining
software and the dangers of unsupported or
non-authorised software. To minimise thisrisk cyber risk awareness is included instaff training. Further mitigation of this risk
includes protections for critical ACyC
applications
andMulti-Factor
Authentication for all remote access. A
medium-term Cyber Security Strategy is inplace
toenhancetheCompany’s
governance, protection, resilience andvigilance.
C-6.4 Emerging risks
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• Inflation• Extended economic recession• Regulatory developments• Cyber risks.

could have a negative impact on Atradius byaffecting our operations and/or ourcustomers and their buyers. Focus oncarbon footprint / CO2 emissions may
require manufacturers to adapt or go out ofbusiness, in turn having a knock-on effecton their suppliers. Doing business in certain
trade sectors may become undesirable andattract negative publicity. At the same time,interest in climate change / ethicalpractices, such as ESG (Environmental,
Social & Governance) and CSR (Corporate
Social Responsibility) considerations, may
create opportunities to enhance the Atradius
offering. Developments are monitored anddiscussed in various forums within
Atradius.

Analysis shows that ACyC’s strong solvency
ratio ensures satisfaction of the interests ofcustomers and policyholders throughout
our planning horizon.
C-6.5 Climate-related risks
More frequent and severe weather eventsare damaging infrastructure and disrupting
supply chains. Transition to a lower carbon
economy is bringing new policies,
regulations and changes to market
dynamics. There is a risk that such changes
48

C-7

Any other information

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
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 2021, the impact ofexternal factors related to various risk types
on ACyC has been assessed. For several
sensitivity tests the impact on Solvency49

C-7.1b Scenario Analyses
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.
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 moderate
the decrease in year t+1 and t+2 and thenincrease thereafter. Here, “year t” refers to
the first full year after the scenario
materializes.
The following tablescenario assumptions:summarizes

theThe scenario and its assumptions are basedon 2021 information, so that year t
represents a hypothetical year 2022 under
the assumptions above. The following tablesummarizes the year t impact of the
scenario on the Solvency Ratio.

C-7.2 Brexit
The UK left the European Union (‘EU’) on 31January 2020, enabled by the Withdrawal
Agreement agreed between the EU and the
UK Government. The Company’s activities
continued without interruption post-Brexit
as it had prepared itself well for the
regulatory changes. In 2020 Atradiusapplied to the UK’s Prudential Regulatory
Authority (‘PRA’) for authorisation as a
Third Country Branch (‘TCB’) and has been
operating ‘as if’ authorised as a TCB, underthe Bank of England’s Temporary
Permissions Regime. On 21 December 2021
the Company has received the TCB
authorization, with effect from 1 January50

2022. In this way, risk associated with theuncertainty around the authorisation was
adequately mitigated.
C-7.3
Environmental,
Governance risk (ESG)

Social,andIn the changing world environmental, socialand governance topics are becoming
increasingly
important.
Atradiusisembracing these changes and aims to work
together with our stakeholders to put ESG
at the core of our business.
As a worldwide operating company, we areaware of our responsibility to do business ina way that is ethically and environmentallysound.
Environmental,
Socialand
Governance topics are more important thanever, as the urgency of taking care of ourplanet for future generations and ourselves
has further grown. We take up our
responsibility as a global organisation. We
work together with our stakeholders, with agoal of maximizing the sustainable social
value and minimizing the negative impacts
on social and environmental matters arisingfrom our activities.
Continued commitment
Environmental, Social and Governance
Sustainability is embedded in our culture

and a key driver in our day-to-day
operations. As a credit insurer, we strongly
support the management of our customers’risks, enabling them to increase their tradeprofitably, prosper in their respective
industry segments, and thus create andmaintain employment and reduce poverty.
It is our objective to do this jointly with ourcustomers in a transparent and ethicalmanner, allowing both parties to growsustainably. We place particular emphasison the identification of risks andopportunities related to ESG parameters andcriteria and embed them in our
underwriting strategy. We are persistently
improving and promoting the developmentof sustainable products and services that
contribute to protection of the environment.
We expect the same approach by our
suppliers, which is hard-coded in our
procurement policy. Within the Atradiusculture, a key building block is theencouragement of efficient and responsible
use of resources, as well as behaviour
supporting its responsible use.
A company consists of individual people
and our employees are committed to putting
ESG at the heart of their activities.
Initiated by individual employees all over
the world, Atradius engages in local

initiatives for the benefit of communities inthe different countries where we arelocated. From an employer perspective,
Atradius provides a workplace environmentthat is based on an atmosphere of trust andmutual commitment, upholding people andguaranteeing the right to equality ofopportunities and treatment for all people.
International ESG standards and reporting
To connect with the international ESG
standards in our commitments andambitions, we have subscribed to the ten
principles of the United Nations Global
Compact (UNGC) on human rights, labour
conditions, the environment and anticorruption.
Every year we provide an update on the
progress we have made.
We provide transparency about our ESGcommitments via various channels. In 2021,
we subscribed the Atradius Group to theDutchgovernment’s
bi-annualTransparency Benchmark study of the 200
largest companies in the Netherlands.
Atradius was awarded 9th place for clarity
in ESG-reporting. We also had the quality of
our sustainability management systemmeasuredby
EcoVadis(Business
Sustainability Rating Agent, Barcelona). Our51

policies, actions and results were assessedon 21 sustainability criteria, ranging fromenvironment, labour and human rights, toethics and sustainable procurement. The
resulting scorecard puts Atradius in theupper half of all rated companies.
Our ambitions for the future
The ESG Sustainability Policy of Atradius isclosely aligned with the ESG Sustainability
Plan of GCO, our parent company. In 2021,
we continued to build on the foundations
with the intention of further improving thefull group’s business. Key areas to bementioned are our efforts in dealing withclimate change and sustainability, humanrights and diversity, as well as digitization,
innovation and employee experience. All
relevant units in Atradius and GCO arebrought together to contribute to our ESG
ambitions as a whole organisation,
providing a scope and ambition that has
been generated in the form of a three year
Master Plan (2020-2023).

December 2021 significantly improved
GCO’s ESG rating. Grupo Catalana Occidente
S.A. is now 12th out of 300 insurancecompanies evaluated. This recognition as agroup is a further push for our obligation to
manage the ethical, environmental andsocial risks of our business and contribute to
global efforts for making the world a better
place to live, work and trade.

The progress we have made, especiallyaround our ESG programs, practices andpolicies,has
been
recognisedbySustainalytics, a Global leader in ESG
research with almost 30 years of experiencearound sustainability, which has in52

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 2021
amount to EUR 3,972 million, EUR 200 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

2021

2021

Solvency II(Statutory Acc)

Difference

Goodwill

0

18

(18)

Intangible assets

0

79

(79)

Deferred acquisition costs

0

61

(61)

Deferred income tax assets
Pension Benefit Surplus

397

170

227

95

95

(0)

Property, plant and equipment for own use

192

72

120

Property (other than own use)

22

2

19

AssetsParticipations

20

17

4

1,678

1,678

0

Deposits other than cash equivalents

92

92

0

Reins. Recoverables
Deposit to Cedant

554

1,012

(458)

3

3

0

Reinsurance Receivables

204

221

(17)

Receivables (Insurance, intermediaries and trade)

261

242

19

Cash and cash equivalents

392

392

0

Any other assets, not elsewhere shown

62

18

44

3,972

4,172

(200)

Other Financial investments

Total

53

Investments: represent 46% of the total assets, of which theinvestment in Debt securities is the main item.
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.

ACyC
Eur million
Liabilities

2021
Solvency II

2021(Statutory Acc)

Difference

Technical Provisions
Provisions other than technical provisions
Pension benefit obligations
Deposits from reinsurers
Deferred tax liabilities

859

1,706

(847)

3

3

(0)

99

99

0

12

12

0

537

224

313

Insurance & intermediaries payables

57

57

0

(Re)insurance accounts payable

343

314

28

Payables (trade, not insurance)

328

255

73

Any other liabilities, not elsewhere shown

142

153

(10)

2,379

2,822

(443)

Total

Liabilities Bridge between PCEA and Solvency II is as follows:

Solvency II Total liabilities balances EUR 2,379 million, EUR 443
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
54

D-1

Assets valuation

At the end of 2021, ACyC has assets with a
total value of EUR 3,972 million under
Solvency II (EUR 4,172 million under PCEA).
The main differences are as follows:• goodwill: in the economic balance thisis valued at zero (EUR 18 million
PCEA)• intangibles: in the economic balance
sheet these assets are valued at zero
(EUR 79 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 61 million
under PCEA)• property, plant & equipment for own
use: in the economic balance sheet arevalued at their market value,
determined by approved independent
real state valuator registered in therelevant countries.

In 2019 IFRS 16 was adopted and applied for
Solvency II, in consideration of art. 75 of the
Directive, with an impact both in assets andliabilities. Therefore, difference in this item,with PCEA is:• + EUR 58 million due to market value• +EUR 62 million corresponding to
IFRS 16 Right of use assets. See
further details in Chapter F-4,
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 4 million)• any other asset not elsewhere shown:Technical items considered ascustomer deposit given contracts
boundaries
andreinsurance
commissions. (+ EUR 44 million)• deferred tax assets: + EUR 227 million,
records the tax effect of the valuationdifferences 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 358
million and reinsurance recoverable.

55

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 havealready occurred, regardless of whether
the claims arising from those events
have been reported or notpremium provisions (PP): The PP is thebest estimate relating to future claim
events covered by insurance andreinsurance obligations falling within
the contract boundary. Cash flow
projections for the calculation of the PP
include claims, expenses and premiumsrisk 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-ofcapital approach as prescribed within
the Solvency II Directive.

For the purposes of this report, the best
estimate, unless otherwise specified isgross, without deduction of the amounts
recoverable from reinsurance contracts andspecial purpose vehicles.
The calculation of the technical provisions
includes cash flows associated with existing
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 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.

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.

For credit insurance, the contract boundaryis chosen such that all contractual
obligations for insured risks (shipments) atreporting date are provisioned for within
Solvency II technical provisions.

Choice of contract boundary

The choice of contract boundary hence
reflects the credit insurance business’
ability to continually re-underwrite risks as
it may at any time reduce or withdraw credit
limit decisions.

The Company has chosen the following
contract boundaries. The choices are
specified by product: Credit Insurance (CI),Special Products (SP), Bonding (BO), andInstalment Credit Protection (ICP).

Valuation methodologies
The Solvency II best estimate is valued
56

using methodologies consistent withprinciples and bases used for financial
reporting.
A short description of the methodologies
used to determine provisions by product isprovided below.
•

•

•

•

traditional credit insurance: provisions
are calculated based on statisticalmethods. These are used to project claim
counts for each month of risk taken on
and an average claim severity toestimate ultimate claim cost. For largecases, individual assessments ofprovisions are made. In addition,
reserves are carried for future large
losses and losses resulting from
reporting on specific events
special products: provisions for reported
claims are calculated on a case by casebasis. Provisions for future claims are
based on an expected premium /expected loss ratio approachbonding: provisions for reported claims
are calculated on a case-by-case basis.
Provisions for future claims are basedon an expected premium / expected loss
ratio approach
ICP: claims reserves for reported but not
settled claims are determined on a caseby case basis. Salvage and subrogation
dominate the ICP provisions due to thenature of the product: claims paid are in
the order of three times premium.
Claims paid are typically recovered infull over a period of over ten years.
Provisions for salvage and subrogation
for ICP are estimated using a chain
ladder method.

reinsurance covers 48% for UWY 2021 (59%UWY 2020) of all technical amounts:
premiums and claims.

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
in combination with realistic assumptions.

Parts of the ACyC C&S business wereadditionally protected by reinsurance
arrangements supported by governments.
Reference is made to Chapter C-1.

There are no future management actions
assumed in the calculation of the Company’s
gross of reinsurance best estimate
liabilities.
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

Main proportional reinsurance treaty above,
includes an internal cession with Atradius
Reinsurance DAC for all technical amounts(11% for underwriting year 2021 and 22% forunderwriting year 2020). (See chapter C-1)

The amounts recoverable from reinsurance
contracts are estimated consistently withthe boundaries of the underlying contracts
to which they relate. The reinsurance
recoverables are calculated directly, treaty
by treaty in essence 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 capital57

requirements 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 of timein the future needs to be estimated.
The Company follows the general guidance
given under Method 1 within the EIOPA
Solvency II Guideline 62 (EIOPA-BoS-14/166
EN). This assumes that the risk margin isbased on a cost of capital approach forbusiness that is considered ‘existing’. For
the cost-of-capital, a rate of 6% is usedaccording to the Delegated Regulation(Article 39).
The overall approach used to calculate therisk margin is to perform a full calculationof the SCR at each future point in time using
the Standard Formula with certain
simplifications. The simplifications are used
for the counterparty default and operationalrisk 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 to thatwhich is used to calculate the Actual SF SCR
as outlined in DIR: Article 103.

Comparison with financial statements
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:Overview of technical provisions
The table below shows the Solvency II grossbest estimate, risk margin and the share of
reinsurance recoverables as of 31 December
2021 for the Credit & Suretyship business:
Solvency II Technical
Provision by SII LOB and
31.12.2021
Eur Million

Eur Million
Gross Technical provisions
Ceded Technical provisions

PCEA (*)

IFRS (**)

SII (***)

1,706
1,012

1,554
915

859
554

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

PCEA to IFRSSII B/S Component/BE Split

Direct, Accepted Proportional andNon proportional C&S
PCO

Total

•

PP

Gross BE Split by Product
CI
SP
BO
ICP
Gross BE Split by Product

303
36
105
(169)
274

550
15
(41)
5
529

854
50
63
(164)
803

Reinsurance Recoverable
CI

181

300

482

SP
BO
ICP

29
68
(4)

7
(31)
4

36
37
(0)

Reins Recov. Split by Product
Implied Net Best Estimate
Risk Margin

274
0

280
249

554
249
56

•

Spain and Portugal estimated claims
recoveries are shown under PCEA in theassets split in reinsurance recoverables
and Receivables (trade, not insurance).
This reclassification amounts to EUR 27
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 otherasset not else where shown” (gross and58

ceded respectively). Net reclassification
for this concept is EUR 37 million (EUR
104 million gross and EUR 67 million
ceded).
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 and assumptions reflect a
probability weighted average. Overall
impact (Net of Reinsurance including
Risk margin) of these changes isfavorable by EUR 213 million.

Comparison with the previous year
The Solvency II Best Estimate (gross ofreinsurance) decreased by EUR 16 million.
Reinsurance recoverables in 2020 and thefirst semester of 2021 were impacted by theGovernment
Support
Schemes(see
Reinsurance recoverables); this fact,

together with the reduction of the internal
cession, bred to a decrease of thereinsurance recoverable of € 117 million
which led to an increase of Solvency II Bestestimate net of reinsurance of EUR 101
million.
The Risk Margin has increased by EUR 5
million as a consequence of the increase in
the technical provisions.
No other material assumption changes weremade compared to the previous reporting
period.

•••that the insured shipment took place, theexpected average claims payment andthe expected percentage of cases that do
not lead to a payment
the expected number of claims for risks
taken on during the most recent months
since very few claims will have beenreported for the most recent five toseven months (depending on the
country of the customer)
the inflow by number and size of large
casethe estimation of the expected recovery
percentages.

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.
All forms 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 for
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 the moment

As result of COVID-19 and direct support
provided by the governments, of which thetiming and impact of roll-back is not known,
the state of the economy in the near futureis significantly more uncertain than usual.
This, in turn, impacts uncertainty related to
the frequency and severity of claims.
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 issuance ofthe bond and receipt of the bond call tends
to be much longer than that of traditional
credit insurance. For example, most credit
59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 will take longer to settle theclaim and litigation 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.
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 thatwould materially affect the Best Estimate on
this product.
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 rate-term
structure referred to Article 308c of
Directive 2009/138/EC
Transitional deduction referred to in
Article 308d of Directive 2009/138/EC

D-3 Other liabilities valuation
Economic liabilities excluding technicalprovisions, amount to EUR 1,521 million(EUR 1,117 million under PCEA).
As shown in D-0, the main differences
between Solvency II and PCEA is:••deferred tax liability: + EUR 537 million,
records the tax effect of the valuationdifferences between PCEA and Solvency
IIpayables (trade, not insurance): In 2019
IFRS 16 has been adopted, thus in thisitem is included the lease + EUR 63
million. See further details in F-4,
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 2020 is in Reinsurance
account payables which has increased EUR
64 million due to the government schemes.

60

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 2021 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
to 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
procedures for:• capital planning• capital monitoring• capital management.

processes

andThose processes and procedures aim toensure compliance with compulsory
regulations and internally self-imposed
requirements for capital adequacy.
Such compliance is ensured by:• regular assessment of solvency needs,
61

•

•

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
capitalmonitoring 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 ofreinsurers,
throughanumberofreinsurance arrangements.
The cancellation of the intra-group cession
from ACyC to Atradius Reinsurance DAC

from underwriting year 2022 results into anincrease of the reinsurance self-retention of
ACyC. Reference is made to Chapter A-5 andC-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 2021:
31.12.2021
Tier 1

31.12.2020
Tier 1

Ordinary Share Capital

25

25

Share Premium

1

1

Mem bers contributions

60

0

1,507

1,244

1,264

1,065

(200)

(88)

Adjustment to Technical Prov

847

651

Adjustments to other liabilities

(404)

(383)

Eur Million

Reconciliation Reserve
Reserve and Retained earnings from financial
Statements
Adjustment to assets

Foreseeable Dividends
Total Basic Ow n funds

0

0

1,593

1,271

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 as62

shown in the ACyC's financial statements
and the excess of assets over liabilities ascalculated for solvency purpose have been
explained in Section D.
To partially compensate the effect of theincrease of the reinsurance self-retention,
mentioned above, a capital reallocation has
been executed before year-end 2021: EUR
60m have been up-streamed from Atradius
Reinsurance DAC (via a distribution ofretained earnings) to Atradius Insurance
Holding and down-streamed to ACyC via acapital contribution from its shareholders:
Atradius Insurance Holding and Atradius
NV (1 share).
In addition, the good performance of theresult of 2021 led to an increase of theeligible own fund in comparison to
December 2020
Main variations with +/- according to theimpact in own funds:• (+) Increase financial investments(excluding cash and cash equivalents)
by EUR 358 million• (+) Other Capital Contributions by EUR
60 million• (-) Decreased reinsurance recoverable•

EUR 117 million(-) decrease driven by additional
reinsurance payables EUR 64 million.

specific parameter or the duration-based
equity risk sub-module.

E-2 Solvency capitalrequirement and minimum
capital requirement
In 2021, SCR has increased by EUR 222
millon (36%) in line with business andmarket developments:• market risk remained stable• non-life UW risk increase of EUR 266m
(58%) is explained by the diminishedrisk mitigation effect of COVID-19
relatedgovernment
schemesincombination with exposure growth andthe decreased cession to reinsurers• counterparty default risk remained
stable• tax adjustment increase of EUR 25m(23%) is mainly attributed to the BSCR
growth.
The following table shows the solvency
capital requirement, calculated under theapproved partial internal model, and thevarious risk components. The calculation
uses no simplified calculation, undertaking63

Q4 2021

Q4 2020

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

Q4 2021

Q4 2020

972
(134)
839
1,593
190%

726
(109)
617
1,271
206%

Solvency Capital Requirement
38
170
36
90
10
114
458
(130)
327

16
183
40
87
7
85
418
(90)
327

Non-Life UW Risk
Internal Model

668.7

403

Premium and Reserve risk

40.9

41

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

29
0
0
29
0
29

28
0
0
29
0
28

Lapse Risk

4

4

Total undiversified
Diversification
Total diversified

743
(18)
725

476
(18)
458

Counterparty Risk

104

101

Total undiversified
Diversification
Total diversified

1,156
(232)
924

886
(204)
682

Operational Risk

48

44

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

Minimum Capital Requirement
TPnl , 9249

148

Premium 9

593

447

MCRlinear111

77

MCRcombined
AMCR
Minimum Capital Requirement

210
4
210

154
4
154

Basic Solvency Capital Requirement64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

an internal model, formerly called the ECAP
model, since 2004. GCO did not create aninternal model to calculate the solvency
capital requirement of ACyC as a result of
the onset of Solvency II, but adapted its
former ECAP model by making it Solvency
II compliant with the aim of aligning capitalmanagement, risk management and overall
solvency needs with the strategy of thebusiness.
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 Solvency
II regulation, the internal model is used toderive the 99.5 percentile of the losses
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 product65

segments within ACyC except for
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 the model
output in combination with other risk
evaluation measures to generate buyer
underwriting strategies• pricing - including an internal modelbased calculation of capital costs in thepricing model• business planning - this use of the model
includes the annual long-term planningand budgeting processes• reinsurance analysis - the model output
is used in the evaluation process ofdifferent
reinsurance
programscenarios for capital management
purposes andfor deriving
anappropriate risk mitigation strategy• product development - use of the model
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 2021, 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-5 Non-compliance with theminimum capital requirement
and non-compliance with thesolvency capital requirement
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.

E-6 Any other information
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• the carry forward of unused tax credits.
Temporary differences may be either:• taxable temporary differences, which
are temporary differences that will
resultintaxableamounts
indetermining taxable profit (tax loss) offuture periods when the carrying
amount of the asset or liability isrecovered or settled; or• deductible
temporarydifferences,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 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 account66

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 is identified considering thedifferent tax- authorities’ legislation andlimitations. See more details in F-4,

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
are limiting and (potentially) extending the
support of the Tax Adjustment for LACDT
respectively.

which the Solvency Capital Requirement
has been adjusted for the loss-absorbing
capacity of deferred taxes and it how it isjustified.

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.
The following table shows the amount with67

F.

Annexes

F-1
F-2
F-3
F-4

Details of the governance and process for the execution of the ORSA
All relevant QRTs
Overview of subsidiaries and minority shareholdings
Solvency II Valuation principles

68

F-1

Details of the governance and process for the execution of the ORSA

Activity
Review andApproval of
ORSA Policy
Approval of
Scenarios
Design andimplementationof ORSA process
Process
Execution and
Results

Responsibility Participants
ACyC Board of ORSA Platform,
Directors
Risk Strategy
Management
Board (RSMB)RSMBORSA Platform,
ORSA Technical
Group
RSMB
ORSA Platform,
ORSA TechnicalGroup

Review of Risk
Strategy

Base case, scenarios and sensitivity analyses preparations and approval.

Actuarial
Function

Actuarial
Function

Ensure that the ORSA process is designed in accordance with the ORSA Policy.
Ensure that the ORSA Process addresses all material risks of ACyC.
Ensure that sufficient resources are allocated to the ORSA Process.
Ensure the planning and coordination of participating areas.
Implement the ORSA Process in compliance with the ORSA Policy.
Ensure that a relationship with other management processes is established and that all
participating areas are coordinated.
Ensure that the various contributions are consolidated into a single ORSA Report and verify
their overall cohesion.
Run analysis, projections, sensitivities, stress tests, etc.
Ensure the compliance with the requirements for the calculation of the technical provisions.
Coordinate the process and results with areas involved.
Drafting ORSA Report.
Verify that the process complies with ORSA Policy and has been duly executed.
Analyze ORSA results, methods and assumptions.
Examine results provided by the participating departments.
Suggest the methods and assumptions for validation by control agencies.
Review the methodologies and assumptions underlying the Technical Provisions estimatesfor ORSA purposes.

ACyC Board of
Directors
ACyC Board of
Directors

RSMB, ORSA
Platform
RSMB, ORSA
Platform

Approve ORSA results based on proposal of the ORSA Platform and ensure that they reflect
the risk profile of ACyC.
Review and advise on setting the maximum level of risk which ACyC is willing to accept inorder to achieve the objectives set in the Strategic Plan.

ORSA Platform ORSA TechnicalGroup

Review of results RSMB

Review
compliance ofTechnical
Provisions
ORSA Approval

Main Activity
ACyC ORSA Policy review and approval.

ORSA Platform,
ORSA Technical
Group

69

The ORSA Platform consists of thefollowing permanent members:•(Chair) Director of Group Risk
Management [representative of risk
management function]

held in order to ensure alignment with
GCO’s Group-level ORSA.
The ORSA process is outlined as follows:•

Director of Group Finance1.
Define base case, scenarios andsensitivity analyses•

Director of Corporate Finance & Tax

2.

•

Director of Group Control•

Representative of Atradius Spain
Portugal Brazil

3.
Determine P&Ls, capitalrequirements, own funds••

Representative of Atradius
Reinsurance
Representative of GCO (with standing
invitation).

Project business drivers

4.
Assess and determine
management actions
5.
Review methodologies andassumptions underlying technicalprovisions
6.

Report ORSA results

The ORSA Technical Group is composedof dedicated resources assigned by the
ORSA Platform members. The ORSA
Technical Group is authorized to execute
operational ORSA activities and deliver
ORSA report elements. The ORSA
Technical Group reports to the ORSA
Platform and is coordinated by Group
Risk Management.
The Dirección de Control de Riesgos of
GCO (responsible for execution of theGroup's ORSA) may intervene in meetings

70

F-2

All relevant QRTs (all amount in EUR thousand)S.02.01.02
Balance sheet
Solvency II value
C0010
AssetsGoodwill
Deferred acquisition costs
Intangible assets
Deferred tax assets
Pension benefit surplus
Property, plant & equipment held for own use
Investments (other than assets held for index-linked and unit-linked
contracts)
Property (other than for own use)
Holdings in related undertakings, including participations
Equities
Equities - listed
Equities - unlisted
Bonds
Government Bonds
Corporate Bonds
Structured notes
Collateralised securities
Collective Investments Undertakings
Derivatives
Deposits other than cash equivalents
Other investments
Assets held for index-linked and unit-linked contracts
Loans and mortgages
Loans on policies
Loans and mortgages to individuals
Other loans and mortgages
Reinsurance recoverables from:
Non-life and health similar to non-life
Non-life excluding health
Health similar to non-life
Life and health similar to life, excluding health and index-linked
and unit-linked
Health similar to life
Life excluding health and index-linked and unit-linked
Life index-linked and unit-linked
Deposits to cedants
Insurance and intermediaries receivables
Reinsurance receivables
Receivables (trade, not insurance)
Own shares (held directly)
Amounts due in respect of own fund items or initial fund called up
but not yet paid in
Cash and cash equivalents
Any other assets, not elsewhere shown
Total assets

R0010
R0020
R0030
R0040
R0050
R0060

0
396,736
95,156
191,569R0070

1,812,328

R0080
R0090
R0100
R0110
R0120
R0130
R0140

21,702
20,10689,67989,6790
1,284,335
187,227

R0150

1,097,109

R0160
R0170
R0180
R0190
R0200
R0210
R0220
R0230
R0240
R0250
R0260
R0270
R0280
R0290
R0300

0
0
304,378
092,128000000553,884
553,884
553,884
0

R0310

0

R0320
R0330
R0340
R0350
R0360
R0370
R0380
R0390

0
0
0
3,201
117,633
204,463
143,687
0

R0400

0

R0410
R0420
R0500

391,546
61,671
3,971,874

Liabilities
Technical provisions - non-life
Technical provisions - non-life (excluding health)Technical provisions calculated as a whole
Best Estimate
Risk margin
Technical provisions - health (similar to non-life)

R0510
R0520
R0530
R0540
R0550
R0560

858,930
858,9300802,884
56,0460

Technical provisions calculated as a whole

R0570

0

Best Estimate
Risk margin
Technical provisions - life (excluding index-linked and unit-linked)
Technical provisions - health (similar to life)
Technical provisions calculated as a whole
Best Estimate
Risk margin
Technical provisions - life (excluding health and index-linked
and unit-linked)
Technical provisions calculated as a whole
Best Estimate
Risk margin
Technical provisions - index-linked and unit-linked
Technical provisions calculated as a whole
Best Estimate
Risk margin
Other technical provisions
Contingent liabilities
Provisions other than technical provisions
Pension benefit obligations
Deposits from reinsurers
Deferred tax liabilities
Derivatives
Debts owed to credit institutions

R0580
R0590
R0600
R0610
R0620
R0630
R0640

0
0
0
0
0
0
0

R0650

0

R0660
R0670
R0680
R0690
R0700
R0710
R0720
R0730
R0740
R0750
R0760
R0770
R0780
R0790
R0800

0
0
0
0
0
0
0
0
0
2,508
98,753
11,556
537,068
0
0

Financial liabilities other than debts owed to credit institutions

R0810

0

Insurance & intermediaries payables
Reinsurance payables
Payables (trade, not insurance)
Subordinated liabilities
Subordinated liabilities not in Basic Own Funds
Subordinated liabilities in Basic Own Funds
Any other liabilities, not elsewhere shown
Total liabilities

R0820
R0830
R0840
R0850
R0860
R0870
R0880
R0900

57,431
342,784
327,58100
0142,421
2,379,033

R1000

1,592,840

Excess of assets over liabilities

71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)Line of Business for: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

R0110
R0120

Credit and suretyshipinsurance

Total

C0090

C0200

1,537,045
94,596

1,537,045
94,596

R0140
R0200

981,740649,901

981,740649,901

R0210
R0220

1,473,472
90,561

1,473,472
90,561

R0240
R0300

1,059,025
505,007

1,059,025
505,007

R0310
R0320

278,082
69,229278,082
69,229204,189
143,122204,189
143,122245,578245,578

R0130

R0230

R0330
R0340
R0400
R0410
R0420
R0430
R0440
R0500
R0550
R1200
R1300

245,57872

S.05.02.01.03
Total Top 5 and home country - non-life obligations

Home country NETHERLANDS

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

ITALY

UNITED
KINGDOMFRANCEGERMANY

Total Top 5
and home
country
C0140

C0080

C0090

C0090

C0090

C0090

C0090

R0110
R0120

323,5120

127,843
10,109126,930
28

137,411
1,310

137,9780205,238
1,191

1,058,913
12,639

R0130

0

0

0

0

0

0

0

R0140
R0200

224,571
98,941

108,432
29,51981,23245,72685,20953,51374,296
63,682

137,553
68,877711,294360,258

R0210
R0220

309,8230

121,080
10,076116,225
23

134,275
1,238

137,166
0201,208
1,230

1,019,776
12,566

R0230

0

0

0

0

0

0

0

R0240
R0300

237,459
72,364

115,275
15,88084,911
31,336

100,755
34,75881,93655,230150,93151,507771,267
261,074

R0310
R0320

55,645-62

17,4496,438

33,40833

19,056
161

39,5760

48,641-917

213,775
5,653

R0330

0

0

0

0

0

0

0

R0340
R0400

20,956
34,62821,3602,527

28,352
5,089

11,195
8,022

25,207
14,36931,647
16,077

138,71780,712

R0410
R0420

0
0

0
0

0
0

0
0

0
0

0
0

R0430

0

0

0

0

0

0

R0440
R0500
R0550
R1200
R1300

0
0
30,53000-2,5590024,5280012,5500033,4090036,059134,51573

S.17.01.02.01
Non-Life Technical Provisions
Direct business andCredit and suretyshipinsurance
C0100
Technical provisions calculated as a whole
Total Recoverables from reinsurance/SPV and
Finite Re after the adjustment for expected losses
due to counterparty default associated to TP
calculated as a whole
Technical provisions calculated as a sum of BE
and RM
Best estimate
Premium provisions
Gross
Total recoverable fromreinsurance/SPV and Finite Re after
the adjustment for expected losses
due to counterparty default
Net Best Estimate of Premium
Provisions
Claims provisions
Gross
Total recoverable fromreinsurance/SPV and Finite Re after
the adjustment for expected losses
due to counterparty default
Net Best Estimate of Claims
Provisions
Total Best estimate - grossTotal Best estimate - net
Risk margin
Amount of the transitional on Technical
Provisions
Technical Provisions calculated as a whole
Best estimate
Risk margin
Technical provisions - total
Technical provisions - total

Total Non-Life
obligation
C0180

R0010
R0050

R0060

528,782

528,782

R0140

280,264

280,264

R0150

248,518

248,518

R0160

274,102274,102R0240

273,620

273,620

R0250

482

482

R0260
R0270
R0280

802,884
249,000
56,046

802,884
249,000
56,046

R0290
R0300
R0310
R0320

858,930

858,930

Recoverable from reinsurance contract/SPVand Finite Re after the adjustment for expected
losses due to counterparty default - total

R0330

553,884

553,884

Technical provisions minus recoverables fromreinsurance/SPV and Finite Re - total

R0340

305,046

305,04674

S.19.01.21.01
Gross Claims Paid (non-cumulative) - Development year (absolute amount). Total Non-Life Business

COLUMN_AXIS
R0100
R0160
R0170
R0180
R0190
R0200
R0210
R0220
R0230
R0240
R0250

ORD_Y
Prior
N-9
N-8
N-7
N-6
N-5
N-4
N-3
N-2
N-1
N

Accident year / Underwriting
year
Z0020
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]

0

1

2

3

4

5

6

7

8

9

C0010

C0020

C0030

C0040

C0050

C0060

C0070

C0080

C0090

C0100

239,047
316,643
327,875
289,954
314,430
287,198
133,831

571,192
730,578
609,104
699,493930,243796,363
300,935

93,15090,107
131,836
131,075
97,40589,311
113,014

1,413(3,576)
1,780(48,959)
3,981(7,018)(7,969)(9,735)(12,232)(3,181)(17,181)670(4,213)(29,651)(340)(15,497)
9,793(4,612)(11,892)(10,974)816(17,148)(8,084)(2,906)(7,489)(6,637)(9,549)10 & +
C0110(290,948)(5,852)

S.19.01.21.02
Gross Claims Paid (non-cumulative) - Current year, sum of years (cumulative). Total Non-Life Business

COLUMN_AXIS ORD_Y
Prior
R0100
N-9
R0160
N-8
R0170
N-7
R0180
N-6
R0190
N-5
R0200
N-4
R0210
N-3
R0220
N-2
R0230
N-1
R0240
N
R0250
Total
R0260

Accident year / Underwriting
year
Z0020
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]

In Current year
C0170
(23,193)(5,852)(9,549)(7,489)(17,148)(4,612)(4,213)(7,969)113,014300,935
133,831467,753

Sum of years(cumulative)
C0180(290,948)(70,437)
53,573
637,727
1,027,967
1,056,860
1,113,542
1,301,539
1,223,807
588,132
133,8316,775,59475

S.19.01.21.03
Gross undiscounted Best Estimate Claims Provisions - Development year (absolute amount). Total Non-Life Business

COLUMN_AXIS
R0100
R0160
R0170
R0180
R0190
R0200
R0210
R0220
R0230
R0240
R0250

ORD_Y
Prior
N-9
N-8
N-7
N-6
N-5
N-4
N-3
N-2
N-1
N

Accident year / Underwriting
year
Z0020
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]

0

1

2

3

4

5

6

7

8

9

C0200

C0210

C0220

C0230

C0240

C0250

C0260

C0270

C0280

C0290

(33,707)(39,657)(23,124)(43,725)(97,231)(41,368)(17,121)(44,421)(15,542)(34,600)(63,729)(17,143)(30,141)(5,785)(21,608)(7,169)(13,585)(1,543)

152,685
196,945
245,173
263,862
367,311
328,665

46,156(21,237)
8,937(31,983)
100,113
105,914(8,481)(79,954)(110,931)(92,492)(62,633)(3,878)(48,260)(14,096)(52,459)(111,805)(54,099)(47,836)(747)(6,663)10 & +
C0300(6,903)

7,997

S.19.01.21.04
Gross discounted Best Estimate Claims Provisions - Current year, sum of years (cumulative). Total Non-Life Business

COLUMN_AXIS
Prior
N-9
N-8
N-7
N-6
N-5
N-4
N-3
N-2
N-1
N
Total

ORD_Y
R0100
R0160
R0170
R0180
R0190
R0200
R0210
R0220
R0230
R0240
R0250
R0260

Accident year / Underwriting
year
Z0020
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]
Underwriting year [UWY]

Year end (discounted data)
C0360
114,346
7,838(6,809)(1,826)(21,936)(62,975)(41,752)(47,969)(3,840)104,803
328,037
367,91876

S.23.01.01.01
Own Funds
Tier 1 unrestricted
C0020

Total
C0010
Basic own funds before deduction for participations in other financial sector as foreseen
in article 68 of Delegated Regulation 2015/35
Ordinary share capital (gross of own shares)
R0010
Share premium account related to ordinary share capital
R0030
Initial funds, members' contributions or the equivalent basic own - fund item for
R0040
mutual and mutual-type undertakings
Subordinated mutual member accounts
R0050
Surplus funds
R0070
Preference shares
R0090
Share premium account related to preference shares
R0110
Reconciliation reserve
R0130
Subordinated liabilities
R0140
An amount equal to the value of net deferred tax assets
R0160
Other own fund items approved by the supervisory authority as basic own funds not
R0180
specified above
Own funds from the financial statements that should not be represented by thereconciliation reserve and do not meet the criteria to be classified as Solvency II own
funds
Own funds from the financial statements that should not be represented by thereconciliation reserve and do not meet the criteria to be classified as Solvency II own R0220
funds
Deductions
Deductions for participations in financial and credit institutions
R0230
Total basic own funds after deductions
R0290
Ancillary own funds
Unpaid and uncalled ordinary share capital callable on demand
R0300
Unpaid and uncalled initial funds, members' contributions or the equivalent basic own
R0310
fund item for mutual and mutual - type undertakings, callable on demand
Unpaid and uncalled preference shares callable on demand
R0320
A legally binding commitment to subscribe and pay for subordinated liabilities on
R0330
demandLetters of credit and guarantees under Article 96(2) of the Directive 2009/138/EC
R0340
Letters of credit and guarantees other than under Article 96(2) of the Directive
R0350
2009/138/EC
Supplementary members calls under first subparagraph of Article 96(3) of theR0360
Directive 2009/138/EC
Supplementary members calls - other than under first subparagraph of Article 96(3) ofR0370
the Directive 2009/138/EC
Other ancillary own funds
R0390
Total ancillary own funds
R0400
Available and eligible own funds
Total available own funds to meet the SCR
R0500
Total available own funds to meet the MCR
R0510
Total eligible own funds to meet the SCR
R0540
Total eligible own funds to meet the MCR
R0550
SCR
R0580
MCR
R0600
Ratio of Eligible own funds to SCR
R0620
Ratio of Eligible own funds to MCR
R0640

Tier 1 - restricted

Tier 2Tier 3

C0030

C0040

C0050

24,87061,231

24,87061,231001,506,739

1,506,739

1,592,840

1,592,840

0001,592,840
1,592,840
1,592,840
1,592,840

0
0
0
0

0
0
0
0

0

0
1,592,840
1,592,840
1,592,840
1,592,840
838,749
209,687
189.91%759.63%077

S.23.01.01.02
Reconciliation reserve
C0060
Reconciliation reserve
Excess of assets over liabilities
R0700
Own shares (held directly and indirectly)
R0710
Foreseeable dividends, distributions and charges
R0720
Other basic own fund items
R0730
Adjustment for restricted own fund items in respect of matching adjustment portfolios
R0740
and ring fenced funds
Reconciliation reserve
R0760
Expected profits
Expected profits included in future premiums (EPIFP) - Life business
R0770
Expected profits included in future premiums (EPIFP) - Non-life business
R0780
Total Expected profits included in future premiums (EPIFP)
R0790

1,592,840
0086,1010
1,506,739

109,179
109,179

S.25.02.21.01
Component-specific information

Unique number
Components Descriptionof component
C0010
1
2
5
7
9

C0020
Market Risk
Counterparty default risk
Non-life underwriting risk
Operational risk
LAC Deffered Taxes

Calculation of
the Solvency
CapitalRequirement
C0030
327,451
103,789
724,556
48,334-133,599

Amountmodelled
C0070
00668,668
0
0

USP
C0090
Don´t use undertaking specific parameters
Don´t use undertaking specific parameters
Don´t use undertaking specific parameters
Don´t use undertaking specific parameters
Don´t use undertaking specific parameters

Simplifications
C0120
Simplifications not used
Simplifications used
Simplifications not used
Simplifications not used
Simplifications not used78

S.25.02.21.02
Calculation of Solvency Capital Requirement

Total undiversified components
Diversification
Capital requirement for business operated inaccordance with Art. 4 of Directive
2003/41/EC
Solvency capital requirement excluding capital
add-onCapital add-ons already set
Solvency capital requirement
Other information on SCR
Amount/estimate of the overall lossabsorbing capacity of technical provisions
Amount/estimate of the overall lossabsorbing capacity of deferred taxes
Capital requirement for duration-based
equity risk sub-module
Total amount of Notional Solvency Capital
Requirements for remaining part
Total amount of Notional Solvency Capital
Requirement for ring fenced funds
Total amount of Notional Solvency Capital
Requirement for matching adjustment
portfolios
Diversification effects due to RFF nSCR
aggregation for article 304

R0110
R0060

C0100
1,070,532-231,783

R0160

0

R0200

838,749

R0210
R0220

0
838,749

R0300
R0310

-133,599

R0400
R0410
R0420

R0430
R0440

S.25.02.21.03
Approach to tax rate

Approach based on average tax rate

R0590

Yes/NoC0109
Approach not based on average tax rate79

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

Amount/estimate of LAC DT
Amount/estimate of LAC DT justified byreversion of deferred tax liabilities
Amount/estimate of LAC DT justified byreference to probable future taxable
Amount/estimate of AC DT justified bycarry back, current year
Amount/estimate of LAC DT justified bycarry back, future years
Amount/estimate of Maximum LAC DT

R0640

LAC DT
C0130-133,599

R0650

84,887R0660

47,356

R0670

1,356

R0680

0

R0690

-231,015

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 obligations

MCRNL Result

R0010

MCR
components
C0010
111,02880

S.28.01.01.02
Background information
Background information
Net (of
Net (ofreinsurance/SP reinsurance)V) bestwrittenestimate and premiums in
TP calculated
the last 12
as a wholemonths
C0020
C0030
Medical expense insurance and proportional reinsurance
Income protection insurance and proportional reinsurance
Workers' compensation insurance and proportional reinsurance
Motor vehicle liability insurance and proportional reinsurance
Other motor insurance and proportional reinsurance
Marine, aviation and transport insurance and proportional reinsurance
Fire and other damage to property insurance and proportional reinsurance
General liability insurance and proportional reinsurance
Credit and suretyship insurance and proportional reinsurance
Legal expenses insurance and proportional reinsurance
Assistance and proportional reinsurance
Miscellaneous financial loss insurance and proportional reinsurance
Non-proportional health reinsurance
Non-proportional casualty reinsurance
Non-proportional marine, aviation and transport reinsurance
Non-proportional property reinsurance

R0020
R0030
R0040
R0050
R0060
R0070
R0080
R0090
R0100
R0110
R0120
R0130
R0140
R0150
R0160
R0170

249,000

592,520

S.28.01.01.05
Overall MCR calculation

Linear MCR
SCR
MCR cap
MCR floor
Combined MCR
Absolute floor of the MCR
Minimum Capital Requirement

R0300
R0310
R0320
R0330
R0340
R0350
R0400

C0070
111,028
838,749
377,437
209,687
209,687
3,700
209,68781

F-3 Overview of subsidiaries
and minority shareholdings
The following table sets forth, as at 31
December 2021, 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.

82

F-4 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, as a result, it does not83represent an 'economic value' under
Solvency II that can be separately sold ortransferred 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

Pre-designed
purchased
softwareapplications (i.e. ‘off the shelf’ software
licenses) cannot be sold to another user.

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.

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.

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

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 most84

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.

85

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.

86

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
87

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:Cash comprises cash at hands (including
borrowings) and deposits on demand (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
•
•
•
•
•

pre-payments
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

Cash equivalents correspond to shortterm, highly liquid investments that arereadily convertible to known amounts ofcash and which are subject to an
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.

88

The cash and cash equivalent (including
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: amounts of income
taxes payable in future periods in respectof taxable temporary differences.
Deferred tax assets: amounts of income
taxes recoverable in future periods inrespect of:• deductible temporary differences• the carry forward of unused tax losses• 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.

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.

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). These valuation
principles reminds under Solvency II.

The Company, when preparing the annual
statements, differentiate between:•

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.

While measuring deferred tax assets thetime horizon of profit and losses must be
taken into account for the reversal period.
Non-underwriting provisions••

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 isconditional upon the occurrence or
non-occurrence of one or more future
eventsindependentfromtheCompany's will.

89

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.

Employee benefits assets/liabilities
Post-employment benefit plans are
determinedbyperiodic
actuarial
calculations and are generally fundedthrough payments to state plans,
insurancecompaniesortrusteeadministered funds.
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.
Defined benefit plans
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 andcompensation. 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.
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.
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 thebenefits will be paid and that have terms of
maturity that approximate the terms of therelated pension liability.
90

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.

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.
Termination benefits are recognised when
the Company is demonstrably committed
to either terminating the employment of
current employees according to a detailed

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 thefinancial statements under PCEA. For
Solvency II purposes, the IFRS (IAS 37)
definition of a contingent liability is used:‘A possible obligation that arises from past
events and whose existence will be91

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 2021, consisting of 92
pages numbered from 1 to 92.
Madrid, 7th of April, 2022
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.

92