TIO Group Statement of Corporate Intent 1 July 2014 to 30 June 2017
Tabled paper 992
Tabled Papers for 12th Assembly 2012 - 2016; Tabled Papers; ParliamentNT
2014-08-21
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Made available by the Legislative Assembly of the Northern Territory under Standing Order 240. Where copyright subsists with a third party it remains with the original owner and permission may be required to reuse the material.
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Tabled papers
TIO Group
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https://www.legislation.gov.au/Details/C2019C01121
https://hdl.handle.net/10070/274964
https://hdl.handle.net/10070/424707
6 TIO Group Risk Profile TIO seeks to continually evolve its understanding of risk and the management of its risk profile. To assist in this process TIO undertakes Dynamic Financial Analysis (DFA) modelling which aims to identify the key sources of volatility in the Insurance and MAC scheme businesses and assist in understanding how these can be managed and mitigated through the use of varying capital and reinsurance strategies. The DFA model has been calibrated to represent TIO's business profile. It is a quantitative method of analysing and understanding the large number of interrelated dynamics and sources of risks within TIO and the flow on effect of those decisions impacting the bottom line. TIO's key drivers of volatility: Investment Stock market Asset & liability management Claims Catastrophic loss Risk Profile Business Under writing Operational risk Economy Interest rate Inflation TIO's key driver of volatility remains its exposure to underwriting risk - especially in the long tail classes of Workers Compensation and Motor Accidents Compensation where claims outcomes stretch over more than one year. In addition underwriting risk is heightened by the significant exposure TIO holds to catastrophic weather events - primarily in the form of cyclonic risk in Darwin. Once again TIO's lack of diversification and concentration of risk in the Territory magnifies this risk. Both Insurance and the MAC scheme are exposed to the volatility of the investment markets through the management of their prudential capital and policy holder reserves. In seeking to manage the interrelationships between these key drivers TIO deploys strategies in respect to its Reinsurance program which affects both catastrophic and attritional risks, as well as managing its investment portfolios to a Strategic Asset Allocation. As a result of the DFA modelling review of the business, the Board and Management have set divisional risk appetites. This is expressed as a probability of breaching the Regulatory Minimum Capital Requirement stated in the ICAAP of each division. For Insurance this has been expressed as a 5% probability or 1:20 year chance of breaching the Regulatory Minimum Capital Requirements of PCR of 120%. TIO Group Statement of Corporate Intent 9