ECIC AR 2024 9TH

E

D

H

S

I

L I

N

B

2

0

A

0

T

S

1

E

Integrated Report 2024

E X P O R T C R E

L T D

O C

A S

C

R I

D I

F

T

A

I

N

H

S

T

U

U

R

O

A

S

N

F

C

O

E

N

C

O

O

I

R

T

P

A

O

R

Risk Appetite The Board together with management have crafted the Corporation’s risk appetite as stipulated in the Risk Management Strategy, as per below.

Table 17: Risk appetite

Breach (Y/N)

Core Principle

Risk Appetite Statement

Measure

Self-Sustaining on a standalone basis

The Corporation shall grow the business by maintaining a capital buffer above SCR and EC. The Maximum Insurance Capacity that can be sustained by the available capital. The maximum combined loss (gross of claim salvages) of a single event from exposures in a single country. The maximum combined loss (gross of claim salvages) of a single event from exposures in an industry. The maximum loss (gross of claim salvages) of a single obligor/project. The Corporation will manage or avoid situations / actions that could have a negative effect on its reputation and brand. To ensure liquidity risk is kept low, the Corporation shall ensure that its insurance liquidity ratio (ILR) does not fall below set limit.

The SCR and EC cover ratios shall not fall below 115% and 110% respectively The Maximum Insurance Capacity is 10 times multiple of equity. This limit is subject to both EC and SCR cover ratio limits. US$696 million loss (US$313 million loss net of salvages) 1

N

Maximum underwriting capacity

N

N

Country concentration risk

Industry concentration risk

US$696 million loss (US$313million loss net of salvages)

N

N

Obligor concentration risk

US$313 million loss (at a 100% LGD) 2

Protect reputation and brand

N/A

N

Liquidity risk

ILR>100%

N

1 The claim salvages are assumed to be 55% i.e., 45% LGD as per the highest expected for securitized investment insurance transactions. 2 Should an exposure be underwritten above this limit, a lower LGD must be justified.

The above solvency-derived risk appetite limits are the utmost maximum or high watermark in terms of possible risk exposure under the different measures. The Corporation is in the process of reviewing its risk appetite framework to ensure operative limits that take cognisance of potential convergence and/or intersection of disparate risk factors that could potentially result in higher aggregate exposures playing out simultaneously. At a macro level, the Corporation is exposed to global economic shocks that have a knock-on

effect on the demand of South African exports globally and to Africa in particular. In the post pandemic world, most countries have been left with elevated debt levels arising from their respective fiscal allocations to finance pandemic containment measures on one hand. On the other hand, persistently high global inflation has resulted in monetary policy normalisation in most developed economies, with a resultant high cost of borrowing. The confluence of high debt and high borrowing costs have seen a sharp rise in the risk of sovereign default in one country within the ECIC portfolio.

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