Aviva 2007 Annual Report Download - page 230
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Please find page 230 of the 2007 Aviva annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.55 – Risk management continued
(d) Liquidity risk
The Group has a strong liquidity position and through the application of a Group Liquidity Management policy seeks to
maintain sufficient financial resources to meet its obligations as they fall due. In addition to its strong liquidity position, the
Group maintains significant committed borrowing facilities from a range of highly rated banks to further mitigate this risk.
Analysis of maturity of liabilities
For non-linked insurance business, the following table shows the gross liability at 31 December 2007 analysed by
remaining duration. The total liability is split by remaining duration in proportion to the cash-flows expected to arise during
that period, as permitted under IFRS4 Insurance Contracts.
Almost all investment contracts may be surrendered or transferred on demand. For such contracts the earliest contractual
maturity date is therefore the current balance sheet date, for a surrender amount approximately equal to the current
balance sheet liability. Although we expect surrenders, transfers and maturities to occur over many years, the total liability
for non-linked investment contracts is shown in the Within 1 year column below. Unit-linked contracts are repayable or
transferable on demand and therefore excluded from this analysis.
At 31 December 2007
Within
Total 1 year 1-5 years 5-15 years Over 15 years
£m £m £m £m £m
Long-term business
Insurance contracts – non linked 106,758 9,480 27,726 44,305 25,247
Investment contracts – non linked 45,492 45,492 – – –
General insurance and health 18,653 8,325 7,517 2,666 145
At 31 December 2006
Within
Total 1 year 1-5 years 5-15 years Over 15 years
£m £m £m £m £m
Long-term business
Insurance contracts – non linked 99,482 9,140 25,959 40,651 23,732
Investment contracts – non linked 41,578 41,578 – – –
General insurance and health 18,006 8,482 6,824 2,617 83
A maturity analysis of borrowings is given in note 47
(e) Insurance risk
(i) Life insurance risk
Types of risk
Life insurance risk in the Group arises through its exposure to mortality and morbidity insurance and exposure to worse
than anticipated operating experience on factors such as persistency levels and management and administration expenses.
Risk management framework
The Group has developed a life insurance risk policy and guidelines on the practical application of this policy. Individual life
insurance risks are managed at a business unit level.
The management of life insurance risk is undertaken primarily in business units but is also monitored at Group level.
The impact of life insurance risks is monitored by the business units as part of the control cycle of business management.
Exposure is monitored through the assessment of liabilities, the asset liability management framework, profit reporting
(under both IFRS and EEV), financial condition reporting, and the ICA process. Significant insurance risks will be reported
through the Group Risk Monitoring framework and overseen by the Life Insurance Risk Committee. At Group level the
overall exposure to life insurance risk is measured through the ICA, FCRs, and other management reporting.
The Life Insurance Risk Committee monitors the risk framework developed and implemented in each business, and
receives management information on life insurance risks. The committee considers all areas of life insurance risk, but in
particular has a remit to monitor mortality, longevity, morbidity, persistency, pricing, unit pricing and expenses.
The committee also considers the reinsurance coverage across the life businesses. It confirms that guidance and procedures
are in place for each of the major components of life insurance risk, and that businesses adopt a risk management
framework to mitigate against any life insurance risk outside local appetite, within the parameters for the overall Group
risk appetite. The framework adopted in business units is reviewed in detail and approved twice yearly.
The committee has also developed guidance for business units on management of a number of areas of life insurance risk
to ensure best practice is shared throughout the group and common standards are adopted.
Aviva plc
Annual Report and
Accounts 2007
226
Financial
statements
Notes to the consolidated financial statements continued