Barclays 2014 Annual Report Download - page 185

barclays.com/annualreport Barclays PLC Annual Report 2014 I 183
17.1%
24.1%
24.6%
18.8%
11.3%
4.2%
Proportion of liability cash flows
0-10 years
11-20 years
21-30 years
31-40 years
41-50 years
51 years +
Risk measurement
In line with the Group’s risk management framework, the assets and liabilities of the UKRF are modelled within a VaR framework to show the
volatility of the pension positions on a total portfolio level. This ensures that the risks, diversification benefits and liability matching characteristics
of the UKRF obligations and investments are adequately captured. VaR is measured and monitored on a monthly basis at the pension risk fora
such as the Market Risk Committee, Pension Management Group and Pensions Executive Board. The VaR model takes into account the valuation
of the liabilities based on an IAS 19 basis (see Note 35 to the financial statements). The trustees, receive quarterly VaR measures on a funding
basis.
The pension liability is also sensitive to post-retirement mortality assumptions. See Note 35 to the financial statements for more details.
In addition to this, the impact of pension risk to the Group is taken into account as part of the stress testing process. Stress testing is performed
internally at least on an annual basis, covering scenarios such as European economic crisis and quantitative easing. The UKRF exposure is also
included as part of the regulatory stress tests and exercises indicated that the UKRF risk profile is resilient to severe stress events.
The defined benefit pension scheme affects capital in two ways. The IAS 19 deficit impacts the CET1 capital ratio. Pension risk is also taken into
account in the Pillar 2 capital assessment.
Triennial valuation
Please see Note 35 to the financial statements for information on the current position of the fund.
Insurance risk review
Insurance risk is managed within Africa Banking. From an economic capital perspective, four significant categories of insurance risk are reported.
Please see page 146 in Barclays PLC Pillar 3 Report for definitions and governance procedures.
The risk figures are based on economic capital principles and refer to 1 in 250 event levels. The underwriting risk appetite for short term insurance
for 2014 was calculated based on the projected net written premium. See page 146 in Barclays PLC Pillar 3 Report for a description of the risks and
a discussion of their measurement.
The year-on-year utilisation (as a percentage of approved appetite) remained relatively stable, except for life insurance mismatch risk which is
explained below. The risk types below include the assessments of the main insurance risks for determining the economic capital requirements.
As at 31 December
2014 2013
Position
£m
Appetite
£m
Position
£m
Appetite
£m
Short term insurance underwriting risk 40 44 40 51
Life insurance underwriting risk 21 28 22 26
Life insurance mismatch risk 16 40 17 44
Life and short-term insurance investment risk 12 14 12 16
Risk positions were broadly stable over the year. The life insurance mismatch risk utilisation was lower than appetite as a refined actuarial
valuation methodology was implemented. This model refinement resulted in a better matching position between assets and liabilities resulting in
a desired lower mismatch for 2014 compared to 2013.
The Strategic Report Financial review Financial statements Shareholder information
Risk review
Governance