Risk Management

The overall risk management and internal control principles as well as divisions of responsibilities of the insurance subsidiaries are defined on the Sampo Group level. The insurance subsidiaries organise their operations according to these principles while taking into account the specific characteristics of the respective business area.

Risk Management Principles

Risk is an essential and inherent element of Sampo Group´s business activities and operating environment. A high quality risk management process is a prerequisite for running the business. The core competence in Sampo Group's businesses is the pricing of risks and the proper management of the arising risk exposures.

In Sampo Group the key objectives for risk management are to:

• ensure that risks affecting profitability as well as other material risks are identified, assessed and analysed;
• ensure that risks are properly priced and that risk bearing capacity is correctly allocated into different business areas;
• ensure that risk buffers - in the form of capital and foreseeable profitability of businesses - are adequate in relation to the current risks inherent in business activities and existing environment;
• limit and mitigate fluctuations in the economic values of group companies; and
• ensure the overall efficiency, security and continuity of operations.

To meet these objectives, Sampo Group's risk management process includes the tasks described in the figure.

Risk Governance

The reporting of Sampo Group is divided into three segments, which are P&C insurance, life insurance and holding. These segments correspond to the legal entities of If P&C, Mandatum Life and Sampo plc respectively.

If P&C and Mandatum Life organise their activities autonomously but in accordance with the Group level risk management principles. The Board of Directors of Sampo plc, the parent company, defines return and capitalisation targets of the subsidiaries. The risk exposures and capitalisation of the subsidiaries are consolidated on the Group level on a quarterly basis and reported to the Board and Audit Committee of Sampo plc.

The roles and responsibilities of different governing bodies in Sampo Group and individual subsidiaries are described in more detail in Sampo's Online Annual Report 2009.