HSBC 2015 Annual Report Download - page 182

Report of the Directors: Risk (continued)
Risk management of insurance operations
HSBC HOLDINGS PLC
180
Risk management of insurance operations
Page App1Tables
P
age
HSBC’s bancassurance model 180
Overview of insurance products 219
Nature and extent of risks 220
Risk management of insurance manufacturing
operations in 2015 181
Asset and liability matching 181 Balance sheet of insurance manufacturing subsidiaries by:
–
type of contrac
t
181
–
geographical region 182
Movement in total equity of insurance operations 183
Financial risks 183 220 Financial assets held by insurance manufacturing
subsidiaries 184
Market risk 184 220 Financial return guarantees 185
Sensitivity of HSBC’s insurance manufacturing
subsidiaries to market risk factors 185
Credit risk 185 222 Treasury bills, other eligible bills and debt securities in
HSBC’s insurance manufacturing subsidiaries 186
Reinsurers’ share of liabilities under insurance contracts 187
Liquidity risk 187 222 Expected maturity of insurance contract liabilities 187
Remaining contractual maturity of investment contract
liabilities 187
Insurance risk 188 223
A
nalysis of insurance risk
–
liabilities under insurance
contracts 188
Sensitivities to non-economic assumptions 188 Sensitivity analysis 188
1
A
ppendix to Risk
–
p
olicies and practices.
The majority of the risk in our insurance business
derives from manufacturing activities and can be
categorised as financial risk and insurance risk.
Financial risks include market risk, credit risk and
liquidity risk. Insurance risk is the risk, other than
financial risk, of loss transferred from the holder
of the insurance contract to the issuer (HSBC).
There were no material changes to our policies and
practices for the management of risks arising in the
insurance operations in 2015.
A summary of HSBC’s policies and practice regarding the risk
management of insurance operations and the main contracts
we manufacture is provided in the Appendix to Risk on page 219.
HSBC’s bancassurance model
We operate an integrated bancassurance model which
provides insurance products principally for customers with
whom we have a banking relationship. Insurance products
are sold through all global businesses, but predominantly
by RBWM and CMB through our branches and direct
channels worldwide.
The insurance contracts we sell relate to the underlying
needs of our banking customers, which we can identify
from our point-of-sale contacts and customer knowledge.
The majority of sales are of savings and investment
products and term and credit life contracts.
By focusing largely on personal and SME lines of business
we are able to optimise volumes and diversify individual
insurance risks.
We choose to manufacture these insurance products in
HSBC subsidiaries based on an assessment of operational
scale and risk appetite. Manufacturing insurance allows us
to retain the risks and rewards associated with writing
insurance contracts by keeping part of the underwriting
profit and investment income within the Group.
Where we do not have the risk appetite or operational
scale to be an effective insurance manufacturer, we engage
with a handful of leading external insurance companies
in order to provide insurance products to our customers
through our banking network and direct channels. These
arrangements are generally structured with our exclusive
strategic partners and earn the Group a combination of
commissions, fees and a share of profits.
We distribute insurance products in all of our geographical
regions. We have life insurance manufacturing subsidiaries
in nine countries (Argentina, mainland China, France, Hong
Kong, Malaysia, Malta, Mexico, Singapore and the UK). We
also have a life insurance manufacturing associate in Saudi
Arabia and a joint venture in India.
The life insurance manufacturing entities in Brazil were
classified as held for sale during the period, following the
announcement of our plan to sell our operations in the
country.
The disposal of HSBC Life (UK)’s pensions business, which
was agreed during 2014, was completed in August 2015.