BBVA in 2013

Insurance and fund administration activities

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The risk functions in the insurance activities and mutual fund administration are integrated into the Retail Banking GRM unit in order to assist the business in managing its risks, while supporting its strategy and development. Hence, Retail Banking GRM centralizes the management of these risks through the corporate Insurance & Prevision and Asset Management & Fiduciary Risk units, whose main task is to establish the risk strategy for these activities.

Management of these risks is carried out according to the general principles of GRM: single, independent and global function, following the relationship model between the corporate area and the risk units of the business areas. Under this model, Insurance & Prevision and Asset Management & Fiduciary Risk are global risk units responsible for determining the risk policies, methodologies and tools. They also monitor risks in close cooperation with the business units, with whom they collaborate and coordinate risk-related activities. The risk units of the business areas develop the procedures aligned with the established corporate policies, adapting them to the specific nature of the local markets and the characteristics of their own activity. They also execute the processes and controls needed to verify their implementation and the effectiveness in mitigating and controlling the risks.

Economic capital is the standard metric for estimating risk in the BBVA Group and the basis for calculating attributable profit and risk-adjusted return.

The economic capital of the insurance activity in 2013 stood at €864m. Of this amount, credit risk accounts for 48%, insurance risk for 26% and market risk for 18%.

Insurance companies. Economic capital breakdown
by type of risk

(31-12-2013. Percentage)

In the area of mutual and pension fund administration, economic capital at the close of 2013 stood at €259m, being market risk the most relevant and guarantee risk its main component.

Asset Management & Fiduciary Risk. Economic capital
breakdown by type of risk

(31-12-2013. Percentage)