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## Risk management 

## General 

As an insurance group, Aegon manages risk on behalf of its customers and other stakeholders. As a result, the company is exposed to a range of underwriting, operational and financial risks. Aegon’s risk management and control systems are designed to ensure that these risks are managed effectively and efficiently in a way that is aligned with the company’s strategy. 

## Definition and tolerances 

For Aegon, risk management involves: 

■ Understanding which risks the company is able to underwrite; 

■ Establishing a company-wide framework through which the risk-return trade-off associated with these risks can be assessed; 

■ Establishing risk tolerances and supporting policies to limit exposure to a particular risk or combination of risks; 

■ Measuring and monitoring risk exposures and actively maintaining oversight of the company’s overall risk and solvency positions. 

By setting certain predefined tolerances and adhering to policies that limit the overall risk to which the company is exposed, Aegon is able to accept risk with the knowledge of potential returns and losses 

## Objectives of risk management 

Aegon’s risk strategy provides direction for the targeted Aegon risk profile while supporting the Aegon business strategy. The targeted risk profile is determined by customer need, Aegon’s competence to manage the risk, the preference of Aegon for the risk and whether there is sufficient capacity to take the risk. Key inputs for our risk preferences include expected returns, alignment with customer interests, the existing risk exposures and other risk characteristics. 

Next to the targeted risk profile, risk tolerances and limits are established to ensure that Aegon maintains, at all times, a solvency and liquidity position such that no plausible scenario would cause the company to default on its obligations to policyholders. To accomplish this, Aegon has established a number of risk criteria and tolerances as part of its risk strategy: 

■ Financial strength: Ensure Aegon meets long-term obligations to policyholders and to enable Aegon to compete in key markets as a financially strong global insurer; 

■ Continuity: Ensure that Aegon meets policyholder obligations, even under extreme event scenarios; 

■ Culture: Encourage a strong risk awareness by stressing the company’s low tolerance for operational risk. This helps to improve operational excellence and ensures that the company is fair in its treatment of customers and other stakeholders; 

■ Risk balance: Manage the concentration of risk and encourage risk diversification within Aegon. 

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## Aegon’s risk governance framework 

Aegon has a strong culture of risk management, based on a clear, well-defined risk governance. The goals of this risk governance are: 

■ To minimize ambiguity by clearly defining roles and responsibilities and risk reporting procedures for decision makers; 

■ To institute a proper system of checks and balances, and to ensure that senior management is aware at all times of material risk exposure; 

■ To manage risk in line with the targeted risk profile, including the avoidance of an over-concentration of risk in particular areas; 

■ To facilitate diversification by enabling management to identify diversification benefits from apparent risk-return trade-offs; 

■ To reassure external stakeholders that Aegon has appropriate risk management structures and controls in place. 

## Governance structure 

Aegon’s risk management framework is represented across all levels of the organization. This ensures a coherent and integrated approach to risk management throughout the company. Similarly, Aegon has a comprehensive suite of company-wide risk policies, which detail specific operating guidelines and limits. These policies are designed to keep overall risk-specific exposures to a manageable level. Any breach of policy limits or warning levels triggers immediate remedial action or heightened monitoring. Further risk policies may be developed at a local level to cover situations specific to particular regions or business units. Aegon’s risk management governance structure has three basic layers: 

■ The Supervisory Board (SB) and the Supervisory Board Risk Committee (SBRC); 

■ The Executive Board (EB) and the Management Board (MB); 

■ The Enterprise Risk Management Committee (ERMC) and the Group Risk & Capital Committee (GRCC). 

Additionally, there are working groups and regional committees which support the ERMC and GRCC. 

Aegon’s EB has overall responsibility for risk management. The EB adopts the risk strategy, risk governance, risk tolerance and material changes in risk methodology and risk policies. The Group Chief Risk Officer (CRO) attends EB meetings and has a direct reporting line to the SB to discuss enterprise risk management and related matters, and is a member of the MB. 

The MB oversees a broad range of strategic and operational issues. While the EB remains Aegon’s statutory executive body, the MB provides vital support and expertise in safeguarding Aegon’s strategic goals. The MB discusses and sponsors 

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