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Strengthening Risk Management

Cathay Life upholds the Principles for Sustainable Insurance (PSI) and has incorporated ESG issues into our daily operations. We monitor and promptly respond to potential operational, financial, and emerging risks in relation to environmental or social trends. We have established a complete risk assessment process, goals, and response plans through enterprise risk management (ERM), ensuring the smooth operation of risk management mechanisms, while mitigating the negative impacts of risks when they occur.

Established in 2010 and directly subordinated to the Board of Directors. The Chairman of the committee is served by an independent director. The committee consists of several board members as well as functional supervisors, including the President, the Executive Vice President, the Senior Vice President of the finance and investment system, the Senior Vice President of the operation and management system, and the Chief Risk Officer (CRO). The committee convenes quarterly meetings. The Risk Management Department periodically submits work reports on risk management to the Committee for review and reports to the Board of Directors. The Risk Management Committee is also the highest-level supervision organization in the company that manages and monitors climate risks and opportunities.

Cathay Life collaborated with experts and academics from various countries and cross disciplines in establishing quantitative models for financial risks and emerging risks in 2005, such as: financial distress prediction models, various empirical models of incidence rate, smart insurance policy analysis, claims and abnormality detection, and anti-money laundering models. We have developed over 43 models as of the end of 2021.

  • Financial Risk Model： Establish all-around financial risk quantification models including the asset valuation model, stochastic market risk factors model, credit default model, asset/liability matching model, R&D on dynamic hedging strategies, thereby developing a comprehensive model for solvency assessment.
  • Operational Risks Model： Establish relevant operational risk models, such as: loan default and appraisal, underwriting and claims, anti-money laundering, mortality rate, hospitalization rate, surgery incidence rate, critical illness incidence rate, and risk rating models, in order to give operational risk warnings in advance.
  • Emerging Risk Model： Establish relevant risk quantification models, such as: monitoring long-term care incidence rate and analyzing the effects of talking walks on morbidity in response to the aging of the population, and creating models for evaluating the effects of climate change on mortality/morbidity rate to analyze the changes and impacts of future trends.

Cathay Life has engaged in international exchanges and learned from the experience of others, so as to reinforce our professional skills and strengthen our risk assessment abilities to prepare for the transition to IFRS 17. We have also engaged in discussions with domestic academics, the Taiwan Insurance Institute, and competent authorities in hopes of facilitating the establishment of an accounting system that not only complies with the international framework, but also suits Taiwan's industry characteristics. Cathay Life is formulating business strategies and implementing systems to successfully transition to IFRS 17.

Furthermore, Cathay Life began voluntarily participating in the field testing of the Insurance Capital Standards (ICS), which was proposed by the IAIS, in 2015 to get a head start on understanding trends in international capital supervision. During the field testing process, we made constructive proposals in response to the regional characteristics of Taiwan, such as long-term debts, so that the ICS can reasonably reflect on the solvency of life insurance companies in Taiwan.

Cathay Life continues to refine the information security management system to enhance our ability to defend and protect in response to various risks associated with information security and personal data, ensuring customer privacy and the Company’s information confidentiality. In addition to the information security system and customer information management mechanisms, we established the dedicated Information Security Department in April 2018, to enhance strategic planning and technological management of information security. Furthermore, in 2020, through active participation and in-depth intervention in four dimensions—system management, information security, control measure, risk warning, and crisis communication management—we seek to achieve early warnings and quick responses. In 2021, employees from the Information Security Department completed the relevant training of 15 hours per person to acquire the necessary professional skills. Under such a rigorous information security management framework, Cathay Life found no significant information security event in 2020.

Implementing Operational Integrity

Integrity, Accountability, and creativity are the core values of Cathay Life. We strive to form a corporate culture of emphasizing legal compliance, in order to implement operational integrity and enhance our control and response to information security issues, as well as anti-money laundering (AML) and countering the financing of terrorism (CFT) via rigorous organization and system. In 2020, the "Ethical Corporate Management Procedure and Code of Conduct" was promulgated so that every employee is able to implement the legal compliance, information security as well as AML/CFT in daily operations and services.

Cathay Life establishes systematic channels for the dissemination of laws and regulations, control, and education to raise our employees’ awareness, ensure legal compliance for all businesses, and reduce the probability of operational risks. In 2021, we have completed the optimization of the legal compliance management system, and integrated the Legal compliance assessment and examination to improve the effectiveness of legal compliance.

Cathay Life has established and passed a comprehensive AML/CFT policy. We have also established our Anti-Money Laundering and Counter-Terrorist Financing Committee. Through the participation and directions of senior executives, along with the cooperation of task forces across departments, and external advisories, we continue to optimize our AML/CFT risk management mechanism and support the government's promotion of AML/CFT.