Just Group plc | Annual Report and Accounts 2024
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PRINCIPAL RISKS AND UNCERTAINTIES
Risks and uncertainties are presented in this report in two separate sections: (1) the first section summarises the Group’s ongoing principal risks and how they are managed in business as usual; and (2) the second section calls out the risk outlook for subjects that are evolving and are of material importance from a Group perspective.
STRATEGIC PRIORITIES Grow sustainably
Scale with technology Reach new customers Be recommended by our customers Be proud to work at Just
ONGOING PRINCIPAL RISKS
RISK
How We manage or mitigate the risk
A Market Risk
strategic priorities
• Premiums are invested to match asset and liability cash flows as closely as practicable. • Market risk exposures are managed within pre-defined limits aligned to risk appetite for individual risks. • Exposure is managed using regulatory and economic metrics to achieve desired financial outcomes. • Balance sheet is managed by hedging exposures, including currency and inflation where cost effective to do so. • Interest rate hedging is in place to manage Solvency capital coverage and IFRS equity positions.
Arises from changes in interest rates, residential property prices, credit spreads, inflation, and exchange rates, which affect, directly or indirectly, the level and volatility of market prices of assets and liabilities. The Group is not exposed to any material levels of equity risk.
B CREDIT Risk
strategic priorities
Arises if another party fails to perform its financial obligations to the Group, including failing to perform them in a timely manner.
• Investments are restricted to permitted asset classes and concentration limits. • Credit risk exposures are monitored in line with credit risk framework, driving corrective action where required. • External events that could impact credit markets are tracked continuously. • Credit risks from reinsurance balances are mitigated by the reinsurer depositing back premiums ceded and through collateral arrangements or recapture plans. • Credit risk associated with derivatives is managed through collateral arrangements. • The external fund managers we use are subject to Investment Management Agreements and additional credit guidelines.
C Insurance Risk
strategic priorities
Arises through exposure to longevity, mortality, morbidity risks and related factors such as levels of withdrawal from lifetime mortgages and management and administration expenses.
• Controls are maintained over insurance risks related to product development and pricing. • Approved underwriting requirements are adhered to. • Medical information is developed and used for pricing and reserving to assess longevity risk. • Reinsurance is used to reduce longevity risk exposure, with oversight by Just of overall exposures and the aggregate risk ceded. • Group Board review and approve assumptions used. • Regular monitoring, control and analysis of actual experience and expense levels is conducted.
D LIQUIDITY Risk
strategic priorities
The risk of insufficient suitable assets available to meet the Group’s financial obligations as they fall due.
• Stress and scenario testing and analysis is conducted: including collateral margin stresses, asset eligibility and haircuts under stress. • Corporate collateral capacity to reduce liquidity demands and improve our liquidity stress resilience is monitored. • Risk assessment reporting and risk event logs inform governance and enable effective oversight. • Contingency funding plan is maintained with funding options and process for determining actions.
E CONDUCT AND OPERATIONAL RiskS
strategic priorities
Arise from inadequate internal processes, people and systems, or external events including changes in the regulatory environment. Such risks can result in harm to our customers, the markets in which we do business or our regulatory relationships as well as direct or indirect loss, or reputational impacts.
• Implement risk policies, controls, and mitigating activities to keep risks within appetite. • Oversee risk status reports and any actions needed to bring risks back within appetite. • Scenario-based assessment is in place to establish the level of capital needed for conduct and operational risks. • Monitor conduct and customer risk indicators and their underlying drivers prompting action to protect customers. • Deliver risk management training and other actions to embed regulatory changes. • Ensure that risks associated with outsourcing and critical third parties including their suppliers, are adequately mitigated via robust processes and controls. • Ensure data subjects can exercise their GDPR rights including their right to be forgotten and subject access requests to obtain their data held by Just.
F STrATEGIC Risk
strategic priorities
Arises from the choices the Group makes about the markets and environment in which it competes. These risks include the risk of changes to regulation, competition, or social changes which affect the desirability of the Group’s products and services.
• The Group operates an annual strategic review cycle. • Information on the strategic environment, which includes both external market and economic factors and those internal factors which affect our ability to maintain our competitiveness, is regularly analysed to assess the impact on the Group’s business models. • Engagement with industry bodies supports our information gathering. • The Group responds to consultations through trade bodies where appropriate.
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