ATP maintains a keen focus on risk management
Our risk management is based on an overall assessment of the company’s risk factors. Generally, we deal with two types of risks:
- Risks we are willing to assume because we anticipate that they will contribute to higher returns
- Risks we are unwilling to assume because we do not anticipate that they will contribute to higher returns
We allocate and monitor the risks we are willing to assume so that no one single type of risk could result in substantial losses. To the extend possible, we eliminate any risks we are unwilling to assume.
Market risk is necessary
ATP’s most significant risk is market risk. We assume market risks which we anticipate will make a positive contribution to returns for our members. Our market risks are mainly in the investment portfolio. The interest-rate sensitivity of our pension liabilities, however, is a market risk which we do not anticipate will contribute to higher returns, which is why we hedge this risk in our hedging portfolio.
We minimise unrewarded risk
Another significant risk is longevity risk. This is the risk that ATP’s members will live longer than expected so that our pension pay-outs increase. Longevity risk is an unrewarded risk, which is why we reduce it as much as possible. Our model for computing longevity takes full account of predicted future increases in life-expectancy.
We also deal with a number of other unrewarded risks such as operational risks, counterparty exposures and reputation risks. In order to safeguard returns for our members, we have implemented comprehensive procedures to reduce these risks.