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Credit Risks

Credit risks in Sampo Group mainly consist of the issuer risk related to investment assets, and counterparty risk related to derivatives and reinsurance transactions.

The essential difference in terms of risk is that in the case of issuer risk, the entire market value of the instrument is at risk, whereas in the case of counterparty risk, it is only the possible positive market value of the contract that is at risk. Credit risk related to reinsurers arises through reinsurance receivables and through the reinsurers' portion of outstanding claims. Credit risk related to reinsurance mainly concerns If P&C, as the use of reinsurance in Mandatum Life is relatively limited.

In addition, credit risk arises from receivables from policyholders and other receivables related to commercial transactions. Credit risk exposure towards policyholders is very limited, because non-payment of premiums generally results in cancellation of the insurance policies. Also the credit risk exposures arising from other receivables related to commercial transactions are minor in Sampo Group.

This chapter describes the principles of credit risk management in general and the credit risk exposures related to reinsurance counterparties. Credit risk exposures related to the investments are presented in tables "Investment allocation according to asset classes, sectors and fixed income investments according to rating, If P&C, 31 Dec 2010", "Investment allocation according to asset classes, sectors and fixed income investments according to rating, Mandatum Life, 31 Dec 2010", "Investment allocation according to asset classes, sectors and fixed income investments according to rating, Sampo Group, 31 Dec 2010", and "Fixed income investments by type of instrument excluding derivatives, If P&C, Mandatum Life and Sampo Group, 31 Dec 2010" in the Market risks section.

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