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<br /> NHBC Solvency and<br /> Financial Condition<br /> Report<br /> 2018<br /> NHBC Solvency and Financial Condition Report 2018<br /> 01 Contents<br /> 02 C<br /> Executive Summary 4<br /> 03<br /> Directors' Responsibility Statement 6<br /> 04<br /> Independent auditor's opinion 8<br /> A<br /> Business and performance 11<br /> A.1 Business 12<br /> A.2 Underwriting performance 16<br /> A.3 Investment performance 18<br /> A.4 Performance of other activities 19<br /> A.5 Any other information 19<br /> B<br /> System of governance 21<br /> B.1 General information on the system<br /> of governance <a title="Solvency and Financial Condition Report 2018 page 1" href="http://viewer.zmags.com/publication/8c04a72f?page=1"> NHBC Solvency and Financial Condition Report 2018</a> <a title="Solvency and Financial Condition Report 2018 page 2" href="http://viewer.zmags.com/publication/8c04a72f?page=2"> NH</a> <a title="Solvency and Financial Condition Report 2018 page 3" href="http://viewer.zmags.com/publication/8c04a72f?page=3"> </a> <a title="Solvency and Financial Condition Report 2018 page 4" href="http://viewer.zmags.com/publication/8c04a72f?page=4"> </a> <a title="Solvency and Financial Condition Report 2018 page 5" href="http://viewer.zmags.com/publication/8c04a72f?page=5"> Risk profile The majority of the risks that NHBC f</a> <a title="Solvency and Financial Condition Report 2018 page 6" href="http://viewer.zmags.com/publication/8c04a72f?page=6"> </a> <a title="Solvency and Financial Condition Report 2018 page 7" href="http://viewer.zmags.com/publication/8c04a72f?page=7"> 7</a> <a title="Solvency and Financial Condition Report 2018 page 8" href="http://viewer.zmags.com/publication/8c04a72f?page=8"> </a> <a title="Solvency and Financial Condition Report 2018 page 9" href="http://viewer.zmags.com/publication/8c04a72f?page=9"> Other Information The Directors are responsible f</a> <a title="Solvency and Financial Condition Report 2018 page 10" href="http://viewer.zmags.com/publication/8c04a72f?page=10"> A</a> <a title="Solvency and Financial Condition Report 2018 page 11" href="http://viewer.zmags.com/publication/8c04a72f?page=11"> Business and performance </a> <a title="Solvency and Financial Condition Report 2018 page 12" href="http://viewer.zmags.com/publication/8c04a72f?page=12"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 13" href="http://viewer.zmags.com/publication/8c04a72f?page=13"> Basis of preparation NHBC has updated its basis o</a> <a title="Solvency and Financial Condition Report 2018 page 14" href="http://viewer.zmags.com/publication/8c04a72f?page=14"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 15" href="http://viewer.zmags.com/publication/8c04a72f?page=15"> 15</a> <a title="Solvency and Financial Condition Report 2018 page 16" href="http://viewer.zmags.com/publication/8c04a72f?page=16"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 17" href="http://viewer.zmags.com/publication/8c04a72f?page=17"> Claims incurred An increase in claims incurred to</a> <a title="Solvency and Financial Condition Report 2018 page 18" href="http://viewer.zmags.com/publication/8c04a72f?page=18"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 19" href="http://viewer.zmags.com/publication/8c04a72f?page=19"> it was agreed to carry out a number of changes to</a> <a title="Solvency and Financial Condition Report 2018 page 20" href="http://viewer.zmags.com/publication/8c04a72f?page=20"> B</a> <a title="Solvency and Financial Condition Report 2018 page 21" href="http://viewer.zmags.com/publication/8c04a72f?page=21"> System of governance B.1</a> <a title="Solvency and Financial Condition Report 2018 page 22" href="http://viewer.zmags.com/publication/8c04a72f?page=22"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 23" href="http://viewer.zmags.com/publication/8c04a72f?page=23"> Audit Committee The key role of the Audit Committ</a> <a title="Solvency and Financial Condition Report 2018 page 24" href="http://viewer.zmags.com/publication/8c04a72f?page=24"> NHBC</a> <a title="Solvency and Financial Condition Report 2018 page 25" href="http://viewer.zmags.com/publication/8c04a72f?page=25"> For all NHBC employees, excluding NEDs, there are</a> <a title="Solvency and Financial Condition Report 2018 page 26" href="http://viewer.zmags.com/publication/8c04a72f?page=26"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 27" href="http://viewer.zmags.com/publication/8c04a72f?page=27"> Overview The Risk Management Framework is a set o</a> <a title="Solvency and Financial Condition Report 2018 page 28" href="http://viewer.zmags.com/publication/8c04a72f?page=28"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 29" href="http://viewer.zmags.com/publication/8c04a72f?page=29"> Own risk and solvency assessment (ORSA) The ORSA </a> <a title="Solvency and Financial Condition Report 2018 page 30" href="http://viewer.zmags.com/publication/8c04a72f?page=30"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 31" href="http://viewer.zmags.com/publication/8c04a72f?page=31"> As defined in the Internal Audit Charter, internal</a> <a title="Solvency and Financial Condition Report 2018 page 32" href="http://viewer.zmags.com/publication/8c04a72f?page=32"> C</a> <a title="Solvency and Financial Condition Report 2018 page 33" href="http://viewer.zmags.com/publication/8c04a72f?page=33"> Risk profile C.1 Underwriting risk </a> <a title="Solvency and Financial Condition Report 2018 page 34" href="http://viewer.zmags.com/publication/8c04a72f?page=34"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 35" href="http://viewer.zmags.com/publication/8c04a72f?page=35"> The nature of NHBC's business model means it is s</a> <a title="Solvency and Financial Condition Report 2018 page 36" href="http://viewer.zmags.com/publication/8c04a72f?page=36"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 37" href="http://viewer.zmags.com/publication/8c04a72f?page=37"> NHBC is also indirectly exposed to market risk on</a> <a title="Solvency and Financial Condition Report 2018 page 38" href="http://viewer.zmags.com/publication/8c04a72f?page=38"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 39" href="http://viewer.zmags.com/publication/8c04a72f?page=39"> 39</a> <a title="Solvency and Financial Condition Report 2018 page 40" href="http://viewer.zmags.com/publication/8c04a72f?page=40"> D</a> <a title="Solvency and Financial Condition Report 2018 page 41" href="http://viewer.zmags.com/publication/8c04a72f?page=41"> Valuation for solvency purposes </a> <a title="Solvency and Financial Condition Report 2018 page 42" href="http://viewer.zmags.com/publication/8c04a72f?page=42"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 43" href="http://viewer.zmags.com/publication/8c04a72f?page=43"> Investments The valuation approach is consistent </a> <a title="Solvency and Financial Condition Report 2018 page 44" href="http://viewer.zmags.com/publication/8c04a72f?page=44"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 45" href="http://viewer.zmags.com/publication/8c04a72f?page=45"> D.2 Technical Provisions The following table pres</a> <a title="Solvency and Financial Condition Report 2018 page 46" href="http://viewer.zmags.com/publication/8c04a72f?page=46"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 47" href="http://viewer.zmags.com/publication/8c04a72f?page=47"> Expenses There are three categories of expenses w</a> <a title="Solvency and Financial Condition Report 2018 page 48" href="http://viewer.zmags.com/publication/8c04a72f?page=48"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 49" href="http://viewer.zmags.com/publication/8c04a72f?page=49"> D.3 Other liabilities NHBC's Solvency II liabilit</a> <a title="Solvency and Financial Condition Report 2018 page 50" href="http://viewer.zmags.com/publication/8c04a72f?page=50"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 51" href="http://viewer.zmags.com/publication/8c04a72f?page=51"> D.4 Alternative methods for valuation Following t</a> <a title="Solvency and Financial Condition Report 2018 page 52" href="http://viewer.zmags.com/publication/8c04a72f?page=52"> E</a> <a title="Solvency and Financial Condition Report 2018 page 53" href="http://viewer.zmags.com/publication/8c04a72f?page=53"> Capital management </a> <a title="Solvency and Financial Condition Report 2018 page 54" href="http://viewer.zmags.com/publication/8c04a72f?page=54"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 55" href="http://viewer.zmags.com/publication/8c04a72f?page=55"> The Solvency II balance sheet uses the NHBC Compa</a> <a title="Solvency and Financial Condition Report 2018 page 56" href="http://viewer.zmags.com/publication/8c04a72f?page=56"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 57" href="http://viewer.zmags.com/publication/8c04a72f?page=57"> 57</a> <a title="Solvency and Financial Condition Report 2018 page 58" href="http://viewer.zmags.com/publication/8c04a72f?page=58"> F</a> <a title="Solvency and Financial Condition Report 2018 page 59" href="http://viewer.zmags.com/publication/8c04a72f?page=59"> Quantitative reporting templates </a> <a title="Solvency and Financial Condition Report 2018 page 60" href="http://viewer.zmags.com/publication/8c04a72f?page=60"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 61" href="http://viewer.zmags.com/publication/8c04a72f?page=61"> S.02.01.02 Balance sheet Solvency II value Liabil</a> <a title="Solvency and Financial Condition Report 2018 page 62" href="http://viewer.zmags.com/publication/8c04a72f?page=62"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 63" href="http://viewer.zmags.com/publication/8c04a72f?page=63"> S.05.02.01 Premiums, claims and expenses by Non-</a> <a title="Solvency and Financial Condition Report 2018 page 64" href="http://viewer.zmags.com/publication/8c04a72f?page=64"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 65" href="http://viewer.zmags.com/publication/8c04a72f?page=65"> S.19.01.21 Non-Life insurance claims Total Non-l</a> <a title="Solvency and Financial Condition Report 2018 page 66" href="http://viewer.zmags.com/publication/8c04a72f?page=66"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 67" href="http://viewer.zmags.com/publication/8c04a72f?page=67"> S.25.01.21 Solvency Capital Requirement - for und</a> <a title="Solvency and Financial Condition Report 2018 page 68" href="http://viewer.zmags.com/publication/8c04a72f?page=68"> NHBC S</a> <a title="Solvency and Financial Condition Report 2018 page 69" href="http://viewer.zmags.com/publication/8c04a72f?page=69"> NHBC is authorised by the Prudential Regulation A</a>