Implementation and Uses of Economic Capital ... - ERM Symposium

More documents

Recommendations

Info

Implementing a similar approach to set US Risk Appetite and support decision-making process ING Group Risk Appetite • EaR = % of Group forecast earnings • CaR = % of Group available financial resources • ING Group’s risk appetite has been defined and is measured regularly • Diversification between bank, insurance, risk factors and geographies is fully taken into account • EaR diversification approach between risk factors and US Risk Appetite business units needs to be developed • EaR = % of US forecast earnings • • The US risk appetite needs to be further defined The % of earnings and available financial resources the • CaR = % of US available financial US can put p at stake depends p on the appetite pp of senior resources leaders for volatility in earnings and capital • A high range is limited by the stated Group risk appetite Transaction approval: • EaR vs. forecast earnings • CaR vs. forecast earnings • Within overall US risk appetite Retirement - Insurance - Investments 11 • Develop criteria to evaluate major transactions/projects; streamline decision-making and approval process • Minimum requirements for EaR/CaR vs forecast earnings • Transactions can be added to the portfolio when the total risk appetite has not been breached; • and when the US/BU is within its MVaR limit
Example of EC approach within the Retail Life Business • Largest element of EC is Market Risk, with risk of loss from movement in interest rates • Success of ALM drives optimization of Market Risk EC • Consider out-of-the out of the money hedges to limit tail risk 11% 14% 11% 12% 52% Market Risk Business Risk Credit Risk Insurance Risk Operational Risk • Not optimum risk distribution for Life insurance business • EC tools support direction for future management actions • Increase mortality exposure → “Term Strategy” • Reduce market risk exposure → Lengthen asset duration • Reduce market risk exposure → Reduce exposure to volatile asset types • Improve distribution of risk → Increase diversification benefit Retirement - Insurance - Investments 12
Page 1 and 2: Use of Economic Capital for Perform
Page 3 and 4: Definition of Economic Capital (“
Page 5 and 6: Economic Capital is a more complete
Page 7 and 8: EC/ERM requires continually improvi
Page 9 and 10: The Executive Board defines Risk Ap
Page 11: Risk Dashboard provides an overview
Page 15 and 16: Concluding Remarks • ING has been
Page 17 and 18: Key technical elements of the EC me
Page 19 and 20: The rationale behind using a stress
Page 21 and 22: The key risks that financial servic
Page 23 and 24: Example of Stressing Key Risks: Equ
Page 25 and 26: Aggregating results across risks fo
Page 27 and 28: Linkage of EC with capital manageme
Page 29 and 30: Evolution of usage for capital mana
Page 31 and 32: It should be noted that this presen
Page 33 and 34: ERM’s efforts “connect the dots
Page 35 and 36: Rating Agencies Four major rating a
Page 37 and 38: Source: Citigroup Global Markets,
Page 39 and 40: European Insurers Report Increasing
Page 41 and 42: Economic Capital at AIG By focusing
Page 43 and 44: CRO Forum Recommendations Re EC Tim
Page 45 and 46: Assessment of Financial Strength of
Page 47 and 48: Economic Capital - the Importance o
Page 49 and 50: $BN 101.68 GAAP Shareholders' Equit
Page 51 and 52: $BN 25.0 20.0 15.0 10.0 5.0 0.0 AIG

Implementation and Uses of Economic Capital ... - ERM Symposium

Create successful ePaper yourself

Delete template?

Save as template?