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

More documents

Recommendations

Info

Calculating required EC via stress testing: 4 stages to implementation Developing an economic view of the business Identify key risks and determine level of stress to be applied Apply stresses to the economic balance sheet Aggregate individual risk capital results, allowing for correlation effects Economic assessment of assets, liabilities and net available capital using risk neutral principles Real world stress events for each key risk Reassess value of assets, liabilities and net available capital under each risk stress Change in net available capital for each risk is the required economic capital (REC) for the risk. Total REC across risks for aggregate requirement 5
The key risks that financial services firms may consider include: Risks Financial Risks Non-Financial Risks Market Risks Credit Risks Client Behavior Equity Level Default Equity Volatility Ratings Migration Interest Rates Spread Volatility Foreign Exchange Property Price Alternative Assets Counterparty Concentration Risk Subcategories for each include: •Catastrophe •Trend •Parameter & mis-estimation Exits People Utilization of Product Optionality Process Expense Risk Systems Brand Risk (Catastrophic Client Exits) Insurance /Underwriting Mortality / Longevity Morbidity Property & Casualty Operational Risk Regulatory Legal Strategic Risks
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 and 12: Risk Dashboard provides an overview
Page 13 and 14: Example of EC approach within the R
Page 15 and 16: Concluding Remarks • ING has been
Page 17 and 18: Key technical elements of the EC me
Page 19: The rationale behind using a stress
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

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?