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

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Aggregating Results across businesses: One Enterprise View The diversification between risks is captured with the risk correlation matrix Additionally diversification benefit is seen between business units due to portfolio effect. This can be quantified using an “in and out” type analysis. Hypothetical illustration for two Business units (BU) Sum of BU-1 risks Sum of BU-2 risks Risk 1 Risk 2 Risk 3 Risk 4 Standalone BU-1 Risk 1 Required EC Risk 2 Risk 3 Risk 4 Diversification between risks within a single business unit Standalone BU-2 Required EC Diversification of risks between different business units (portfolio effect) Aggregate Enterprise Required EC BU-1 BU-2
Linkage of EC with capital management framework EC usually starts as a corporate initiative with a focus on assessing capital adequacy and planning. Subsequent applications embed the discipline down in the business units Capital Adequacy Organization wide adoption & knowledge transfer Capital Efficiency Capital Protection Start
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 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: Aggregating results across risks fo
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

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