ING Direct 2004 Annual Report Download - page 171

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ING Group Annual Report 2004 169
OPERATIONAL RISK
GENERAL
For information about ING’s operational risk framework we refer to the section under ING Bank.
Although not required for regulatory purposes ING has decided internally that ING Insurance will also adhere to the new Basel II
regulations with respect to operational risk management.
MEASUREMENT
The ING Insurance units are increasingly making progress on Operational Risk Management implementation in all regions.
The maturity of the Operational Risk Management process is measured on an annual basis by a set of 5 scorecards assessing the
ORM-framework activities. In March 2004 the 2003 scorecard panels were evaluated based on supporting evidence. These
scorecards have been translated in capital reductions only on a pilot basis for ING Insurance. In 2005 ING Insurance will migrate
to a quarterly economic capital calculation for operational risks.
CAPITAL
GENERAL
ING assesses internal capital requirements by using its own risk based methodologies. The capital model is developed to
measure the amount of capital ING believes is necessary to be considered a AA rated insurance business.
During 2004, ING further refined its internal model by which to allocate capital to the business lines. This capital formula is
based on asset and liability factors with adjustments to provide additional calibrations to internal economic capital results.
This capital formula does not calculate economic capital, but is considered to be a conservative estimate of economic capital
for the ING insurance businesses in total. ING expects to continue to refine economic capital models and to potentially move
to those in the future.
MEASUREMENT
ING believes that its new internal insurance capital model is a significant improvement over current EU capital requirements as more
risk factors are considered. The results of the internal capital model indicate that ING Insurance has more assets than required.