ING Direct 2009 Annual Report Download - page 271

The frequency and severity of such events, and the losses associated with them, are inherently unpredictable and cannot always be
adequately reserved for. Furthermore, we are subject to actuarial and underwriting risks such as, for instance, mortality, longevity,
morbidity, and adverse home claims development which result from the pricing and acceptance of insurance contracts. In accordance with
industry practices, modelling of natural catastrophes is performed and risk mitigation measures are made. In case claims occur, reserves are
established based on estimates using actuarial projection techniques. The process of estimating is based on information available at the
time the reserves are originally established and includes updates when more information becomes available. Although we continually
review the adequacy of the established claim reserves, there can be no assurances that our actual claims experience will not exceed our
estimated claim reserves. If actual claim amounts exceed the estimated claim reserves, our earnings may be reduced and our net results
may be adversely affected. In addition, because unforeseeable and/or catastrophic events can lead to an abrupt interruption of activities,
our banking and insurance operations may be subject to losses resulting from such disruptions. Losses can relate to property, financial
assets, trading positions, insurance and pension benefits to employees and also to key personnel. If our business continuity plans are not
able to be put into action or do not take such events into account, losses may further increase.
We operate in highly regulated industries. There could be an adverse change or increase in the financial services laws and/
or regulations governing our business.
We are subject to detailed banking, insurance, asset management and other financial services laws and government regulation in each of
the jurisdictions in which we conduct business. Regulatory agencies have broad administrative power over many aspects of the financial
services business, which may include liquidity, capital adequacy and permitted investments, ethical issues, money laundering, privacy,
record keeping, and marketing and selling practices. Banking, insurance and other financial services laws, regulations and policies currently
governing us and our subsidiaries may also change at any time in ways which have an adverse effect on our business, and it is difficult to
predict the timing or form of any future regulatory or enforcement initiatives in respect thereof. Also, bank regulators and other
supervisory authorities in the EU, the US and elsewhere continue to scrutinize payment processing and other transactions under
regulations governing such matters as money-laundering, prohibited transactions with countries subject to sanctions, and bribery or other
anti-corruption measures. Regulation is becoming increasingly more extensive and complex and regulators are focusing increased scrutiny
on the industries in which we operate, often requiring additional Company resources. These regulations can serve to limit our activities,
including through our net capital, customer protection and market conduct requirements, and restrictions on businesses in which we can
operate or invest. If we fail to address, or appear to fail to address, appropriately any of these matters, our reputation could be harmed
and we could be subject to additional legal risk, which could, in turn, increase the size and number of claims and damages asserted against
us or subject us to enforcement actions, fines and penalties.
In light of current conditions in the global financial markets and the global economy, regulators have increased their focus on the
regulation of the financial services industry. Most of the principal markets where we conduct our business have adopted, or are currently
considering, major legislative and/or regulatory initiatives in response to the financial crisis. In particular, governmental and regulatory
authorities in the Netherlands, the United Kingdom, the United States and elsewhere are implementing measures to increase regulatory
control in their respective financial markets and financial services sectors, including in the areas of prudential rules, capital requirements,
executive compensation and financial reporting, among others. For example, the EC is conducting a full scale review of solvency margins
and provisions for insurance companies known as ‘Solvency II’. Each member state of the EEA, including the Netherlands, is required to
implement Solvency II by 31 October 2012. On 17 December 2009 the Basel Committee issued two consultative documents proposing
reforms to bank capital and liquidity regulation and the EC is also considering increasing the capital requirements for banks. In addition,
the International Accounting Standards Board (‘IASB’) is considering changes to several IFRS standards, including significant changes to the
standard on financial instruments (IAS 39) and to the standard on pensions (IAS 19). These changes could have a material impact on our
reported results and financial condition.
Governments in the Netherlands and abroad have also intervened on an unprecedented scale, responding to stresses experienced in the
global financial markets. Some of the measures adopted subject us and other institutions for which they were designed to additional
restrictions, oversight or costs. For restrictions related to the Core Tier 1 Securities and the Illiquid Assets Back-up Facility (together, the
‘Dutch State Transactions’), see ‘- Our agreements with the Dutch State impose certain restrictions regarding the issuance or repurchase of
our shares and the compensation of certain senior management positions’. As a result of having received state aid through the Dutch State
Transactions, we were required to submit our Restructuring Plan to the EC in connection with obtaining final approval for the Dutch State
Transactions. See ‘Risks Related to the Group - The implementation of the Restructuring Plan and the divestments anticipated in
connection with that plan will significantly alter the size and structure of the Group and involve significant costs and uncertainties that
could materially impact the Group’. We cannot predict whether or when future legislative or regulatory actions may be taken, or what
impact, if any, actions taken to date or in the future could have on our business, results of operations and financial condition.
Despite our efforts to maintain effective compliance procedures and to comply with applicable laws and regulations, there are a number of
risks in areas where applicable regulations may be unclear, subject to multiple interpretation or under development or may conflict with
one another, where regulators revise their previous guidance or courts overturn previous rulings, or we fail to meet applicable standards.
Regulators and other authorities have the power to bring administrative or judicial proceedings against us, which could result, amongst
other things, in suspension or revocation of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other
disciplinary action which could materially harm our results of operations and financial condition.
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2.4 Additional information
Risk factors (continued)