ING Direct 2011 Annual Report Download - page 254

CRO Corp Line CRO Benelux CRO CRE CRO Asia
Business units
CRO’s
Business units
CRO’s
Business units
CRO’s
CRO IIM
Investment Risk
Management
Operational Risk
Management
Group
Actuary
Risk
Measurement
Model Validation
Deputy CRO Insurance Eurasia
Risk management continued
ING Insurance Eurasia
Regional level and business unit level have separate risk committees. The Regional CROs report functionally to the Deputy CRO, while the
Business Units CROs in turn functionally report to the Regional CROs. Within ING Insurance Eurasia Compliance Risk Management is part
of the Legal and Compliance function.
Product Approval and Review Process
A critical aspect of risk management is that all products are designed, underwritten and priced effectively. Within ING Insurance Eurasia
this is safeguarded by the Product Approval and Review Process (PARP). This standard includes requirements to risk profile, value-oriented
pricing metrics, targets and documentation. The PARP includes requirements to assess market risks, credit risk, insurance risk, compliance
risk, legal risk, operational risk as well as the assessment of the administration and accounting aspects of the product. Requirements with
respect to the customer suitability of insurance products are an integral part of the PARP.
New Investment class and investment mandate process
Complementing the PARP for insurance products, ING Insurance Eurasia maintains a New Investment Class Approval and Review Process
(NICARP) for approving new investment classes. Each asset ING Insurance Eurasia invests in should be on the Global Asset List; the list of
all approved investment classes. Each Business Unit maintains a Local Asset List that is a subset of the Global List. For a limited number of
investment classes, a Group Investment Transaction Approval (GITA) is required for each new transaction. This requirement only applies
when the level of complexity or diversity warrants Group approval for individual (programmes of) transaction(s). Actual investments are
made based on Investment Mandates, a formal agreement between the owner of the investments and its asset manager. Business Units
can only include investment classes in their Investment Mandates that are on their Local Asset List. Next to setting the allowed investment
classes, the mandate also serves to agree the strategic asset allocation and asset, industry, regional, and credit concentration limits.
Reserve adequacy
The ING Insurance Eurasia Group Actuary instructs and supervises all ING Insurance Eurasia entities to ensure that the IFRS insurance
liabilities of ING Insurance Eurasia are tested for adequacy taking into account the insurance premium rate levels and the uncertainty of
future returns on investments. The reserve adequacy test is executed by evaluating insurance liabilities on current best estimate actuarial
assumptions plus a risk margin, ensuring that the reserves remain adequate based on these assumptions. The assumed investment
earnings are a combination of the run-off of portfolio yields on existing assets and new money and reinvestment rates. For short-term and
reinvestments, new money rates are used. For other reinvestments, long-term best estimate assumptions are taken into account. For many
products stochastic testing is required, taking the 90th percentile of results as the required level. In the case where deterministic testing is
used, the 90% confidence level is achieved by subtracting risk margins of 20% from the best-estimate interest rates or one percent point,
whichever is higher.
Policies
ING Insurance Eurasia has a comprehensive set of risk management policies in place, which are regularly updated to align with the best
practices, regulations and change in business profile. Starting in 2011, ING Insurance Eurasia reviews all policies for compliance with
emerging Solvency II and other regulations, for example Capital Requirements Directive III (CRD III).
252 ING Group Annual Report 2011