ING Direct 2011 Annual Report Download - page 258

Risk management continued
ING Insurance Eurasia
While the figures above are shown by business line, the diversification across ING Insurance Eurasia businesses is calculated across business
units. Total diversification between ING Insurance Eurasia’s business units and the Corporate Line Insurance is 34% (2010: 28%).
Economic Capital for ING Insurance Eurasia decreased from 2010 to 2011 primarily due to significant de-risking activities in the Benelux
and overall lower market valuations, partly offset by increased interest rate risk in Asia Pacific as actual market rates have become closer to
guarantees embedded in the insurance products. The Economic Capital assigned to Corporate Line Insurance Eurasia primarily relates to
foreign exchange translation risk of the market value surplus of the business units in non-euro countries to the euro.
The table below shows the breakdown of the Economic capital per risk type. Details can be found in the various risk type sections below.
Economic Capital break-down ING Insurance Eurasia (99.5%) by risk category
2011 2010
Insurance risk 2,003 1,833
Business risk 3,011 2,979
Market risk 7,651 9,411
Credit default risk 606 627
Operational risk 640 633
Diversification between risk types –3,625 – 4,165
Total insurance operations Eurasia 10,286 11,318
INSURANCE RISK
Insurance risks comprise of actuarial and underwriting risk such as mortality, longevity, morbidity and property & casualty risks which result
from the pricing and acceptance of insurance contracts.
Model disclosure
The table below shows the main risk categories for insurance risks within ING Insurance Eurasia. IFRS Earnings sensitivities are defined on a
shock scenario at the 90% confidence level, EC numbers are determined using a 99.5% confidence interval on a one-year horizon.
Description Key Drivers
Mortality Mortality risk can be subdivided into:
– Positive mortality risk occurs when claims are higher due to higher
mortality experience e.g. term insurances
– Negative mortality risk occurs when insured persons live longer than
expected, for instance pension products. Longevity risk hits earnings
gradually over time.
IFRS Earnings: Death claims in life business
EC: Pension and annuity business mainly in
theNetherlands
Morbidity Morbidity or Health insurance covers insurance indemnifying or
reimbursing losses (e.g. loss of income) caused by illness or disability, or
for expenses of medical treatment necessitated by illness or disability.
IFRS Earnings & EC: Income protection in the
Netherlands and Health riders in Korea and
Malaysia
Property & Casualty P&C insurance products cover various risks such as fire damage, car
accidents, personal and professional liability, hurricanes etc.
IFRS Earnings & EC: Storms and third party
liabilities in Benelux
256 ING Group Annual Report 2011