ING Direct 2011 Annual Report Download - page 302

Because our life and non-life insurance and reinsurance businesses are subject to losses from unforeseeable and/or
catastrophic events, which are inherently unpredictable, our actual claims amount may exceed our established reserves
or we may experience an abrupt interruption of activities, each of which could result in lower net results and have an
adverse effect on our results of operations.
In our life and non-life insurance and reinsurance businesses, we are subject to losses from natural and man-made catastrophic events.
Such events include, without limitation, weather and other natural catastrophes such as hurricanes, floods, earthquakes and epidemics
that may be more severe or difficult to predict as a result of variable climate conditions, as well as events such as terrorist attacks and
political and social unrest.
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 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 taken. 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, and as discussed further below under ‘Risks Related to the Group’s Business, Operations, and Regulatory Environment–
Operational risks are inherent in our business’, 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, our financial condition could be adversely affected.
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, anti-money laundering,
anti-terrorism measures, privacy, record keeping, product and sale suitability, and marketing and sales practices, and our own internal
governance practices. Banking, insurance and other financial services laws, regulations and policies currently governing us and our
subsidiaries may also change at any time and 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, regulators and other supervisory authorities in the EU,
the US and elsewhere continue to scrutinize the financial services industry and its activities 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. 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, crisis and
contingency management, bank levies and financial reporting, among others. Additionally, governmental and regulatory authorities in the
Netherlands as well as in a multitude of jurisdictions continue to consider new mechanisms to limit the occurrence and/or severity of future
economic crises (including proposals to restrict the size of financial institutions operating in their jurisdictions and/or the scope of operations
of such institutions). 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.
Risk factors continued
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