ING Direct 2011 Annual Report Download - page 320

CLAIMS RATIO
Claims, including claims handling expenses, expressed
as a percentage of net earned premiums.
COLLATERALISED DEBT OBLIGATION (CDO)
A type of asset-backed security which provides investors exposure
to the credit risk of a pool of fixed income assets.
COLLATERALISED LOAN OBLIGATION (CLO)
A type of CDO which is backed primarily by leveraged bank loans.
COMBINED RATIO
The sum of the claims ratio and the cost ratio for a non-life
insurance company or a reinsurance company. A combined ratio
of more than 100% does not necessarily mean that there is a loss
on non-life insurance policies, because the result also includes the
allocated investment income.
COMMERCIAL PAPER
Promissory note (issued by financial institutions or large firms) with
very-short to short maturity period (usually 2 to 30 days, and not
more than 270 days), and unsecured.
COMPLIANCE RISK
Compliance risk is defined as the risk of damage to ING’s reputation
as a result of failure or perceived failure to comply with relevant
laws, regulations, internal policies and procedures or ethical
standards.
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk exist when changes in economic,
industry or geographical factors similarly affect groups of
counterparties whose aggregate exposure is material in relation
to ING Group’s total exposure.
CONTINGENT LIABILITIES
Possible obligations that arises from past events and whose
existence will be confirmed only by the occurrence or non-
occurrence of one or more uncertain future events not wholly
within the control of the entity; or a present obligation that arises
from past events but is not recognised because:
• it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation; or
• the amount of the obligation cannot be measured with
sufficient reliability.
CONTROL
The power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
CONVERTIBLE DEBENTURES
Debentures with embedded options issued by corporations. The
holder has the right to exchange a convertible debenture for equity
in the issuing company at certain times in the future according to a
certain exchange ratio. Very often, the conversion is callable. This
means that it can be repurchased by the issuer at a certain price at
certain times in the future. Once the debentures have been called,
the holder can always choose to convert prior to repurchase.
CONVEXITY
The non-linear relationship between changes in the interest rates
and changes in bond prices and their Net Present Value. It is a very
important market risk measure for portfolios containing
(embedded) options.
CORE DEBT
Investments in ING Group subsidiaries minus the equity of the
holding company including hybrids.
COST OF CAPITAL
The costs related to owning capital. These can be split into the cost
of equity, hybrids and debt, taking a target leverage into account.
COST RATIO
Underwriting costs expressed as a percentage of premiums written.
COUNTRY RISK
The risk that a government will not fulfil its obligations or obstructs
the remittance of funds by debtors, either for financial reasons
(transfer risk) or for other reasons (e.g. political risk).
CREDIT INSTITUTIONS
All institutions that are subject to banking supervision by public
authorities, including mortgage banks, capital market institutions,
multilateral development banks and the International Monetary
Fund (IMF).
CREDIT RISK
The risk of loss from default by borrowers (including bond issuers)
or counterparties. Credit risks arise in ING’s lending, presettlement
and investment activities, as well as in its trading activities. Credit
risk management is supported by dedicated credit risk information
systems and internal rating methodologies for debtors and
counterparties.
DEFERRED TAX LIABILITIES
The amounts of income tax payable in future periods in respect of
taxable temporary differences between carrying amounts of assets
or liabilities in the balance sheet and tax base, based on tax rates
that are expected to apply in the period when the assets are
realised or the liabilities are settled.
DEFINED BENEFIT PLAN
Post-employment benefit plans other than defined contribution plans.
DEFINED CONTRIBUTION PLAN
Post-employment benefit plans under which an enterprise pays
fixed contributions into a separate entity (a fund) and will have no
legal or constructive obligation to pay further contributions if the
fund does not hold sufficient assets to pay all employee benefits
relating to employee service in the current and prior periods.
Financial glossary continued
318 ING Group Annual Report 2011