ICAAP of SNS Bank - GARP · 2015-04-06 · • ICAAP document, scenario’s, assumptions and...

ICAAP of SNS Bank

Arno van Eekelen

Senior Consultant

SNS Bank

Global Association of Risk Professionals

June 2014

2 | © 2012 Global Association of Risk Professionals. All rights reserved.

Table of contents

1. SNS REAAL

2. ICAAP

a) Basic elements and environment

b) ICAAP stages

c) Internal governance


SNS REAAL

Dutch service provider in the banking and insurance sector

Balance sheet total of € 125 billion

Dutch state single shareholder as of February 2013

ICAAPORSA


Basic elements and environment

Current balance sheet

External factors

Financial markets Customers Analists/investors

Rating agencies Supervisor Regulation

ICAAP capital

Available

capital

Risk appetite

Risk assessment, Risk

policy and risk limits

(reverse) Stress test

Business strategy

Economic Capital

Regulatory Capital


ICAAP stages

Preperationfase I

Preperationfase II

Executionfase

Determinationfase

Evaluationfase

Preperationfase I and II

• ICAAP document, scenario’s, assumptions and guidelines

Executionfase

• Risk analysis and (reverse) stress test

Determinationfase

• Determination of capitalisation of SNS Bank (with board & experts)

• Finalise ICAAP package (document and attachement)

Evaluationfase

• Internal and external (DNB/SREP) evaluation of ICAAP


Internal governance

ALCO Bank

Executive Board

Steering CommitteeFinance SNS Bank

Regulatory projects

Working group


ORSA of REAAL Verzekeringen

Gabe Langhout

Senior Risk Consultant

SNS REAAL


June 2014


Table of contents

1. ORSA process

2. ORSA stages

3. ORSA organization

4. ORSA evaluation & development

5. ORSA shifting focus in workshop discussions

6. ORSA (internal) intervention ladder

7. ORSA versus ICAAP


ORSA Process

Triggers

Risk Appetite

Risk Analyses

Draft Report

Workshops

Final Report

Scaling

Business Strategy

Stress Testing

Management Body

Risk Identification

& measurement

Appropriateness

Assessment

Supervisory

Review Process

Eva

lua

tio

n

See also: Good Practices ORSA, Verbond van Verzekeraars

https://www.verzekeraars.nl/actueel/nieuwsberichten/Documents/2012/Maart/ORSA%20Good%20practice.pdf


ORSA Stages

Preparation Execution Decision Evaluation

ORSA Policy &

Table of contents

ORSA Report

Risk Measurement

& Analyses

(Internal)

Intervention

Ladder

Supervisory

Review @

Evaluation Process

Business Strategy Appropriateness

Assessment

Calibration of

Risk Appetite

Statement,

Strategy, Limits

(Internal)

Evaluation

Baseline projection Stress Testing Management

actions to be taken

Stress scenarios Draft

ORSA Report

Final

ORSA Report


ORSA Organization

Decide

Advise

Coordinate

Participate

ORSA Project Team

Risk

Finance

Balans Sheet

Management

Financial RiskNon-Financial

Risk

Risk

Reporting

Balans

OptimizationCorporate

Strategy

ControlFinance

Reporting

Supervisory Board Group Audit

Management Board

Operational Risk &

Compliancy CommitteeALCO

Steering Committee


ORSA Evaluation & Development

Subject 1e ORSA 2e ORSA 3e ORSA 4e ORSA

Governance

ORSA Policy

Data

Stress Testing

Forward Looking


ORSA Workshops: Shifting Focus in workshop discussions

From Solvency I via Theoretic Solvency Criterion (TSC) to Solvency II

The “Metric” is still changing unfortunately

From Risk to Risk/Return

Without Risk no Return, “there is no free lunch”

From Risk Appetite to Efficacy of Management Actions

The Risk Appetite may be high(er) if many capital strengthening and de-risking options are available

From Stress Scenarios to Recovery Options / Capacity in different types of stressed situations

Slow, Fast, Idiosyncratic, System wide

From Compliancy to Understanding vulnerabilities & possible mitigating actions


ORSA (Internal) Intervention Ladder

Internal Intervention Ladder

based on own perception of

Risk and the possibility that the

SCR exceeds Own Funds

Solvency = 150%,

Is that OK?

Solvency = 150%,

Is (forward looking)

not OK in scenario!



Appropriateness Assessment:

Risk is underestimated in Pillar

I calculation



De-risking improves solvency in

the short term

Risk Taking improves rate of

return in the long term

Baseline


ORSA versus ICAAP: main differences

Subject ICAAP ORSA

HorizonNot prescribed

(>= 1 year)Forward looking (>= 3 years)

Appropriateness

Assessment Risk

measurement

Optional Required

ProcessFinal “chapter” of the

Basel framework

Starting point for the Solvency

Framework

Focus Capital Capital & Risk

Compliancy Assessment Optional Required

Accounting Method Mainly: Amortized Cost Fair Value

Risks covered

in Pillar 1

Credit-, Market- &

Operational Risk

Market- (single risks), Insurance-

(single risks), Counterparty

Default-, Operational Risk


ICAAP versus ORSA

Jeroen van Duren

Sr. manager Financiën & GRC Centraal

Menzis


June 2014


Table of contents

• Introduction Menzis

• Risk Framework Menzis

• ORSA Menzis

• Lessons learned


> 2,1 million people insured

1704 fte medewerkers

€ 5,5 billion GWP

(incl. AnderZorg en Azivo)

Three “Zorgkantoren”:

Arnhem, Groningen, Twente

€ 3,5 billion GWP

daadkrachtig

menselijk

voor elkaar

Health Insurer (Co-op)

Drivers: Price, volume and Quality

‘Samen verzekeren wij kwalitatief goede zorg om de leefkracht van ieder menz te versterken.’

Introduction Menzis


Table of contents



• ORSA Menzis

• Lessons learned


ORSA: linking Risk and

Capital management:

What is the required level of Solvency to realise our strategic goals and

to absorb future (unknown) risks over a three to five years horizon?

Risk and Capital


Hoeveel risico

lopen we?

SRA

ORSA

Risicobereidheid

Specifieke

risico’s

Toleranties

Hoeveel risico zijn

we bereid te lopen?

Risicoprofiel Toleranties

“Management

actions”

Strategie

Aanpasing/herijking

strategie

Wat is de impact

van risico’s op het

kapitaal op lange

termijn?

23


Planning andControl cycle

Risico’s op

strategisch niveau

Doelstellingen op

strategisch niveau

Doelstellingen op

tactisch niveau

Risico’s op

tactisch niveau

Doelstellingen op

operationeel niveau

Risico’s op

operationeel niveau

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telle

n

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ran

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ord

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stu

urin

form

atie

Do

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n s

telle

n

Ve

ran

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ord

ing

en

stu

urin

form

atie

Ris

ico

pla

nn

ing

Ris

ico

pla

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ing

Ve

ran

two

ord

ing

en

stu

urin

form

atie

Ve

ran

two

ord

ing

en

stu

urin

form

atie

Strategie Menzis

Missie Menzis


Table of contents



• ORSA Menzis

• Lessons learned


From risks to scenarios

Beleggingen

Scenario

Beheerskosten

Scenario

Verzekerden

Scenario

Uitkomst SRA

2

Meerjaren

strategie

Prudent

Scenario

AV

ScenarioBudgetresultaat

Scenario

34

5

11

6

9

18

8

13

14

25

29

16

19202126

27

28

29

2 4

5

9

3

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1314 25 29

16 1920

21 26

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AWBZ

Scenario


From scenarios to capital

Kapitaal

Ontwikkeling van

het eigen vermogen

Ontwikkeling van de

kapitaalsvereiste

Scenario’sStrategische Risico’s

Ontwikkeling van de

kapitaalsvereiste

Ontwikkeling van

het eigen vermogen

Kapitaal

Scenario 1

Scenario 2

Scenario 3

1Ho

og

Aa

nzie

nlij

kB

ep

erk

La

ag

2

3

5

4

6

7

9

8

10

1

2 7

7

9

5

8

5 Ontwikkeling van de

kapitaalsvereiste

Ontwikkeling van

het eigen vermogen

Kapitaal

Tijd

Tijd

Tijd

Premie

Schade

Beleggingen

Verzekerden

Bedrijfskosten

T+1 T+2 T+3 T+4 T+5

Premie

Schade

Beleggingen

Verzekerden

Bedrijfskosten

T+1 T+2 T+3 T+4 T+5

Premie

Schade

Beleggingen

Verzekerden

Bedrijfskosten

T+1 T+2 T+3 T+4 T+5

Balans

Verlies en Winst

T+1 T+2 T+3

T+1 T+2 T+3

T+4 T+5

T+4 T+5

Balans

Verlies en Winst

T+1 T+2 T+3

T+1 T+2 T+3

T+4 T+5

T+4 T+5

Balans

Verlies en Winst

T+1 T+2 T+3

T+1 T+2 T+3

T+4 T+5

T+4 T+5

Financiële projecties KapitaalberekeningenVariabelen


Regulatory Required Minimum

• Market risk

• Underwriting risk

• Counterparty risk

• Liquidity risk

• Operational risk

• Historic risk

• Worst Case –strategic scenario

• Strategic choices

Required & desired solvency

Additional

Internal

buffer

SCR

buffer


Menzis ORSA

Expertteam Actu

arialdept

Advis

ory

Board

After sales service

CommerceFin

ancia

l Adm

inis

tration

Board

Business Control

Board of Directors

Corporate office

Health management

Accounting

Fin

ancia

l Contr

ol &

Report

ing

Solvency II Program

Audit


Table of contents



• ORSA Menzis

• Lessons learned


Lessons Learned (summary)

• Integral Risk Framework (consistent, related)

• Key input for main decision making (e.g. premium setting)

• Control & Risk Management (integral steering)

• Set limits (risk tolerance)

• Required (external) versus eligible solvency (intern)

• Entire organisation involved (commitment, widespread support)


Creating a culture of

risk awarenessTM

Global Association of

Risk Professionals

111 Town Square Place

Suite 1215

Jersey City, New Jersey 07310

USA

+ 1 201.719.7210

2nd Floor

Bengal Wing

9A Devonshire Square

London, EC2M 4YN

UK

+ 44 (0) 20 7397 9630

www.garp.org

About GARP | The Global Association of Risk Professionals (GARP) is a not-for-profit global membership organization dedicated to preparing professionals and organizations to make

better informed risk decisions. Membership represents over 150,000 risk management practitioners and researchers from banks, investment management firms, government agencies,

academic institutions, and corporations from more than 195 countries and territories. GARP administers the Financial Risk Manager (FRM®) and the Energy Risk Professional (ERP®)

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ICAAP of SNS Bank - GARP · 2015-04-06 · • ICAAP document, scenario’s, assumptions and...

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