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A.M. Best Indonesia Seminar 2015 Indonesia: Ready to embrace the next wave of change? 9 April 2015 The General Insurance Association of Indonesia (AAUI), Jakarta

RUNDOWN:

Time Agenda Speaker

MORNING SESSION

8:15 am Registration and light breakfast -

9:00 am

Opening remarks and introduction to A.M. Best

Dr Roger Sellek Chief Executive Officer A.M. Best – EMEA & Asia-Pacific

9:15 am

Keynote address

Dr Firdaus Djaelani Chief Executive of Non-Bank Financial Institutions Supervisor Indonesia Financial Services Authority (OJK)

9:30 am

Rating and regulation


9:55 am

The CEO’s influence on ratings outcome

Mr Moungmo Lee General Manager, Analytics A.M. Best – Asia-Pacific

10:20 am Coffee break -

10:45 am

Utilisation of reinsurance by non-life insurers in Indonesia

Mr Chi-Yeung Lok Senior Financial Analyst A.M. Best Asia-Pacific (Singapore) Pte. Ltd

11:05 am

Panel discussion: Indonesia: Ready to embrace the next wave of change?

Dr Frans Y. Sahusilawane President Director PT. Reasuransi Indonesia Utama (Persero) Mr Jeff Malatskey Head Of Insurance Practice Ernst & Young Mr Richard Austen Chairman Reinsurance Brokers Association of Singapore (RBAS) Mr Wayan Pariama Vice Chairman The General Insurance Association of Indonesia Asosiasi Asuransi Umum Indonesia (AAUI) Ms Susanna Lam (Moderator) Managing Director A.M. Best – Asia-Pacific

12:20 pm Luncheon

AFTERNOON SESSION

13:45 pm Registration -

14:00 pm

A.M. Best rating methodology and rating process

Mr Moungmo Lee General Manager, Analytics A.M. Best – Asia-Pacific

14:45 pm

Mock rating committee

Mr Moungmo Lee General Manager, Analytics A.M. Best – Asia-Pacific Mr Jeff Yeung Associate Director, Analytics A.M. Best Asia-Pacific Ltd Mr Chi-Yeung Lok Senior Financial Analyst A.M. Best Asia-Pacific (Singapore) Pte. Ltd

16:00 pm

Closing address


1

Opening remarks and introduction to A.M. Best / Rating and regulation

Dr Roger Sellek Chief Executive Officer A.M. Best – EMEA & Asia Pacific

Roger Sellek is based in London and oversees A.M. Best’s ratings, information-services and news businesses throughout Europe, the Middle East, Africa and the Asia-Pacific region. Prior to joining A.M. Best, Roger was Commercial Director for Lloyd’s of London for six years, responsible for the market’s strategic business relationships with its investor base, brokers, the rating agencies and the financial-analyst community. Shortly after joining Lloyd’s, Roger was appointed Head of Commercial Policy and subsequently became Managing Director of Lloyd’s Market Risk Unit, where he directed the development and application of the market’s risk-based capital system. He had earlier worked as a consultant to the Equitas Project, assuming management responsibility for the analysis of all non-APH liabilities. In addition to 15 years of extensive experience and achievement in the insurance and reinsurance sectors, Roger has a long academic background, graduating with a BSc in mathematical physics from the University of Exeter and with a PhD three years later. Roger also holds an MBA in strategic management from Imperial College at the University of London and carried out post-doctoral research at the University of Cambridge. He has worked in a number of academic positions in the United Kingdom and overseas, including as a lecturer in applied mathematics at the University of Sydney, Australia. He also spent two years as the National Squash Coach for Thailand.

2

Keynote address Dr Firdaus Djaelani Chief Executive functioning as Non-Bank Financial Institutions Supervisor Indonesia Financial Services Authority (OJK)

Firdaus Djaelani started his civil servant career as a staff at Ministry of Finance in 1981. Born in Jakarta in December 1954, he was once in charge as member or head of operational team for various researches and preparation of law making, such as insurance law, pension fund law, law on OJK, law on Deposit Insurance Corporation (LPS), anti-money laundering act, and many more. The 1993 alumnus of Management, Faculty of Economics at University of Indonesia, who is experienced as regulator as well as industry player in banking sector and non-bank sector (particularly insurance), was appointed as Director of Directorate of Insurance at Directorate General of Financial Institutions (DLJK), Ministry of Finance, from 2000 to 2006. He was once in charge as Director of Insurance and Risk Management at LPS from 2005 to 2008. The Master’s degree holder in economics from Ball State University in Indiana, U.S., was then promoted as member of LPS Board of Commissioners concurrently as LPS Chief Executive from 2008 to April 2012. Firdaus gained doctoral degree from Gadjah Mada University in 2012 and is active as Head of Indonesia Senior Executive Association (ISEA), takes part in ISEI management, and performs as Advisor of Sharia Economic Community since 2009. Previously, he was a member of Expert Board of Indonesian Association of Muslim Intellectuals or ICMI (2006-2011), Deputy Head of Civil Society Association (2002-2006), and was on leadership of Betawi Consultative Body (1982-1990). Firdaus Djelani was enacted as member of OJK Board of Commissioners based on Presidential Decree No. 67/P of year 2012. He was inaugurated and sworn in before Chief Justice of Supreme Court for 2012-2017 term of office.

3

The CEO's influence on ratings outcome / A.M. Best rating process and rating methodology / Mock rating committee

Moung Mo Lee General Manager, Analytics A.M. Best – Asia-Pacific

Moung Mo Lee is the general manager of analytics at A.M.Best Asia-Pacific (Singapore) Pte. Ltd. Moung Mo has been with A.M. Best since 2000. He is responsible for the analytics of A.M. Best’s ratings in the Asia-Pacific region. Prior to assuming his current role, Moung Mo served as the lead analyst for numerous companies in A.M. Best’s Asia-Pacific portfolio. Before joining A.M. Best, Moung Mo worked for Siemens AG and Hypo Bank in Germany. Moung Mo received his bachelor’s degree in economics from Chung Ang University and his master’s in economics from Seoul National University.

4

Utilisation of reinsurance by non-life insurers in Indonesia /

Mock rating committee Chi-Yeung Lok Senior Financial Analyst A.M. Best Asia Pacific (Singapore) Pte. Ltd Chi Yeung Lok is a Senior Financial Analyst at A.M. Best Asia Pacific (Singapore) Pte. Ltd. Chi Yeung has been with A.M. Best since 2010. His portfolio of rated clients includes insurance companies in South and South East Asia as well as Australia and New Zealand. Chi Yeung previously worked with Potomac Capital and KPMG in Hong Kong, as well as with Allianz and Deutsche Bank in Germany. Chi Yeung graduated with a joint degree in Chinese and Economics from the University of Leeds in the United Kingdom and a Masters in Financial Management from the Rotterdam School of Management, Erasmus University, in the Netherlands.

5

Panel discussion Indonesia: Ready to embrace the next wave of change?

Dr Frans Y. Sahusilawane President Director PT Reinsurance Indonesia Utama (Persero) Frans joined PT Asei Reinsurance Indonesia (Persero) as President Director in October 2014. In January 2015, the company changed its name to PT Reinsurance Indonesia Utama (Persero), abbreviated Indonesia Re. Until 2015, Frans has 40 years of working experience in the world of insurance. For 19 years from 1975 to 1993, Frans worked at PT (Persero) General Reinsurance Indonesia (UmumRe) - which changed its name to Indonesia Re, starting from staff positions until he is Head of the Division, before moving to Tugu Pratama in early 1994. Ten months later, the government asked him to return again to Indonesia Re as Director in November 1994, together with B. Munir Sjamsoeddin. Two years later, they both established PT Reinsurance International Indonesia (ReIndo) as a subsidiary of Indonesia Re who took over the portfolio of Indonesia Re since January 1, 1997. Frans also served as Technical Director of PT Tugu Reinsurance Indonesia - Tugu Re (1998-2000) and then President Director at Tugu Re (2000-2008), and was President Director of PT Asuransi MAIPARK Indonesia - PT Reinsurance MAIPARK Indonesia (2008-2014). In the field of insurance industry organizations, Frans served as Head of Reinsurance in Indonesian Insurance Council (DAI) from 1996 to 2002. When the General Insurance Association of Indonesia (AAUI) was formed in 2002, he was elected as Chairman, a position that he held for two terms (2002-2008). After 2008 until now, Frans has served as a Member of the Board of Trustees in AAUI. From 2003 to present, Frans has become the Honorary Chairman of the Council Code of Ethics in the Insurance Management Association of Indonesia (AAMAI). Before that from 1993 to 2003, Frans was Vice Chairman of the Board AAMAI. Frans earned a Master of Business Administration from De Montfort University, Leicester, England, UK, and his PhD in Strategic Management from the Faculty of Economics, University of Indonesia, Chairman of the Managing Board of Special Risk Insurance Consortium (KARK).

6


Jeff Malatskey Insurance Practice Leader, Asia Ernst & Young

Background Jeff Malatskey is Insurance Practice Leader, Asia and is located in the Hong Kong office where he leads their local practice and is responsible for assurance services to major insurance industry clients of Ernst & Young. Jeff represents the Asian Pacific Region on Ernst & Young's global insurance assurance panel. Jeff joined Ernst & Young in 1987 and has been based in Hong Kong office since 2007. From 1987 to 2006, Jeff was based in Ernst & Young’s Sydney office. Jeff qualified as a Chartered Accountant in South Africa, and is also an Australian Chartered Accountant. Jeff is a member of the institute of chartered accountants in Australia. Professional experience Jeff has 34 years audit experience of which 26 have been spent in financial services across a range of areas including life/P&C insurance, investment management, funds management, brokers/distribution and property. In that time he has worked on a number of the firm’s global clients and his roles have included regional responsibilities for some of these. His current client portfolio comprises life insurers, general insurers and brokers. Jeff’s current assurance engagements include Client service executive responsible for Manulife and Generali in the region, and Liberty Mutual, Chubb /Federal and Starr. Jeff also acts as Quality Review Partner on a number of insurance engagements. Jeff also has client relationship responsibility for a number of major multinational insurers and in that role leads and/or ensures the quality delivery of EY’s advisory services to those insurers. Jeff’s past Australian experience included serving the ING Group in Australia; Engagement partner for MLC Funds Management Services, AMP Investment Management, UBS Asset Management and Austbrokers Ltd. Jeff has also served a number of Australian general insurers in previous years including Mercantile Mutual Insurance (Australia) Ltd, AMP General Insurance Company Ltd, Chubb Insurance, and Liberty Mutual. Jeff’s past Australian experience also included Financial and Regulatory Reporting for funds/asset management companies and as compliance auditor for a number of major financial service providers.

7


Richard N C Austen Chairman Reinsurance Brokers Association of Singapore (RBAS)

Mr Austen started his career at Lloyd’s of London in 1972 for Thompson Graham Ltd which was renamed Jardine Thompson Graham. He became actively involved in Asian reinsurance business in 1974. His love for the region led him to move to Singapore in 1982 where he incorporated Singapore’s first regional reinsurance broking business. Adopting Singapore and Asia as his home, Mr Austen has travelled extensively in Asia in pursuit of delivering reinsurance solution to clients. He has served on many industry committees and spoken at numerous reinsurance conferences. After 30 years of insurance and reinsurance broking services in Asia with Jardines, in 2003 he joined Arthur J Gallagher to develop their broking business in Asia. Subsequently, with the global sale of Gallagher’s reinsurance operations, Mr Austen led the local management team to complete a management buy-out in January 2008 and rebranded the company “Asia Reinsurance Brokers Pte Ltd (ARB)”. Mr Austen is Chief Executive Officer of Asia Reinsurance Brokers Pte Ltd, Chairman of the Reinsurance Brokers’ Association, Singapore, a founding partner of Catalytics Pte Ltd and a member of the organising committee of the Singapore International Reinsurance Conference.

8


Wayan Pariama Vice Chairman The General Insurance Association of Indonesia Asosiasi Asuransi Umum Indonesia (AAUI) Wayan has developed a career in the insurance industry for almost 19 years since 1995. He started at PT. Asuransi Astra Buana in 1995 until 2003 with various positions. Wayan then joined ADIRA Insurance in 2003 as a division head and was promoted as Deputy Director. Within that period of time, besides working as an Underwriter, Wayan also involved in marketing, technical, internal control and claim. From 2014 until now, Wayan has become a member of Board of Director of ADIRA Insurance. Wayan completed Bachelor of Business, major in Accounting and Information Technology in Swinburne University of Technology, Melbourne, Australia and Glasgow Caledonian University, Glasgow, United Kingdom, for Associateship of Chartered Insurance Institute (ACII). Wayan took lessons at Executive Leadership Program at Insead Business School, Singapore. Wayan also sits as Vice Chairman of AAUI, Head of Agency Division, Head of the Department of Motor Vehicle Line Department AAUI and Member of OJK’s Tariff Team.

9


Susanna SW Lam Managing Director A.M. Best – Asia-Pacific Susanna Lam is the managing director of A.M. Best Asia-Pacific Ltd., where she leads A.M. Best’s operations throughout the Asia-Pacific region. Susanna oversees the ratings and news businesses of A.M. Best within the insurance and reinsurance sectors in the region, managing existing relationships and developing new relationships with key constituents in the insurance and broader financial services sectors. As a member of the Board, Susanna is responsible for ensuring that the compliance and regulatory requirements of the business are fulfilled. Susanna has over 30 years’ experience in the reinsurance and insurance industry and is the former general manager – reinsurance department of Ping An Property & Casualty Insurance Company of China, Ltd, where, based in Ping An’s Shenzhen headquarters, she managed the company’s outwards and inwards reinsurance portfolios and headed both the treaty and facultative divisions. Prior to Ping An, Susanna was the director and general manager of Miller Insurance Services (Hong Kong) Ltd, where she set up their Hong Kong office and was responsible for developing and producing business in North Asia. Susanna was also formerly with Swiss Re, where she worked in the company’s Hong Kong and Sydney offices. Susanna holds an ACII qualification and a master degree in business administration from The University of New South Wales, Australia.

10

Jeff Yeung Associate Director A.M. Best Asia-Pacific Ltd

Jeff Yeung is an associate director at A.M. Best Asia-Pacific Ltd. Jeff joined A.M. Best in 2011. Prior to joining A.M. Best, Jeff held the role of senior pricing actuary at Gen Re in Sydney. He has worked in Gen Re’s Hong Kong and Cologne, Germany, offices as well. He has more than 10 years of experience in the property and casualty reinsurance industry in markets that include Australia, Germany and China. Jeff is a Fellow of the Casualty Actuarial Society, Fellow of the Institute of Actuaries of Australia and RMS Certified Catastrophe Risk Analyst. He is a member of the Casualty Actuarial Society Committee on Reinsurance Research. He received his BS in Actuarial Science from the University of Hong Kong.


11

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A.M. Best Asia-Pacific Ltd credit ratings and any other related research are not intended for and must not be distributed to any person in Australia other than a wholesale client, as defined in the Corporations Act of 2001, Chapter 7. The A.M. Best websitesare not intended for use by Australian users who are not defined as wholesale users.

2A.M. Best Indonesia Seminar 2015 9 April 2015

12

Discussion outline


Introduction to A.M. Best




Panel discussion

Feedback

Introduction to A.M. Best


Dr Roger SellekChief Executive Officer

A.M. Best EMEA & Asia-Pacific

13

Corporate strategy

5

• Continue specialist focus on the (re)insurance sector

• Support growth of insurance industry in emerging markets

• Develop rating methodologies to respond to new risk transfer structures and sources of industry capital

• Explore opportunities to develop information/data business

• Build optimal operating structure through regional hub locations

A.M. Best Indonesia Seminar 2015 9 April 2015

A.M. Best Current Corporate Structure

A.M. Best Indonesia Seminar 2015

A.M. Best CompanyOldwick, New Jersey, USA

Europe

A.M. Best Rating Services

&A.M. Best Information

ServicesLondon

MENA Latin AmericaAsia Pacific

A.M. BestDubai

A.M. BestHong Kong

A.M. BestSingapore

A.M. BestMexico City

focus on Greater China, Japan & Korea

focus on SE Asia, ANZ

9 April 2015 6

14

Comparison of ratings coverage –global insurer interactive FSRs


A.M.Best3481

S&P1547

Fitch788 Moody's

723

Source: A.M. Best, Moody’s and Fitch’s websites and S&P’s Ratings Direct. Data as of January 2015.

Does not include PD ratings, NR ratings, “National” ratings, rated companies who are branches of a parent (Canada, Japan, New Zealand and U.S.), or companies who are under regulatory supervision or in liquidation.

79 April 2015

ASIA-PACIFIC

150

Best’s global ratings coverageExcluding USA and Canada

Western Europe

EasternEurope

Middle EastAsia

Oceania

Africa

Latin America & Caribbean

Bermuda

Interactive rating relationships with insurers/reinsurers in over 80 countries worldwide

A.M. Best Indonesia Seminar 2015 9 April 2015 8

15

Methodology & Research

9 April 2015 9

Research

Indonesia Non-Life Market Review: Risk Based Capital Impacts from Reinsurance Asset Leverage in Indonesia- 31 March 2015

Market Prospects Improve for Insurers Ahead of ASEAN Integration - 6 October 2014

ASEAN Non-Life & Life Market Review: Capitalizing on the Benefit and Opportunity in an ASEAN Open Market - 31 March 2015

(Global Re) How Relevant Is The Underwriting Cycle? - 8 September 2014

The "Grey" Swans: A.M. Best's Ratings Approach to the Top 10 Threats - 8 December 2014

Insurance Markets Advance as ASEAN Countries' Economies Grow - 9 June 2014

Asia-Pacific M&A Seen as More Balanced, Driven by Value Creation - 24 November 2014

Asia-Pacific Reinsurance - Segment Review. Asia's Reinsurers Are Looking to Grow Again - 2 September 2013

Methodology for the Indonesian Insurance Market

A.M. Best Ratings on a National Scale - 5 September 2014 Evaluating Country Risk - 2 May 2012

Rating Reinsurance Pools - 2 August 2013 Takaful (Shari'a Compliant) Insurance Companies - 10 January 2012

Risk Management and the Rating Process for Insurance Companies - 2 April 2013

Catastrophe Analysis in A.M. Best Ratings - 3 November 2011


Awards & Recognition

Read more about our awards and achievements at: www.ambest.com/ratings/awards.html

A.M. Best Company, Inc. (AMB) Regulatory Registrations and RecognitionsFor a comprehensive profile of our regulatory registrations around the world, please visit

http://www.ambest.com/nrsro/index.html


2009 - 2014

6

9 April 2015

A.M. Best also named

“International Best Ratings Agency”by The International Takaful Awards

10

16



Dr Roger SellekChief Executive Officer

A.M. Best EMEA & Asia-Pacific

9 April 2015A.M. Best Indonesia Seminar 2015 12

Importance of credit quality in Developing insurance markets

Key role of reinsurance as facilitator of growth

Developing insurance markets are generally heavily reliant on reinsurance (counterparty) support

Focus on counterparty credit quality

Sharpened focus on counterparty credit will continue to embed ratings in the financial fabric of the insurance and reinsurance sectors

Ratings becoming enshrined in legislation

Ratings are increasingly becoming enshrined in insurance legislation around the region as regulatory regimes evolve and their sophistication increases – runs counter to G20/FSB intentions

17

Growing risk exposure in Asia-Pacific


Dev

elo

pm

ent

and

gro

wth

Time

Coverage Growth

Risk Growth

Economic Growth

Risk exposure exceeds coverage

Premium growth

exceeds GDP growth


2005-2009Five years total of yearly top

10 global catastrophe insured losses = US$141.2 billion

2010-2014Five years total of yearly top

10 global catastrophe insured losses = US$208.4 billion

Source: Swiss Re SIGMA report

Growing risk exposure in Asia-Pacific

Asia$52.5 billion

25%

Australasia$25.8 billion

12%

Europe$16.0 billion

8%

North America$104.5 billion

50%

Latin America & South America$9.7 billion

5%

Asia$5.8 billion

4%

Australasia$2.4 billion

2%

Europe$22.5 billion

16%

North America$110.6 billion

78%

18

Regulation – capital requirements

159 April 2015A.M. Best Indonesia Seminar 2015

^ C-ROSS in transition stageSource: Insurance regulators, insurance associations

“Solvency I” capital requirement Risk-based capital (RBC) requirement

0

20

40

60

80

100

120

140

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Number of non‐life direct insurers

Minim

um cap

ital req

uirem

ents (USD

million)

Number of non‐life direct insurers and minimum capital requirements in Asia‐Pacific markets

Minimum capital requirement (USD mil) number of nonlife insurers

Ratings in insurance regulation (1)

Minimum rating requirements on reinsurers have been imposed by regulators in some territories

• 100% capital charge is applied to unsecured reinsurance recoverablesfrom foreign reinsurer with rating lower than a‐

Australia

• Under C‐ROSS, capital charge of over 80% is applied to uncollateralized retrocession recoverables from foreign retrocessionaires with rating lower than bbb‐

China ^

• Insurers should place reinsurance with foreign reinsurers with a minimum rating of bbb

India

• Overseas reinsurance companies reinsuring Indonesian business should have a minimum rating of bbb *

Indonesia

• minimum ratings for international reinsurers is A.M. Best financial strength rating (FSR) of B+ or equivalent

• Foreign reinsurers accepting 10% or more in any reinsurance contract must have a minimum rating of bbb

Vietnam

* Higher risk charges will otherwise be appliedRisk‐based capital (RBC) requirement

“Solvency I” capital requirement


Taiwan

^ C‐ROSS in transition stage

19

Ratings in insurance regulation (2)

Ratings of reinsurers are used in calculating insurers’ counterparty risk in many regulatory solvency requirements

* Note: the Australian risk charges for unsecured RI recoverables from foreign reinsurers are not shown in the chart# Note: risk charges for lower than bbb rating categories can be higher than the values indicated in the chart

179 April 2015A.M. Best Indonesia Seminar 2015

0%

5%

10%

15%

20%

25%

aaa aa a bbb lower thanbbb #

Australia ‐ APRA authorisedreinsurer *

Australia ‐ foreign reinsurer,secured RI recoverables *

Malaysia

New Zealand

Korea

Thailand

Rating in insurance regulations

New ZealandAll insurers* are required to obtain a financial strength rating from an

approved rating agency**

SingaporeMAS takes into account applicant’s credit rating by an international rating agency in assessing license

application

Rating is becoming an increasingly important factor that regulators consider in assessing insurance license applications

* Exemptions for small insurers with GPW below NZD 1.5 million, reinsurers, captive insurers, crown entities** A.M. Best Asia‐Pacific Ltd was first CRA to be approved in New Zealand on 15 April 2010


20

Conclusions (1)


International rating scale

Key input into "policyholder and other stakeholder decision making"

Provides financial due diligence on

insurers

Conclusions (2)


… foster a transparent and open business

environment

… encourage greater

corporate accountability

… are a valued

independentsource of

detailed and comparable information

… leading to stronger and

healthier insurance markets

Ratings…

There is a naturally symbiotic relationship between regulation and ratings that can exert strong positive influences on the evolution of international insurance markets

21



MM LeeGeneral Manager - Analytics

A.M. Best Asia-Pacific

22

Balance SheetStrength

Operating Performance

Business Profile

Enterprise Risk Management

+ Country Risk

Rating

Insurance Company Financial Strength

Key rating components


22

Integration of the CEO into the rating process

23

Company Rating Proposal

Peer Analysis / Industry

Composite

Capital Adequacy


CEO & Management

Team

Country Risk

Industry Trends & Analysis


Factors in the rating process

24

Qualitative aspects

Operating performance

Balance sheet strength

Historical ProspectiveCurrent


23

Importance of the rating management meeting

25

• The rating decision is not reached during the management meeting

• However, it is the one contact point where:

– The CEO and the senior team can show-case their company

– The analysts can get first-hand exposure to the team that is running the company


CEO engagement

26

• CEO needs to . . .

– be involved not only in the rating process, but also the management meeting itself

– provide guidance and direction – shouldn’t run the process

– understand key points of the rating process

– be aware of issues for and within the company that can influence the rating


24

Engagement - examples

27

INVOLVEMENT

PROVIDINGDIRECTION

COMPANY KNOWLEDGE

RATING PROCESS

BEST PRACTICE

• Not involved in preparation for the meeting

• Not present at management meeting

• Leads pre-meeting preparation• Delegates preparation for the

meeting • Leads management meeting

• Has limited input on direction• Is shown items to be presented

just prior to the meeting

• Receives frequent updates on communication with the CRA

• Sets tone of communication

• Is unfamiliar with key performance indicators

• Has no decision-making input to key activities e.g. investment strategy

• Has limited understanding of rating process

• Understands rating process and manages it to present company in best possible light

• Deep knowledge of company’s key financial metrics

• Able to demonstrate control of key company activities


Managing rating communication

28

• CEO needs to . . .

– define clear communication strategy with the CRA

– manage pro-actively the communication with the CRA. Ensure key information is delivered in a timely fashion

– admit and address shortfalls in company performance rather than ignore issues

– allow strengths of senior-management team to be evidenced


25

Managing rating communication -examples

29

BEST PRACTICE

COMMSSTRATEGY

PRO-ACTIVEMANAGEMENT

MANAGINGSHORTFALLS

INVOLVING SNR MGT

• There is none • Identifies person responsible to communicate with CRA

• Sets communication tone

• CEO and company react only when asked by the CRA

• Ensures that CRA is provided with relevant updates on timely basis

• Refuses to acknowledge performance / operating shortfalls

• CEO personally communicates all company developments

• Exhibits depth of expertise by allowing senior management to communicate developments in their respective areas

• Recognises main shortfalls, accepts them and communicates corrective action


Embedding ERM

30

• CEO expected to . . .

– identify and establish credible Risk Management (RM) function

– contribute to identifying risk appetite and ensure buy-in from staff at all levels of the organisation

– ensure there are clear RM responsibilities for senior management and CRO

CRO should have easy access to CEO and BoD

– drive clear communication of risk appetite throughout entire organisation

– demonstrate link between RM and performance-based remuneration


26

Defining ERM best practice -examples

31

BEST PRACTICE

CREDIBLERM

RMRESPONSIBILITIES

RISKAPPETITE

COMMS &REWARDS

• No RM function• CRO having dual responsibilities e.g.

CRO and CFO

• RM function established and adequately staffed

• CRO in place with relevant experience

• Only some members of staff have risk-related responsibilities e.g. Chief Underwriter has combined-ratio target

• Risk responsibilities identified for all employees

• Responsibilities linked to risk appetite• CRO monitors and controls risk-

related performance

• No risk appetite defined• Risk appetite defined purely as

underwriting performance

• ERM and risk appetite confined to senior management

• No link to remuneration

• All members of staff are aware of their risk targets

• Performance of at least senior management linked to achieving risk-adjusted returns

• Clearly defined appetite specifying capital and income at risk at given points in time


The CEO’s influence

32

• Greater credibility will be given if the CEO has a track record of meeting financial forecasts

• Reputation and past experience of the CEO plays a major role in building confidence in the forecasts provided

• Even if the company has a track record of not meeting forecasts, confidence can be achieved if the CEO admits the shortcomings in the past and discusses how underperformance has been addressed

• In many cases the credit to CEO is conveyed in the press release through an expression such as: ‘The ratings reflect sound capitalization, improved performance and experienced management.’


27

Summary: CEO and the rating outcome

33

• The CEO and his/her management team is critical to the rating

• Involvement in the rating process and management meeting(s) is essential

• Most successful CEOs influence the rating outcome indirectly through the performance of their company and their team

• In rare cases the departure of a CEO can result in a downgrade or negative outlook




Chi Yeung LokSenior Financial Analyst

A.M. Best Asia-Pacific (Singapore) Pte. Ltd

28

Agenda

9 April 2015 35

• Utilisation of reinsurance by non-life insurers in Indonesia

• Managing reinsurance assets: why it matters

• Impact on capital ratios under different scenarios


Premium retention of Indonesian non-life insurers relative to neighbouring markets

9 April 2015 36

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013

Malaysia Singapore Indonesia Philippines

Indonesia and Philippines cede a relatively high proportion of gross premiums for reinsurance protection


Source: Bank Negara Malaysia, Monetary Authority of Singapore, Otoritas Jasa Keunangan, The Insurance Commission, Philippines

29

Reinsurance utilisation varies by line of business

9 April 2015 37

• Direct non-life insurers with larger property and commercial portfolios likely have higher reinsurance leverage

• Managing reinsurance leverage is of greater importance for such insurers

-

2

4

6

8

10

12

14P

rem

ium

s in

ID

R T

rillio

n Gross Premiums Net Premiums

2013 Gross and Net Premiums by LoB

Source: Otoritas Jasa Keunangan, Statistik Perasuransian 2013


Average reinsurance leverage of selectedIndonesian non-life direct insurers in 2013

9 April 2015 38

0%

20%

40%

60%

80%

100%

120%

Average RI Assets / Capital Average Net RI Assets / Capital

• Average of around 1x may not appear high

• However this measure could be higher after a large catastrophe

Source: Company financial statements, regulatory filings


30

Agenda

9 April 2015 39





575%

100%

542%

100%

80%

100%

Reinsurance Gearing - Selected Thai NL Insurers

Capital - Selected Thai NL Insurers

Reinsurance Gearing - Selected NZ NL Insurers

Capital - Selected NZ NL Insurers

Reinsurance Gearing - Selected Indonesian NL Insurers

Capital - Selected Indonesian NL Companies

High reinsurance leverage needs to be well managed

9 April 2015 40

For an insurer with high reinsurance leverage, any unfavourable change in reinsurer balances could have an disproportionate impact on capital, capital requirements and RBC ratio


Indonesia average (Pre Catastrophe)

New Zealand, 2010/11 EQ

Thailand Flood, 2011


31

Pre and Post CAT Reinsurance leverage –experience of selected regional non-life insurers

9 April 2015 41


Reinsurance leverage and related capital requirements could spike after a catastrophe event and take years to return to pre-catastrophe levels


0

1

2

3

4

5

6

7

Pre CAT Post CAT

Net

Rei

nsu

ran

ce B

alan

ces

/ Cap

ital

(T

imes

)

Thailand - 2011 Flood

New Zealand - 2010/11 EQ

Philippines - 2013 Typhoon Yolanda

Indonesia 2013 Average

0%

50%

100%

150%

200%

250%

(a) (b) (c ) (d) (e ) (f) (g) (h) (i) (j) (k) (l)

RI Assets / CapitalNet RI Balances / CapitalAverage

2013 reinsurance leverage of selected Indonesian non-life insurers

9 April 2015 42

While average reinsurance leverage is at around 1x there is a wide variation across Indonesian non-life insurers



32

Agenda

9 April 2015 43





2013 BCAR selected Indonesian insurers –Average level of reinsurance assets (80% capital)

9 April 2015 44A.M. Best Indonesia Seminar 2015

a- , 100%

a- , 75%

NR, 25%

a-75%

bb-25%

a- , 94%

bb-, 6%

Assumed credit quality of reinsurance assets




310%

231%

282%303%

(C)(D)

NR = non-rated

(A)

(B)

33


a- , 100%

a- , 75%

NR, 25%

a-75%

bb-25%

a- , 94%

bb-, 6%





2013 BCAR selected Indonesian insurers –2x average level of reinsurance assets

310%

231%

282%303%

260%

142%

208%

246%

Average reinsurance asset level 2x average reinsurance asset level

NR = non-rated

(A)

(B)

(C)(D)


a- , 100%

a- , 75%

NR, 25%

a-75%

bb-25%

a- , 94%

bb-, 6%





2013 BCAR selected Indonesian insurers –3x average level of reinsurance assets

310%

231%

282%303%

208%

92%

149%

190%

Average reinsurance asset level 3x average reinsurance asset level

NR = non-rated

(A)

(B)

(C)(D)

34


a- , 100%

a- , 75%

NR, 25%

a-75%

bb-25%

a- , 94%

bb-, 6%





2013 BCAR selected Indonesian insurers –Reinsurance assets = 5.75x of capital

310%

231%

282%303%

82%

28%50%

71%

Average reinsurance asset level Reinsurance assets = 5.75x capital

NR = non-rated

(A)

(B)

(C)(D)

Summary

9 April 2015 48

• Reinsurance asset risk - varies by line of business and insurer- has disproportionate capital impact if it is high

• For the time being, reinsurance asset risk appears moderate for the average insurer, however

- there is wide variation among insurers- post-catastrophe level needs to be considered, especially for insurers

that already have a higher than average reinsurance asset leverage ratio in a pre-catastrophe scenario

• On average, capital impact of higher cessions to national reinsurers appears manageable. However the capital impact will increase

- with continued growth in exposure, insurance penetration and density - for insurers with a higher than average amount of reinsurance assets- a rating is better than no rating


35

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A.M. Best Asia-Pacific Ltd is registered as a Credit Rating Agency in Australia and holds a Financial Services Licence number 411055 under the Corporations Act of 2001.

A.M. Best Asia-Pacific Ltd credit ratings and any other related research are not intended for and must not be distributed to any person in Australia other than a wholesale client, as defined in the Corporations Act of 2001, Chapter 7. The A.M. Best websitesare not intended for use by Australian users who are not defined as wholesale users.


36

Discussion outline


A.M. Best rating process and rating methodology


Feedback

A.M. Best rating process and rating methodology


MM LeeGeneral Manager - Analytics

A.M. Best Asia-Pacific

37


Agenda

1. The rating process

2. The rating methodology

3. Country Risk & Enterprise Risk Management

The interactive rating process


38

Timeline of the rating process

7

5. Rating decision and dissemination

4. Best’s analysis

3. Rating meeting

2. Pre-rating preparation

Week 1-2 Week 3-6 Week 7 Week 8-16 Week 16-18

1. Rating Engagement and Contract

• Rating is determined through a committee process• On-going monitoring throughout the year• The rating (management) meeting is an annual process • Information deemed confidential by the company will not be

published



Agenda




39

9

Rating Recommendation

Country Risk

Industry Trends & Analysis


Balance Sheet Strength

Operating Performance

Business Profile

Peer Analysis / Industry

Composite


Rating methodology

Rating methodology


40


11

• Absolute capital?

• Risk-based capital?

• Parental support?

• Low volatility of capital?

• Being mutual?

• Government owned?



12

Company Structure

Capitalization

Adequacy of Reserve

Financial Flexibility

Liquidity

Reinsurance

Holding company Gov’t-owned / Public / Private

Absolute / Risk-adjusted Stress testing

Prudent assumptions Degree of uncertainty

Equity Subordinated debt

Quality Diversification of assets

Quality Coverage


41

Best’s RBC (BCAR)

13

LOW HIGH

Volatility / Sensitivity

BC

AR

100%

200%

BCAR Guidelines

Ratings A- or above

Ratings B+ or above



14

• Underwriting margin?

• Return on investment?

• Absolute level of earnings?

• Track record of stable earning?

• Return on shareholders’ equity?

• Favorable market environment?


42


15

Profitability

Revenue Composition

Ability to Meet Plan

Sustainability

Strong vs Weak High vs Low fixed costs

Diversification Investment income

Actual vs Forecast

Consistency vs Volatility


Business profile

16

• Market share?

• Growth rate?

• Brand recognition?

• Captive business?

• Strong parent?

• Excellent management?


43

Business profile

17

Premium Composition

Premium Growth

Competiveness

Management

Insurance Market Risk

Event Risk

Niche vs Diversified Personal vs commercial

Premium rate vs Unit volume Profitability

Distribution capabilities (new channel) Brand recognition

Alignment Adaptive to changes

Insurance industry Regulations / Economy

Financial impact Risk control



Agenda




44

Country Risk

19

Country Risk: The risk that country-specific factors could adversely affect an insurer’s ability to pay its financial obligations.

Distinct from:

Sovereign Default Risk: Probability that a sovereign government does not repay its debts on time and in their entirety.


Country Risk

2020

Lowest RiskCRT‐1

CRT‐3Moderate Risk

CRT‐5Highest Risk


45

Country Risk

21

CRT-1: Superior stability. Predictable and transparent political environment, legal system and business infrastructure; sophisticated financial system with deep capital markets; mature insurance industry.

CRT-2: Predictable and transparent political environment, legal system and business infrastructure; sophisticated financial system; mature insurance industry.

CRT-3: Developing political environment, legal system and business infrastructure with developing capital markets; developing regulatory structure.

CRT-4: Relatively unpredictable and non-transparent political, legal and business environment with underdeveloped capital markets; partially to fully inadequate regulatory structure.

CRT-5: Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low human development and social instability; nascent insurance industry.


Country Risk


46

Country Risk

23

0

20

40

60

80

100

120

140

160

180

CRT-1 CRT-2 CRT-3 CRT-4 CRT-5

Eas

e o

f D

oin

g B

usi

nes

s R

ank

(O

ut

of

183

Co

un

trie

s)


Country Risk considerations

24

A++ A+ C++B-BB+B++A-AFSR

AMB’s Country Risk Tiers do not impose ratings’ ceiling


47

Risk management

25

• Risk management is the common thread that links…– Balance sheet strength– Operating performance– Business profile

• Risk management fundamentals can be found in a company’s…– Strategic decision making process – Financial management and control practices– Daily operating procedures


26

Risk management

LOW HIGH

Product Complexity

High Risk Profile

Low Risk Profile

Earnings and

Capital Volatility

LOW

HIGH

Industry risk profile trends


48

27

Risk management

Today Future

BC

AR Average Returns

Baseline Model

BCAR Guideline

Return Model Supports Higher

Rating


Best’s RBC (BCAR)

28

LOW HIGH


BC

AR

100%

200%

BCAR Guidelines

Ratings A- or above

Ratings B+ or above


49

29

Risk management

Today Future

BC

AR

Average Returns

Baseline Model

BCAR Guideline

Return Model Supports Higher

Rating


Best’s RBC (BCAR)

30

LOW HIGH


BC

AR

100%

200%

BCAR Guidelines

Ratings A- or above

Ratings B+ or above


50

31

Enterprise Risk Management integration is considered throughout the rating

Risk identification

Risk tolerance

Risk mitigation

Recognition of opportunity areas

Cognizance of strengths and weakness

Actionable plans to address risk levels

Awareness and involvement at all levels of the organization

Risk management




Jeff Yeung FCAS, FIAA, CCRAAssociate Director-Analytics

A.M. Best Asia-Pacific Ltd

51



Background

• Hypothetical direct non-life insurer in Indonesia: “PT Asuransi ABC”

• Simulate past financial performance from Indonesia insurance market statistics and individual insurers’ financial statements

• Peer comparison with local and regional peers

Rating methodologies used


• Best’s Credit Rating Methodology – Global Life and Non-Life Insurance Policy

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings

• Evaluating Country Risk

• Risk Management and the Rating Process for Insurance Companies

• Understanding Universal BCAR

Best's Credit Rating Methodology and the above insurance criteria reports can be found at www.ambest.com/ratings/methodology.

52

Agenda


• Country Risk: Indonesia

• Business profile

• Operating performance

• Balance sheet strength

• ERM

• Vote on rating outcome

Country Risk: Indonesia


• Economic Risk: Moderate

– Continued inflationary pressure

• Political Risk: High

– Social and political instability may limit the amount of capital investment

– Vulnerable to exchange rate volatility and speculative attacks

• Financial System Risk: High

– Bank Indonesia tightened monetary policy by 175 bps in 2013, with additional tightening expected in the second half of 2014

53

Agenda






• ERM


Business profileGPW by key lines of business:PT Asuransi ABC vs peers


• PT Asuransi ABC focused on commercial lines (property, engineering, marine hull), began to write personal lines business in 2012

• Top line and market share declining

Source: Otoritas Jasa Keunangan

54

Business profileMarket share of key lines of business:PT Asuransi ABC vs peers


FY 2013 All LOBs PropertyEngineer

ingMarine hull

MotorPA & health

Indonesia direct non‐life Top 20 71.1% 73.8% 60.7% 81.7% 70.1% 61.3%

PT Asuransi ABC 3.4% 8.6% 10.8% 12.0% 0.9% 0.9%

Indonesia direct non‐life rank 1 to 5 35.1% 37.1% 27.4% 51.7% 37.6% 22.4%




FY 2010 All LOBs PropertyEngineer

ingMarine hull

MotorPA & health

Indonesia direct non‐life Top 20 68.6% 68.9% 50.3% 61.5% 72.9% 63.6%

PT Asuransi ABC 5.5% 13.9% 16.0% 23.2% 0.4% 0.0%




Indonesia direct non‐life rank 16 to 20 7.4% 9.5% 8.8% 1.6% 4.6% 9.1%Source: Otoritas Jasa Keunangan

Business profilePT Asuransi ABC: Summary of key rating considerations


Positives: • Competitive position / experience: expertise in underwriting commercial lines (property, engineering, marine hull)

Negatives: • Competitive position: declining market share in core lines

Other remarks: • Product mix & diversification: commercial lines focus → less LOB diversification. (However core lines were profitable)

Conclusion: • Although the company showed strong presence in its core lines in the past, weakening competitive position is a concern

55

Agenda






• ERM


Operating performanceFY 2009 to 2013 combined ratio: PT Asuransi ABC vs peers


Source: insurance regulators, insurance associations websites; BestLink

56

Operating performancePT Asuransi ABC: FY 2009 to 2013 key performance indicators


Average 2013 2012 2011 2010 2009

Net loss ratio 53.9% 54.0% 55.3% 55.8% 51.7% 52.8%

Net commission ratio 10.3% 10.5% 10.1% 10.2% 10.4% 10.4%

Underwriting expense ratio 25.4% 26.3% 25.8% 25.1% 24.9% 24.6%

Combined ratio 89.6% 90.8% 91.2% 91.1% 87.0% 87.7%

Operating ratio 66.6% 65.8% 66.9% 69.0% 64.8% 66.3%

Net investment yield 5.7% 5.8% 5.8% 5.8% 5.8% 5.7%

Underwriting results (IDR billion) 61.23 52.23 49.92 56.91 76.57 70.54

Profit before tax (IDR billion) 196.80 197.95 190.10 191.45 208.65 195.87

Operating performanceProperty net loss ratio FY 2010 to 2013:PT Asuransi ABC vs peers


Average 2013 2012 2011 2010

Indonesia direct non‐life (joint‐venture) 73% 88% 17% 62% 124%

Indonesia direct non‐life (local) 53% 53% 44% 39% 81%

PT Asuransi ABC 50% 53% 47% 51% 49%

Indonesia direct non‐life rank 1 to 5 61% 85% 54% 67% 32%



Indonesia direct non‐life rank 16 to 20 27% 44% ‐4% 38% 46%


57

Operating performanceEngineering net loss ratio FY 2010 to 2013:PT Asuransi ABC vs peers


Average 2013 2012 2011 2010



PT Asuransi ABC 52% 55% 71% 46% 52%



Indonesia direct non‐life rank 11 to 15 98% 97% 178% 53% ‐26%



Operating performanceMarine hull net loss ratio FY 2010 to 2013:PT Asuransi ABC vs peers


Average 2013 2012 2011 2010



PT Asuransi ABC 73% 57% 90% 75% 79%






58

Operating performancePT Asuransi ABC: Benchmarking with local and regional peers


Positives: • vs regional peers: 5‐year average combined ratio lower than some top insurers in the Philippines, Thailand and Vietnam. Less variability

• vs local peers: 5‐year average combined ratio similar to top 20 insurers in Indonesia. Less variability

Negatives: • vs local peers: marine hull average past net loss ratio was higher than local peers

Operating performancePT Asuransi ABC: Summary of key rating considerations


Positives: • Operating performance: consistently positive operating results, low volatility

• Underwriting performance: combined ratio similar to peers on average, low variability. Property line shows stable loss ratio over past 4 years

• Investment performance: stable and positive results

Negatives: • Expense ratio shows increasing trend• Marine hull average past net loss ratios was higher than local peers

Other remarks: • Marine hull net loss ratio volatility observed across the whole industry

Conclusion: • PT Asuransi ABC has good operating performance on absolute basis• Performance similar to local peers on average, better than some big

players in other markets in Southeast Asia• Low volatility in past 5 years’ performance

59

Agenda






• ERM


Balance sheet strengthCapital & surplus: PT Asuransi ABC vs peers FY 2013



60

Balance sheet strengthNPW to surplus ratio: PT Asuransi ABC vs peers FY 2013



This ratio measures a company’s exposure to pricing errors in its current book of business

Balance sheet strengthNet technical reserves to surplus ratio: PT Asuransi ABC vs peers FY 2013



This ratio shows a company’s exposure to reserving errors relative to size of its capital and surplus

61

Balance sheet strengthInvested assets to C&S ratio: PT Asuransi ABC vs peers FY 2013



Balance sheet strength analysis include evaluation of asset leverage, i.e. the exposure of a company’s surplus to investment risk, interest rate risk and credit risk

Balance sheet strengthNet retention ratio: PT Asuransi ABC vs peers FY 2013



Low net retention ratios are generally associated with high reinsurance credit risk exposures

62

Balance sheet strengthCash and deposits to net technical reserves: PT Asuransi ABC vs peers FY 2013



A company’s liquidity depends on the degree to which it can satisfy its financial obligations, whether by holding cash and investments that are sound, diversified and liquid, or through operating cash flow.

Balance sheet strengthPT Asuransi ABC: investment profile FY 2013


• Bonds portfolio average duration: 2.5 years

• Investment allocation strategy:

Target Range

Cash & deposits 67% 50% ‐ 90%

Bonds 20% 10% ‐ 30%

Equities (listed) 10% 0% ‐ 15%

Real estate 3% 0% ‐ 7.5%

63

Balance sheet strengthPT Asuransi ABC: reinsurance strategy


• Maximum retention per event:

< 2% of company's capital and surplus

• Reinsurers selection criteria:

o ICR “a-” or above

o Share per reinsurer up to 20%

(leader up to 35%)

Reinsurer’s ICR

Percentage

aaa, aa+ 0%

aa, aa‐ 5%

a+, a 20%

a‐ 75%

Reinsurance recoverables: % split by reinsurers’ ratings

(December 2013)

Currency: Indonesia RupiahDenomination: Billion

NET REQUIRED CAPITALFY ending % of

Asset Risk: 12/31/13 GRC Exposure(B1) Fixed Income Securities Risk 100.79 12.1% 2,285.66 (Total of cash & deposits, bonds)

(B2) Equity Securities Risk 70.13 8.4% 266.37 (Total of equities, real estate)

Subtotal (B1 + B2) 170.93 20.6%

(B3) Interest Rate Risk 2.07 0.2% 469.53 (Total bonds)

Total Investment Risk (B1 + B2 +B3) 172.99 20.8%

(B4) Credit Risk 255.09 30.7% 3,547.58 (Total of receivables, reinsurance recoverables)

Total Asset Risk (B1 + B2 + B3 + B4) 428.09 51.5%

Underwriting Risk

(B5) Net Loss and LAE Reserve Risk 236.41 27.3% 693.63 (Total net loss reserves)

(B6) Net Premium Risk 184.32 21.2% 586.32 (Total net premium written)

Total Underwriting Risk (B5 + B6) 420.73 48.5%

(B7) Business Risk 0.00 0.0%

Gross Required Capital (GRC) 848.82 100.0%

Less: Covariance Adjustment 404.08 47.8%

Net Required Capital 444.74 52.2%

Adjusted Policyholder Surplus12/31/13

Reported Surplus 1,212.05

Loss Reserve Equity 6.09Sub-total 1,218.14

Net Catastrophe PML (After-Taxes and Reinsurance) 48.72Unearned Premium Capital Charge (P/C Only) 27.51

Adjusted Surplus (APHS) 1,141.91

Calculated APHS/NRC - Standard 256.8%Calculated APHS/NRC - Catstress 247.8%

Balance sheet strengthPT Asuransi ABC: Best’s Capital Adequacy Ratio (BCAR)


223.4%

233.7%238.0%

243.6%256.8%

1,0201,082

1,141 1,178 1,212

800

1,000

1,200

1,400

1,600

200%

215%

230%

245%

260%

12/31/2009

12/31/2010

12/31/2011

12/31/2012

12/31/2013

BCAR Reported surplus (IDR billion)

64

Balance sheet strengthPT Asuransi ABC: Benchmarking with local and regional peers


Positives: • Underwriting leverage: lower NPW to surplus ratio than most peers • Liquidity: High ratio of cash and deposits to net technical reserves

Negatives: • Absolute capital: absolute capital size relatively smaller than some regional peers

Other remarks: • Net retention ratio: lower than most peers (which usually implies higher reinsurance dependency)

• Underwriting leverage: slightly higher net technical reserves to surplus ratio than some local peers

Balance sheet strengthPT Asuransi ABC: Summary of key rating considerations


Positives: • Capitalization: steady growth of C&S, high BCAR scores• Investment allocation: conservative• Liquidity: good• Reinsurance protection: “a‐” above for reinsurers on the panel;

diversified panel; set event retention to be 2% of capital and surplus

Negatives: • Absolute capital size relatively smaller than some regional peers

Other remarks: • High reinsurance dependency (need good management of reinsurance program)

• High net technical reserves relative to capital and surplus (need prudent reserving practice)

• Catastrophe exposed portfolio

Conclusion: • PT Asuransi ABC has favorable balance sheet strength

65

Agenda






• ERM


Enterprise risk managementPT Asuransi ABC: Summary of key rating considerations


Positives: • Risk culture: Establish risk tolerance or appetite in relation to earnings and capital

• Risk identification: Identify and manage five categories of risk – underwriting, market, credit, operational, strategic

• Risk management and monitoring: strong adherence to underwriting policy and investment policy

Negatives: • Role and responsibilities: ERM department newly established 2 years ago: still developing holistic view of risk profile and potential impact of risk correlations

Conclusion: • “Moderate” risk profile

Risk Profile Risk Management Capability

GoodLow risk

SuperiorHigh risk

StrongModerate

risk

66

Agenda






• ERM


Impact of operating performance and business profile on the balance sheet


67

Vote on rating outcomePT Asuransi ABC




Business profile

+

–

0

+

–

0

ERM (+ / ‐ / 0 ?)

Country Risk

68

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