Effective Information Management in the new RBC ... - Thai · PDF fileEffective Information Management in the new RBC Environment © Copyright IBM Corporation ... US Gaap - IFRS convergence

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© Copyright IBM Corporation03/10/2010

Effective Information Management in the new RBC EnvironmentIBM Point of View

Srikanth VenkatesanGlobal Insurance SMEIBM Global Business Services

© Copyright IBM CorporationEffective Information Management in the new RBC Environment


Agenda

The New Financial and Regulatory Environment Focus on Solvency II,RBC requirements, IFRS and MCEV

Key Challenges of Compliance with Regulation Internal risk model approval process Data Integration and Common Reporting Platform Implementation Costs

Solution Architecture Key Components Solvency II Showcase, La Gaude

Case Studies Value Management Program with leading European Insurer Global Insurer Strategy on Market Consistency

Value Proposition – Client Benefits and Why IBM Estimated cost savings in implementation projects Global Delivery capability Risk & Compliance Diagnostic



Insurance Industry faces numerous regulatory challenges

Financial Accounting Standards

IFRS Phase II

Market Consistent Embedded Value (MCEV)

Regulatory Capital Standards

Solvency II

Regulatory Supervision & Corporate Governance Standards

SOX

AML

KYC



Impact on Business Design

CxO ImpactCRO: Ensuring practices, operations, and risk exposure levels are transparent while aligning with internal and external prudential requirements

CFO: Insurers will seek to leverage their investments in Solvency II platforms for purposes such as Value Based Management, customer value analysis, reinsurance optimization, pricing and harmonization with accounting and asset and liability management in order to maximize risk-adjusted performance and value creation

COO: Protecting business assets and efficiency by improving integrity, resiliency, and transparency, while maintaining operational effectiveness



5 03/10/2010

Summary of Solvency II Requirements

Valid for all insurance companies in EU after forming the directive into national law

Solvency IIProtection of policyholders

against failure of insurance companies

Capital Adequacy

Pillar IQuantitative

Supervision and

Governance

Pillar IIQualitative

Disclosure

Pillar IIIMarket

Discipline

Underwriting Risk

Market Risk

Credit Risk

Asset/Liability Management Risk

Operational Risk

Liquidity Risk

“The aim of Solvency II is to more accurately reflect the true economic risks facing insurance companies, by taking into account both asset- and liability-side risks, and the interactions within and between those risks. In addition, the new regimen [Solvency II] aims to promote more efficient supervision, especially for large groups, and should translate into improved financial soundness of insurance companies, allowing them to better survive difficult periods.” Fitch Ratings, March 2008

Pillar I Quantitative Demonstrate adequate quantitative financial resources Technical rules for valuation of assets, liabilities and required

solvency margins Establishment of a basic and an advanced capital requirement:

– Minimal Capital Requirement (MCR)– Solvency Capital Requirement (SCR)– Concentration Risk– Liquidity Risk

Pillar II Qualitative Enhanced supervisory review process Ability to set bespoke capital requirements in addition to

SCR/MCR Will reflect firms’ internal model of risk management and

corporate governance capabilities

Pillar III Market Discipline Public and regulatory disclosures Comprehensive timely reporting (internal and external) Public disclosures should be consistent with IASB (1) IFRS (2)

Phase II disclosures

Source: Moodys; Fitch Ratings; Tillinghast; Swiss Re

(1) IASB: International Accounting Standards Board(2) IFRS: International Financial Reporting Standards



Summary of financial reporting implications of IFRS Phase II

Potential earnings volatility

New basis of valuation

Potential day one profit and loss

Impact on revenue

Impact on equity

US Gaap - IFRS convergence

Accounting items affected by IFRS 4Example: Life Insurers

Treatment of Reinsurance Recoverables

Treatment of Financial Assets

Treatment of Discretionary Participation Features (DPF)

Treatment of Embedded Derivatives

Liability Adequacy Test

Unbundling of Deposit Components

Insurance vs Investment Contracts

Medium

High

High

Medium

Low

Medium

High

Assets

Liabilities

P&L

Source: Swiss Re Economic Research & Consulting, Sigma N°7, 2004

IFRS Phase II introduces a consistent measurement basis at global level and improves transparency and comparability of financial reporting. Like Solvency II, implementation will become effective in 2012.



Comparison of IFRS Phase II and Solvency II

Source: KPMG Solvency II Briefing 3, December 2007

IFRS Phase II and Solvency II projects will interact. Source data used for projecting cash flows have significant commonality.



At present, Solvency II and IFRS Phase II have common challengesin the calculation of Technical Provisions

Emphasis on future cash-flows

Definition of risk-free rate

Treatment of inflation

Move towards stochastic reserving

Selection of mortality, lapse/ surrender assumptions

Provision for bonuses

Treatment of negative provisions

Treatment of reinsurance

Selection of assumptions for non-life liabilities



New economic framework for management reporting:Market Consistent Embedded Value (MCEV)

In June 2008, the European Insurance CFO Forum launched its Market Consistent Embedded Value Principles© (MCEV).MCEV is a supplementary basis of disclosure

geared to Life Insurance - only mandatory for members of the CFO Forum.Market consistent value of insurance

liabilities covers the present value of all expected costs: Expected claims costs, including financial

guarantees and contractual options, as well as expected policyholder’s profit participation.

Expected expenses (eg, policy admin costs)

Expected capital costs for non-hedgeablerisks

There are sufficient similarities between IFRS Phase II, Solvency II and MCEV to realize cost-saving synergies in areas such as data, assumption setting, modeling and reconciliation. Common aspects include: Market-consistent financial assumptions

driving calculation of best-estimate liability;

Liability measure includes a risk margin above financial best-estimate of liabilities;

Current rather than locked-in assumptions;

Diversification of risks across portfolios considered.



Opportunities and Challenges of Reporting Convergence

The convergence in financial accounting and regulatory standards offer insurers the opportunity to enhance the quality and consistency of reporting to different stakeholders including management, analysts, investors, supervisors and rating agencies.The challenges and opportunities

presented by MCEV, Solvency II and IFRS Phase II can be divided into three components: Data, Systems and organisation: Enhancing the speed, efficiency, consistency

and cost-effectiveness of the reporting process Management reporting: Providing a basis for more informed and

reliable decision-making Stakeholder relations: Developing more credible, intelligible and

comparable disclosure



11 03/10/2010

Financial Accounting Standards

IFRS Phase II

Market Consistent Embedded Value (MCEV)

Regulatory Capital Standards

Solvency II

Regulatory Supervision & Corporate Governance Standards

SOX

AML

KYC

Drivers of Change Business Impact IT Requirements

Improved Management of Business Profitability

Pro-active Financial Reporting

Effective Risk Management Capabilities

Asset/Liability Management (ALM)

New Solvency Margin Systems

Ready access to consistent and accurate data

Identification, tracking and analysis of key performance indicators (KPI)

Compliant financial reporting for regulators

Identification and assessment of financial and operational risks

Use of risk models (e.g., Dynamic Financial Analysis (DFA), Risk Adjusted Return on Capital (RAROC)

Gather reliable and complete data on company’s risk exposures

Regulatory and Financial Reporting requirements are driving investment in Risk & Compliance Solutions



Effective Information Management in the new RBC environmentIBM Point of View

Key Challenges

IBM Internal Use Only © Copyright IBM Corporation2008 Solvency II Solution for Insurers


13 03/10/2010

Business Problem: The enactment of Solvency II will be challenging…

Correct quantification of all material risks, including ones that were never quantified before (operational, reputational risk)Pass 6 tests for internal model approval, use and documentation test are step change. Proof needed that risks are represented well

Total implementation costs up to 0,5% of GPW, driven by ambition, scope, diversity in sources, data quality, existing and data repositoiresResistance, due to power shift from decentral to central and change the actuarial function

Due to embedding and compliance applications, deadline for a data infrastructure is early 2011, leaving only 18 months from now. Starting up takes long, because solvency II is a ‘new’ functional area and both source as well as requirements are moving targets

Compliance requirements much

more demanding than old regime

Large effort while stakeholders may not

be aligned

Lack of sense of urgency leads to

timecrunch



The approval process of internal risk models to be used for calculating the Solvency II SCR poses additional challenges to insurers. The internal risk models must pass 6 tests / requirements:

Statistical quality: Are data and methodology underlying both internal and regulatory applications sound and sufficiently reliable to support both satisfactorily?Calibration: Is the SCR calculated by undertaking an unbiased estimate of the risk and measured by the common SCR criteriaValidation: Includes sensitivity analyses, stress testing, back testing of results and soundness of system implementationProfit & Loss attributionDocumentation: It must be complete and thorough enough to allow third parties to replicate the internal model. Use: Is the actuarial model genuinely relevant for and used within risk management?’

Maturity gap for UK insurers with the required status on 6 tests is still large



Summary of key challenges associated with internal risk model approval process.

Install appropriate control over document changes. Monitoring of compliance with risk management framework

Enable to aggregate exposures in all combinations and at all organizational levels where needed

Drive culture to discuss decisions in terms of value and risk appetite

Provide validated and authenticated sources for business and customer data

Analyze and retrieve data from source systems, and set up data governance

Provide a single version of the truth, including data marts and data history

Use Calculation Engines for quantification of all material risks and ALM

Set up broad and integrated decision support / reporting environment

UseDocumen-tation

Profit & Loss Attribution

ValidationCalibrationStatistical Quality

Test Challenge

Adressing this challenge is of large importance to be able to pass this test



The data integration challenges to comply with Solvency II, IFRSand MCEV are huge …

Meeting the regulatory and reporting requirements of Solvency II, IFRS and MCEV is far more demanding than traditional actuary and insurance risk requirements Solvency II requires massive amounts of consistent, readily searchable, accessible and

auditable historical loss data that must be normalized and standardized over time and across legal jurisdictions

Getting the data out of siloed systems in order to run analytics to gain insights and get them to the right people will be crucial to fulfill the statutory requirements. Retrieving, normalizing and loading data represents approximately 65% of a Solvency II implementation project.

The capability to drill down to the detailed data sources will also be required at the report level.

Many insurers lack the infrastructure of risk monitoring, stress testing, control and disclosure required to comply with Solvency II, IFRS and MCEV Managing the risk information demands of rating agencies, regulators and customers can

only be satisfied by implementing a periodic reporting mechanism. IFRS will require much greater transparency, including more detailed analysis and

disclosure about concentrations of risk and the sensitivity of cash flows to different risk scenarios and market variables.

Adoption of XBRL standards requires financial reporting in a more real time basis and standardized manner



Results of QIS 4 of the Solvency II readiness assessment

The solvency II proposal emphasizes the need for processes that ensure the appropriateness, completeness and accuracy of the data used in the calculation of risk capital and technical provisions.

Results of QIS 4 confirmed issues related to the collection of data required for regulatory calculations, data consolidation and reporting to regulators.

There are inconsistent data models for transaction and reference data

There are multiple interfaces between IT applications

There is inconsistent or missing documentation

Lack of data flow orientation

Underestimation of time to implement required tools

High volume data for storage and retention

Effort for preparation of the required historic data

Time and effort required to design and prepare consistent reports.

Source: CEIOPS QIS 4, 2008



Key inputs to the development of insurer’s internal risk model

Reference data model from the insurance industry, independent from existing legacy systems.

Inventory of IT systems and existing data flows to support current actuarial analysis, ALM and risk management systems.

Understanding of data inconsistencies (eg, statutory reserves for some product types and best estimate reserves for others) and deep knowledge of calculation details (eg, technical reserves of complex life insurance products could be split into several data components whose definitions are different from product to product and generation to generation).

Identification of Solvency II data requirements: Consultation Paper 15 (CEIOPS-CP-08/06) and CEIOPS QIS 3 & 4 show that supervisory reporting and public disclosure require significantly higher data requirements than the present regulatory context.



19 03/10/2010

Estimated Cost of a Solvency II Project based on IBM’s experience in numerous Basel II and Solvency II implementation projects.

IIW delivers a Business Glossary and a normalized set of data definitions and reference data model for the insurance industry

Activity % of Total Cost Time Offering

Assess current situation 1% Varies Determine the required processing steps, including project setup, budgeting and resource planning. Work with business partners asneeded.

Build internal risk model 10% Varies IBM, in conjunction with business partners and third parties, works to determine the most suitable risk model and implements and calibrates it to the client’s needs

Detail requirements 4% 1-2 months IIW delivers Business Solution Templates compliant with Solvency II, enabling customization of requirements versus building from scratch

Retrieve and normalize data 65% 6-8 months IBM´s InfoSphere Information Server speeds up the retrieval and normalization phase and is very helpful in assessing, retrieving, and transforming data

A significant portion of this phase of the project (50%) could be handled by IBM’s Global Delivery services

Build insurance enterprise data warehouse

5% 3-4 months IIW delivers Logical and Physical Design of Solvency II compliant enterprise data warehouse

Leverage Solvency II findings 15% 3-4 months IIW generates Data marts for reporting Solvency II requirements

Cognos provides integrated reporting and planning environment to leverage Solvency II requirements

IBM Intellectual Property IBM Global Business Services IBM Software Assets

Note: Customized enterprise data warehouse based on IIW serves as an auditable Solvency II Internal Enterprise Model and as a single source of truth for Solvency II compliance documentation; internal auditors and risk officers; and for external regulatory reviewers and auditors



Estimated Total IT Spend in Solvency II implementation projects exceeds 1 Billion €

Estimated Solvency II IT Spending

700

1'000

900

1'300

0 200 400 600 800 1'000 1'200 1'400

New Project ITSpend

Total IT Spend

In €mio

High rangeLow range

Split of Solvency II IT BudgetHardware

8%

Consulting services

38%

Internal38%

Software16%

Source: Celent, September 2008




Solution Architecture



22 03/10/2010

Key components of the Solvency II solution include the IBM Insurance Information Warehouse (IIW); InfoSphere Information Server to extract information from multiple sources; reporting and enterprise content management solutions, including Cognos; and IT Infrastructure offerings including IBM hardware and middleware.

The solution is built and implemented utilizing IBM’s extensive experience and capabilities in the risk management space combined with the Business Intelligence Roadmap. Furthermore, IBM has partnered with leading actuarial business partners, including, Watson Wyatt and EMB, to provide state of the art risk modeling engines.

Solution Elements

Solution Element Components Description

Decision Supporting /Reporting

DashboardsAnalysisBudgetingScenario Planning

Display of information to support business processes (e.g. create reports, views) Integration of Solvency II information generated through all related business

processes Generate Solvency II specific reports (e.g. report on capital ratios to supervisor)

Calculation Engines Financial risk modeling framework Specification and calculation engine

Model & analyze financial risks with IBM partners such as Watson Wyatt or EMB Perform specific data transformation operations (e.g., formulas, rules & calculations) Generate information needed for risk and/or performance management

Data Marts Dimensional Data ModelsStorage of History

Subsets of data (operational and result data) from Enterprise Data Warehouse Data schema and storage mechanisms tailored to specific business analytical

purposes (e.g., de-normalized structures)

Enterprise Data Warehouse

KPI and Data RequirementsLogical & Physical Data ModelsEDW (Atomic plus Analytical Layer)Historical data

Central data store for all analytic purposes (e.g. risk and performance measurement) Storage of detailed raw data from multiple sources (primary data area) Capturing of results from calculation engines (result data area) Repository of historical data for validation/calibration of internal models and reporting

Extract, Transform, and Load (ETL)

Source System AnalysisData Mapping, Governance & QualityData Integration Models

Extraction processes of data from data source (e.g. operational systems) Technical data transformation (e.g. formatting) Exception handling and data cleansing procedures Loading processes of data into target system (e.g. data warehouse)

Data Sources Operational Systems Validated and authenticated sources for business and customer data External sources to provide supporting data for analytical purposes (e.g. market data,

customer/country rating information) Supporting risk management tools (e.g. rating engine, loss database)



23 03/10/2010

To ensure data consistency and use of a common reporting platform across Risk and Finance, IBM’s recommends the following Solution Architecture.

Data Sources/Operational Systems Extraction

Insurance Information Warehouse

Calculation Engines ResultsData Marts

Decision Support/Reporting

Meta Data

Software Infrastructure

Development Environment and System Management

Enterprise DataConsolidation

Stress Test

Fair Value

Controlling

Scenarios

Other

Risk Analysis and Reporting

ALM

Actuarial Services

IAS

Controlling

Risk Management

Products

Partner/Clients

Contracts

Sales

Claims

FinancialAccounting

Capital Investment

Other

Extr

act –

Tran

sfor

m -

Load

TransformationCalculation

(e.g. Risk Engine)• Market Risk• Operational Risk• Actuarial Risk• Other Risk

Insurer IBM ISV and Business PartnersPrimary Provider:



Business Services

Legal

Underwriter

Actuary

Analyst

AnalystWorkplaceAnalyst

Workplace

EmployeeWorkplaceEmployeeWorkplace

Electronic BusinessGateway


Sales

BusinessParticipants Channels

ServiceProviders

Regulator

PartnerWorkplacePartner

Workplace

Vendor / PartnerSystems

Integration (ESB)

Infrastructure /Technology

Services

Forms

Email

Browser

Services

ProcessServices

Filing

Deployment

Business Case

Internal Approval

Pricing

SecurityServices

VirtualizationServices

Systems MgmtServices

DataServices

Operational Data

Operational Data

MarketResearchPLM

Underwriting Analytics

Pack

age

Lega

cy

Custo

m

Exte

rnal

Product Analysis

Configuration

Filing

Create Concept

AnalyticsAnalytics

Collaboration

Business Services

Legal

Underwriter

Actuary

Analyst

AnalystWorkplaceAnalyst

Workplace

EmployeeWorkplaceEmployeeWorkplace



Sales

BusinessParticipants Channels

ServiceProviders

Regulator

PartnerWorkplacePartner

Workplace

Vendor / PartnerSystems

Integration (ESB)

Infrastructure /Technology

Services

Forms

Email

Browser

Services

ProcessServices

Filing

Deployment

Business Case

Internal Approval

Pricing

SecurityServices

VirtualizationServices

Systems MgmtServices

DataServices

Operational Data

Operational DataOperational Data

Operational Data

MarketResearchPLM

Underwriting Analytics

Pack

age

Lega

cy

Custo

m

Exte

rnal

Product Analysis

Configuration

Filing

Create Concept

AnalyticsAnalyticsAnalyticsAnalytics

Collaboration

Cognos Reporting and Analytics

dashboardIIW and valuation engine

powered calculation

InfoSphere Information Server Datastage and

Rational

IBM InfoSphere Server

iLog jRules

© Copyright IBM Corporation2009 Risk & Compliance


IBM’s Insurance Information Warehouse (IIW) delivers the Solvency II and IFRS data requirements and reference data warehouse model.

Business Glossary Enterprise-wide vocabulary of business concepts that provides an organization's view of

itself and its industry. Business Terms compliant with Solvency II and IFRS.Business Data Model (BDM) Reference data model (normalized view of insurance business), adopted by over 150

insurers worldwide. IFRS requirements are fully represented by Business Model concepts.Business Solution Templates (BST) Structured requirements covering management information and regulatory needs, such as

Solvency II and IFRS. Collections of related Key Performance Indicators (KPIs) used to create OLAP cubes and/or

Data Marts for Dashboard, Scorecard, Applications or ad-hoc reporting.Enterprise Data Warehouse (EDW) Model Enterprise-wide data model defines how multiple sources of data should be consolidated

into a single logical structure to enable real-time business analytics.Project Views Logical subset of the EDW and BSTs designed to solve a business problem, such as

Solvency II and IFRS reporting.



IBM’s Infospshere Information Server addresses the data integration and data quality issues

Integrated Metadata ManagementParallel Processing

Parallel ProcessingRich Connectivity to Applications, Data, and Content

IBM Information Server

Understand

Discover, model, and govern information

structure and content

Cleanse

Standardize, merge,and correct information

Transform

Combine and restructure information

for new uses

Deliver

Synchronize, virtualize and move information

for in-line delivery

Unified Deployment

Unified Metadata Management

WebSphere DataStage®

WebSphere Business Glossary®WebSphere Information Analyzer® WebSphere QualityStage® WebSphere Federation Server ®

IBM Metadata Server®



IBM’s Cognos 8 BI delivers a Risk Management & Compliance consistent reporting environment



The integration of IIW, Information Server, and Cognos delivers a platform for Trusted Information.

Key Features include: Business metadata sharing and end-to-end data lineage Use of Data Profiling and Data Quality InfoSphere DataStage with Cognos Data Manager InfoSphere Change Data Capture with Cognos Lineage and business metadata accessible from Cognos 8 Metrics-driven data quality for performance management Pre-packaged insurance industry data model accelerators for Solvency II

Source Tables

IBM Information Server

Unified Deployment

Unified Metadata Management

Understand Cleanse Transform Deliver

Data Warehouse / and Data Marts

Insurance Industry Models & Accelerators



Solvency II Showcase at IBM’s Demo Center La Gaude, France, demonstrates the value of IBM’s Integrated End-to-End Solution.

Insurance Information Warehouse

Solvency Reports

Standard Formula SCR

Internal Model SCR

Calculation Data

Unstructured Operational

Data

Risk Segmentation

RoRAC

Data Sources

Reporting Datamarts

Reporting Portal

Calculation Engine

(EMB Igloo, WW VIPitech)

Analysis Datamart

DWH

ETL2: Input data for

internal modelling

ETL3:Solvability capitalcalculation output

ETL4

ETL1

Decision support Reports & Dashboards

1

3

3

5

2

4

4

4

Structured Operational

Data

OrganisationalunitsContracts

Finance

ClaimsCustomers

Insurer

IBM

ISV and Business Partners

Primary Provider:



In particular, the Solvency II Showcase shows how IBM’s Integrated Set of Solution Components - IIW, Information Server, and Cognos, can help insurers address the key issues with the internal risk model approval process.

Challenge Components Value of IBM’s Integrated set of Solution Components

Set up broad and integrated decision support / reporting environment

DashboardsAnalysisBudgetingScenario Planning

Good fit between IIW and Cognos enables integrated and broad reporting Cognos 8 BI enables good availability on multiple display vehicles Data Lineage functionality in combination with IBM Information Server enable

tracking of data from report to source

Use Calculation Engines for quantification of all material risks and ALM

Financial risk modeling framework Specification and calculation engine

IBM’s Business Partner EMB commercializes Igloo a framework with which risk models can be easily built, a wide variety of business structures can be modelled

The model can be tailored by the user of the problem being tackled Large models can be constructed for entire financial groups Not a black box – all model components are open and results can be analyzed

Single version of the truth, including data marts and data history

Dimensional Data ModelsStorage of HistoryKPI and Data RequirementsLogical & Physical Data ModelsEDW (Atomic plus Analytical Layer)

Without single version of truth, Solvency II compliance will be difficult as it forms the basis for all calculations, reporting and subsequent actions

However, providing a single version of the truth is not easy: History of failed enterprise DWH projects, already on a smaller scale Requirements not entirely clear and will remain changing in the future

IBM´s IIW solution is a key component in the development of a Solvency II DWH

Analyze and retrieve data from source systems, set up data governance

Source System AnalysisData Mapping, Governance & QualityData Integration Models

IBM’s Information Server delivers all the functionality required to perform the Data Extraction, Transformation and Loading processes in an efficient, timely and auditable manner.

Provide validated and authenticated sources for business and customer data

Operational Systems Validated and authenticated sources for business and customer data External sources to provide supporting data for analytical purposes (e.g. market

data, customer/country rating information) Supporting risk management tools (e.g. rating engine, loss database)

1

3

5

2

4



The underlying software solutions, assets and experience addressall critical success factors

Enterprise integration

Auditable,flexible

Realise efficient

Change mngnt

Components

Cognos providing reporting and planning. IBM building CP58 SII reports

IIW has Data-marts for S2 reporting

IIW for Logical & Physical Design of Warehouse. Balanced Warehouse as componentized infrastructure solution. Optim lowers storage costs

IIW contains Business Glossary and reference data model

Information Server speeds up ETL. IBM building ETL assets to be reused

IIW templates for standard model

Working with partners to feed models. Computing on Demand to improve calculation performance

IBM working with business partners to carry out assessment

OfferingProjectActivity

% of Total Cost

Time

Assess current situation

1% 4-10 weeks

Build internalrisk model

10% Varies

Detail requirements

4% 4-6 months

Retrieve and normalize data

65% 6-18 months

Build Warehouse

5% 3-4 months

Leverage Solvency II findings

15% 3-4 months

Intellectual Property Business Partner Software/Hardware

Assets




Case Studies



Value Management Program with leading European InsurerObjectives of Value Management Program:

MCEV Solvency II IFRS Standard & Poor’s Internal steering in line with compliance

Challenges:

External stakeholders demand transparent quantitative disclosure of all risks and Reporting/Accounting on fair value principles (IFRS, MCEV, Solvency II).

Internal stakeholders will use the same information, but require: More detail and higher data delivery frequency Valuation in a different way (stretched time horizon) Additional reports

Risk calculations and most of the new fair value are both based on mathematical (stochastic) models.

Risk and valuation results will be integrated in standard reporting environment, therefore origin of the models (process, IT, data, data flows) and models themselves must be auditable, predictable, transparent, robust, etc.

All data used for reporting, risk calculation and valuation purposes must be actual, timely and complete.

End-to-end audit trail from source system to calculations systems and consolidation systems is required.

Data will be extracted from 100+ systems, uniformed, enriched and stored to be used in calculations and accounting.

Six Themes



Target Solution Architecture Enterprise

Stage OUTLOR

Federated UDSData Stage

Out Data Marts Applications

Meta Data Management

Software Infrastructure

Development Environment and System Management

DW LIFE(UPAR 2)

DMsLife

DMsNon-Life

DMsHealth

DMsDisability

AnalyticalReporting

Finance (SAP)

Europa

SAP

DirecteDistributies

Social Zekerheid

Zorg

Intermediair

Pensioen verzekeren

Bancair

Connecting sources TO BE build LegacyComponents :

Market Risk

Operational Risk

Enterprise Stage IN

Data Colledtion

Data Colledtion

Data QualityData

Quality

Data Enrichment

Data Enrichment

ETL Other

ETLETL

SAP BW

UPAR 1

Goudmijn

TO BE DWs

AGIS

TO BE DWsTO BE DWs

Central Risk Distribution Infrastructure

SourceStaging

ETL

Standard Reporting

DW Health

DW Non Life

DW Non-insurance

Risks

DisabilityData

LifeData

HealthData

OtherData

ETLDiv 1

ETLDiv 2

ETLDiv 3

ETLDiv 4

ETLDiv 5

ETLDiv 6

ETLDiv 7

ETLOther

Data Corrections

CalculationModels

Manual Data Input

ETLUPAR 2

ETLPension

ETLNon Life

ETLNon-ins.

Risk

DMsPensionPension

Data

Non LifeData

ETLDisability

ETLHealth



Proposed IBM Delivery model leverages both local consulting services and Global Delivery model

SolutionOutline

Macro Design

Micro Design Build Deploy

• Outline Solution Strategy

• Outline Application Model

• Assess Business Impact

• Review client environment

• Outline Solution Requirements

• Define infrastructure requirements

• Define architecture model

• Define organization

Review solution outline Perform estimates and

prepare for macro design Build prototype Prepare Functional

Specifications

• Design architecture model

• Design solution plans• Conceptual solution

design• Design test strategy• Create Logical Data

Models• Build Development

Environment

Estimate Components (ETL, Access, Analytics) Prepare test cases

for functional requirements Build development

environment Confirm macro

design Prepare task plans

for micro design and build

Review technical specifications Ensure design

cohesiveness, reuse and integration Define training

requirements

Build Physical Data Models Prepare technical

Specifications Define standards and

templates for delivery Plan development Refine test cases and

prepare test data

Build and Release management Review overall

quality of artifacts/deliverables Perform System and

Integration Testing

Configure offshore test environment Build (ETL, Analytics’

,Access Components) Perform code review Perform Unit testing Assist system and

integration testing Handle build

exceptions Manage Version

Control

Perform Acceptance Testing Setup Production

Environment Cut over to

Production Review Solution

Plans

Handle deployment exceptions Prepare training

material

Prim

arily

Per

form

ed

Ons

ite

Prim

arily

Per

form

ed

at G

loba

l Del

iver

y C

ente

r



Achmea – Solvency 2

Improves financial transparency towards the market and shareholders and strengthens the basis for strong ratings

Delivers timely, complete and uniform information about value creation, risk and capital reserve

Delivers sustainable solution for integrated actuarial data management

Delivers conditions and basis for performance management

Is driver for change management in Finance Function

Sound delivery performance

Key delivery team members well integrated and key influencer in proposal team

Client intimacy

Data Management is IBM core competence with strong global delivery presence since solution inception, design & development.

Cognos migration project experience helping IBM win over the customer confidence on Cognos capability.

Project BenefitsWhy IBM

IBM Solution and MethodsBusiness Issues

Achmea

IBM BI methodIBM IAA and IIW methodsIBM global delivery frameworkIBM SolvencyII La Gaude showcase

Solvency II will oblige insurance companies to improve their risk management

Compliance by 2012 or else risk of losing company license

Current Management & Information structure is not adequate for meeting fair value requirements

The execution of this program will cause a major change for the finance, business and IT organizations

Achmea is the primary operating subsidiary of Dutch firm Eureko. Eureko is the insurance market leader in the Netherlands with a yearlyGross Written Premium of over €19B. Eureko provides insurance and financial services through several subsidiaries in the Netherlands, Belgium, Ireland, Portugal, Poland, Greece Turkey and some Eastern European European countries. The company sells life, non-life, health insurance and social security services under several brand names, including Centraal Beheer Achmea, FBTO, Zilveren KruisAchmea, Interpolis, and Avéro. In addition to its insurance operations, Achmea provides mortgage lending and retail lending services, as well as private banking (Staalbankiers).



37

Enterprise Data

Warehouse

Including ESI/ESO

Landing Zone In

Chain in scope for Solvency2

Source

Asis

SAP

Chablis

GoudmijnGoudmijn

AlertAlert

Landing Zone Out

FTP

1 (2,3),4 8

Flatfile (csv)Drop Zone

Sources

5

Flatfile (csv)Drop Zone

Sources

Anonimiseren

6

SAP BWSAP BW

ETL

2+3

ETL

7 B

DM

Stage Out (optional)

Met

a m

odel

repo

rts

Data Marts

ControllReports

DataMartNon-Life

DataMartLife

Risk

Calculations (LoR

)

C

E

Chain




Why IBM and Next Steps



39 10/03/2010

Value Proposition - Client Benefits and Why IBM

Is fully compliant with regulatory and financial reporting standardsProvides end-to-end coverage of key aspects of a Risk & Compliance solution: Business Reporting Data warehouse Data Integration Risk Modelling Implementation Services, including IBM’s Global Delivery capabilities and third parties

Leverages Insurance Information Warehouse (IIW): A holistic, enterprise-wide, coherent, consistent, efficient organization of information. A proven insurance business model (IAA) developed by IBM and more than 40 leading insurance

companies and now used by over 150 insurance companies worldwide. Leverages IBM’s unique InfoSphere Information Server product portfolio to address Data Quality, Data Integration and Data Governance issues.Cognos provides best of breed analytical, reporting and dashboard for Enterprise Risk Management specifically targeted to the various types of users (CxOs, risk and financial specialists, actuaries or other users) within and outside the insurance company.Supports integration with multiple risk calculation engines, such as those from Watson Wyatt and EMB IglooIs supported by IBM consulting services (Business Analytics & Optimization) and Global Delivery capabilityLeverages partnerships with leading edge consulting partners in Actuarial & Risk ManagementSolvency II Showcase in La Gaude serves as accelerator for customer implementation projects

IBM has developed an approach to Risk & Compliance which helps to assess, implement, and manage business, regulatory, and technology requirements in an efficient and effective manner. Further benefits are realized through the reduction of implementation risk and by providing a hedge against continually evolving business and regulatory requirements.



IBM Solution portfolio based on IIW, Information Server and Cognosprovide accelerators to Solvency II and IFRS implementation projects, that lead to significant cost savings in the development effort.

Reqtsanalysis

Determine measures

and dimensions

Determine data

definitions

Design logical

data model

Sourceanalysis

and extraction

DWH build

Generation data-

marts

Data Management activities to comply with Solvency II and IFRS

60% 70% 80% 60% 40% 50% 40%

IIW BSTs enable scoping and easycustomization of business reqts vsdefinition of requirements from scratch

IIW BSTscontain all measures and dimensions compliant with Solvency II

IIW Business Glossary contains normalized set of data definitions

IIW Enterprise Model delivers logical DWH design compliant with Solvency II and IFRS

Information Server toolset supports Data Quality Assessment, Data Source to Target Mapping and Metadata Management

Generation of physical DWH design; Information Server toolset supports ETL processing and creation of DWH

IIW Project Views and BSTs and Information Server toolset enable easier and faster generation of data-marts

IIW

IIW & Information Server

Illustrative

Creation of BI

reports

60%

Cognos pre-defined Solvency II & Risk reports accelerate build and generation of BI Reports

Cognos

% Estimated reduction in development effort by using IIW accelerators, Information Server and Cognos



IBM’s extensive experience in the risk management space combined with the Business Intelligence Roadmap and supported by Global Delivery capabilities will ensure a cost-effective and low risk successful project delivery.

BAO Strategy

Business Intelligence & Performance Management

Advanced Analytics and Optimization

Enterprise Information

Management

Enterprise Content

Management

• BAO Strategy and Roadmap

• BAO Process Improvement

• BAO Governance

• Dashboards & Scorecards

• Planning, Budgeting, & Forecasting

• Business Analytics & Reporting

• Advanced Analytics

• Analytic Applications

• Predictive Modeling

• Business Optimization

• Visualization

• Data Integration

• Data Quality

• Data Architecture

• Master Data Management

• Document & Records Management

• Web 2.0 / Web Content Management

• Digital Asset & Rights Management

• Archiving & Record Management

Business Analytics & Optimization: Competencies and Offerings



Risk & Compliance Diagnostic Process

C ore B a nk ingI MS

C re di t C ardA S/ 40 0

Mu tu al Fu ndE S un F un d Mg mt

T rus tA S /4 00

Fo re i gn E xc han geA S/ 40 0

T el ler S ys te mJ FT S

T e lle r S y st emWS BC C

C o nsum erN e tB an k

& Web A TMC orpo ra teN e tB an k

C al l Cen t er- B an ki n g

Br anchAS / 40 0

E A I-MQW F

E A I-M Q S I

E. Su nS ecu r it yI nt er ne t

Se cu r it i esA S / 40 0

M Q

S QLS e rv er

M Q

5 250 Ga t e wa y

M QS Q L

Se rv er

MQATMIVR

Fo re ig nE xch an ge

W orks ta t ionC on su merB ank i ng

Not e s

C all C en te r-C red it C ard

FISC票保FEDI

52 50 Ga te w ay

M Q

Overs easBr anc h

C P SD omin o

M QC us to mer

D at aWar eh ou se

W ea lt hMg mt

B ran ches

As-Is Architecture

COE E me rg i ng Te ch n ol o g y Te am ( L ed b y IB M Co ns ul ta nts w it h p ar t ici pa tio n f ro m E .S u n)

Co nsu m er Ne tB ankPor ta l Fram ework

Pi lo t Pro jec t

Cons umer Ne tBankM id- & B ac k -T ie r

Se rv ic esPi lot Projec t

G o-L ive

Cons o l idat edCus tom er View

Pi lot P ro ject

Ca l l Cen terRe- pla tfor m

Pi lo t P ro ject

Br anc h Sys temFul l Capab i li ty

Im p lem en ta tion

Cal l Cen terFul l C apab i li ty

Im plemen ta tionG o- Live

G o-L iv e

C OE Ch an ne l In iti ati v e Te am (L ed b y E .S u n wi th ass is t an ce fr o m IBM BCS )

Consum er Ne tBa nkFu l l Capab il ity

Im p lem en ta tion

P ilo t S tep 1 P il ot St e p 2 P ilo t St ep 3Bra nch S ystem

Re-p latfo rmPi lo t Projec t

Co rp N etBankRe-p latfo rmPi lot Pro jec t

Corp N etB ankFul l Ca pabi li t y

I mple men t at i on

YearM on th 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 1 1 12 1 2 3 4 5 6 7 8 9 10 1 1 1 2

C OE de fini tion and s taffingR ef a rc hi tectur e and roadm ap deve lopm entWeb Servic es relat ed t ec hno logy tra in ingR ationa l M etho d Com pos e r and RUP tra iningP ortfol io M anage r deploy m en t and tr aining

S tanda rd dev too ls dep loym ent and tra in ingP ilo t St e p 1 - C o ns u mer N e t Ba n k Po r t al Fra me w or k

P ilo t St ep 2 - S e rvic es fo r Cons umer N etBankP ilo t St ep 3 - C ons ol ida ted Custom er ViewC ons umer NetBank ful l imp lem ent ationC al l Cen ter New Platform fu l l imp le men ta tionB ranch Sys tem New Pla tfo rm ful l im plem entat ionE nte rpri s e Data War ehous e Im plem en ta tionD epa rtm en ta l data marts imp le men tationA na ly ti ca l Tool Dep loym en t to LOB Us ers

C us tom er Ope rationa l Da ta Sto reE ve nt in fras truc tu re - event sto re & mon i tor

M oni tor ing fo r Proc es s Se rve r even tsM oni tor ing fo r non-Proc ess Se rver even tsB us iness D ashboa rdsP roc es s Mode l ing Dep loym ent to LOB use rs

2006 2007 2008

S OA COE

A rchit ecture

Bo ard

S OA COEE m ergin g Te chnology T ea m

C OE Cha nne l Rep la tfo r mIn itia ti v e T eam

S OA COEB usine ss Intel ligen ce

Init iative Team

S OA COEBP M

I nitiative T eam

Roadmap

COE E me rg i ng Te ch n ol o g y Te am ( L ed b y IB M Co ns ul ta nts w it h p ar t ici pa tio n f ro m E .S u n)

Co nsu m er Ne tB ankPor ta l Fram ework

Pi lo t Pro jec t

Cons umer Ne tBankM id- & B ac k -T ie r

Se rv ic esPi lot Projec t

G o-L ive

Cons o l idat edCus tom er View

Pi lot P ro ject

Ca l l Cen terRe- pla tfor m

Pi lo t P ro ject

Br anc h Sys temFul l Capab i li ty

Im p lem en ta tion

Cal l Cen terFul l C apab i li ty

Im plemen ta tionG o- Live

G o-L iv e

C OE Ch an ne l In iti ati v e Te am (L ed b y E .S u n wi th ass is t an ce fr o m IBM BCS )

Consum er Ne tBa nkFu l l Capab il ity

Im p lem en ta tion

P ilo t S tep 1 P il ot St e p 2 P ilo t St ep 3Bra nch S ystem

Re-p latfo rmPi lo t Projec t

Co rp N etBankRe-p latfo rmPi lot Pro jec t

Corp N etB ankFul l Ca pabi li t y

I mple men t at i on

YearM on th 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 1 1 12 1 2 3 4 5 6 7 8 9 10 1 1 1 2

C OE de fini tion and s taffingR ef a rc hi tectur e and roadm ap deve lopm entWeb Servic es relat ed t ec hno logy tra in ingR ationa l M etho d Com pos e r and RUP tra iningP ortfol io M anage r deploy m en t and tr aining

S tanda rd dev too ls dep loym ent and tra in ingP ilo t St e p 1 - C o ns u mer N e t Ba n k Po r t al Fra me w or k

P ilo t St ep 2 - S e rvic es fo r Cons umer N etBankP ilo t St ep 3 - C ons ol ida ted Custom er ViewC ons umer NetBank ful l imp lem ent ationC al l Cen ter New Platform fu l l imp le men ta tionB ranch Sys tem New Pla tfo rm ful l im plem entat ionE nte rpri s e Data War ehous e Im plem en ta tionD epa rtm en ta l data marts imp le men tationA na ly ti ca l Tool Dep loym en t to LOB Us ers

C us tom er Ope rationa l Da ta Sto reE ve nt in fras truc tu re - event sto re & mon i tor

M oni tor ing fo r Proc es s Se rve r even tsM oni tor ing fo r non-Proc ess Se rver even tsB us iness D ashboa rdsP roc es s Mode l ing Dep loym ent to LOB use rs

2006 2007 2008

S OA COE

A rchit ecture

Bo ard

S OA COEE m ergin g Te chnology T ea m

C OE Cha nne l Rep la tfo r mIn itia ti v e T eam

S OA COEB usine ss Intel ligen ce

Init iative Team

S OA COEBP M

I nitiative T eam

Roadmap

Questionnaire

0 1 2 3 4 5

B usiness Ar ch

In fo rm ation Ar ch

A pplic ation Ar ch

T e chni cal A rch- Inte grat ion

T ec hnical Ar ch- Development

Techn ical Arc h-Se curity

T echnical Ar ch- Ma nagement

T echnical Ar ch-Collab orat ion

Gove rnan ce

Readiness Assessment

0

1

2

3

4

5

6

7

S ervice Bus ines s Al ignment

Gov ernanc e o f Se rvices

IT P rocess es

Svc Oriented A rc h & Des ign

Se rv ic es Management

S ervices Sec uri ty

Web S vc Techno logi es

O pera tional Model

SOA Migra tion App roach

Serv ic es ID & Ex pos ure

C omponenti z ation

E ncaps ulation o f Se rvices

Com ponen t Placement

IT S tandards

Com ponen t St ructu ri ng

Services Po rtfol ioPR OC ES SSER VIC ES

ARC HIETC TUR E

AP PLIC ATION INFR ASTRU CTUR E0 1 2 3 4 5

B usiness Ar ch


A pplic ation Ar ch






Gove rnan ce

Readiness Assessment0 1 2 3 4 5

B usiness Ar ch


A pplic ation Ar ch






Gove rnan ce

Readiness Assessment

0

1

2

3

4

5

6

7



IT P rocess es





O pera tional Model



C omponenti z ation



IT S tandards



ARC HIETC TUR E

AP PLIC ATION INFR ASTRU CTUR E

0

1

2

3

4

5

6

7



IT P rocess es





O pera tional Model



C omponenti z ation



IT S tandards



ARC HIETC TUR E

AP PLIC ATION INFR ASTRU CTUR E

Business Case

ImplementationImplementation

Bus. ValueAssessment

Analysis &Roadmap

Design

InformationArchitectureReadiness

Assessment(on site) W A S +MQ W A S+ M Q

C ore B a nki n gI MS

E nte rprise S er vice B usP roce ssC oo rd i na to r &O rche st rat i on

Te ll er S y st emC all C en t er- I nt eg rat e d

C T I

I MSC on nec t

C u st ome rO p erat i on

D at aSt ore

E nt erpr i seD at a

W areh ou seC re di t C a rd

A S /4 00Mu t u al F un d

AS / 40 0F ore ign E xc han ge

AS / 40 0S e cu r it ies

AS / 40 0Tr us t

A S/ 40 0

A da pt er f o r i Se r ie s A dap t er f or i Se r ies Ad ap te r f or iS er ies Ada pt er fo r i S e ri es Ada pt er fo r i Se r ie s

WA S + MQW A S +M Q WA S +MQ

C on sum erWe bB a nk

Co rpWe bB a nk

S ec ur it yWeb P or t alW e b AT M

I MSR es ou rc eAd ap t er

o n W A S

I MSSO A P

G a t ewa y

T I M &TA M

ATMIVR

FI SC票保

FE DI

Ov e rseasBr anc h

Fo rei g nE xc han g e

W orks ta t io nW eal t hM gm t

W eb Sp her e I I

To-Be Architecture

Interviews

Workshop participants complete questionnaire

on web-based assessment toolFace-to-face Interviews

are conducted to collect information using EA and

IOD principles

High-level roadmap is developed based on As-

Is architecture, to-be architecture and

interviews

A business case (ROI and TCO) can be

developed based on the roadmap.

High-level As-Is architecture

is depicted

High-level To-Be architecture is

defined based on assessment and

interviews

Planning &Pre-

Assessment Analysis Assess As-Is

Define To-Be

Develop Roadmap

Business Case

Illustrative: Example of IOD Workshop Process and IBVA



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