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人壽保險風險管理人壽保險風險管理Life Insurance Life Insurance

Risk ManagementRisk Management

南山人壽 劉禧寧資深副總 南山人壽 劉禧寧資深副總 S.N. LowS.N. Low

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排名Ranking

國家Country

總計Total

壽險業Life

產險業Non-life

排名Ranking

國家Country

總計Total

壽險業Life

1 瑞士 Switzerland 5,558.4 3,078.1 2,480.3 1 台灣 Taiwan 14.10 11.17

2 英國 U.K. 4599.00 3287.10 1311.9 2 南非 South Africa 13.87 10.84

3 愛爾蘭 Ireland 4,177.1 2,759.7 1,417.4 3 英國 U.K. 12.45 8.904 比利時 Belgium 3,985.6 2,988.7 996.9 4 瑞士 Switzerland 11.19 6.20

5 丹麥 Denmark 3,876.2 2,489.9 1,386.3 5 比利時 Belgium 11.15 8.36

6 美國 U.S. 3875.20 1753.20 2122 6 日本 Japan 10.54 8.32

7 日本 Japan 3746.70 2956.30 790.4 7 南韓 South Korea 10.25 7.27

8 荷蘭 Netherlands 3,739.7 1,954.2 1,785.5 8 法國 France 10.21 7.08

9 法國 France 3,568.5 2,474.6 1,093.9 9 香港 Hong Kong 9.92 8.6310 芬蘭 Finland 3,389.2 2,707.8 681.4 10 荷蘭 Netherlands 9.79 5.12

11 挪威 Norway 3,302.3 2,043.1 1,259.2 11 芬蘭 Finland 9.18 7.33

12 瑞典 Sweden 3,092.0 2,105.2 986.8 12 美國 U.S. 9.15 4.1413 盧森堡 Luxembourg 2,756.3 1,112.5 1,643.8 13 葡萄牙 Portugal 9.07 6.20

14 澳洲 Australia 2,569.9 1,366.7 1,203.2 14 愛爾蘭 Ireland 8.55 5.65

15 香港 Hong Kong 2544.90 2213.20 331.7 15 那米比亞 Namibia 8.27 5.81

16 加拿大 Canada 2,449.0 1,071.9 1,377.1 16 丹麥 Denmark 8.08 5.19

17 奧地利 Austria 2,342.8 1,095.1 1,247.7 17 瑞典 Sweden 7.82 5.32

18 德國 Germany 2,310.5 1,042.1 1,268.4 18 千里達 Trinidad-Tobago 7.63 5.61

19 義大利 Italy 2,263.9 1,449.8 814.1 19 義大利 Italy 7.59 4.86

20 台灣 Taiwan 2,145.5 1,699.1 446.4 20 新加坡 Singapore 7.48 6.00

世界總計Total in the World

518.5 299.5 219.0 世界總計Total in the World

7.52 4.34

保險密度 Insurance Density (USD 美元) 保險滲透度 Insurance Penetration %

Insurance Density = Average premium per person Insurance Penetration = %Premium/GDP

Source: “Swiss Re, Sigma No. 5 / 2006”

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Life Insurance in TaiwanLife Insurance in Taiwan

Total Life Ins Co.: 22 (local) +9 (foreign) = 31Total Life Ins Co.: 22 (local) +9 (foreign) = 31

20052005 Total in-house staff (Life: 24,839 in 2005)Total in-house staff (Life: 24,839 in 2005) Total agency (Life 202,737 in 2005)Total agency (Life 202,737 in 2005)

Total asset in industry: Life Ins NT$ 6,574b Total asset in industry: Life Ins NT$ 6,574b Total policies: Basic 44,243,445; Rider 70,874,777Total policies: Basic 44,243,445; Rider 70,874,777 Total Life Ins premium: NT$ 1,457,632mTotal Life Ins premium: NT$ 1,457,632m Total claims: NT$ 498,827mTotal claims: NT$ 498,827m

National Income per Capita: NT$ 438,255National Income per Capita: NT$ 438,255 NT$ spending per person in life insurance: NT$ 64,015NT$ spending per person in life insurance: NT$ 64,015

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Life insurance Life insurance - beyond commercial activities- beyond commercial activities

Institutional investorsInstitutional investors – Source of fund for private/public sectors – Source of fund for private/public sectors Government/Treasury Bond: NT$1,631,285m @ Aug06Government/Treasury Bond: NT$1,631,285m @ Aug06 Insurance Industry holds 20% of total outstanding Gov’t BondsInsurance Industry holds 20% of total outstanding Gov’t Bonds Foreign Investment: NT$ 2,022,944m @ Aug06Foreign Investment: NT$ 2,022,944m @ Aug06 Insurance Industry holding ~2.5% of total market capitalizationInsurance Industry holding ~2.5% of total market capitalization

Financial protectionFinancial protection against premature death or health problems against premature death or health problems Savings vehicles for planned/unplanned events and retirementSavings vehicles for planned/unplanned events and retirement

Contribution to social stabilityContribution to social stability Promote and support community services and welfarePromote and support community services and welfare Promote better employer/employee relationshipPromote better employer/employee relationship Created more job opportunitiesCreated more job opportunities Relieve social welfare systemsRelieve social welfare systems

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Why is Life Insurance Why is Life Insurance Unique?Unique?

Lifetime commitmentLifetime commitment Unilateral - Utmost good faithUnilateral - Utmost good faith Aleatory contract (Aleatory contract ( 射倖契約射倖契約 )) Contracts of adhesion (Contracts of adhesion ( 附合契約附合契約 )) Fiduciary roleFiduciary role

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Keys to lifetime Keys to lifetime commitment…commitment…

Governance Governance Risk ManagementRisk ManagementProfessionalismProfessionalism

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Leading to ERM as Leading to ERM as defined…defined…

“… “… a process, effected by an entity's a process, effected by an entity's board of directors, management and board of directors, management and other personnel, applied in strategy other personnel, applied in strategy setting and across the enterprise, setting and across the enterprise, designed to identify potential events that designed to identify potential events that may affect the entity, and manage risks may affect the entity, and manage risks to be within its risk appetite, to provide to be within its risk appetite, to provide reasonable assurance regarding the reasonable assurance regarding the achievement of entity objectives.”achievement of entity objectives.”

Source: Source: COSO Enterprise Risk Management – Integrated FrameworkCOSO Enterprise Risk Management – Integrated Framework. 2004. COSO.. 2004. COSO.

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ERM - objectivesERM - objectives Aligning risk appetite and strategyAligning risk appetite and strategy Enhancing risk response decisionsEnhancing risk response decisions Reducing operational surprises and Reducing operational surprises and

losseslosses Identifying and managing multiple and Identifying and managing multiple and

cross-enterprise riskscross-enterprise risks Seizing opportunitiesSeizing opportunities Improving deployment of capitalImproving deployment of capital

Reference: ERM – Integrated Framework. COSOReference: ERM – Integrated Framework. COSO

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Control

Share/Transfer

Mitigate/Avoid

RiskManagement

ProcessLevel

ActivityLevel

Entity Level

RiskMonitoring

Identification

Measurement

Prioritization

RiskAssessment

Risk management Risk management processprocess

Reference: Applying COSO’s Enterprise Risk Management — Integrated Framework, The Institute of Internal Auditors

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Risk management toolsRisk management tools

1.1. Self-assessment and controlsSelf-assessment and controls(e.g. Audit, claim management, agency disciplinary (e.g. Audit, claim management, agency disciplinary

committee)committee)

2.2. Process descriptions Process descriptions (e.g. Operation manual, company policy, Sarbanes-(e.g. Operation manual, company policy, Sarbanes-

Oxley, ISO)Oxley, ISO)

3.3. Key risk indicators and reportsKey risk indicators and reports(e.g. Efficiency report, regular management reports, IT (e.g. Efficiency report, regular management reports, IT

exception reports) exception reports)

4.4. Specialized techniques, process Specialized techniques, process and organizationand organization

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Financial risk Financial risk

as illustrationas illustration

Capital managementCapital management ALM (e.g. interest, forex)ALM (e.g. interest, forex) Pricing (e.g. assumption vs Pricing (e.g. assumption vs experience)experience) Liquidity (e.g. cash flow)Liquidity (e.g. cash flow)

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Risk Assessment/Mitigation Risk Assessment/Mitigation Impact vs. ProbabilityImpact vs. Probability

High

I M P A C T

Low High

Share/ Transfer

Accept

Mitigate/ Avoid

Control

Medium Risk High Risk

Low Risk Medium Risk

PROBABILITYReference: Applying COSO’s Enterprise Risk Management — Integrated Framework,

The Institute of Internal Auditors

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High

I M P A C T

Low High

Medium Risk High Risk

Low Risk Medium Risk

PROBABILITY

Risk Assessment/MitigationRisk Assessment/Mitigation

• Catastrophic loss• Jumbo case• Currency mismatch

• Fraud• Irrational competition

• Anti-selection• Risky investment activities

• Assumptions deviations • Expense overrun • Entry error

Share/Transfer

Accept

Mitigate/ Avoid

Control

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Operating Margin

0% 2% 4% 6% 8%

1999

Target

2000

8%

7%

6%

8%

7%6.80%

6.50% 6.60%

3.20%

2.50%

1.90%

3.10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

1997 1998 1999 2000 YTD

yields-new invmts portfolio yields GNP deflator

0

2

4

6

8

10

12

14

16

1997 1998 1999 2000 YTD

# catastrophes # bad faith lawsuits

Financial scorecard/ risk Financial scorecard/ risk dashboarddashboard

Financial analysisFinancial analysis Capital adequacy level Capital adequacy level Revenue growthRevenue growth Earnings growthEarnings growth ROEROE

Variance analysisVariance analysis Investment performanceInvestment performance Expense ratioExpense ratio Claim ratioClaim ratio PersistencyPersistency Reinsurance profileReinsurance profile

Actuarial analysisActuarial analysis Cash flow testingCash flow testing Asset Liability ManagementAsset Liability Management

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Examples on performance Examples on performance benchmarkbenchmark

1.1. Minimum level of capitalMinimum level of capital Regulatory RBCRegulatory RBC Capital to obtain given rating from rating Capital to obtain given rating from rating

agencyagency Capital to cover operation risk and business Capital to cover operation risk and business

growthgrowth

2.2. Acceptable cash flowAcceptable cash flow Cash flow testing assuming extremely Cash flow testing assuming extremely

negative situation – stress testingnegative situation – stress testing

3.3. Acceptable growth/pattern of profit and Acceptable growth/pattern of profit and ROEROE

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Do we have the structure?Do we have the structure?Corporate Level

Enterprise Risk Mgt Team

Financial Operations OthersProfit Center/

Branches

Accounts

Actuarial

Admin

MIS

PR/ Mkt

Audit/Legal

Life

A&H

HR/ RE Group

Others

Service Mgt

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Summary…Summary… Importance of life insuranceImportance of life insurance Uniqueness of life insuranceUniqueness of life insurance

Major risks exposures…Major risks exposures… Mitigation measures…Mitigation measures…

Most importantly…Most importantly… Continuous growth through providing Continuous growth through providing

value-added products and servicesvalue-added products and services Sustainable long term financial strength to Sustainable long term financial strength to

deliver lifetime commitmentdeliver lifetime commitment

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ReferencesReferences

1.1. Overview of risk management, Casualty Actuarial SocietyOverview of risk management, Casualty Actuarial Society

2.2. Enterprise Risk Management in the Life Insurance Industry, Enterprise Risk Management in the Life Insurance Industry, LOMALOMA

3.3. Enterprise-wide Risk Management for the Insurance Industry: Enterprise-wide Risk Management for the Insurance Industry: Global Study, PricewaterhouseCoopers, 2004Global Study, PricewaterhouseCoopers, 2004

4.4. ERM – Integrated Framework. COSOERM – Integrated Framework. COSO

5.5. Applying COSO’s Enterprise Risk Management — Integrated Applying COSO’s Enterprise Risk Management — Integrated Framework, The Institute of Internal AuditorsFramework, The Institute of Internal Auditors

6.6. Creating value through ERM – A practical approach for the Creating value through ERM – A practical approach for the insurance industry, Tillinghast-Pwers Perrininsurance industry, Tillinghast-Pwers Perrin

7.7. AEGON Risk Management, SOA Risk Management TaskforceAEGON Risk Management, SOA Risk Management Taskforce

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Thank youThank you