Life pensions Solvency II

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Solvency II
Special report
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Internal models
A stamp of approval
by Clive Davidson
Come 2012, insurers will be able to to calculate their
capital based on models they have developed
themselves. How will the system be supervised?
Klaas Knot, DNB
beyond the standard
the challenges of
self-modelling
7
After four
12
quantitative impact studies (QIS), myriad working groups
and countless hours of debate both at an industry and a ministerial level, a draft version of the Solvency II directive was agreed at a December 2 meeting
of the Ecofin group, representing the finance ministries of the EU’s 27 member states.
The pork barrel politics that led to the omission of the group support directive will no
doubt come as a disappointment to many in the industry, but with the politicking (mostly)
now completed, attention can shift to the challenges of implementing Solvency II – chief
of which is the option for insurers to use an internal model, rather the standard formula.
While the results for QIS 4 gave companies a capital incentive to move to an internal
standard, it was less clear cut for those in the life sector. And for those expecting Solvency
II to emulate Basel II and provide a healthy capital incentive for those opting to endure the
time, stress and expense of implementing an internal model, this was a disappointment.
At Life & Pensions Solvency II conference in October, CEIOPS representatives stoutly
defended the status quo, arguing that the increased awareness of the risk posed on companies’ balance sheets was reward enough for moving to an internal approach.
But with each model a bespoke reflection of the risk faced by individual companies the
debate over how Solvency II works in practice has only just begun – the hope is that these
arguments, unlike those at a political level, can be settled on an economic basis.
Nick Dunbar, Editor
Systems for
Solvency II
Model behaviour
Roundtable partners Barrie & Hibbert and Watson
Wyatt, together with industry leaders, recently took part
in a unique forum that discussed the modelling and
systems challenges of Solvency II
The holistic
approach
Watson Wyatt
Enterprise risk management offers a holistic approach to
risk assessment and management for insurance firms
working to ensure that their systems conform to the
new regime under Solvency II. But ERM not only offers
a tool for compliance, it also helps firms make better
business decisions
14
Risk management
using economic
scenarios
Barrie+Hibbert
As Solvency II looks set to require market-consistent
valuation of complex insurance liabilities, many of the
largest global insurance firms have been using economic
scenario generators to produce market-consistent
valuations
15
Comment
QIS-4 and the Italian
insurance industry
by Angelo Doni, Giorgia Esposito,
Dario Focarelli and Antonio Nicelli
The high and rising levels of participation in QIS‑4, the
fourth quantitative impace study, indicate the Italian
insurance industry’s positive attitude to Solvency II
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solvency II special report: internal models
Solvency II will permit insurers to use internal
models to calculate their capital, but how will
regulators decide whether to approve them or not?
A
stamp
clive davidson reports
approval
of
From 2012, insurers will have a choice of applying a
standard formula for calculating capital or using internal models,
with the thrust of the proposed Solvency II directive towards encouraging the development of models. But modelling the activities of a
modern insurer, especially one with global operations and multiple
lines of business, is no small task. Meanwhile, supervisors will have to
approve the results, which will require of them a whole new set of
skills and expertise. Regulators can acquire some of these from their
colleagues in banking who have been through the process with Basel
II. But with the banking sector in meltdown, a cloud of suspicion has
descended over risk modelling in general. Nevertheless, despite the
challenges, insurers and their supervisors are determined to push
ahead with internal models, while acknowledging that some key
issues remain to be resolved.
A high proportion of insurers have already stated their intention of
developing internal models, if they have not already begun to do so,
and of seeking regulatory approval for their use to calculate solvency
capital. Generali in Italy, Scor Group in France, Talanx and Hannover
Re in Germany, and Standard Life in the UK are just a few of the
insurers that are already using internal models to some degree in their
business and capital decision making, and are planning to apply for
model approval under Solvency II.
“We are strongly committed to achieving internal model approval as
we believe that this will add real value to the business,” says Bruce
Porteous, head of UK risk capital development at Edinburgh-based
Standard Life UK Financial Services.
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Insurance supervisors in the UK and Europe are encouraging these
developments, but with a number of caveats.
The French supervisor l’Autorité de Contrôle des Assurances et des
Mutuelles (ACAM) believes that a good internal model is the best way
for an insurer to understand and manage its risk profile. Therefore, it
welcomes companies it supervises that are moving in this direction,
but says it is up to them to calculate the overall advantage. “For supervisors, it is always good news when insurers improve their risk
management,” says Régis Weisslinger, insurance supervisor at ACAM.
“However, it is up to the insurers to assess the costs and benefits of
seeking model approval.”
Like ACAM, the UK’s Financial Services Authority (FSA) believes
that developing internal models as part of a strategy to improve risk
management is the right approach. “But it is clear that there is still
work to be done [by insurers] and, in any case, modelling is a continuous improvement exercise – that is to say, models are a simplification
of reality, and the world around models is changing,” says Janne
Lipponen, manager of the Solvency II team at the FSA.
Model behaviour
The Dutch supervisor also welcomes companies developing internal
models as part of a sound risk management approach, but warns that it
will not lower its standards in order to accommodate models. “We will
set relatively high standards for internal models, and it must be clear that
we will not lower our standards to [help companies] qualify,” says Klaas
Knot, director of supervisory policy at De Nederlandsche Bank (DNB).
Reprinted from Life & Pensions
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Most Italian insurers plan to develop models, at least for part of their
operations, says the country’s supervisor, Istituto per la Vigilanza sulle
Assicurazioni Private e di Interesse Collettivo (ISVAP). The supervisor took the opportunity of the fourth quantitative impact survey
(QIS 4) of the Solvency II programme to encourage companies to
undertake validation tests of their models. “This encouragement,
however, should not be perceived as creating a sort of expectation of
ISVAP future [approval], but as an incentive to put in place more accurate risk management systems within our market,” says Fausto Parente,
head of international affairs at ISVAP.
While there is considerable enthusiasm among insurers for internal
models, they recognise there are many challenges to their implementation and approval. Gerhard Stahl, head of quantitative risk management
at German insurer Talanx, says the three main challenges for his company
are data quality, documentation and meeting the use test. Amerigo
Borrini, chief risk officer at Generali, says that while the insurer has made
good progress in turning its models into management tools, for Solvency
II approval it still needs to do much work to get its capital calculation
model to an appropriate level of auditability and transparency, in particular in terms of IT integration and detailed documentation.
Standard Life is expecting the internal model approval process to be
fairly arduous, “with a particular challenge being satisfying and evidencing the use test requirements,” says Porteous. Paris-based Scor is
also expecting a demanding approval process, and has identified being
able to demonstrate the robustness of the internal process for data
gathering, quality assurance and aggregation – as well as a lack of statistical evidence for certain risks, weaknesses in its technical modelling
infrastructure, and a need to further embed model results into its business management – as areas of particular concern. To address these
issues, the company has embarked on a major two-year project, with
significant investment in building a credible and practical asset and
liability management model and process, and integrating these with
the group’s planning, control and reporting cycle, says Michael
Kastenholz, deputy chief risk officer at Scor Group.
On their side of the fence, the regulators have a number of concerns
about the approval process. One is the competitive issues that could
arise with insurance groups that operate across borders if there is a lack
of consistency in the approval of internal models across the Solvency II
region. “The approval process must ensure a level playing field at the
national and European level,” says ACAM’s Weisslinger. ISVAP’s
Parente agrees, and says that to avert this danger will require a high level
of cooperation among supervisors. The challenge is that by their nature
internal models are tailored to the individual insurer, and because there
is so much variety among insurers, no two models will be the same. “We
will need huge cooperation both within and between supervisory
authorities to treat entities in a similar way,” says Weisslinger.
But it is clear that the biggest challenge to the approval process for
internal models is the need for new skills and expertise by the supervisors, and here they will be competing with the companies themselves.
Thomas Steffen, chief executive director of insurance supervision at
Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), the German
federal financial supervisory authority, says the first step for the authority in preparing for approving internal models is hiring adequately
qualified staff. “We are in the middle of a process to increase our
resources, but have to compete with the industry and its higher level of
salaries,” says Steffen.
DNB’s Knot says the supervisors will have to match the insurers in
terms of skills and expertise if they are to be able to challenge the
companies regarding the appropriateness and robustness of their
Bruce Porteous
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solvency II special report: internal models
models and their underlying assumptions. “We need to be sufficiently
versed in the issues in order to challenge the insurers – we need to
know the models almost as well as they do, although we still have
some way to go in this area,” he says. However, given that there is
still a couple of years until the Solvency II deadline, Knot is confident his authority will be ready in time. DNB has already begun
looking at where it needs to make further investments in resources,
and while Knot agrees that there will be strong competition for qualified staff, he believes the market will respond and produce the
required individuals, although salary levels could be an issue.
“We think the
benefits of internal
models [would
extend] to all
parties, including
policyholders and
regulators”
Fausto Parente, ISVAP
Furthermore, Knot believes that as an integrated financial supervisor,
DNB is at an advantage, in that it can call on the expertise already
established in its banking division for Basel II approval of internal ratings-based (IRB) approaches. “Some of my colleagues who have
already gained experience with IRB approval are now shifting their
attention to insurance,” says Knot.
But with Solvency II still a work in progress, and many insurers not
yet decided if and when they will apply for internal model approval,
the authorities cannot be sure precisely what resources they will
need. Given this uncertainty, ACAM has prepared several scenarios
of resource requirements depending on the final shape of Solvency II
and the number of firms that will apply for internal model approval,
says Weisslinger.
Such increases in resources will cost, and the FSA, for one, has
already made clear that it plans to recover part of its project development costs related to Solvency II internal model approval work through
imposing special project fees. These will amount to £3.2 million in
2009/10, gathered from the 60 largest life and 60 largest non-life
insurers in the UK and the Society of Lloyd’s, with the fee capped at
£95,000 for any individual firm or group.
The fact that the insurance industry is planning to take some lessons
from banking regarding internal models is not something that fills
everyone with confidence. With banks’ models receiving some of the
blame for the financial crisis, a backlash would not be surprising.
However, supervisors do not report a decline in insurers applying for
internal model approval, nor does their own confidence in the modelling approach appear to be dented.
“If anything, the financial crisis demonstrates the need for sound risk
management, and an internal model is a tool that will improve risk
management, so you could say that we need the models more than
ever,” says Knot. But he acknowledges that the crisis has been something of a reality check on models – on their assumptions and the
confidence that can be placed in their output. “An important issue
with internal models is the diversification question, and the set of correlations that you input to the model,” says Knot. Insurers have to
input their own assumptions with respect to correlations and diversifi-
Thomas Steffen
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cation. Meanwhile, “the crisis has cast a lot of
doubt on how big these diversification effects
really are at the times when you need them
most,” he says.
ACAM’s Weisslinger agrees on the need for
insurers to use more conservative assumptions
in their models following the crisis, but emphasises that the calculation of solvency capital is
just one use of internal models, with the priority in their deployment being the overall
improvement of risk management.
Eberhard Müller, chief risk officer of
Hannover Re, says that what the crisis has
really highlighted is the structural difference
between insurance risks, especially natural
catastrophes, and capital market risks.
“Whereas the former are dominated by real
random events like hurricanes and earthquakes, the latter are heavily influenced by
behaviour rather than by pure randomness.
This does not mean that [the capital markets]
part of the model is not useful – it only means
that you might have to recalibrate. And that is
the process we are currently in.”
Meanwhile, the FSA points out that the move
to a more model-based approach to risk management, in both banking and insurance, is
not a fly-by-night decision, but one based on
careful consideration over a long period. And
while it is important for the development of
any regulatory regime to have a period of
reflection after tough times to assess what can
be learnt from them, it must be remembered
that the alternative to internal models is static
formulas, which are themselves a simplistic
form of modelling. “Some of the risks that
insurers are faced with are well suited to modelling, or in fact can only be adequately
captured through modelling, for instance natural catastrophes or with-profits insurance
products with various guarantees – here, simple
factor-based models just cannot cope with the
complexity and are inherently less safe than
internal modelling options,” says Paolo Cadoni,
a member of the FSA Solvency II team and secretary of the Committee of European Insurance
and Occupational Pensions Supervisors’ internal model expert group.
The introduction of internal models is
clearly placing enormous demands on insurers
and the authorities that supervise them. The
insurers stand to possibly reduce their regulatory capital, but who else will benefit?
Parente of ISVAP says: “Even though at
first glance the most interested parties will
be the insurers and their shareholders, we
think the benefits of internal models [would
extend] to all the other parties, including
policyholders and regulators.” BaFin is less
certain about the benefits being spread
evenly. “The main beneficiaries will certainly
be the insurers, as they will know better
where their risks come from,” says Steffen.
“Regulators and supervisors get a much
better understanding of the insurer’s overall
risk situation, [but] we feel, for policyholders
“An internal model is a
tool that will improve risk
management, so you
could say we need the
models more than ever”
Klaas Knot, DNB
as well as shareholders, that the use of a
model will be more or less neutral.”
DNB’s Knot points out that by seeking to
align capital more closely with risk, Solvency
II in general is a big advance on existing regulations, and gives policyholders, in particular,
more protection. Internal models attempt to
make this link between risk and capital even
more precise, and that will lead to more targeted protection of policyholders “because
the capital will be there where most of the
risks are,” he says.
Meanwhile, insurers that have already been
actively using models in running their businesses say they have brought important
benefits. Porteous at Standard Life says: “The
ICA regime and [preparations for] Solvency
II have helped us to understand and manage
our balance sheets in challenging market conditions.” Generali has found similar benefits
from using its models. “Current financial tur-
moil is proving the reliability of our internal
model. [The results it generates are] consistent with actual impacts on our available
capital,” says Borrini.
Part of the design of Solvency II is to encourage the use of internal models by the promise
of lower solvency capital requirements that
could result from the more precise calculation
of risk. This worked for some insurers in QIS
4, with Hannover Re achieving a 27% lower
capital requirement at the 99.5% value-at-risk
confidence level through its internal model
compared with the standard formula, says
Müller. However, a number of insurers found
their internal models led to only modest capital requirement reductions compared with the
standard formula.
Corrective measures
This was largely down to an undercalibration
of equity and property market risk that
negated gains elsewhere from the use of
models, says Knot of the DNB. Although it
would seem a relatively straightforward imbalance to correct, the signs of this happening
are not good so far. “If you look at the recent
decisions at the political level, everybody is
focusing on the group support aspect, but
there was also a proposal that for equity risk
there would be a further reduction of the
charge under the standard formula, and that
would not only be imprudent but would also
widen the gap between the outcomes [of the
standard formula and internal models],” he
says. The FSA counters that just because
internal models are more exact in the calculation of an individual insurer’s solvency capital,
it does not necessary follow that the capital
amount will be less. “A more precise assessment of risks may inevitably lead to a different
capital allocation than the standard formula
– in some cases higher, in some others lower,”
says Lipponen.
Despite the regulators’ self-confessed current inadequacies in terms of skills and
expertise, insurers have a fair degree of confidence that they will rise to the occasion, and
that the internal model approval process will
be successful. “Our experience with the regu-
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solvency II special report: internal models
Klaas Knot
latory authorities is positive, and the regulatory bodies are sufficiently
prepared,” says Stahl of Talanx. Porteous at Standard Life says: “We
find our conversations with supervisors to be open and constructive.
The supervisor is making good progress in developing and clarifying
how the internal model approval process will work in practice.” Scor is
equally positive about the French authority, having already experienced a good working relationship between Scor Switzerland and the
Federal Office of Private Insurance, Switzerland’s regulator, in fulfilling the criteria of the Swiss Solvency Test. “It is important to anticipate
the regulator’s expectations,” says Kastenholz. “In October, we had a
very fruitful conversation with representatives of the ACAM, who
wanted to learn more about our internal model.”
But Müller at Hannover Re says there is still some way to go to
achieve a useful dialogue across the Solvency II region. While he
acknowledges that supervisors in countries like the UK are fairly
advanced in their understanding of internal models, in other countries he sees a marked gap between senior industry professionals and
young inexperienced supervisors. Another area of difficulty is where
supervisors make assumptions about insurance based on their knowl-
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edge of modelling under banking’s Basel II. “Especially regarding
validation, we have to educate supervisors about the differences
between the banking industry and the insurance and reinsurance
industry, and to clearly point out what makes sense for practical purposes, and where academic requirements [reach] their boundaries in
the real world data structure.”
Whatever the current and future issues with internal models, the
regulators are at pains to emphasise that it is the journey rather than
the destination that is most important. DNB’s Knot says: “The
whole process of building the model and doing the risk analysis on
the basis of the model is much more important than the numbers
coming out of the model.” Lipponen of the FSA agrees. “We cannot
emphasise enough that one definite benefit of models is not so much
the models themselves as the intellectual discipline of building them,
maintaining them, monitoring their outputs, and identifying their
shortcomings. This requires a comprehensive and up-to-date understanding of the risks to which a firm is exposed, and contributes
substantially to a general improvement of risk management practices,” he says. L&P
Reprinted from Life & Pensions
19/12/08 14:59:48
SPONSOREDROUNDTABLE
Model
behaviour
Roundtable partners Barrie & Hibbert and Watson Wyatt, together with
industry leaders, recently took part in a unique forum that discussed the
modelling and systems challenges of Solvency II
Life & Pensions Could you give an overview of the current issues relating to
the Quantitative Impact Study 4 (QIS-4) process and Solvency II, and how these
have been impacted by the recent financial crisis?
Mark Chaplin The latest round of QISs generated different issues for our clients
depending on whether they are based in the UK or continental Europe, as risk
profiles, product lines and internal model usage varies from region to region.
The standard formula solvency capital requirement (SCR) continued to produce
higher results for non-life business. Also, the market risk stress tests are much
lower under the standard formula than for companies using an internal model
– a result that reflects our experience in the UK and with some multinationals.
This provides a limited capital incentive for life insurers to move across to an
internal model instead of simply sticking with the standard formula.
In addition, the minimum capital requirement calibration didn’t work well for
some life companies and the impact of the emerging credit crisis was keenly
felt by annuity providers. They have had to deal with a significant change in
the credit spreads used to value annuities between now and the QIS-3 process
conducted in 2007 on end-2006 data. Marking the assets to market was taken
through, but marking the liabilities to the swap curve meant that they were
unable to realise the illiquidity premium that had been included as part of the
Individual Capital Assessment (ICA) framework – thereby limiting any offsetting
reduction in the liabilities.
Bruce Porteous Our experience at Standard Life was similar. We were a little
disappointed with the size of the internal model incentive – we would have
liked that to be bigger. But, aside from that, we were very pleased with the
process. And, looking at a post-Solvency II world, Standard Life is happy with the
robustness and resilience of its balance sheets. One issue of the technicalities of
QIS-4 was that the counterparty credit risk module just simply didn’t work.
Mark Chaplin
Dokkie Nel We also had an issue with the counterparty credit assessment when
applied to our annuity book. We have significant swap and derivative exposure,
and trying to unwind them for the counterparty risk was very cumbersome. The
market value margin and cost of capital for our annuity business, where an SCR-type
calculation for each year was required, proved to be extremely difficult as well.
Alan Joynes We already have a group internal model, which we applied to QIS4. But we found that trying to provide the comparisons between the outputs
of our model and the breakdown of information requested for QIS-4 was
very difficult, simply because our model is constructed differently. This is not
surprising, given that we are looking at the application of the standard formula
to large and complex reinsurance organisations for which it isn’t intended. For
our business, the standard formula doesn’t work.
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Nick Dunbar
Editor, Life & Pensions
Mark Chaplin
Global Head of Risk & Value Management, Watson Wyatt
John Hibbert
Director, Barrie & Hibbert
Alan Joynes
Director, Regulatory Affairs, Swiss Re
Per Linnemann
Chief Advisory Officer, SEB Pension
Evelyne Massé
National Expert, European Commission
Dokkie Nel
Head of Financial Risk Analytics, Prudential
Bruce Porteous
Head of Solvency 2 and Regulatory Development,
Standard Life UK Financial Services
Evelyne Massé With regard to QIS-4, even though we still have some work
before all the technical details of Solvency II are fully fleshed out, the key
message remains that it was a major success, with an unprecedented level
of participation and significant progress made since QIS-3. Regarding the
political negotiations, the Solvency II Proposal was successfully adopted, with
some amendments, by the Economic and Monetary Aff airs Committee in the
European Parliament on October 7, 2008. Huge progress was also made in
Council, with more than 90% of the text agreed. Unfortunately, the Council
of Finance Ministers on October 7 did not reach agreement on two very
topical issues: the group support regime and the duration approach to
equities. The latter is defended by two Member States, but opposed by a
number of others.
We are now waiting for the French presidency to take this forward. The plan
is that, once there is a clear position on Solvency II in Council and in parliament,
we will engage in trilateral negotiations and a final text will be agreed between
these two institutions and the Commission, before its formal adoption by the
European Parliament. We need this discussion to take place by April next year,
before the EU parliamentary elections.
Life & Pensions So Solvency II might roll over into the Czech presidency of
the EU?
Evelyne Massé Yes, that is a possibility. But the French presidency can still get an
agreement in Council on the last meeting of the Economic and Financial Affairs
Council on December 2. As long as a political agreement is reached before the
elections, then we can stick to the proposed timetable.
8
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John Hibbert
John Hibbert Our primary focus has been on the technical specifications and
resulting implementation issues for firms. For example: What does ‘a deep and
liquid market’ mean? How do we are estimate ‘pseudo prices’ where no reliable
market exists? These are surmountable technical challenges but do require
careful thought and analysis.
Life & Pensions What are the methodological challenges of using an
internal model?
Mark Chaplin There are a number of methodological challenges and these will
vary depending on where you are in the construction cycle for your internal
risk model. There is a perception among some supervisors that you could come
up with an unique correct answer simply by aggregating and analysing a lot of
data, but, even in those areas in which significant data is available, you still need
to apply judgement: on what time period you take, what frequency of data to
look at and what kind of model you are fitting. The answers to these questions
determine to a great extent the actual results that are generated by the internal
model. Other key methodological challenges include incorporating dynamic
policyholder behaviour and management decision-making into the stochastic
projection models, developing market consistent modelling techniques and
refining scenario reduction and model-pointing techniques.
Alan Joynes The point is that the structure may be different in different
companies – and what is important is to make sure that you have a grip on all of
the risks that are most relevant to your organisation.
The other topical issue is how do you model the movement of capital between
separate parts of the business? I think UK companies might be used to this issue
due to the large amount of with-profit business they hold, but generally people
come to an internal model on a fully economic and diversified basis.
The issue of transferability at a group level is well known but it is also applicable
to a solo entity with segregated funds. Can you make resources available to
policyholders where they are needed and when they are needed? It is possible
to build this into an internal model but is this really necessary for everyone?
Reprinted fromLife&Pensions
19/12/08 15:02:02
SPONSOREDROUNDTABLE
Per Linnemann In Denmark when we moved to a market value environment,
we saw that assessing liabilities was very difficult, especially when you need to
project these far into the future as with asset-liability models.
I think it is important to know the limitations of your models. Do you have the
people able to run these models in your company? The number of professionals
who can go into this area is quite limited – and, if you already have someone
in-house with the capability to construct and run these models, you must make
contingency plans in case they move to another firm. And, as the importance of
internal models increases, the people with these kinds of skills and abilities will
become much more attractive to other firms.
Mark Chaplin How models work in extreme conditions is particularly relevant
given the recent market stresses. The QIS-4 process, perhaps quite sensibly from
a market stability standpoint, included an equity dampener that requires lower
stress tests following a period of equity market falls.
The research we have carried out suggests that there is relatively limited
theoretical support for this sort of model structure, particularly when considering
possible market moves over the next year. Indeed, stresses may need to be
higher to reflect the higher levels of volatility. This could give rise to a conflict
between wanting to use an internal model, but seeing the business benefits of
the dampener in the standard formula.
Evelyne Massé The biggest challenge is having a model that is meaningful for,
and widely used in, your business. It is all well and good to develop a sophisticated
model but, in our opinion, the key challenge is meeting the use test.
To pick up on the criticisms of the counterparty default risk module of QIS-4, this
was probably an example where it went ‘over the top’ – the kind of mathematical
modelling was disproportionate to the issues facing most companies. Where this
is the case, both in the context of the standard formula and internal models, senior
management does not buy into the model and instead says, “this is just the toy of
the actuary” – which is the complete opposite of our intention.
John Hibbert The most fundamental challenge to implementation is inferring
market prices that simply don’t exist. Many financial markets are sufficiently deep
and liquid to provide reliable market prices with long maturities, but there are
many territories and segments of the bond and derivative markets where this
liquidity simply is not available.
It is not at all straightforward to ‘manufacture’ prices that are meaningful for
the purposes of this exercise and then to update this information over time in a
coherent fashion. It is relatively easy to construct a reasonable price estimate at
a point in time, but consistent extrapolation of yield curves or volatility surfaces
through time is more difficult. Weak implementation can transfer short-term
volatility onto an insurer’s long-term balance sheet in a way that is not credible.
Bruce Porteous With models, it is important to remember that firms don’t
just need them for Solvency II – we are constantly reviewing our modelling
infrastructure and, in a post-Solvency II world, we will have to cater for all of
market-consistent embedded value (MCEV), Solvency II and International
Financial Reporting Standards. All of those needs have different requirements.
Alan Joynes
Bruce Porteous
For example, with MCEV it is perhaps less important for us to model with profits
business to the same degree of rigour as we will with Solvency II, as shareholders
have less of an interest In that business.
Dokkie Nel The internal model should be based on a one-year value-at-risk
(VaR), but for long-term insurance business – like annuities – a run-off approach
could be more appropriate. The one-year VaR approach potentially increases
volatility, adds to capital and, as a result, reduces annuity prices. Dealing with this
contradiction would be difficult.
Life & Pensions With markets moving at such a fast pace, how can systems
and technology enable insurers to get information at the speed required by
Solvency II?
Alan Joynes One of the biggest issues in all of this is the people – whether it
is your technicians who understand the minutiae of the model or the person
supplying the data. On data, if you have the wrong data then you will be starting
on the wrong foot. So there are some quite interesting issues over data audit
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trails, systems and data warehouses. All of this is really important – what data have
you got and how applicable to the past and the future is it? These are the sort
of questions that supervisors will be asking and therefore the data interpretation
and audit trail can be as important as the systems using it.
important as the systems, I think most companies’ systems a are bit piecemeal
and linking these together is like putting together a jigsaw. The process of
putting together the pieces may not be fully understood and there may be just
the one person with a view of the whole picture.
Dokkie Nel I think you are right – there is often a disconnect between the people
producing the data and those using the models and, if the two are not joined up,
it is easy for errors to distort results.
Life & Pensions What are the cost benefits and what are the risks of
outsourcing in a Solvency II world?
Alan Joynes We have used internal models for more than 10 years and one
thing that has always been very apparent is that the data – which in the past
was deemed appropriate and driven by accounting principles – is not what you
need to do risk analysis.
Mark Chaplin Many existing models and systems cannot deliver what will be
required under Solvency II – risk management information that is timely enough
and accurate enough to support decision-making. Models need to be stochastic
and yet run quickly. This has led to the development of variance reduction
techniques, more efficient model pointing, the elimination of spreadsheets and
manual processes and the use of GRID technology. We have seen significant
successes with companies implementing these techniques and developing
accurate proxy measures such as replicating portfolios that help monitor the
position and allow what-if analyses.
Alan Joynes A possibility exists for a supervisor that, if there is a large amount of
outsourcing done in a particular locality or risk area, they end up in a situation
where there is a single dominant model constructed by an outside supplier who
is deemed to be the expert and everyone uses that supplier. In this instance,
where is the challenge to this model going to come from?
Mark Chaplin To a certain extent you have that even without one dominant
model – companies are reluctant to being an outlier and will seek reassurance
that they are not. This will tend to normalise model calibrations over time and
is reinforced to some degree through the internal model review and approval
process by supervisors.
Life & Pensions What is more important, people or systems?
Dokkie Nel You need good systems to satisfy the mechanics of the models,
but having good people is probably more important as they can interpret the
models and prevent them from becoming ‘black boxes’.
John Hibbert This will be judged over decades and not just over the next
few years. Today’s models are immature in the sense that there is still much
development to improve implementation. The ideal calculation is a ‘nested
stochastic projection’, but there simply isn’t the computing power available yet.
However, researchers are working hard to develop computational short cuts to
help make this a practical proposition.
Another observation on technology is that we are moving from a situation
where actuaries and analysts manually operate models, to moving control to
systems groups. Internal models can be designed and developed by professional
software engineers rather than junior actuaries. Hardware solutions are also
evolving and maturing.
Dokkie Nel
Life & Pensions But, of course, all of those incredible computers the banks
used to price collateralised debt obligation portfolios didn’t save them...
John Hibbert Computer power and models are necessary, but not sufficient, for
good risk management.
Bruce Porteous The underlying business processes are going to be just as
10
007-011.indd 32
Per Linnemann
Reprinted fromLife&Pensions
19/12/08 15:02:27
SPONSOREDROUNDTABLE
Alan Joynes There is definitely a force for convergence.
Life & Pensions Of course, Barrie & Hibbert has a strong presence in the
economic scenario generator (ESG) field. Do you think that this dominance can
create a dangerously high level of convergence?
John Hibbert It is important to understand that we do not provide a single model
with fixed assumptions. Rather, firms have access to a library of different models
and calibration tools as well as our research on assumptions for different markets
and asset types. Firms can perform their own calibration analysis and input their
own assumptions. Indeed, regulators require them to take responsibility for
these assumptions. So, although we have a strong market position, our clients
are actually using different models with a range of assumptions.
In addition, we have always taken the view that everything we do should
be transparent. In principle, our documentation should provide sufficient
information to recreate the model. And – while this transparency is now a
regulatory requirement – it is something that we strongly believe in.
Assuming that you have succeeded in hiring a smart quant – who, as Per
said, is hard to find – if you choose to construct the model in-house, he will be
focused on building and maintaining a piece of software rather than answering
the long list of hard questions associated with actually using the model. Insurers
don’t build spreadsheet software from scratch. They spend their time using it to
solve problems. It’s just the same with ESG software. In my view, the in-house
approach creates a far bigger operational risk exposure. We typically see a very
small, tight-knit team building, maintaining and calibrating models with lots of
‘key man’ risk. So outsourcing in some of these areas can strengthen processes
as well as reducing risk.
Per Linnemann I agree that it can make sense to outsource also because you
can share cost, but I would prefer that – if you use an externally created model
– it is well documented. This is so the external consultants and the employees
are speaking the same language – and I am not talking about Danish – I mean
mathematical language. By having this, the company has ownership and
those running the model know exactly what is going on – someone in the
company, that is.
Evelyne Massé I guess when you decide to develop an internal model you have
two phases – the building phase and then the ongoing phase where you are
trying to update it regularly.
In practice, it will be very useful to use outside resources to develop the model
– you can learn from other people. But, in any case, the directive is 100% clear
that you must own the model, there can be no possibility of the model being a
black box. It should be documented as if you had developed it yourself. You have
to understand how it works and know where the input data and assumptions
come from.
In any case, I do not think that calling in a consultant to help you build an
internal model really counts as ‘outsourcing’ as legally defined under Solvency
II. Normally this refers to, for example, getting a third party to complete your
claims handling and it is therefore no longer performed within your company.
Evelyne Massé
If you go to the extreme of having the model outside the company you would
have problems internally, and not only from your supervisor. And I don’t think
that this is realistic in practice.
Life & Pensions What are the issues of the testing and documentation of
internal models? This is clearly going to be a big issue when it comes to the point
of supervisors approving internal models. Will they understand the models that
they are looking to approve?
Mark Chaplin You are right that there are potentially big challenges for
supervisors. In a number of countries there are not that many firms that are
already using internal models, so their countries’ supervisors may need
to establish ways of benchmarking internal models and this will require
knowledge-sharing and co-operation across supervisors.
There is also likely to be high demand for qualified modelling resources and
this may make staff retention difficult for some supervisors.
In terms of testing, I mentioned earlier that judgement plays a significant
role in internal model development. Testing and validating judgement to the
satisfaction of the supervisors will be challenging. More generally, insurers will
need to do more work on collating and checking data, testing the goodness of
fit of assumed distributions and running sensitivity tests. This can be very timeconsuming. Documentation will need to be improved, but it remains unclear
exactly what standard models will need to be documented. The fabled ‘white
room’ standard would put internal model approval beyond virtually all insurers
if it was implemented.
Evelyne Massé Having a sound validation process is another requirement of
the directive, so you should expect some questions from the supervisors on
that. Regarding the approval by the supervisors, it is a bit of challenge – it is a
new area for many supervisory authorities. In the UK, companies already have
to comply with the ICA rules, so you already have knowledge and experience
of this. But this is not true of all other Member States that will have to build the
knowledge and expertise.
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The holistic approach
Enterprise risk management offers a holistic approach to risk assessment and
management for insurance firms working to ensure that their systems
conform to the new regime under Solvency II. But ERM not only offers a
tool for compliance, it also helps firms make better business decisions
With the Solvency II deadline of 2012 looming, there is much work for insurance
firms to do in reviewing and adapting their risk management systems. Under
Solvency II, firms in 30 countries will have to conform to one set of prudential
regulatory requirements. Against this backdrop, enterprise risk management
(ERM) – which is an integrated risk management framework – has received much
attention in the industry as a compliance tool. Although ERM is not the only way
through which an insurance firm can achieve the objectives established under
Solvency II, the fact that such a framework will allow firms to get a clear picture
of all the risks inherent to the business across departments makes it a natural
solution for meeting the new standards.
Moody’s team managing director of insurance, Simon Harris, says that a
robust ERM framework will show regulators that a firm has the adequate risk
management system in place. “A well-established centralised risk management
system, with defined roles and responsibilities for risk managers, management
and the board, will demonstrate to regulators and other parties that risk
management is being given the appropriate level of focus,” he adds.
Compliance aside, an integrated ERM system can provide firms with timely
and dynamic information that can be harnessed to ensure competitive
advantages and better synergies within large organisations. Insiders say that
firms must not view ERM merely as part of the daily grind of managing an
organisation and satisfying the requirements of regulators.
“The focus of regulators and supervisors is inevitably on protecting
policyholders in relatively extreme scenarios,” says Mark Chaplin, global head of
risk and value services at Watson Wyatt. “This leads to a greater emphasis on
controlling risk and downside and less on maximising the expected return for a
given level of risk tolerance. This is natural, but does mean firms will need to look
well beyond pure compliance to derive real benefits from their investment.”
Crucial to a successful ERM system is a management that is committed to risk
management. Organisations need to have a strong risk management culture
and management needs to be able to articulate its risk tolerance throughout the
ranks. By having a clear understanding of an organisation’s risks, management
can make better decisions and, in turn, improve returns earned per unit of risk
012-013_L&P.indd 34
Watson Wyatt ERM framework
Definition and application
of organisational structure,
roles & responsibilities,
risk appetite, policies,
limits
Risk
Optimisation of culture Identification,
risk-adjusted
quantification
returns within
and reporting of
risk appetite
risk and value
taken. With management commitment, the implementation of an ERM
framework will also come more naturally.
There are three elements to ERM. The first is governance, which means that
an organisation’s business units and risk committees must establish its risk
appetite, risk limits and risk policies. The second is assessment, which refers
to the identification and quantification of risks an organisation faces. Part of
this process involves the reporting of risk and returns through management
information. The third element of ERM is action, which is to put into practice
business decisions based on the organisation’s risk tolerance.
“The ultimate aim is to choose which risks to take so that the risk-adjusted
return of the organisation is optimised and that the overall level of risk taken
falls within the agreed risk appetite,” says Chaplin. “Actions include setting
the strategic asset allocation, selecting which risks to hedge and to reinsure,
19/12/08 15:10:40
SPONSORED ARTICLE
choosing the appropriate level and
form of collateralisation, deciding
what controls to put in place and
deciding whether or not to outsource
certain functions.”
With such a framework in place,
organisations will have a deeper
understanding of their own risk
appetites and, hence, can make a
better assessment of their portfolios.
This then allows management to seek
ways to realise benefits and synergies
within the organisation that it may not
have been aware were there before.
Organisations will also then be able to
focus on the segments in the market
that provide the most attractive
returns and ensure that they are
properly rewarded for risks taken.
“Through an ERM programme,
management can better understand
the risk exposures and the portfolio
so that, if it had an opportunity to take
Mark
more risks, it could make decisions
that actually allow it to expand into
new areas to get better diversification across all the risk categories,” says Colin
Ledlie, chief risk officer and group chief actuary of Standard Life who is also the
chairman of the ERM practice area committee of the UK Actuarial Profession.
“There may be some very positive synergy benefits organisations could get
between different areas. It shouldn’t be and it isn’t the objective that ERM is
purely defensive.”
In practice, firms can create their own internal models in an ERM framework to
calculate their solvency capital requirements under Solvency II, instead of using a
standard formula. In some cases, a firm’s supervisor will require it to use an internal
model if the standard formula is not thought to reflect accurately all the material
risks to the organisation. To this end, the benefit of using an internal model is that
firms will be able to set up their own risk distributions, stress tests and correlations,
as a result of which they will be able to get a more exact picture of underlying risk
profiles and risk management activities. For supervisors to grant approval, internal
models will be expected to meet statistical, calibration, validation, documentation
standards and to pass the use test. All of these requirements only make the risk
management system more robust, ratings agencies say.
“Embedded within the regulations will be a ‘use test’ before a company can
use their internal model for solvency assessments,” says Keith Bevan, director of
insurance ratings at Standard & Poor’s (S&P). “The use test is broadly aligned with
what S&P would describe as a ‘strong’ or ‘excellent’ strategic risk management, a
key part of an advanced ERM programme.”
Ratings agencies and regulators are among the key proponents of using ERM
as a risk management system. But, for
all the benefits that an ERM framework
provides, there are problems that
could hamper the workings of such a
system. For example, the calculation of
economic capital is an area on which
some firms have spent a lot of money
and effort. But, because it is timeconsuming to produce this figure, the
information can be out of date by the
time it is disseminated. Management
information is also sometimes not
timely enough for firms to be able to
take better corporate decisions.
“Many organisations are held back
by their systems, which are often
incapable of providing the necessary
risk and value information rapidly
enough,” says Chaplin at Watson
Wyatt. “Improving processes and
systems to reduce manual intervention
in the calculations will help, but often
a new approach may be required.
Chaplin
Examples of this include the rapid
increase in interest that we are seeing
in the use of replicating portfolios alongside actuarial projection systems and
the investments being made into GRID processing technology.”
While there has been a perception in the market that implementing an ERM
framework could be a financial drain for smaller firms, in reality, companies with
less complicated structures and businesses will require simpler systems and will
need to maintain and manage less data. There are simple things that companies
can do without incurring huge costs. For example, they can strive to improve risk
information and establish a clearer understanding of where the responsibility for
the management of risk lies. Running stress and scenario tests to understand
how different risks and combinations of risks could affect the balance sheet and
the profit and loss accounts could also help.
“A smaller company can be nimbler and change the way things are done
more easily,” says S&P’s Bevan.
More generally, while there may be some cost to improving ERM, the cost of
not acting may be greater. “If the main competitors are using ERM to define
their strategy and set their pricing, there is the possibility that companies
without ERM will be writing unprofitable business, which would not be
sustainable for long. Therefore, the costs of not implementing an ERM system
might be substantial,” says Bevan. Chaplin agrees, and comments: “There are
plenty of examples of companies with a more advanced ERM framework
finding it useful in implementing hedges to reduce the overall level of market
risk being taken. This has been a source of competitive advantage in the recent
market turbulence.”
“Many organisations are held back by their
systems, which are often incapable of
providing the necessary risk and value
information rapidly enough”
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SPONSORED ARTICLE
Risk management using
economic scenarios
As Solvency II looks set to require market-consistent valuation of complex
insurance liabilities, many of the largest global insurance firms have been
using economic scenario generators to produce market-consistent valuations
In the UK, where market-consistent valuation has been required for profitparticipating life insurance contracts since 2004, economic scenario generators
have been used extensively. Colin Ledlie, CRO and group chief actuary of UKbased Standard Life, says “We’ve found the use of a market-consistent economic
scenario generator to be a flexible and transparent tool for calculating marketconsistent values of our with-profits policies. It enables us to put an economic
value on features such as policy-holder behaviour and management actions.”
Good data is available for market-consistent valuation of widely traded
instruments over short to medium-term horizons. For example, equity optionimplied volatilities are available to 10-year maturities for most major markets.
However, there are other prices where market data is not readily available and
where robust economic analysis is required to form an objective view of where
a liquid market might be expected to trade. This will lead to some degree of
subjectivity in the calibration, which needs to be managed and disclosed.
John Hibbert, founder and director of leading ESG provider Barrie & Hibbert,
explains the solution his firm has taken: “We took a decision that the subjective
elements of our market-consistent calibrations should be open to public
scrutiny. We therefore set up a Technical Advisory Panel comprising experts in
audit, investment banking and academic research and also invited participants
from three of the largest global insurers. We asked them to review our calibration
policy so that the choices made will stand up to independent expert scrutiny.
We find it a very good way of engaging the key stakeholders in the calibration
process and forming an objective view.”
Many insurance companies are also finding that an enterprise risk management
(ERM) programme needs, at its core, a method for identifying adverse scenarios
and quantifying risk exposures, and have been developing sophisticated internal
economic capital models for this purpose. With many of the risks that are faced
by insurance companies directly or indirectly linked to movements in key market
and economic variables, economic scenario generators are proving useful for
identifying sequences of economic events that can lead to problems. But, John
Hibbert cautions that careful calibration is as important as developing very
014_L&P.indd 36
sophisticated economic models; “It is easy to get carried away designing ever
more complex models, but we have found that careful model calibration is the
key driver for insurance economic capital requirements. Therefore we feel it is
very important to back up developments in model complexity with a coherent
calibration process.”
However, the ERM process extends beyond the risk management function.
Insurance companies are now taking risk management to the front office so that
the principles of ERM are being applied in product design and communication.
Andy Frepp, corporate development director at Barrie & Hibbert, says: “Our view
is that risk management should start before any products are sold. An economic
scenario generator can be used to understand guarantee costs and the risk
profile of products. This can help to ensure that the products taken to market are
genuinely value-added and that there is effective communication of the product
risks to the customer”.
Solvency II will require that the senior management of the insurance company
have oversight and approval of the key assumptions. Elliot Varnell, head of
European insurance at Barrie & Hibbert, adds: “Getting senior management
engagement on the complex economic modelling in modern insurance
companies is a major challenge posed by Solvency II. We see the ability of the
board of directors to approve a consistent set of economic assumptions and
then have those filtered down to all areas of the business as key to satisfying the
demands of Solvency II.”
Contact
Elliot Varnell, Head of European Insurance, Barrie & Hibbert Ltd
T. +44 (0)20 3170 6145
E. [email protected]
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19/12/08 15:15:28
SOLVENCY II SPECIAL REPORT: COMMENT
QIS 4
and the
Italian insurance industry
The high and rising levels of participation in QIS 4, the fourth
quantitative impace study, indicate the Italian insurance industry’s
positive attitude to Solvency II
ANGELO DONI, GIORGIA ESPOSITO, DARIO FOCARELLI AND ANTONIO NICELLI
THE ITALIAN INSUR ANCE INDUSTRY welcomed the Solvency
II project and has strongly supported it from the start. The general
aims – clearly stated by the European Commission – are of prime
importance to Italian insurers: more effective protection of policyholders, enhanced risk sensitivity for capital requirements, greater
harmonisation of rules, more consistency in rules between different
segments within the fi nancial industry, more efficient supervision of groups, and greater
incentive for risk management.
Participation in QIS 4
The Italian insurance industry’s positive
attitude to Solvency II stands confi rmed by
the high level of participation in the fourth
quantitative impact study, conducted from April to July this
year. A total of 88 fi rms took
part, up from 73 in QIS 3. In
fact, the number of insurers
participating has risen every
time since the fi rst study.
Of the 88 participants in
QIS 4, 17 are large fi rms (18
in QIS 3), 40 mid-sized (33
in QIS 3), and 31 small (22
last time). In short, the increase
in participation was greatest for
small insurers, in accordance with
the study’s aim of reducing the
potential sample distortion due to
Angelo Doni
015-016_L&P.indd 15
the prevalence – as in the previous studies – of the largest fi rms. Overall,
the participating insurance companies account for 87% of non-life premiums in Italy (82% in QIS 3) and
83% of technical provisions in the
life sector (71% last time). This time
seven groups also participated, fi lling out the relevant part of the
questionnaire.
In a word, at least as far as participation goes, there is no doubt
that the Commission’s objectives
have been attained.
Giorgia Esposito
Quantitative results
The main fi ndings of QIS 4 for the Italian insurance industry were:
1. For both life and non-life insurers, technical provisions according
to the study’s standards were smaller than as currently calculated,
mainly because of new valuation criteria. The weighted-average ratio
between the two was 94% for life and 92% for non-life business.
2. The QIS 4 capital requirement for non-life and composite insurers
was higher in absolute value than under current rules; for life insurance companies, however, the QIS 4 requirement is a bit lower.
3. Available capital as calculated for QIS was considerably larger than
under current standards. Further, much of the available capital is of
high quality, qualifying for Tier 1.
4. The solvency ratio – available capital over capital requirement – was
lower under QIS 4 standards than as currently computed for non-life
and composite insurers, higher for life companies.
5. The minimum capital requirement to solvency capital requirement
ratio (MCR/SCR) is 38% on average.
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SOLVENCY II SPECIAL REPORT: COMMENT
It should be stressed that the data used in the study were for end2007, when market conditions were still relatively favourable. The
results would be significantly different today. Even so, the fi ndings
confi rm the great resilience of the Italian insurance industry, as we
have seen in the present phase of great fi nancial turmoil. Since the start
of the year Italian insurance shares have not fallen as much as the
Italian stock market overall or European insurance shares generally.
Turning to the composition of the capital requirements, and basic
SCR (BSCR) in particular, we fi nd:
● In the life sector, the capital charge for market risks is the largest
component, followed by life underwriting risk.
● For non-life fi rms, underwriting risk is prevalent.
● For composite fi rms, market risk predominates, followed by non-life
underwriting risk.
Comparing the composition of the capital requirement as determined in QIS 3 and in QIS 4, the fi rst thing to notice is that equity
risk is still the largest component of market risk but is relatively less
important in QIS 4, mainly because the requirement in respect of investments in participations
has been lowered. Second, concentration risk
remains important and with a larger incidence
than in the previous study. Finally, in the life
sector, the incidence of catastrophe risk has diminished while the weight of lapse risk has increased
sharply. This depends basically on the fact that
lapse mass risk has now been shifted from the life
cat-risk sub-module to the lapse risk sub-module.
Qualitative feedback from participants
Dario Focarelli
16
015-016_L&P.indd 16
Apart from these quantitative fi ndings, the study
was most interesting for the qualitative judgments
of the participating companies about the exercise
itself. In particular:
● The pre-test consultation was considered most
useful for spotlighting and resolving doubts and
concerns before the commencement of the study.
● The simplifications in calculating the technical
provisions and some of the SCR modules were
deemed helpful.
● One of the most puzzling points of QIS 4 was
the treatment of taxes. Most companies found it
hard to calculate the capacity of deferred taxes to
absorb losses, as the technical specifications were
unclear.
● Finally, the participants reported difficulty in
splitting the best estimate of technical provisions
in the life sector according to risk driver.
Some other major aspects worth noting are
detailed below.
On market risk, and equity risk
in particular, most companies
appreciated the differential treatAntonio Nicelli
ment of participations (applying
half as much stress as to ordinary
shareholdings), which they saw as properly taking account of their
lesser volatility, owing to the stable, long-term relationship between
investor and investee company.
The QIS 4 approach to counterparty risk produces unrealistic capital
requirements against credit exposures to intermediaries (especially
insurance agents). The participants pointed out that losses on claims
with agents are minimal, that these claims are normally recovered
within two or three months, and that the exposures are usually guaranteed, in part when not wholly, by mandatory insurance policies.
On life underwriting risk, there were a number of comments on lapse
risk. To determine the requirement against mass lapse risk, companies
were asked to apply a shock corresponding to 30% of ‘surrender strains’
(the difference between the redemption value and the accrued provision), where these are positive. It was pointed out that it is unrealistic
to hypothesise the same lapse probability in conditions of great stress
for unit-linked policies (which generally have small penalties for early
cancellation) and traditional with-profit policies.
On non-life underwriting risk, most respondents noted that the volatility factors determined by CEIOPS for calculating reserve risk for the
motor and general liability lines were very high, resulting in capital
requirements so heavy that they could make higher premiums necessary.
Finally, on group requirements, among the possible methods of calculation, the respondents displayed a marked preference for
consolidation, which takes due account of diversification both between
EU and non-EU companies and between with-profit business and the
rest of the group’s business.
In closing, a brief comment on internal models for calculating SCR.
About half the participants gave the results produced by their internal
models, many of which are already being reported to the board.
Conclusion
QIS 4 was a most useful exercise within the Solvency II project. It
produced information on the possible fi nancial impact of the new
supervisory regime, on Italian insurers’ preparedness, and on the use
of internal models.
The agenda for the next few months is busy in the extreme. The
implementing measures for the framework directive must be passed by
the end of 2010, and CEIOPS’ technical opinion on them is expected
for October 2009. For the project to proceed on schedule, the framework directive must be approved before the election of the European
Parliament in the spring of 2009.
Italian insurers are convinced of the necessity for a policy solution
based on an economic approach. They emphasise that the group support regime forms an integral part of such an approach. L&P
Reprinted from Life & Pensions
19/12/08 15:31:35