ICA Individual Capital Assessment analysis as presented at Milliman\'s 2005 Casualty Consultants Forum

1. Individual Capital Assessment – Setting Solvency Capital Levels 2005 Casualty Consultants’ Forum Presented by Kyle Mrotek 16 th June 2005

3. Components of ICA

4. Capital Credit Market Liquidity Group Insurance Operational FSA Risk Types - Defining Capital Requirements

6. Approach to ICA

8. Estimate correlations between risk areas and determine aggregate capital requirement Dynamic Risk Model Individual Capital Assessment Determining the ICA based on Risk Assessment Insurance Risk Credit Risk Market Risk Operational Risk Liquidity Risk Group Risk Additional Risk Consider Benchmarks Loss History Consider Maximum Cash-flow Contingency Plans Consider Capital Structure Contagion Risk Consider Concentration Risk System Controls Capital requirement for Insurance and Market Risk Consider Counterparties Off Balance Sheet Items

9. Modelled Risks

11. Outline of Process Simulate Results Sample from Distributions Model Insurance and Asset Portfolio Gross, and Net Results, in Financial Accounting Framework Loss distributions Premiums Balance Sheet Generate random number Obtain value from distribution

13. Existing Business Assumptions

14. Future Business Assumptions

15. Marketing Surplus Assumptions

17. Correlation Matrix

18. Capital Requirements

20. Draft Results for DGI Indicative Capital Requirements (£000s) * excludes non-insurance liabilities Assets 130,927 130,849 129,322 124,163 122,168 Liabilities* - UPR 129,176 133,696 138,440 143,461 148,833 - Claims O/S 8,779 9,239 10,199 10,956 12,253 Surplus Emerging -7,027 -12,085 -19,318 -30,254 -38,918 Total Required Assets 137,955 142,934 148,640 154,417 161,086 Capital Required 7,027 12,085 19,318 30,254 38,918 End of Year 5 (2009) End of Year 3 (2007) End of Year 1 (2005) End of Year 2 (2006) End of Year 4 (2008)

22. Added Value Beyond Regulatory Requirements

23. Any Other Business?