It is old news that the credit crisis dealt a blow of unprecedented force to the solvency of banks
and insurers. It is also known that SNS REAAL was one of the service providers that requested
state aid to create a ﬁnancial buffer. The company makes no secret of its bailout. But SNS REAAL
is now doing its utmost to be able to absorb such blows in future by means of its own assets.
This includes a company-wide programme to structurally improve its management of solvency.
SNS REAAL learns from the crisis
Managing solvency: structural
improvements for future protection
In common with all other ﬁnancial service providers, SNS REAAL company. “The chief lesson that we learned from the credit crisis
was hit in 2008 by the effect of collapsed share prices and was that our solvency management had literally been overtaken
increased credit spreads, which sent the value of its assets into by events,” says Bas de Jong, head of Asset & Liability Manage-
an unparalleled nosedive. Against this the fall in interest rates ment (ALM) at SNS REAAL. “Before we had answers to questions
pushed up the value of its commitments to policyholders and like, ‘How will a movement of equities and interest rates to level x
made SNS REAAL’s indebtedness grow. The bottom line was a or y affect our solvency?’ it was already bitter reality.”
breathtaking slide in the solvency of the bank and insurance
From left to right: Sol@r trio: Wouter Dikkers of Zanders, Bas de Jong and
Peter Olij of SNS REAAL.
Comparing apples with apples
In January 2009 SNS REAAL launched Sol@r (Solvency at Risk).
This company-wide programme consisted of six overlapping SNS REAAL was created in 1997 out of a merger between SNS
projects each with its own scope. One focused on ensuring Groep and REAAL Groep. These two groups had originated
greater reliability of solvency ﬁgures, others concentrated on from various regional banks, mortgage providers and insurers.
bringing about more immediacy, faster calculation of variables SNS REAAL serves mainly private individuals and small and
and more accurate analyses. Another goal of Sol@r was to medium-sized companies in the Netherlands. Besides its
increase uniformity substantially. De Jong says: “Due to recent main brands of SNS Bank and REAAL the company markets
acquisitions of DBV, AXA, Winterthur, and Zwitserleven we had a some speciﬁc brands, such as SNS Property Finance, SNS
fairly complex organizational structure. There were lots of new Fund Coach, SNS Regio Bank, ASN Bank, BLG Hypotheken,
portfolios, different methods of calculation and different Zwitserleven, Proteq, and Route Mobiel.
systems. We needed to move towards a uniform way of managing Due to the credit crisis SNS REAAL made a loss of EUR 504
solvency, both in the actuarial valuation of all our policies and in million in 2008, compared with net proﬁts of EUR 465 million
how our entities determine their market, liquidity, and solvency in 2007, and EUR 371 million in 2006. The Dutch State
risks. In other words, there had to be reconciliation between provided a capital injection of EUR 750 million at year-end
actuaries and ALM.” 2008. Stichting Beheer SNS REAAL, a management founda-
tion, reinforced that buffer by another EUR 500 million. For
Hands on more information visit www.snsreaal.nl
The Sol@r core team members included De Jong, his colleague
Peter Olij who managed the project full-time and Zanders
consultant Wouter Dikkers. He provided support for three of the provide certain input to assure the correct solvency ﬁgures and
six projects. “We already had some experience with Wouter,” says how much effort that would take. Based on the outcome several
De Jong. “He knows the market and techniques and he speaks the options were placed before the steering committee. Olij notes:
same language as all the stakeholders, everybody from actuaries “We presented the possibilities to them very clearly and
to asset managers and risk managers. This was precisely the transparently in terms of, ‘This is solution 1, this it what it will cost
versatility that we needed.” The Sol@r steering committee in procurement and it will require this much effort by so and so,
“The chief lesson that we learned from the credit crisis was that our
solvency management had literally been overtaken by events.”
represented all the important echelons within SNS REAAL and was but it will ultimately produce this result... This is solution 2, this is
chaired by the company’s CFO. “This shows not only how what it will cost...,’ and so on. The higher the quality of the
important the board considers this programme, it also speeds up ﬁgures, the more man-hours you must free up to make it work. It’s
the decision-making process enormously and that’s very nice,” up to you to set priorities.” The great appreciation of this
says Olij. “We did our utmost to retain this no-nonsense, approach was evident from the speed at which decisions were
hands-on mentality and we succeeded.” taken. Within six months it was clear which solutions were good,
structural and widely supported at SNS REAAL.
Identifying and indexing risks
The team devoted considerable effort to a thorough initiation Thinking in market values
phase and took stock of the organization’s wishes and capabili- The implementation of some new calculation models and tools is
ties. The next step was to identify accurately all risks and index now nearing completion. A few projects have yet to crystallize out
them according to their impact on solvency. To obtain a correct in the line organization. Dikkers says: “Partly due to the introduc-
risk estimate it was necessary to examine SNS REAAL’s balance tion of Solvency II and IFRS, the actuaries need to start thinking
sheet far more from the point of view of market value than from an more in terms of market value. It takes people and processes time
accounting angle. Dikkers explains: “Our goal was to make the to adjust to this approach.” De Jong and Olij nod in agreement.
risks hedgeable. In other words, we wanted SNS REAAL to be able “But the more grip we get, the faster we will move forward.
to decide under all market conditions the risks that were Just one year ago we were still presenting our solvency ﬁgures
acceptable or hedgeable up to a certain limit or that needed to be once a year. Following the crisis we do so every quarter, ad hoc.
eliminated.” The Sol@r team compiled a picture of who needed to Our objective now is to move structurally to twice a month!” <
IF YOU WANT TO GET A GRIP ON SOLVENCY, PHONE WOUTER
“It’s certainly a change of culture. DIKKERS AT ZANDERS ON +31 (0)35 692 89 89.
Actuaries must suddenly start
thinking in terms of market values.”