17 Insurance and investment contracts, reinsurance contracts
The provisions for insurance and investment contracts, net of reinsurance (i.e. the provision for the company’s own account) is presented in the balance sheet gross under ‘Insurance and investment contracts’ and ‘Reinsurance contracts’.
Insurance and investment contracts, reinsurance contracts
| Provision net of reinsurance | Reinsurance contracts | Insurance and investment contracts | ||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Provision for non-participating life policy liabilities | 70,149 | 78,772 | 4,481 | 4,930 | 74,630 | 83,702 |
| Provision for participating life policy liabilities | 54,645 | 52,914 | 175 | 187 | 54,820 | 53,101 |
| Provision for (deferred) profit sharing and rebates | 1,601 | 2,956 | 5 | 5 | 1,606 | 2,961 |
| Provision for life insurance for risk of policyholders | 100,753 | 97,304 | 639 | 651 | 101,392 | 97,955 |
| Life insurance provisions | 227,148 | 231,946 | 5,300 | 5,773 | 232,448 | 237,719 |
| Provision for unearned premiums and unexpired risks | 2,564 | 2,631 | 99 | 156 | 2,663 | 2,787 |
| Reported claims provision | 5,051 | 5,503 | 475 | 600 | 5,526 | 6,103 |
| Claims incurred but not reported (IBNR) | 1,121 | 1,148 | 1,121 | 1,148 | ||
| Claims provisions | 6,172 | 6,651 | 475 | 600 | 6,647 | 7,251 |
| Other insurance provisions | 302 | 176 | 302 | 176 | ||
| Total provisions for insurance contracts | 236,186 | 241,404 | 5,874 | 6,529 | 242,060 | 247,933 |
| Investment contracts for risk of company | 9,520 | 7,505 | 9,520 | 7,505 | ||
| Investment contracts for risk of policyholders | 14,132 | 13,245 | 14,132 | 13,245 | ||
| Total provisions for investment contracts | 23,652 | 20,750 | 23,652 | 20,750 | ||
| Total | 259,838 | 262,154 | 5,874 | 6,529 | 265,712 | 268,683 |
Changes in life insurance provisions
| Provision net of reinsurance | Reinsurance contracts | Insurance and investment contracts | ||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Opening balance | 231,946 | 225,351 | 5,773 | 6,638 | 237,719 | 231,989 |
| Changes in the composition of the group | –3,475 | 83 | 2 | 23 | –3,473 | 106 |
| 228,471 | 225,434 | 5,775 | 6,661 | 234,246 | 232,095 | |
| Current year provisions | 27,224 | 28,863 | 139 | 1,525 | 27,363 | 30,388 |
| Change in deferred profit sharing liability | –1,546 | –1,241 | –1,546 | –1,241 | ||
| Prior year provisions: | ||||||
| – benefit payments to policyholders | –21,933 | –13,166 | –82 | –366 | –22,015 | –13,532 |
| – interest accrual | 6,794 | 4,791 | –40 | 18 | 6,754 | 4,809 |
| – valuation changes for risk of policyholders | 5,612 | 2,702 | 5,612 | 2,702 | ||
| – effect of changes in other assumptions | 2 | –21 | 2 | –21 | ||
| –9,525 | –5,694 | –122 | –348 | –9,647 | –6,042 | |
| Exchange rate differences | –15,583 | –15,874 | –501 | –535 | –16,084 | –16,409 |
| Other changes | –1,893 | 458 | 9 | –1,530 | –1,884 | –1,072 |
| Closing balance | 227,148 | 231,946 | 5,300 | 5,773 | 232,448 | 237,719 |
Included in Changes in the composition of the group is EUR 4,017 million relating to the disposal of portfolios in connection with the sale of Belgian Broker and Employee Benefit insurance business as disclosed in Note 29 ‘Companies acquired and companies disposed’.
Where discounting is used in the calculation of life insurance provisions the rate is within the range 2.9% to 6.0% (2006: 2.9% to 6.8%) based on weighted averages.
ING transferred part of their life insurance business to Scottish Re in 2004 by means of a co-insurance contract. This business continues to be included in Life insurance provisions. The related asset from the co-insurance contract is recognised under Reinsurance contracts.
To the extent that the assuming reinsurers are unable to meet their obligations, the Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are made for receivables on reinsurance contracts which are deemed uncollectible. The life reinsurance market is highly concentrated and, therefore, diversification of exposure is inherently difficult. To minimise its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographical regions, activities or economic characteristics of the reinsurer.
As at 31 December 2007, the total Reinsurance exposure, including Reinsurance contracts and Receivables from reinsurers (presented in Other assets) amounted to EUR 7,044 million (2006: EUR 8,005 million) after the provision for uncollectible reinsurance of EUR 5 million (2006: EUR 6 million).
Changes in provision for unearned premiums and unexpired risks
| Provision net of reinsurance | Reinsurance contracts | Insurance and investment contracts | ||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Opening balance | 2,631 | 2,835 | 156 | 258 | 2,787 | 3,093 |
| Changes in the composition of the group | –194 | –9 | 3 | –191 | –9 | |
| 2,437 | 2,826 | 159 | 258 | 2,596 | 3,084 | |
| Premiums written | 5,780 | 5,994 | 306 | 339 | 6,086 | 6,333 |
| Premiums earned during the year | –5,701 | –5,929 | –326 | –377 | –6,027 | –6,306 |
| Exchange rate differences | 15 | –245 | –10 | –22 | 5 | –267 |
| Other changes | 33 | –15 | –30 | –42 | 3 | –57 |
| Closing balance | 2,564 | 2,631 | 99 | 156 | 2,663 | 2,787 |
Changes in claims provisions
| Provision net of reinsurance | Reinsurance contracts | Insurance and investment contracts | ||||
|---|---|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |
| Opening balance | 6,651 | 8,202 | 600 | 1,389 | 7,251 | 9,591 |
| Changes in the composition of the group | –667 | –4 | –18 | –685 | –4 | |
| 5,984 | 8,198 | 582 | 1,389 | 6,566 | 9,587 | |
| Additions | ||||||
| – for the current year | 3,356 | 3,261 | 78 | 124 | 3,434 | 3,385 |
| – for prior years | –282 | –525 | 14 | –18 | –268 | –543 |
| – interest accrual of provision | 32 | 54 | 32 | 54 | ||
| 3,106 | 2,790 | 92 | 106 | 3,198 | 2,896 | |
| Claim settlements and claim settlement costs | ||||||
| – for the current year | 1,747 | 1,569 | –42 | 33 | 1,705 | 1,602 |
| – for prior years | 1,343 | 1,458 | 151 | 388 | 1,494 | 1,846 |
| 3,090 | 3,027 | 109 | 421 | 3,199 | 3,448 | |
| Exchange rate differences | 84 | –381 | –14 | –93 | 70 | –474 |
| Other changes | 88 | –929 | –76 | –381 | 12 | –1,310 |
| Closing balance | 6,172 | 6,651 | 475 | 600 | 6,647 | 7,251 |
ING Group had an outstanding balance of EUR 66 million at 31 December 2007 (2006: EUR 66 million) relating to environmental and asbestos claims of the insurance operations. In establishing the liability for unpaid claims and claims adjustment expenses related to asbestos related illness and toxic waste clean up, the management of ING Group considers facts currently known and the current state of the law and coverage litigation. Liabilities are recognised for IBNR claims and for known claims (including the costs of related litigation) when sufficient information has been developed to indicate the involvement of a specific insurance policy, and management can reasonably estimate its liability. In addition, liabilities are reviewed and updated regularly.
The release of the provision from prior years in 2006 is as a result of favourable underwriting results in several business units, in particular, the Netherlands business units benefited from changes in legal requirements for disability benefits, favourable results and reserving methodology changes and Canada benefited from favourable experience mostly from automobile pool.
Where discounting is used in the calculation of the claims provisions the rate is, based on weighted averages, within the range of 3.8% to 4.3% (2006: 3.0% to 4.0%).
Changes in investment contracts liabilities
| 2007 | 2006 | |
|---|---|---|
| Opening balance | 20,750 | 18,633 |
| Changes in the composition of the group | –277 | –42 |
| 20,473 | 18,591 | |
| Current year liabilities | 12,890 | 8,432 |
| Prior year provisions | ||
| – payments to contract holders | –9,697 | –6,667 |
| – interest accrual | 408 | 344 |
| – valuation changes investments | 576 | 948 |
| –8,713 | –5,375 | |
| Exchange rate differences | –1,147 | –1,021 |
| Other changes | 149 | 123 |
| Closing balance | 23,652 | 20,750 |
Gross claims development table
| 2004 | 2005 | 2006 | Underwriting year 2007 |
Total | |
|---|---|---|---|---|---|
| Estimate of cumulative claims: | |||||
| At the end of underwriting year | 2,773 | 3,010 | 2,678 | 3,007 | |
| 1 year later | 2,428 | 2,856 | 2,623 | ||
| 2 years later | 2,228 | 2,703 | |||
| 3 years later | 2,169 | ||||
| Estimate of cumulative claims | 2,169 | 2,703 | 2,623 | 3,007 | 10,502 |
| Cumulative payments | –1,638 | –1,929 | –1,588 | –1,052 | –6,207 |
| 531 | 774 | 1,035 | 1,955 | 4,295 | |
| Effect of discounting | –55 | –66 | –84 | –131 | –336 |
| Liability recognised | 476 | 708 | 951 | 1,824 | 3,959 |
| Liability relating to prior underwriting years | 2,688 | ||||
| Total amount recognised in the balance sheet | 6,647 |
The Group applies the exemption in IFRS-EU not to present Gross claims development for annual periods beginning before 1 January 2004 (the date of transition to IFRS-EU) as it is impracticable to obtain such information.
