a dynamic industry in a changing world Idar Kreutzer, CEO, Finance Norway Oslo, 9/17/2018

Finance Norway Established January 1st 2010 by the Norwegian Savings Banks Association and the Norwegian Financial Services Association. The organization's purpose is to strive for a strengthened Norwegian financial industry. The legal framework is getting ever more complex and comprehensive. Thus, specialist expertise is needed, as well as a solid professional environment within the trade associations Finance Norway employs approximately 100 highly skilled persons. House of Finance 9/17/2018

Finance Norway – an employers federation Became an employers federation January 1st 2013 when Finance Norway and Financial Services Employers Association (FA) merged. Important to have good relations characterized by: predictability mutual respect transparency clear understanding of roles Both employers and employees have a common interest in maintaining a robust financial industry – especially in turbulent times as this We look forward to a fruitful cooperation

About Finance Norway Finance Norway represent some 200 financial institutions operating in the Norwegian market. The institutions operate within different sectors of financial activity: savings banks commercial banks life insurance companies non-life insurance companies finance companies management companies for securities funds investment firms finance conglomerates 9/17/2018

Objectives Finance Norway’s objectives are: sound working conditions for financial institutions equal legal framework for all financial enterprises competing in the same market equal terms and conditions for Norwegian based and international financial enterprises a sound development of the financial industry nationally as well as internationally high professional and ethical standards in the financial industry a wide understanding of the importance of the financial industry in society safeguarding interests of member companies in matters concerning wages and working conditions for their employees to ensure that financial institutions are afforded working conditions and opportunities for further development that provide a basis for profitable and sound operation, enabling them to offer their customers the best possible service to ensure equal legal framework for all financial enterprises competing in the same market, independent of size and ownership to ensure that Norwegian based financial enterprises are able to operate on equal terms and conditions with their international competitors, and that these terms and conditions are adjusted to the developments in the EEA area to promote a sound development of the financial industry nationally as well as internationally to promote a high professional and ethical standard in the financial industry and a wide understanding of the importance of the financial industry in society to safeguard interests of member companies in matters concerning wages and working conditions for their employees 9/17/2018

Increased productivity Gross product per working hour, fixed 2005-prices Interest rate margin 1990-2011 Kilde: SSB Kilde: SSB 17.09.2018

The current situation Banks: Life insurance: Non-life insurance: Solid, minor losses, good results, strengthened financial position, improved funding profile, but is still dependant on international funding Life insurance: Defined benefit schemes under pressure due to low interest rates, accounting rules and new capital requirements. Significant capital requirement. Increased transition to defined contribution schemes Non-life insurance: Strong competition, small companies increasing their market share. Foreign companies have more than 50 per cent market share in Norway. Cost efficient 17.09.2018

Legal framework in the making New, international capital requirements for the banking sector – CRD IV/Basel III New, international capital requirements for the insurance sector – Solvency II Norwegian adaption to the new, international regulation Pension reform - building a robust pensions system

The shortening adoption cycles related to innovation 17.09.2018

New capital requirements in the EU/EEC (CRR/CRDIV) What dictates stricter capital requirements? Size of the banking sector compared to GDP Degree of concentration risk Cross-border activities   Norwegian banks have low risk compared to the European banking sector 17.09.2018

Stricter requirements – earlier implementation Consequences for Norwegian banks More capital, better capital and stricter requirements regarding liquidity leads to increased costs for banks Country specific requirements will lead to higher costs for the customers in both the retail and corporate segments, compared to other countries Stricter requirements combined with earlier implementation in Norway than in other countries, may give Norwegian Banks a competitive disadvantage 17.09.2018

Consequences for life insurance The customer will carry more of the risk New capital requirements for the companies Increased need for capital – balance the adjustments Increased focus on costs and efficiency Traditional vs. New business concepts New business models Source: Storebrand ASA Quarterly report Q2 2012 17.09.2018

A robust pension system National level International level Pensions reform, phase II New occupational pensions product: Employer and employees must share risk to a greater extent than in traditional DB schemes Must be sustainable under Solvency II Important challenges Transitional measures - for existing pension rights Defining the new, maximum limits of contribution in DC schemes Implementation of Solvency II Market value also for insurance liabilities Falling interest rates increase the value of future liabilities Figure - 10-year government bonds Source: Finanstilsynet 17.09.2018

A dynamic market for non-life insurance Strong competition in non-life Climate changes and increase in water damages New regulatory framework Strong growth in health insurance Technology and changes in customer behavior are driving the changes in strategy

Strong competition in non-life insurance

Building competence - AFR AFR - The authorization scheme for financial advisers established in 2009 and now counting139 companies – 6400 authorized financial advisors To be authorized you have to pass: A knowledge test in six areas A practical examination – advising and ethics in addition to at least one year’s relevant professional experience To keep the authorization the financial advisors have to: Be employed in a authorized AFR-company Update knowledge Adhere to good advisory practice in all financial advising AFR hostes a directory where costumers can look up their advisers by name and find out whether they are authorized. 17.09.2018

Development programs Good advisory practices and common ethical standards in all schemes Approved – advisers and sellers of insurance from 2009 Three new authorization schemes (studys) in insurance Common standards under consideration for credit and insurance advisors 17.09.2018

Thank you! 17.09.2018