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Nathan Hambrook-Skinner+44 (0)2031248716nathan.hambrook-skinner@willis.com

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WECF Director: We Need Simpler, More Dynamic Models ThatGive us More Insight.

London, UK, October 10, 2012 The insurance industry needs more

dynamic and not more complex economic capital models if its going to avoidsuffering again some of the problems that were exposed during the financialcrisis four years ago. This was the view expressed by Markus Stricker,Director of the Willis Economic Capital Forum (WECF), the latest initiativefrom the academic and analysis arm of Willis Group Holdings (NYSE: WSH).

I think everyone in the industry would be interested in reducing thecomplexity of models, making things more transparent and thus easier tounderstand, said Stricker. We ought to have learnt in the years since thefinancial crisis that our economic capital models need to be more dynamicand more insightful.

Instead, Stricker thinks that Solvency II has become more complicated and itsbenefits will not be fully realised.

The WECF was announced in July last year and is based at Georgia StateUniversity. It aims to support the insurance industrys development and useof economic capital models and is part of the Willis Research Network.

Looking at economic capital in a very static manner is not all that helpful, inparticular if many of the parameters only have a marginal impact on theeconomic capital requirements. We need to develop simpler, more dynamicmodels that give us more insight.

Speaking about the WECF, Stricker said it will seek to advance appliedresearch on the topic of internal economic capital models in a number ofways. One of the biggest challenges that insurers and regulators face, whichthe Forum will seek to overcome, is to validate their models, he said.

At the moment a standardised process does not exist for validating economiccapital models. This creates a number of issues such as their limitations andevolution over the years is usually not well documented, the comparability oftheir results between years and between companies is difficult to assess andlast but not least the validation process is often inefficient.

These issues could be addressed by a widely recognised and structuredvalidation process. This would introduce more transparency and efficiency forall stakeholders: Insurance companies, regulators and brokers.

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We can learn a lot from looking at other industries, he continued. Aeroplanemanufacturers, for example, run standardised stress tests so they know howmuch pressure they can put on a wing before it breaks off. Meanwhilepharmaceutical companies have a rigorous, structured process to get amedication validated.

I think we need a similar set of standard procedures to validate the methodsthat financial companies use to calculate solvency related key figures. TheWECF can make a big difference in this area.

The Willis Research Network is the world's largest collaboration betweenpublic science and the finance and insurance sectors. Some 50 universitiesand public science institutions across the globe collaborate with Willis and thewider industry to confront the challenges of managing risk and deliveringresilience within environmental systems, financial markets and public policy.

Willis Group Holdings plc is a leading global insurance broker. Through itssubsidiaries, Willis develops and delivers professional insurance, reinsurance,risk management, financial and human resource consulting and actuarialservices to corporations, public entities and institutions around the world.Willis has more than 400 offices in nearly 120 countries, with a global team ofapproximately 17,000 employees serving clients in virtually every part of theworld. Additional information on Willis may be found at www.willis.com.

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