Innovative Solutions for Disaster Relief

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1 Innovative Solutions for Disaster Relief How development organizations and foundations can use Capital Markets to prepare and leverage funds for future natural disasters

2 Agenda Natural catastrophes in developing countries Globe Cat Swiss Re at a glance Contact information Slide 2

3 Natural catastrophes Catastrophe events are increasing both in numbers and resulting losses In 2006, natural catastrophes and man-made disasters claimed more than human lives worldwide and caused total losses in excess of USD 48bn. In 2005, total losses from catastrophes amounted to out USD 230bn Only out one third of total losses is covered by insurance Developing countries are particularly affected by natural disasters as they are least resilient Most fatalities from natural disasters occur in developing countries Slide 3 Source: Swiss Re sigma No. 2/2007

4 Catastrophe losses are increasing Insured losses in USD billions USD 110bn Weather-related natural catastrophes Man-made disasters Earthquakes Singapore, 1970 April 4, Insured worldwide cat losses > 40m (property/business interruption) at 2006 price levels in USD bn Man-made disaster include property figures only Slide 4 Source: Swiss Re sigma No. 2/2007

5 Catastrophe risk in industrialized vs. developing countries On a worldwide average, out 25% of the losses from natural disasters are borne by insurance In emerging markets, only 7% of the losses are carried by insurance Most fatalities from natural disasters worldwide occur in developing 2countries nd MiRT Forum Slide 5 Insured and uninsured losses in world and emerging markets World Emerging Markets Not insured 75% 93% Insured 25% 7% Number of Victims from Natural Disasters Emerging markets 94% Mature markets 6% 100% 50% Number of victims from natural disasters 0% World Emerging Markets Not insured Insured 6% 94% emerging markets mature markets Source: Swiss Re Sigma

6 Earthquake losses in percentage of GDP Loss in % of regional GDP 1986 El Salvador 37% 1972 Nicaragua 23% 1999 Turkey 11% 1994 Northridge, CA 3% 1995 Kobe, Japan 1.56% 1989 Loma Prieta, CA 0.96% In industrialized countries, earthquakes tend to cause small economic losses relative to total GDP. In developing countries, insured losses remain negligible due to low insurance penetration. However, as a percentage of GDP, economic losses are devastating. Loss in % of GDP 40% 30% 20% 10% 0% 1989 Loma Prieta, CA 1994 Northridge, CA 1972 Nicaragua 1986 El Salvador 1999 Turkey 1995 Kobe, Japan Slide 6 Source: Swiss Re Sigma

7 Agenda Natural catastrophes in developing countries Globe Cat Swiss Re at a glance Contact information Slide 7

8 GlobeCat Program Unique and proven method created to utilize the capital markets in leveraging donations to provide protection to developing countries during extreme times of distress This is not a concept: A transaction has been closed to prove the execution and simplicity: Guatemala and El Salvador earthquake tranche is currently in the market First-of-a-kind trigger based on population exposed to severe shaking (modeled after the USGS PAGER system) The trigger can be defined to cover catastrophes within a wide range of frequency of occurrence (e.g. from 10 yrs to 500 yrs) Additional triggers are being developed for other geographic areas and perils (e.g. floods, tropical cyclones, infectious diseases, etc.) Slide 8

9 Flow of funds in charitle securitization Donors Donations Bond Principal Disaster Relief in Developing Countries Notes Charity GlobeCat Ltd. Interest Investors SPV Proceeds Slide 9 Catastrophe Event Bond Principal Proceeds Trust Principal Repayment At Maturity No Catastrophe Event

10 GlobeCat Earthquake Cover Example Developing country XYZ is exposed to earthquakes Development organization Alpha decides to purchase a $100MM GlobeCat solution for country XYZ An Earthquake Event occurs affecting country XYZ Issuer requests calculation Calculation agent calculates index (e.g. population exposed to severe shaking) Index exceeds trigger INSERT A PAGER FIGURE GlobeCat pays $100MM to Alpha Alpha deploys funds for disaster relief initiatives in country XYZ Day 1 Day 105 Day 110 Day 120 Day 130 Slide 10

11 Benefits of GlobeCat Immediate access to funds in time of disaster. No additional fund raising efforts are needed after a catastrophe and more time availle to provide relief to the affected area With customized triggers, any type of catastrophe can be covered. Triggers can be customized to where donors want to give or protect. Charitle organization can have autonomy as to how charitle funds are distributed after an event. Structure removes traditional governmental bureaucracy in convincing countries and other agencies to plan ahead and move forward. Structure not limited to securitization and can also be executed in derivative format with complete collateralization. Slide 11 Ability to leverage donations using investor funds. Donations are levered as much as 50 to 1. A $2-3 Million donation can provide $100MM of relief to an country affected by a disaster.

12 Charitle Securitizations: Motivating Factors Facilitate and encourage broader capital market developments for charitle giving Pursue existing efforts and/or launch new initiatives Promote risk transformation and trading in developing areas to bring costs down and awareness up. Leverage Donations through Capital Markets Index Development Example Indexes Numerous Indices & benchmarks can be created Securitizations, Derivatives & instruments will increase awareness and market liquidity Drought/Rainfall Agricultural yields Earthquake/Tsunami Extreme Weather/Hurricanes Malaria/Disease Slide 12

13 Agenda Natural catastrophes in developing countries Globe Cat Swiss Re at a glance Contact information Slide 13

14 Swiss Re is a global financial services firm with a long history of success Swiss Re is a financial services firm with 143 years of experience the world s leading and most diversified reinsurer a proven expert in risk and capital management a pioneer and leader in capital market solutions Quick Facts (2006) Revenues USD 33 billion Net income USD 3.7 billion Assets under management USD 211 billion Market cap USD 30.4 billion 10,000+ employees 90 offices in 25 countries Headquarters in Zurich, Switzerland Recent Awards Best Global Reinsurer (Reactions 2007) Top-10 Green Giant (Fortune Magazine, 2007) Top-50 Low Carbon Pioneers (CNBC, 2007) Insurance Borrower of the Year (Euromoney, 2007) #1 Capital Raising of the Year (Reactions, 2006) Slide 14

15 The nature of our business requires true global cooperation Swiss Re Centre for Global Dialogue, Zurich Our clients come from all over the world Our clients include all leading insurers, many global Fortune 500 companies, who rely on us for comprehensive risk solutions, as well as governments and recipients of microinsurance in emerging markets and to serve them better we must be global, so we are! To ensure the best solutions for our clients, every employee is empowered to call upon any other unit from all around the world to tap into its expertise and build a global team. Asia 9% Europe 1) 44% Americas 47% The Gherkin, London Slide 15 Geographic split Premiums (2006) 1) incl. Middle East and Africa A presence on every continent

16 We are a recognized leader in sustainility and global issues Sustainle Asset Management Committed USD 312 million to our Sustainility asset portfolio Collected USD 447 million for a European Clean Energy Fund in 2007 A founding member of the Carbon Disclosure Project for sustainle investing Jacques Aigrain (CEO) and Roger Ferguson (Head of Financial Services) with Bill Clinton Sustainle Business Solutions Solutions for the market for carbon emission rights trading Emerging market solutions, e.g. microinsurance and disaster covers Catastrophe bonds developed for governments of highly exposed countries 2 nd MiRT Forum Corporate Citizenship The first large financial services company with the goal to become fully greenhouse neutral A partner of the Clinton Global Initiative to address the world s most urgent problems Slide 16

17 Agenda Natural catastrophes in developing countries Globe Cat Swiss Re at a glance Contact information Slide 17

18 Contact Information Andreas Bollmann Director Public Sector Business Development Swiss Reinsurance Company 1 Raffles Place, #60-00 OUB Centre Singapore Tel Fax Andreas_Bollmann@swissre.com Jaesik Choi Assistant Vice President Public Sector Business Development Swiss Reinsurance Company 1 Raffles Place, #60-00 OUB Centre Singapore Tel Fax Jaesik_Choi@swissre.com Slide 18