Class Review Spain Reinsurance excerpt only

Transcription

1 Class Review Spain Reinsurance excerpt only October 2014

2 Key Contacts Juan Arsuaga, International Markets, Spain Country Manager Telephone: Disclaimer This document is confidential and provided by Lloyd's to Lloyd's managing agents subject to the conditions that the document is used for internal purposes only and that it is not made available to any third party without the expressed written consent of Lloyd's. This document contains third party proprietary material and any unauthorised disclosure by a Lloyd's managing agent may cause Lloyd's to be in breach of its obligations as an authorised licensee of such material. This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited, any statement, fact, figure, expression of opinion or belief contained in this document. 2

3 3 1 Introduction IN THIS SECTION 1.1 Foreword 1.2 Executive Summary 1.3 Methodology

4 1. Introduction 1.1 Foreword Spain has been plunged into a major crisis in recent years with signs of recovery beginning to appear. If we look at the latest economic indicators, Spain as a country is growing faster than the European average. Accordingly, the outlook for GDP (Gross Domestic Product) has been revised upwards recently to reflect the improving economy GDP (Nominal GDP in billion US$; Real GDP Growth) 1,600 3% 1, % 1.7% % 2% 2% 1, % 1% 1, % 0.1% -1% 1,200 1, % - 1.2% Actual Nominal GDP Forecast Nominal GDP X% Real GDP Growth -1% -2% -2% At the same time, this change in sentiment has started to impact the unemployment levels. While unemployment levels are high, they have recently stabilised and reduced as more jobs are created * Unemployment Figures (%) (Jan-Aug) * * Forecast 4 Notes: *Data is based on Compare Countries, (September 2014) Source: Juan Arsuaga, International Markets, Spain Country Manager (2014)

5 1. Introduction 1.1 Foreword The reforms, fiscal, financial and labour, have led an effort for Spain in terms of expenditure which has been reflected in a fall in domestic demand. Therefore, Spanish companies have chosen to expand abroad and this has been a real growth driver for Spain s economy. The presence of big Spanish multinationals has grown on every continent with a special center in the Latin American region. Spain s main challenges for the near future lie in domestic growth and political stability. On the former, the current government has announced a tax cut for The issue of regionalism and the upcoming elections could slow the good progress in which is situated today the Spanish economy. The insurance market has not been immune to the crisis. Although no financial aid has been needed and the industry has continued to create jobs, its growth has been limited by the growth of the domestic economy. Gross Premiums (in million EUR) Gross Premium CAGR Property % Pecuniary Loss % Other Non-Life % Motor % MAT % General Liability % Freight % A & H % Total % 5 Notes: *Data is based on Compare Countries, (September 2014) Source: Juan Arsuaga, International Markets, Spain Country Manager (2014)

6 1. Introduction 1.1 Foreword High interest rates, that the Spanish government is paying for their sovereign debt, has enabled the Spanish insurance sector to earn high profits without paying much attention to underwriting for profit. The war for obtaining market share has plunged the Spanish insurance market into an extremely soft market that is still affecting Spanish insurance pricing. Some insurers and primarily brokers are starting to use Madrid as a hub for business interests abroad, with particular prominence in Latin America (LATAM). With the improvement of the Spanish economy, risk premium is decreasing and local insurers need to react and begin to take into account the underwriting discipline as necessary for the sustainable conduct of business Bond Yields* 6% 5% 4% 3% 2% 1% Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Spain Germany *Government Borrowing Cost 10 year Government Bond Yield I hope this analysis will be of interest and we are at your disposal in the office of Lloyd's Iberia to assist you. Juan Arsuaga, Consejero Delegado Lloyd s Iberia 6 Notes: *Data is based on Compare Countries, (October 2014) Source: Juan Arsuaga, International Markets, Spain Country Manager (2014)

7 1. Introduction 1.2 Executive Summary Reinsurance: When addressing the issue of reinsurance, in Spain we must first mention two important characteristics: 1. Catastrophic risk is covered almost entirely by a public body (Consorcio de Compensation de Seguros) 2. There are two national reinsurers that absorb a significant and growing part of the local reinsurance A consequence of these aspects is that ceded reinsurance premium only accounts for 6% of gross life premium, and 14% of non-life premium. This equates to an average cession rate of 10.7%. In terms of volume, ceded reinsurance barely exceeds EUR 6bn, with this figure spread over non-life and life at a ratio of 3:1 respectively. These percentages have remained stable over time, and have not been subject to significant variations in the short/medium term, even despite the implementation of Solvency II. There are currently less than 10 professional reinsurers established in Spain and we do not expect this to change much in the near future. Although the capital required to penetrate the Spanish market is not particularly excessive, the high levels of retention and subsequent level of competition can curb the appetite of stakeholders; despite the positive results posted in recent years. From the perspective of the intermediary we observe two contrary tendencies. On the one hand, we are witnessing a decline in important cessions from multinationals that often use intermediaries. On the other hand, there is a slow but steady progression of intermediated business under a process of greater automation of purchasing reinsurance. The number of officially registered brokers in the DGS has risen over 2013 on record, increasing from 43 in 2012 to 51 in It should be noted, however, that the top ten account for more than 8 of ceded premium. 7 Notes: Executive Summary is based on consultant view Source: Jean-François Berte, (2014)

8 1. Introduction 1.2 Executive Summary In 2013, 15% of total reinsurance premium, EUR 890m, was placed through a reinsurance broker, with 1 from life business and 9 from non-life business. With regards to the method by which this brokered business is placed, 38% of ceded reinsurance is proportional, 14% is non-proportional, and the remaining 48% is facultative. Much of this facultative business is actually intermediated by units or groups of the big brokers, who are also registered as reinsurance brokers. Overall, ceded reinsurance represents a mere 1.6% of total market premium. We have also seen an increase in the number of underwriting agencies over the last few years, with the total standing at 38 in These agencies occupy a growing place in the intermediation of reinsurance. Lloyd's occupies an important place in this business since more than 5 of agencies working with Lloyd's capabilities. It is difficult to predict how reinsurance will evolve in the coming years, but we can say with certainty that growth will prove very difficult unless there is a deep and sustained recovery of the primary market. Intermediation can potentially see some progress, but this will depend on the condition that investment can be maintained at a good level, and that analytical skills and professional services continue to develop. Jean-François Berte, Chairman of Asecore 8 Notes: Executive Summary is based on consultant view Source: Jean-François Berte, (2014)

9 1. Introduction 1.3 Methodology Key definitions for local market figures All insurance market data is based on Direccíón General de Seguros y Fondos de Pensiones (DGSFP), (July 2014). Claims are defined as Incurred Claims. Claims Ratios used in this report are calculated internally using the method below. Reinsurance = is a transfer of part of the risks assumed by a direct insurer, through insurance contracts, to another insurer, the reinsurer. The reinsurer is not directly related with the insured. According to its biding can be obligatory or facultative Obligatory reinsurance = the transferring entity agrees to cede and the reinsurer agrees to accept certain risks, provided that the conditions previously established by contract between both parties are met Facultative reinsurance = The ceding company does not undertake to assign or the reinsurer agrees to accept certain kinds of risks, but these must be reported individually for each case establishing the conditions to regulate the transfer and acceptance Ceded reinsurance = The portion of risk which is transferred from an insurance company to a reinsurer. Accepted reinsurance = Term used to describe the portion of the risk or risks assumed by the reinsurer. Please view the DGSFP website for further detail and analysis: > Calculations for local market figures Incurred Claims Ratio = Calendar Year Incurred Claims Gross Earned Premiums 9 Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

10 1. Introduction 1.3 Methodology Key definitions for Lloyd s figures The Lloyd s premium and claims data is sourced from Xchanging. Lloyd s business in this market is analysed using Gross Signed Premiums (GSP) and incurred claims on a country of origin basis. The Gross Signed Premiums used in this report are gross of reinsurance and acquisition fees (brokerage and commission) and represent the cash flow that has been processed by Xchanging during the calendar year.. Calendar Year: Takes into account the premiums and claims paid from 1st Jan until the 31st Dec of the year when the contract started. Year of Account: Takes into account the premiums as paid and allocated to the year of the policy inception. 10 Source: Lloyd s Market Intelligence based on Xchanging

11 2 Key Themes IN THIS SECTION 2.1 Key Lloyd s statistics 2.2 Reinsurance Trends 2.3 Consorcio de Compensación de Seguros 11

12 2. Key Themes 2.1 Key Lloyd s statistics Lloyd s premiums by OECD class Gross Signed Premiums (EUR m) A & H Freight General Liability Long Term Business MAT Motor Other Non-Life Pecuniary Loss Property Commentary The lack of need for catastrophic insurance in the Spanish market is due to the existence of the Consorcio de Compensación de Seguros. This allows Lloyd's managing agents to provide their capabilities to other classes where the Spanish market can add value. Spain s financial rating and solvency have helped to growth in a country where the sovereign debt rating is BBB. Also, the niche occupied by the Spanish coverholders within the Lloyd's insurance distribution has been essential to maintain growth rates in insurance for SMEs and highly specialised insurance. Motor in the case of Lloyd's business basically refers to products for expatriates so the fall in consumption has been lower than in the rest of the market. 12 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

13 2. Key Themes 2.1 Key Lloyd s statistics Lloyd s total premiums Gross Signed Premiums (EUR m); Calendar Year Direct 250 Reinsurance Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

14 2. Key Themes 2.1 Key Lloyd s Statistics Lloyd s by High Level Class (insurance + reinsurance business) Gross Signed Premium (EUR m) by High Level category; 14 TOTAL Accident & Health Aviation Casualty Casualty Treaty Energy Marine Overseas Motor Property (D&F) Property Treaty UK Motor Premium Trend Size of the Market Absolute Growth CAGR % % % % % % % % % Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

15 2. Key Themes 2.1 Key Lloyd s Statistics Lloyd s by OECD Class (insurance + reinsurance business) Gross Signed Premium (EUR m) by OECD category; TOTAL A & H Freight General Liability Long Term Business MAT Motor Other Non-Life Pecuniary Loss Property Premium Trend Size of the Market Absolute Growth CAGR % % % % % % % % Notes: Source: All Lloyd s data is on a country of origin basis, gross of RI and acquisition fees. Lloyd s Market Intelligence calculations based on Xchanging.

16 2. Key Themes 2.2 Reinsurance trends Introduction The local reinsurance market is comprised of two domestic reinsurers: 1. Nacional de Reaseguros; and 2. Mapfre Re. Several European and other foreign reinsurers have offices in Spain with strong or light underwriting capabilities and rely on their headquarters for part of the underwriting decision making and nearly the whole of the back office activity. With respect to Lloyd s reinsurance business, local insurers may access the Lloyd s reinsurance market via local coverholders, or through a Lloyd s broker. The market is also served by other reinsurers from inside and outside the European Union without local representation. It is, however, difficult to obtain a share of local treaties as there is a traditional and close relationship between direct insurers and their existing reinsurers. Although companies are free to place their reinsurance business wherever they wish, in practice there are incentives to encourage them to use reinsurers established in the European Economic Area, in fact little is placed outside the EEA. The range of business available to reinsurers is more limited than in other countries as catastrophic and political risks are handled by the Consorcio de Compensación de Seguros (hereinafter Consorcio ) and not place at private insurance market. The market is also excluded from writing worker s compensation, a class that is handled by specialist mutual companies within the Social Security System. Direct insurance premiums have fallen as in recent years due to lower family income and less business activity, an ongoing competition and an important reduction in bancassurance occurred. As a result reinsurance premiums have also fallen whilst insurance retention has increased. A number of multinational insurers have also centralised all or most of their Spanish business at a head office level, on a pan-european or similar basis. In recent years these have included Allianz, AXA, Generali, HDI and Zurich. Results for both direct insurers and reinsurers were again good in 2012 and 2013 and there were few changes in treaty terms and conditions at the end of the year. As previously mentioned, there was some increase in retentions by insurers, especially for property business, loss free excess of loss prices fell by around 5% to 1 in 2013 and proportional contracts were renewed on a stable or slightly improved basis. 16 Notes: Based on publicly available information Source: Lloyd s Spain and Area XXI based on soft information (2014)

17 2. Key Themes 2.2 Reinsurance trends Madrid as a Hub for facultative reinsurance regarding LATAM The Spanish insurance sector has begun a phase of expansion and internationalisation of its business. Language and cultural similarities are natural links with Latin America, therefore Spain is considered as an entry port for the continent. Furthermore, not only the Spanish insurance companies look to this market, but also large European multinational insurers are using Spain to jump to these markets. Mapfre is the one with a major presence in LATAM and in Europe is ranked the tenth largest insurer by premium volume and sixth in the Non-Life classes. But in LATAM is the third largest group in terms of insurance premium and the first multinational, leading the ranking of Non-Life. Another example would be Catalana Occidente who has presence in 40 countries and has an economic stake in Atradius of 83.2, (through Crédito y Caución or the Group itself). This company is the second largest world credit insurer. In 2013 it reached a market share of 5 in Spain, 23% in Portugal and 16% in Brazil. In this same sector we should mention CESCE, public corporation capital 50.25% currently under a privatization process which is expected to be formalized during CESCE managed by the State's political, commercial and extraordinary risks associated with the internationalisation of Spanish companies. Other insurers with presence in LATAM are Santa Lucia (using Argentina with the view to increase its presence in other Latin America countries during the period ) and Mutua Madrileña would be willing to invest around EUR 500m on the continent. Meanwhile, large multinational insurers have used Spain as an access ramp to Latinoamércina. So BUPA through Sanitas, has acquired 5 of a Chilean health sector entity (Cruz Blanca Salud) and is considering other operations in these countries. 17 Notes: Based on publicly available information Source: Lloyd s Spain and Area XXI based on soft information (2014)

18 2. Key Themes 2.2 Reinsurance trends Madrid as a Hub for facultative reinsurance regarding LATAM AXA has its operations base for LATAM in Madrid where, according to the company's 400 employees work on expansion projects on this continent, highlighting the Colpatria operation in Colombia. Allianz also is rolling out the Spanish business model for Latin American subsidiaries; in 2012 the group reported EUR 588m. Furthermore Generali appointed its CEO in Spain to coordinate their entire business in Central and South America. Xl Insurance also recently decided to cover Latin America from Spain, under a Madrid centralized management. Undoubtedly one of the biggest operations involves Zurich and Banco Santander. The first acquired 51% of the insurance subsidiaries in Brazil, Chile, Mexico, Argentina and Uruguay. The headquarters of this joint venture is in Madrid but its products are distributed via Santander s 5,600 offices in these countries. Similarly BBVA continues with a leading position in Latin America highlighting its presence in the Mexican market; in fact BBVA s largest operations are in Mexico, larger than in Spain in terms of contribution to P&L. Consequently Spain, predominantly from Madrid, provides an opportunity for expansion of insurance and reinsurance companies to countries throughout Latin America. Other insurers that are providing its offices in Spain capabilities to address LATAM risks are HDI, Munich Re, Swiss Re and Generali. On the other hand, large brokers are using their offices in Madrid to access not only the business of the Spanish multinationals in LATAM but also business of Latin American customers and Latin Americans cedants that need to seek capacity abroad. Many Spanish companies are leaders in the LATAM market in their respective activities. Construction, infrastructure, banking and insurance, communications and energy are some sectors where Spanish multinationals have clear leadership positions in LATAM. Typically, risk managers of these multinationals as well as their lawyers, experts and their brokers have their offices in Madrid. Due to this many of these risks are highly visible in Madrid and are therefore not coming to London in the same way anymore. 18 Notes: Based on publicly available information Source: Lloyd s Spain and Area XXI based on soft information (2014)

19 2. Key Themes 2.2 Reinsurance trends Solvency II Solvency II is an ambitious project that aims at establishing a regulatory framework for the supervision of the insurance sector in the European Union, based on the control of the global solvency of insurance companies. Its starting point is the market-consistent evaluation of all assets and liabilities, so that any adjustments to the balance sheet impact on the global solvency of the entity. The monitoring system must be sensitive to risk and is based on three pillars, which provide the quantitative, qualitative and information requirements that insurance companies and national supervisors must take into consideration. On April 16, 2014 Omnibus II Directive was adopted, in which the European insurance regulations, establishing EIOPA as supervisor adapts. In this directive, we can highlight: On March 31, 2015 at the latest, this directive must be transposed in the various States and became effective on date January 1, Measures are incorporated as: Extrapolation of the Term Structure of Interest Rates Transitional Measures of technical provisions Volatility adjustment Matching Adjustment for life classes Additionally the Transposition of legislation should be adopted via Delegated Acts, currently in draft form. We can extract from the draft: Pillar I SCR and MCR develop both standard formula for Internal Models. Pillar II: governance and supervision is established and from January 1, 2014 states must apply the guidelines for the preparation of EIOPA. Pillar III of detailed reports and briefing schedule Therefore in 2014 we are in the preparatory stage. It has approved the Omnibus II Directive and is working on Regulation, institutions must prepare a schedule for implementation of Solvency II. Those entities that exceed 8 of premium volume already should present a balance adapted to Solvency II in Notes: Based on publicly available information; Mapfre (2012) Source: Lloyd s Spain and Area XXI based on soft information (2014)

20 2. Key Themes 2.2 Reinsurance trends Solvency II On 1 st January 2016 Solvency II will come into effect for all entities, meaning they must submit a variety of reports; Qualitative (RSR and SFCR) and Quantitative (CRT's). All entities must submit an Own Risk and Solvency Assessment (ORSA) analysing prospective risks. Also those entities that require Qualitative analysis are obliged to present it Solvency II as a key driver The implementation of the new Solvency II directive which has already been approved will present a major challenge for companies to adapt to a new way of looking at their balance sheets and they are going to take decisions from a different point of view. Therefore factors that mitigate risk, such as Reinsurance, can be very useful for entities. Indeed reinsurance reduces the capital required by transforming subscription counterparty risk with a lower cost of capital in terms of Solvency Capital Requirement (SCR) for the entity. This is for Lloyd's an opportunity to position itself in the Spanish insurance market to allow institutions perform this mitigation. According to the directive 2009/38/EC Article thereof, counterparty risk should reflect the possible negative effects due to insolvency of the debtor or a deterioration credit quality. Within this counterparty risk, reinsurance contracts are included. On the calculation of the SCR using the standard formulation, the use of risk mitigation techniques should allow a reduction in the requirements that is proportional to the degree of risk reduction and an appropriate treatment of these risks integrated into mitigating techniques. Regulation provides that the entities providing risk mitigation techniques must meet certain capital requirements or have a credit rating equal to or above level 3 (minimum rating A-). This is expected to provide opportunities for the Lloyd s market. 20 Notes: Based on publicly available information Source: Lloyd s Spain and Area XXI based on soft information (2014)

21 2. Key Themes 2.3 Consorcio de Compensación de Seguros Credit Reinsurance Activity The Consorcio s Credit Reinsurance Activity was initiated in 2009 in response to sector requests for addressing the international reinsurance gaps in the credit and surety segments. The reinsurance agreement signed calls for two types of cover by the Consorcio: proportional reinsurance and aggregate excess of loss reinsurance, or stop-loss, of the total of the portion withheld by the transferor. 21 Notes: Source: Based on publicly available information Consorcio, Annual Report 2012, (2013),

22 3 Motor IN THIS SECTION 3.1 Lloyd s statistics 3.2 Local market statistics 3.3 Soft intelligence 22

23 3. Motor 3.1 Lloyd s statistics Lloyd s Motor Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 23 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Lloyd s Market Intelligence calculations based on Xchanging, (2014)

24 3. MOTOR 3.2 Local market statistics Motor Damage - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Motor Damage - Accepted Reinsurance 24 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

25 3. MOTOR 3.2 Local market statistics Motor Liability - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Motor Liability - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio * Note incomplete data source for Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

26 3. Motor 3.3 Soft Intelligence Opportunity matrix Motor Damage Dimension Score Rationale Poor Good Reinsurance Ceded reinsurance has significantly decreased in 2011, with only recovering slightly since This class of business is usually dominated by proportional quota share business Opportunity matrix Motor Liability Dimension Score Rationale Reinsurance Ceded RI loss ratios have increased to 50.1%, while accepted RI loss ratios have improved to 31.1% in However, the regulatory website data is incomplete for Motor Damage Reinsurance With regards to reinsurance the most common formula is proportional quotashare. Ceded reinsurance premiums have decreased since 2008, due to greater retention by insurers. At the same time, accepted reinsurance has decreased sharply from EUR 22m accepted premium to only EUR 6m in During this period the ILR increased from 47.8% to 86.1% Motor Liability Reinsurance The most common types of RI are proportional quota share and non-proportional XL business. There has been an 81% reduction in the amount of ceded RI from , although 2013 (Gross Earned Premium EUR 233m) saw a growth of 94% on 2012 (Gross Earned Premium EUR 120m). It is believed that this is due to higher retention rates of local insurers. Claims relating to ceded RI have seen a steady reduction in the ILR, falling from 69.8% in 2012 to 50.1% in This excludes 2011 that saw an unusually high ILR of 116.8%. The ILR for Accepted RI has fallen from 2008 (74.2%) to 2012 (41.9%) with minor fluctuations between. The data for accepted RI in 2013 was incomplete and is therefore not included in this analysis. 26 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

27 4 MAT IN THIS SECTION 4.1 Lloyd s statistics 4.2 Local market statistics 4.3 Soft intelligence 27

28 4. MAT 4.1 Lloyd s statistics Lloyd s MAT Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 28 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

29 4. MAT 4.2 Local market statistics Hull - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Hull - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

30 4. MAT 4.3 Soft intelligence Opportunity matrix Hull Dimension Score Rationale Poor Good Reinsurance The most common structure of this type of insurance is the quota share. 64% of direct premiums is ceded. 30 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

31 5 Property IN THIS SECTION 5.1 Lloyd s statistics 5.2 Local market statistics 5.3 Soft Intelligence 31

32 5. property 5.1 Lloyd s statistics Lloyd s Property Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 32 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

33 5. Property 5.2 Local market statistics Fire - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Fire - Accepted Reinsurance Gross Earned Premium 884 1,058 1,224 1,359 1,390 2 Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio 1,600 1,400 1,200 1, Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

34 5. Property 5.2 Local market statistics Other Damage to Property - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Other Damage to Property - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

35 5. Property 5.2 Local market statistics Comprehensive Home - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Comprehensive Home - Accepted Reinsurance 35 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

36 5. Property 5.2 Local market statistics Comprehensive Commercial - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Comprehensive Commercial - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio % 3 25% 2 15% 1 5% 36 Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

37 5. Property 5.2 Local market statistics Comprehensive Communities - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Comprehensive Communities - Accepted Reinsurance 37 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

38 5. Property 5.2 Local market statistics Comprehensive Industrial - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio , Premium Claims Loss Ratio Comprehensive Industrial - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

39 5. Property 5.2 Local market statistics Other Comprehensive - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Other Comprehensive - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

40 5. Property 5.3 Soft intelligence Opportunity matrix Fire Poor Good Dimension Score Rationale Reinsurance This remaining subclass is generally covered together with the comprehensive home policies under a pro rata treaty. Of this is combined with excess of loss protection Opportunity matrix Other Damage to Property Dimension Score Rationale Reinsurance Ceded reinsurance has experienced a sharp drop in premiums Opportunity matrix Comprehensive Home Dimension Score Rationale Reinsurance Reinsurance used is pro rata surplus with excess of loss to protect retentions and unknown accumulations. The 2013 cessions came back to a positive trend but remain significantly lower than the 2010 peak figure Opportunity matrix Comprehensive Commercial Dimension Score Rationale Reinsurance As in other comprehensive property subclasses, reinsurance is a combination of pro rata and excess of loss treaties. There is high retention by insurers. There are good overall ILRs when looking at ceded reinsurance. 40 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

41 5. Property 5.3 Soft intelligence Opportunity matrix Comprehensive Communities Poor Good Dimension Score Rationale Reinsurance The type of reinsurance is mainly proportional. With the exception of 2010, ceded premiums have been fairly stable at around EUR 90m Opportunity matrix Comprehensive Industrial Dimension Score Rationale Reinsurance The most extended form of reinsurance is pro rata. Premiums for both ceded and accepted reinsurance have increased during 2012 / 2013 when compared to 2010, while claims have witnessed a corresponding decrease over that period Opportunity matrix Other Comprehensive Dimension Score Rationale Reinsurance As in other comprehensive property subclasses, reinsurance is a combination of pro rata and excess of loss treaties. There is also a high retention rate by local insurers. Loss ratios have been promising, excluding 2011 that displayed a peak of 98%. 41 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

42 5. Property 5.3 Soft intelligence Fire Insurance / Reinsurance This subclass has been largely linked to the granting of mortgage credits. This is due to the Mortgage Act that requires the client to hold valid fire insurance in order to allow banks to secure mortgages. This sub-class has seen a substantial fall in premium since This is due to a change in the Spanish market that has moved traditional fire insurance into a multi-risk policies. The insurer ranking for this sub-class is naturally dominated by large Spanish banks such as BBVA and Santander. These fire policies are going to disappear completely from the Spanish market and will be reintroduced through the Comprehensive Home formula. It is expected that the inclusion of this into Comprehensive Home is likely to contribute to better stability and performance of this class going forward Other Damage To Property Reinsurance While ceded reinsurance has witnessed annual declines in premium since loss ratios have risen dramatically to 225% in Comprehensive Home Reinsurance Reinsurance for Comprehensive Home is dominated by quota share. However, other non-proportional cover can be found for specific events. While Consorcio picks up a large proportion of natural catastrophe risks, the reinsurance element is comparatively limited in this segment. While ceded premiums have fallen significantly in 2011, premium levels are back at 2008 levels reaching EUR 288m in Claims on the other hand have largely fallen since 2009, only experiencing a small increase in This has resulted in ILRs of 55% for Accepted reinsurance, on the other hand, have more than halved in 2013 falling to a mere EUR 25m according to official statistics. 42 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

43 5. Property 5.3 Soft intelligence Comprehensive Commercial Reinsurance The cession of reinsurance premiums has fallen by 2 between to reach EUR 76m by This represents a mere 14% cession rate. Ceded loss ratios have been comparatively stable hovering around the mid to low 50s reaching a record low for this period of 49% during Comprehensive Communities Reinsurance Reinsurance for this segment is usually on a proportional basis, with some XL structures depending on accumulative exposition of risk. Similar to Comprehensive Home insurance, Consorcio picks up a large proportion of natural catastrophe risks, which means that the reinsurance element is comparatively limited in this segment. The level of ceded reinsurance, with the exception of 2010, is quite similar and stable at around EUR 90m. There has been no discernable growth pattern in the period under review. With the exception of 2009, loss ratios have remained largely stable at round 45%. Accepted reinsurance premiums are fairly insignificant reaching a meager EUR 3m during Comprehensive Industrial Reinsurance Ceded reinsurance premiums have grown by around a quarter since This class of business exhibits among the highest cession rates with around 8 of premiums ceded. More dramatically even, has been the development in accepted reinsurance, which has more than doubled since 2008 reaching EUR 624m by Other Comprehensive Reinsurance Even more dramatic than the decline in insurance, ceded reinsurance has fallen from EUR 66m in 2008 to a mere EUR 13m. This dramatic fall is driven by first of all a smaller premium base in the insurance market, but also by higher levels of typical retentions among cedants. Given that the composition of the subclass is not homogeneous, the structure of reinsurance is likely to vary between quota share and non-proportional business. 43 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

44 6 General Liability IN THIS SECTION 6.1 Lloyd s statistics 6.2 Local market statistics 6.3 Soft intelligence 44

45 6. General liability 6.1 Lloyd s statistics Lloyd s General Liability Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 45 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

46 6. General liability 6.2 Local market statistics Casualty - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio , Premium Claims Loss Ratio Casualty - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

47 6. General liability 6.3 Soft intelligence Opportunity matrix Casualty Poor Good Dimension Score Rationale Reinsurance Relative stability in ceded premiums can be observed since However, inconsistent loss ratios appear to be a trend since Commentary Casualty Reinsurance Ceded reinsurance has seen a large fall in premiums from 2008 to 2012, however in 2013 ceded reinsurance premiums rose for the first time since All ceded reinsurance results in 2013 showed improvement on There was a significant fall in the loss ratio to 62%, this was caused by the increased premiums and reduced claims value when compared to The main reinsurance issued is Non-Proportional Excess Loss (XL) in order to guarantee sufficient entities combined ratios. These contracts would help to explain the variability on the ILR. 47 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

48 7 A & H IN THIS SECTION 7.1 Lloyd s statistics 7.2 Local market statistics 7.3 Soft Intelligence 48

49 7. A & H 7.1 Lloyd s statistics Lloyd s A & H Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 49 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

50 7. A & h 7.2 Local market statistics Accidents - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio 5 45% 4 35% 3 25% 2 15% 1 5% Accidents - Accepted Reinsurance 50 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014) 5 45% 4 35% 3 25% 2 15% 1 5%

51 7. A & h 7.2 Local market statistics Disease - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Disease - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

52 7. A & h 7.2 Local market statistics Healthcare - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio 45% 4 35% 3 25% 2 15% 1 5% Healthcare - Accepted Reinsurance 52 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

53 7. A & h 7.2 Local market statistics Dependence - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio 35% 3 25% 2 15% 1 5% Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

54 7. A & h 7.3 Soft intelligence Opportunity matrix Accidents Dimension Score Rationale Poor Good Reinsurance There has been a downward trend in the volume of ceded reinsurance premiums since This trend can also be seen in the claims values between 2009 and Although 2013 saw higher claims levels than usual. Reflected by the increased ILR in Opportunity matrix Disease Dimension Score Rationale Reinsurance The ceded reinsurance premium volume has decreased in the last year. With claims levels remaining fairly constant from This fall in premium and stability in claims value has resulted in a higher loss ratio for 2013 when compared to Opportunity matrix Healthcare Dimension Score Rationale Reinsurance In ceded reinsurance, instability is observed in the IRL. Although a large increase in ceded premiums has shown promise the reinsurance market Opportunity matrix Dependence Dimension? Score Rationale Reinsurance* *No meaningful data was available in relation to reinsurance for analysis. 54 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

55 7. A & H 7.3 Soft intelligence Accidents Reinsurance Individual or group policies usually have a relatively low sum insured per head which can be nearly 10 locally retained. Reinsurance is required to protect ceding companies against known and unknown per event accumulations. Practically 10 of these protections are given on an excess of loss basis. Facultative capacity is needed to cover exceptionally high sums insured for certain individuals Disease Reinsurance The reinsurance structure is similar to the structure of health care. It cedes little compared to the volume of premiums and structures that limit the cluster are used Healthcare Reinsurance Ceded reinsurance premiums have remained stable reaching levels of EUR 155m in However, in 2013 the number of accidents decreased, which has translated into a decreased claims value for 2013 and subsequently resulting in the lower ILR in Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

56 8 Freight IN THIS SECTION 8.1 Lloyd s statistics 8.2 Local market statistics 8.3 Soft Intelligence 56

57 8. freight 8.1 Lloyd s statistics Lloyd s Freight Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 57 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

58 8. freight 8.2 Local market statistics Goods in Transit - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Goods in Transit - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

59 8. freight 8.3 Soft intelligence Opportunity matrix Goods in Transit Poor Good Dimension Score Rationale Reinsurance Both proportional and non-proportional reinsurance are common Goods in Transit Reinsurance To ceded reinsurance is valued at around 4 of direct premiums therefore is significant market in this class of business. There has however, been a sharp drop in last year s premium as a result of higher retention by the local insurers. The ILR of ceded reinsurance has behaved similarly to previous years at about Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

60 9 Pecuniary Loss IN THIS SECTION 9.1 Lloyd s statistics 9.2 Local market statistics 9.3 Soft Intelligence 60

61 9. Pecuniary loss 9.1 Lloyd s statistics Lloyd s Pecuniary Loss Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 61 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

62 9. Pecuniary loss 9.2 Local market statistics Credit - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Credit - Accepted Reinsurance 62 Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

63 9. Pecuniary loss 9.2 Local market statistics Surety - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Surety - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio % 3 25% 2 15% 1 5% 63 Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

64 9. Pecuniary loss 9.2 Local market statistics Pecuniary Losses - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Pecuniary Losses - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

65 9. Pecuniary loss 9.3 Soft intelligence Opportunity matrix Credit Dimension Score Rationale Poor Good Reinsurance In the past year reinsurance 45% of premiums are ceded Opportunity matrix Surety Dimension Score Rationale Reinsurance Until 2012 ceded premiums were declining slightly, in 2013, however, have fallen 43% to EUR 29m. 61% of premiums is ceded. The claims have also been seriously affected in 2013 in line with direct business Opportunity matrix Pecuniary Losses Dimension Score Rationale Reinsurance Reinsurance programs vary due to the wide variety of contracts within this subclass. This kind of business is reinsured almost exclusively on a facultative basis Credit Reinsurance The role of reinsurance in this subclass is relevant. As direct insurance, the amount of premiums has fallen in recent years, from EUR 429m in 2008 to EUR 356m in 2013 This comes to involve 44% of premiums in the sector, although this percentage has also experienced decrease in the period. The evolution of casualties is very even to direct insurance with the same fluctuations in their costs and ILR. 65 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

66 10 Long Term Business IN THIS SECTION 10.1 Lloyd s & local market context* 66

67 11 Other non-life IN THIS SECTION 11.1 Local market statistics 11.2 Soft Intelligence 67

68 11. Other non-life 11.1 Local market statistics Legal Defence - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Legal Defence - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

69 11. Other non-life 11.1 Local market statistics Assistance- Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Assistance- Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

70 11. Other non-life 11.1 Local market statistics Death - Ceded Reinsurance Gross Earned Premium Reinsurer's Share Ceded Loss Ratio Premium Claims Loss Ratio Death - Accepted Reinsurance Gross Earned Premium Reinsurer's Share Accepted Loss Ratio Premium Claims Loss Ratio Notes: Market data is based on local sub-classes as per DGSFP report; * calculated loss ratio see Methodology for details Source: Dirección General de Seguros y Fondos de Pensiones (DGSFP) (July 2014)

71 11. Other non-life 11.2 Soft intelligence Opportunity matrix Legal Defence Poor Good Dimension Score Rationale Reinsurance In ceded reinsurance there was a large peak in the ILR to 132% in 2012, all other years remained at 32% or lower Opportunity matrix Assistance Dimension Score Rationale Reinsurance Since 2008 there has been an increase in the level of premiums and claims in reinsurance ceded. The accepted reinsurance has similar values since 2011, increasing only slightly each year, as well as claims Opportunity matrix Death Dimension Score Rationale Reinsurance An upward trend in ceded reinsurance since 2008, interrupted only in In the accepted reinsurance the volume of premiums increased from 2008, while the rate of claims decreases progressively. 71 Notes: Based on soft intelligence Source: Lloyd s Spain and Area XXI based on soft information (2014)

72 Lloyd s High Level Classes 12 IN THIS SECTION 12.1 Lloyd s premiums & incurred loss ratios 72

73 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Accident & Health Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 73 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

74 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Aviation Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 74 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

75 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Casualty Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 75 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

76 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Casualty Treaty Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 76 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

77 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Energy Gross Signed Premium (EUR m) Calendar Year 25 Direct Reinsurance Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

78 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Marine Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 78 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

79 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Overseas Motor Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 79 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

80 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Property (D&F) Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 80 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

81 12. Lloyd s High Level Classes 12.1 Lloyd s premiums & incurred loss ratios Lloyd s Property Treaty Gross Signed Premium (EUR m) Calendar Year Direct Reinsurance 0 81 Notes: Data based on a country of origin basis (where policyholders are based), gross of reinsurance & acquisition fees. Source: Market Intelligence calculations based on Xchanging, (2014)

82 13 Appendix IN THIS SECTION 13.1 Mappings 13.2 Data limitations 13.3 Lloyd s data reconciliation 13.4 Market Intelligence 82

83 13. Appendix 13.1 Mapping OECD Definition: Motor ("Motor Vehicle Insurance") Land Vehicles: (other than railway rolling stock): All damage to or loss of: - Land motor vehicles, Land vehicles other than motor vehicles. Motor Vehicle Liabilty: All liability arising out of the use of motor vehicles operating on land (including carriers' liability). Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Motor Liability Automoviles Casualty Treaty XM,XN Motor Damage Automoviles otros garantias Overseas Motor MD,ME,MF,MG,MH,MI,MM,MP Property (D&F) UK Motor 5T M2,M3,M4,M5,M6,MA,MC,MK,ML OECD Definition: MAT ("Marine, Aviation And Other Transport Insurance") Railway Rolling Stock and Other Transport: All damage to or loss of railway rolling stock. Aircraft: All damage to or loss of aircraft. Ships (sea, lake, and river and canal vessels): All damage to or loss of: River and canal vessels, Lake vessels, Sea vessels. Aircraft Liability: All liability arising out of the use of aircraft (including carrier's liability). Liability for Ships (sea, lake, and river and canal vessels): All liability arising out of the use of ships, vessels or boats on the sea, lakes, rivers or canals (including carrier's liability). Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Hull Transportes Cascos Aviation Energy 1,3,4,5,6,7,8,9,AO,AP,AR,AX,CX,H,H2,H3,HX, L,L2,L3,SC,SL,SO,X1,XY,XZ,Y1,Y3,Y4,Y5,Y6, Y7 EC,EG,EH,EM,EN,ET,EW,EY,EZ Marine AW,B,G,GC,GX,O,OX,RX,SR,T,TS,TX,W,WB, WX,X2,XE,XT Property (D&F) 1E,2E,2T,3T OECD Definition: Freight ("Freight Insurance") Goods in Transit (including merchandise, baggage and all other goods): All damage to or loss of goods in transit or baggage, irrespective of the form of transport. Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Goods in Transit Transporte Mercancias Marine CT,Q,QL,QX,V,VL,VX Property (D&F) 8T 83 Notes: Source: Market Intelligence based on best available local market data & local office input Market Intelligence, Country Managers, DGSFP, OECD

84 13. Appendix 13.1 Mapping C OECD Definition: Property ("Fire And Other Property Damage Insurance") Fire and Natural Forces: All damage or loss of property (other than land vehicles, railway rolling stock, aircraft, ships and goods in transit) due to: Fire, Explosion, Storm, Natural forces other than storm, Nuclear energy, Land subsidence. Other Damage to Property: All damage to or loss of property (other than land vehicles, railway rolling stock, aircraft, ships and goods in transit) due to hail or frost, and any event such as theft, other than those mentioned under Fire and Natural Forces. Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Fire Incendios Energy EF Other Damage To Property Otros danos a los bienes Marine FA,FR,GS,JB,WL Comprehensive Home Multirriesgo Hogar Property (D&F) 3E,6T,B2,B3,B4,B5,BD,CA,CB,CC,DC,F,HP,N, NB,NP,NX,P2,P3,P4,P5,P6,P7,PD,PG,TE,TO,T U,TW Comprehensive Commercial Multirriesgo Comercio Property Treaty AG,HA,TR,X3,XA,XC,XJ,XP,XR,XU,XX Comprehensive Communities Multirriesgo Comunidades Comprehensive Industrial Multirriesgo Industriales Other Comprehensive Otros Multirriesgos OECD Definition: Pecuniary Loss ("Pecuniary Loss Insurance") Credit: Insolvency (general), Export credit, Instalment credit, Mortgages, Agricultural credit. Suretyship: Suretyship (direct), Suretyship (indirect). Misecellaneous Financial Loss: Employment risk, Insufficiency of income (general), Bad weather, Loss of benefits, Continuing general expenses, Unforseen trading expenses, Loss of market value, Loss of rent or revenue, Indirect trading losses other than those mentioned above, Other financial loss (non trading), Other forms of financial loss, Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Credit Credito Accident & Health P,PB,PC,PF,PN,PS,PU,PW,PZ Surety Caucion Marine BS,CF,CN,CR,FG,FM,FS,PR,SB Pecuniary Losses Perdidas percuniarias Property (D&F) 4T,LE,WA,WS UK Motor PQ OECD Definition: Long Term Business Long Term business is a unique non-life niche business that is not included in the typical OECD classifications. The MI team does not typically capture corresponding local market figures. However, Lloyd's writes a small amount of Term Life business. Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes N/A N/A Accident & Health TL 84 Notes: Source: Market Intelligence based on best available local market data & local office input Market Intelligence, Country Managers, DGSFP, OECD

85 13. Appendix 13.1 Mapping OECD Definition: General Liability ("General Liability Insurance") General Liability: All liability other than motor vehicle liability, aircraft liability and liability for ships. Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Casualty Responsibilidad Civil Casualty Casualty Treaty BB,CY,D2,D3,D4,D5,DM,DO,E2,E3,E4,E5,E6, E7,E8,E9,F2,F3,GH,GM,GN,GP,GT,NA,NC,PI, PL,PM,UA,UC,W2,W3,W4,W5,W6,WC XD,XF,XG,XH,XL Energy EA,EB Property (D&F) 4E,7T,NL OECD Definition: A & H ("Accident & Health") Accident (including industrial injury and occupational diseases): Fixed pecunniary benefits, Benefits in the nature of indemnity, Combinations of the two, Injury to passengers. Sickness: Fixed pecuniary benefits, Benefits in the nature of indemnity, Combinations of the two. Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Accidents Accidentes Accident & Health K,KA,KC,KD,KG,KK,KL,KM,KP,KS,KT,KX Disease Enfermedad Property (D&F) 1T Healthcare Asistencia Sanitaria Dependence Dependencia OECD Definition: Other Non-Life ("Other Non-Life Insurance") Legal Expenses: Legal expenses and costs of litigation. Assistance: Miscellaneous: Local Market Classes Lloyd's Classes & Risk Codes Local Classes & Hierarchy (in English) Local Classes & Hierarchy as per ISP Lloyd's High Level Class Lloyd's Risk Codes Legal Defence Defensa juridica Casualty TC Assistance Asistencia Property (D&F) LJ Death Decesos 85 Notes: Source: Market Intelligence based on best available local market data & local office input Market Intelligence, Country Managers, DGSFP, OECD

86 13. Appendix 13.2 Data Limitations Key Lloyd s definitions and data limitations The detailed Lloyd s data used in this report is based on calendar year gross signed premiums and year of account incurred loss ratios sourced from Xchanging. This analysis is based on the Country of Origin classification which is defined below. Negative Loss Ratios can appear due to refunds or over estimation of reserves. Gross Signed Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums. Country of Origin: Denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes Lloyd s reporting bases Calendar Year: Takes into account the premiums and claims paid from 1st Jan until the 31st Dec of the year when the contract started. All Outstanding Claims are registered as known but not paid yet on the current year and from all previous years. Year of Account: Takes into account the premiums as paid and allocated to the year of the policy inception. Claims are registered as paid and outstanding and allocated to the year of the policy inception, irrespective of the year in which they are paid. 86 Source: Lloyd s, (July 2014)

87 13. Appendix 13.3 Lloyd s data reconciliation Lloyd s Annual Report The accounting-level Lloyd s data published in the Annual Report is based on written gross premiums sourced directly from Syndicates. Lloyd s information published in the Country Class Review report is based on gross signed premiums and incurred losses sourced by Xchanging and Direct. Xchanging total figures do reconcile with Annual Report figures with some adjustments. Adjustments are made by Lloyd s Market Finance and Market Reporting teams and this report follows the same guidelines. Differences between these two reports are therefore explained by (1) the timing differences between written and signed gross premiums, (2) inconsistent use of rates of exchange between Syndicates and Xchanging, (3) Syndicates allocating Facultative business as Direct and (4) a sizeable amount* of coverholders and service companies premiums not being processed via Xchanging Geographic breakdown (2012) Annual Report (Calendar year) Xchanging (Calendar year) Central Asia and Asia Pacific 13% Other America 8% Rest of World 5% US and Canada 41% Other America 16% Central Asia and Asia Pacific 13% Rest of World 5% US and Canada 39% EURope 15% UK 18% EURope 18% UK 9% Total Total Class of business breakdown (2012) Annual Report (Calendar year) Xchanging (Calendar year) Motor 5% Energy 7% Marine 8% Aviation 3% Life Reinsurance 38% Reinsurance 48% Aviation 2% Casualty 15% Energy 5% Life Marine 7% Casualty 18% Motor 5% Property 21% Property 18% 87 Notes: Source: * The Largest segment not processed by Xchanging is UK Motor business Lloyd s Market Intelligence

88 13. Appendix 13.4 Market Intelligence About Market Intelligence Market Intelligence provides analysis of the world s insurance industry to help managing agents, brokers and coverholders grow their business internationally Sign up to stay informed Sign up for Market Presentations, Class Review releases and Country Roundups: Contact the team Contact the Market Intelligence team: 88

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