INSURANCE (PRUDENTIAL STANDARDS) (CLASS C, CLASS D and CLASS E SOLVENCY REQUIREMENT) RULES 2011

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1 SCHEDULE I (Paragraph 4) Bermuda Solvency Captal Requrement (Class D and Class E BSCR) 1. The Class D and Class E BSCR shall be establshed, on an EBS Valuaton bass, n accordance wth the followng formula- where- 2 f 2 eq 2 LT nt 2 Curr 2 Conc 2 LTcred 2 2 ( C + C + C ) C BSCR = C + C + C + C + C + C LTlong LTmort 2 2 ( CLTmort + C LTsl + C LTr ) CLTlong ) + CLTVA + CLTother + C op Cadj cont ' d + C.5 + LTsl LTr LTmort = fxed ncome nvestment rsk charge as calculated n accordance wth paragraph C f 2; C eq = equty nvestment rsk charge as calculated n accordance wth paragraph 3; = long-term nterest rate and lqudty rsk charge as calculated n accordance wth C LT nt paragraph 4; C Curr = currency rsk charge as calculated n accordance wth paragraph 5; C Conc = concentraton rsk charge as calculated n accordance wth paragraph 6; C LTcred = credt rsk charge as calculated n accordance wth paragraph 7; = long-term nsurance rsk - mortalty captal as calculated n accordance wth C LTmort paragraph 8; = long-term nsurance rsk - stop loss captal as calculated n accordance wth C LTsl paragraph 9; = long-term nsurance rsk - rders captal as calculated n accordance wth C LTr paragraph 10; = long-term nsurance rsk - morbdty and dsablty captal as calculated n C LTmortb accordance wth paragraph 11; C LTlong C LTVA C LTother C op C adj = long-term, nsurance rsk - longevty captal as calculated n accordance wth paragraph 12; = long-term varable annuty guarantee rsk captal as calculated n accordance wth paragraph 13; = long-term other nsurance rsk captal as calculated n accordance wth paragraph 14; = operatonal rsk captal as calculated n accordance wth paragraph 15; and =Regulatory captal requrement for regulated non-nsurance fnancal operatng enttes as determned n accordance wth paragraph The fxed ncome nvestment rsk charge calculaton shall be determned n accordance wth the followng formula- C f = c FIastclass µ r where χ = the captal charge factors prescrbed n Table 1 for each type of FIastclass ;and FIastclass = value of nvestment n correspondng asset Class µ = addtonal dversfcaton adjustment factor appled to cash and cash equvalent r balances, or 1 for other asset classes. Table 1 Captal charge factors for 9 FIastclass

2 Type of fxed ncome nvestments FIastclass Statement Source These Rules Captal Factor χ Corporate and Soveregn Bonds BSCR ratng 0 Schedule II & IIA, Lne 1, Column (1) 0.0% BSCR ratng 1 Schedule II & IIA, Lne 2, Column (1) 0.4% BSCR ratng 2 Schedule II & IIA, Lne 3, Column (1) 0.8% BSCR ratng 3 Schedule II & IIA, Lne 4, Column (1) 1.5% BSCR ratng 4 Schedule II & IIA, Lne 5, Column (1) 3.0% BSCR ratng 5 Schedule II & IIA, Lne 6, Column (1) 8.0% BSCR ratng 6 Schedule II & IIA, Lne 7, Column (1) 15.0% BSCR ratng 7 Schedule II & IIA, Lne 8, Column (1) 26.3% BSCR ratng 8 Schedule II & IIA, Lne 9, Column (1) 35.0% Resdental Mortgage-Backed Securtes BSCR ratng 1 Schedule II & IIA, Lne 2, Column (3) 0.6% BSCR ratng 2 Schedule II & IIA, Lne 3, Column (3) 1.2% BSCR ratng 3 Schedule II & IIA, Lne 4, Column (3) 2.0% BSCR ratng 4 Schedule II & IIA, Lne 5, Column (3) 4.0% BSCR ratng 5 Schedule II & IIA, Lne 6, Column (3) 11.0% BSCR ratng 6 Schedule II & IIA, Lne 7, Column (3) 25.0% BSCR ratng 7 Schedule II & IIA, Lne 8, Column (3) 35.0% BSCR ratng 8 Schedule II & IIA, Lne 9, Column (3) 35.0% Commercal Mortgage-Backed Securtes/Asset-Backed Securtes BSCR ratng 1 Schedule II & IIA, Lne 2, Column (5) 0.5% BSCR ratng 2 Schedule II & IIA, Lne 3, Column (5) 1.0% BSCR ratng 3 Schedule II & IIA, Lne 4, Column (5) 1.8% BSCR ratng 4 Schedule II & IIA, Lne 5, Column (5) 3.5% BSCR ratng 5 Schedule II & IIA, Lne 6, Column (5) 10.0% BSCR ratng 6 Schedule II & IIA, Lne 7, Column (5) 20.0% BSCR ratng 7 Schedule II & IIA, Lne 8, Column (5) 30.0% BSCR ratng 8 Schedule II & IIA, Lne 9, Column (5) 35.0% Bond Mutual Funds BSCR ratng 0 Schedule II & IIA, Lne 1, Column (7) 0.0% BSCR ratng 1 Schedule II & IIA, Lne 2, Column (7) 0.4% BSCR ratng 2 Schedule II & IIA, Lne 3, Column (7) 0.8% BSCR ratng 3 Schedule II & IIA, Lne 4, Column (7) 1.5% BSCR ratng 4 Schedule II & IIA, Lne 5, Column (7) 3.0% BSCR ratng 5 Schedule II & IIA, Lne 6, Column (7) 8.0% BSCR ratng 6 Schedule II & IIA, Lne 7, Column (7) 15.0% BSCR ratng 7 Schedule II & IIA, Lne 8, Column (7) 26.3% BSCR ratng 8 Schedule II & IIA, Lne 9, Column (7) 35.0% Mortgage Loans Insured/guaranteed mortgages Schedule II & IIA, Lne 22, Column (1) 0.3% Other commercal and farm mortgages Schedule II & IIA, Lne 23, Column (1) 5.0% Other resdental mortgages Schedule II & IIA, Lne 24, Column (1) 1.5% Mortgages not n good Schedule II & IIA, Lne 25, Column (1) 25.0% 10

3 standng Other Fxed Income Investments Other loans Form 4EBS, Lne 8 5.0% Cash and cash equvalents BSCR ratng 0 Schedule XIX, Column A 0.0% BSCR ratng 1 Schedule XIX, Column A 0.1% BSCR ratng 2 Schedule XIX, Column A 0.2% BSCR ratng 3 Schedule XIX, Column A 0.3% BSCR ratng 4 Schedule XIX, Column A 0.5% BSCR ratng 5 Schedule XIX, Column A 1.5% BSCR ratng 6 Schedule XIX, Column A 4.0% BSCR ratng 7 Schedule XIX, Column A 6.0% BSCR ratng 8 Schedule XIX, Column A 9.0% Less: Dversfcaton adjustment Schedule XIX, Column A INSTRUCTIONS AFFECTING TABLE 1: Captal charge factors for to a maxmum of 40.0% FIastclass (a) all assets comprsng of bonds and debentures, loans, and other mscellaneous nvestments that are subject to captal charges wthn the fxed ncome nvestment rsk charge shall be ncluded; (b) all non-afflated quoted and unquoted bonds and debentures shall be ncluded n the fxed ncome nvestment charge; (c) all bonds and debentures, loans, and other mscellaneous nvestments shall be reported on a bass consstent wth that used for purposes of statutory fnancal reportng; (d) the captal requrements relatng to cash and cash equvalents shall be reduced by a dversfcaton adjustment of up to a maxmum of 40%; (e) the dversfcaton adjustment n paragraph (d) s determned as 40% multpled by 1 mnus the rato of the largest cash and cash equvalent balance held wth a sngle counterparty to the total of all cash and cash equvalent balance; and (f) amounts are to be reported on an EBS Valuaton bass. 3. The equty nvestment rsk charge calculaton shall be establshed n accordance wth the followng formula- C = c Eqastclass where - eq χ = the captal charge factors prescrbed n Table 2 for each type of and Eqastclass = value of nvestment n correspondng asset Class. Table 2 Captal charge factors for Eqastclass Type of equty nvestments Eqastclass Statement Source These Rules Captal Factor χ Common stocks Non-afflated (quoted) Schedule II & IIA, Lne 19, Column (1) 14.4% Eqastclass ; 11

4 common stock Non-afflated (unquoted) 14.4% Schedule II & IIA, Lne 20, Column (1) common stock Equty mutual funds Schedule II & IIA, Lne 21, Column (5) 14.4% Preferred stocks BSCR ratng 1 Schedule II & IIA, Lne 11, Column (3) 0.6% BSCR ratng 2 Schedule II & IIA, Lne 12, Column (3) 1.2% BSCR ratng 3 Schedule II & IIA, Lne 13, Column (3) 2.0% BSCR ratng 4 Schedule II & IIA, Lne 14, Column (3) 4.0% BSCR ratng 5 Schedule II & IIA, Lne 15, Column (3) 11.0% BSCR ratng 6 Schedule II & IIA, Lne 16, Column (3) 25.0% BSCR ratng 7 Schedule II & IIA, Lne 17, Column (3) 35.0% BSCR ratng 8 Schedule II & IIA, Lne 18, Column (3) 35.0% Other equty nvestments Company-occuped real estate less: encumbrances Form 4EBS, Lne 7(a) 10.0% Real estate nvestments less: encumbrances Form 4EBS, Lne 7(b) 20.0% Other equty nvestments Form 4EBS, Lnes 2(e), 3(e) and Schedule IIA, Lne 21, Column (7) 20.0% Other tangble assets net of segregated accounts companes Investments n afflates Unregulated enttes that conduct ancllary servces Unregulated non- fnancal operatng enttes Unregulated fnancal operatng enttes Regulated nsurance fnancal operatng enttes Form 4EBS, Lnes 13(k), 14(d) and 36(f) Less Lne 13(b) and 13(c) INSTRUCTIONS AFFECTING TABLE 2: Captal charge factors for Eqastclass (a) all assets comprsng of common stock, preferred stock, real estate, and other mscellaneous nvestments that are subject to captal charges wthn the equty nvestment rsk charge shall be ncluded; (b) all non-afflated quoted and unquoted common and preferred stock shall be ncluded n the equty nvestment rsk charge; (c) all common and preferred stock, real estate, and other mscellaneous nvestments shall be reported on a bass consstent wth that used for purposes of statutory fnancal reportng; (d) amounts are to be reported on an EBS Valuaton bass. 20.0% Form 4EBS, Lne 4(a) 5.0% Form 4EBS, Lne 4(b) 20.0% Form 4EBS, Lne 4(c) 55.0% Form 4EBS, Lne 4(e) 20.0% 4. The long-term nterest rate and lqudty rsk charge calculaton shall be establshed n accordance wth the followng formula- C LT nt = duraton1 rateshock reserveshare assets 100% + duraton 2 rateshock 1 reserveshare assets where ( ALMCredt) ( ( ) ) 12

5 duraton 1 duraton 2 rateshock assets reservesha re apples for busness where the duraton of assets and labltes s known. duraton 1 = the hgher of (a) 1; or (b) the nsurer s weghted average of the dfference n asset duraton and lablty duraton; (c) The statement source for the weghted average of the dfference n asset duraton and lablty duraton s Schedule V paragraph (f) of these Rules; apples for busness where the duraton of assets and labltes s not known. duraton2 s equal to 2; = assumed nterest rate adjustment prescrbed n Table 3; = quoted and unquoted value of total bonds and debentures, preferred stock, or mortgage loans; s the amount of reserves wth known duraton dvded by the total reserves. The statement source for s Schedule V paragraph (h) of these Rules; and AML Credt = the total factor determned n accordance wth Table 4. Type of nvestments assets Total Bonds and debentures 13 reserveshare Table 3 Interest rate adjustment for assets Statement Source These Rules 200 bass pont nterest rate ncrease rateshock Schedule II and Schedule IIA, Column 9, Lne % Preferred stock Schedule II and Schedule IIA, Column 3, Lne % Mortgage loans Schedule II and Schedule IIA, Column 1, Lne % INSTRUCTIONS AFFECTING TABLE 3: Interest rate adjustment for assets (a) all assets comprsng of total bonds and debentures, preferred stock, and mortgage loans nvestments that are subject to captal charges wthn the nterest rate / lqudty rsk charge shall be ncluded; (b) all quoted and unquoted non-afflated total bonds and debentures and preferred stock shall be ncluded n the nterest rate/lqudty rsk charge; (c) total bonds and debentures, preferred stock, and mortgage loans nvestments shall be reported on a bass consstent wth that used for purposes of statutory fnancal reportng; and (d) amounts are to be reported on an EBS Valauton bass. Table 4 - Asset Lablty Management ( ALM ) Credt Crteron Has the nsurer mplemented polces on ALM, ncludng tolerances for devaton? Implemented If yes, the answers to remanng questons are used, If no, the ALM Credt s zero Score for yes answers Have clear roles and responsbltes for the executon of the ALM program been 10% assgned? Are ALM postons / tolerances communcated to the nvestment functon, senor 10% management and the board on a tmely bass? Have systems and procedures been 10%

6 establshed to dentfy, report and promptly address ALM defcences? Are the ALM polces and procedures revewed and reapproved or revsed at least annually? Is the nsurer s current ALM poston n complance wth the nsurer s polces? Total 10% 10% XX% 5. The currency rsk charge calculaton shall be establshed n accordance wth the followng formula- CCurr = c ( Currproxybscr + Currlab Currast ) where - χ = 25% where ( Currency Currproxyb scr )<0 Currast -Currlab - = refers to a currency used by the nsurer 0% otherwse GrossCurra st = value of assets correspondng to Currency as reported on Form 4EBS Lne 15 Currast = value of assets correspondng to Currency as reported on Form 4EBS Lne 15 adjusted to allow for currency hedgng arrangements Currency as reported on Form GrossCurrl ab = value of labltes correspondng to 4EBS Lne 39. Currlab = value of labltes correspondng to Currency as reported on Form 4EBS Lne 39 adjusted to allow for currency hedgng arrangements GrossCurrl ab and BSCR Proxy factor Currproxyb scr = refers to the product of BSCR Proxy factor = greater of:. the Enhanced Captal Requrement dvded by Form 4EBS Lne 39 Total Labltes for the precedng year;. the average of the above rato for the precedng 3 years. where there are no pror submssons avalable, the BSCR proxy factor s the above rato that would be obtaned from the current submsson wthout takng nto account the currency rsk charge. Currency GrossCurrast Table 5 Captal charge factors for Currency Rsk Currast GrossCurrlab Currlab Currproxybscr Currency 1 Currency 2 Currency 3 Schedule XX, Column A, Lne 1 Schedule XX, Column A, Lne 2 Schedule XX, Column A, Lne 3 Schedule XX, Column B, Lne 1 Schedule XX, Column B, Lne 2 Schedule XX, Column B, Lne 3 Schedule XX, Column C, Lne 1 Schedule XX, Column C, Lne 2 Schedule XX, Column C, Lne 3 Schedule XX, Column D, Lne 1 Schedule XX, Column D, Lne 2 Schedule XX, Column D, Lne 3 GrossCurrlab 1 x BSCR Proxy Factor GrossCurrlab 2 x BSCR Proxy Factor GrossCurrlab 3 x BSCR Proxy Factor 14

7 Currency n Schedule XX, Column A, Lne n Schedule XX, Column B, Lne n Schedule XX, Column C, Lne n Schedule XX, Column D, Lne n GrossCurrlab n x BSCR Proxy Factor INSTRUCTIONS AFFECTING TABLE 5: Captal charge factors for Currency Rsk (a) where the nsurer uses currency hedgng arrangements to manage ts currency rsk, then Currast and Currlab may reflect the mpact of those arrangements on GrossCurra st and ab exchange currency rates, otherwse the amounts GrossCurrl ab shall apply; GrossCurrl of a 25% adverse movement n foregn GrossCurra st and (b) any adjustment to reflect currency hedgng arrangements shall not apply to the calculaton of Currproxyb scr ;. (c) currency hedgng arrangements means dervatve or other rsk mtgaton arrangements desgned to reduce losses due to foregn currency exchange movements, and whch meet the Authorty s requrements to be classed as such; (d) nsurers are to report currences representng at least 95% of ther economc balance sheet labltes; and (e) amounts are to be reported on an EBS Valuaton bass. 6. The concentraton rsk charge calculaton shall be establshed n accordance wth the followng formula- χ C = c Concastclass Conc 15 where - = the captal charge factors prescrbed n Table 6 for each type Concastcla ss of and Concastcla ss = value of correspondng asset n Asset Class Asset Class Table 6 Captal charge factors for Statement Source Concastcla These Rules Cash and Cash Equvalents BSCR ratng 0 Schedule XXI, Column D 0.0% BSCR ratng 1 Schedule XXI, Column D 0.1% BSCR ratng 2 Schedule XXI, Column D 0.2% BSCR ratng 3 Schedule XXI, Column D 0.3% BSCR ratng 4 Schedule XXI, Column D 0.5% BSCR ratng 5 Schedule XXI, Column D 1.5% BSCR ratng 6 Schedule XXI, Column D 4.0% BSCR ratng 7 Schedule XXI, Column D 6.0% BSCR ratng 8 Schedule XXI, Column D 9.0% Corporate & Soveregn Bonds BSCR ratng 0 Schedule XXI, Column D 0.0% BSCR ratng 1 Schedule XXI, Column D 0.4% BSCR ratng 2 Schedule XXI, Column D 0.8% BSCR ratng 3 Schedule XXI, Column D 1.5% BSCR ratng 4 Schedule XXI, Column D 3.0% ss Captal Factor χ

8 BSCR ratng 5 Schedule XXI, Column D 8.0% BSCR ratng 6 Schedule XXI, Column D 4.0% BSCR ratng 7 Schedule XXI, Column D 6.0% BSCR ratng 8 Schedule XXI, Column D 9.0% Resdental Mortgage-Backed Securtes BSCR ratng 0 Schedule XXI, Column D 0.0% BSCR ratng 1 Schedule XXI, Column D 0.6% BSCR ratng 2 Schedule XXI, Column D 1.2% BSCR ratng 3 Schedule XXI, Column D 2.0% BSCR ratng 4 Schedule XXI, Column D 4.0% BSCR ratng 5 Schedule XXI, Column D 11.0% BSCR ratng 6 Schedule XXI, Column D 25.0% BSCR ratng 7 Schedule XXI, Column D 35.0% BSCR ratng 8 Schedule XXI, Column D 35.0% Commercal Mortgage-Backed Securtes/Asset Backed Securtes BSCR ratng 0 Schedule XXI, Column D 0.0% BSCR ratng 1 Schedule XXI, Column D 0.5% BSCR ratng 2 Schedule XXI, Column D 1.0% BSCR ratng 3 Schedule XXI, Column D 1.8% BSCR ratng 4 Schedule XXI, Column D 3.5% BSCR ratng 5 Schedule XXI, Column D 10.0% BSCR ratng 6 Schedule XXI, Column D 20.0% BSCR ratng 7 Schedule XXI, Column D 30.0% BSCR ratng 8 Schedule XXI, Column D 35.0% Bond Mutual Funds BSCR ratng 0 Schedule XXI, Column D 0.0% BSCR ratng 1 Schedule XXI, Column D 0.4% BSCR ratng 2 Schedule XXI, Column D 0.8% BSCR ratng 3 Schedule XXI, Column D 1.5% BSCR ratng 4 Schedule XXI, Column D 3.0% BSCR ratng 5 Schedule XXI, Column D 8.0% BSCR ratng 6 Schedule XXI, Column D 15.0% BSCR ratng 7 Schedule XXI, Column D 26.3% BSCR ratng 8 Schedule XXI, Column D 35.0% Preferred Shares BSCR ratng 1 Schedule XXI, Column D 0.6% BSCR ratng 2 Schedule XXI, Column D 1.2% BSCR ratng 3 Schedule XXI, Column D 2.0% BSCR ratng 4 Schedule XXI, Column D 4.0% BSCR ratng 5 Schedule XXI, Column D 11.0% BSCR ratng 6 Schedule XXI, Column D 25.0% BSCR ratng 7 Schedule XXI, Column D 35.0% BSCR ratng 8 Schedule XXI, Column D 35.0% Mortgage Laons Insured/Guaranteed Schedule XXI, Column D Mortgages 0.3% Other Commercal and Schedule XXI, Column D Farm Mortgages 5.0% Other Resdental Schedule XXI, Column D Mortgages 1.5% Mortgages Not In Good Schedule XXI, Column D 25.0% Standng Other Asset Classes Quoted and Unquoted Schedule XXI, Column D Common Stock and Mutual Funds 14.4% Other Quoted and Schedule XXI, Column D Unquoted Investments 20.0% 16

9 Investment n Afflates Schedule XXI, Column D Unregulated enttes that 5.0% conduct ancllary servces Investment n Afflates Schedule XXI, Column D Unregulated non-fnancal 20.0% operatng enttes Investment n Afflates Schedule XXI, Column D Unregulated fnancal 55.0% operatng enttes Investment n Afflates Schedule XXI, Column D Regulated non-nsurance fnancal operatng 55.0% enttes Investment n Afflates Schedule XXI, Column D Regulated nsurance fnancal operatng 20.0% enttes Advances to Afflates Schedule XXI, Column D 5.0% Polcy Loans Schedule XXI, Column D 0.0% Real Estate: Occuped by Schedule XXI, Column D company 10.0% Real Estate: Other Schedule XXI, Column D propertes 20.0% Collateral Loans Schedule XXI, Column D 5.0% INSTRUCTIONS AFFECTING TABLE 6: Captal charge factors for (a) Concastclass Concastcla ss shall only apply to the nsurers 10 largest counterparty exposures based on the aggregate of all nstruments ncluded n Table 6 related to that counterparty (b) a counterparty shall nclude all related/connected counterpartes defned as: () control relatonshp: f the counterparty, drectly or ndrectly, has control over the other(s); or () economc nterdependence: f one of the counterpartes were to experence fnancal problems, n partcular fundng or repayment dffcultes, the other(s) as a result, would also be lkely to encounter fundng or repayment dffcultes; and (c) amounts are to be reported on an EBS Valuaton bass. 7. The credt rsk charge calculaton shall be establshed n accordance wth the followng formula- C cred = d debtor µ r where - δ = the credt rsk captal charge factor for type of debtor as prescrbed n Table 7; and debtor = recevable amount from debtor net of any collateral placed n favour of the nsurer; and. µ = addtonal dversfcaton adjustment factor appled to rensurance balances r only takng nto consderaton dversfcaton by number of rensurers, equal to 40%. 17

10 Type of debtor debtor Table 7 Captal charge factors for Statement Source These Rules debtor Captal Factor Accounts and Premums Recevable In course of collecton Form 4EBS, Lne 10(a) 5.0% Recevables from retrocessonal contracts less: collateralzed balances Form 4EBS, Lne 10(c) and nstructon (c) below δ 10.0% All Other Recevables Accrued nvestment ncome Form 4EBS, Lne 9 2.5% Advances to afflates Form 4EBS, Lne 4(g) 5.0% Polcy loans Form 4EBS, Lne 6 0.0% Partculars of rensurance balances BSCR ratng 0 Schedule XVIII paragraph (d) 0.0% BSCR ratng 1 Schedule XVIII paragraph (d) 0.7% BSCR ratng 2 Schedule XVIII paragraph (d) 1.5% BSCR ratng 3 Schedule XVIII paragraph (d) 3.5% BSCR ratng 4 Schedule XVIII paragraph (d) 7.0% BSCR ratng 5 Schedule XVIII paragraph (d) 12.0% BSCR ratng 6 Schedule XVIII paragraph (d) 20.0% BSCR ratng 7 Schedule XVIII paragraph (d) 17.0% BSCR ratng 8 Schedule XVIII paragraph (d) 35.0% Less: Dversfcaton adjustment Schedule XVIII paragraph (d) 40.0% INSTRUCTIONS AFFECTING TABLE 7: Captal charge factors for debtor (a) all accounts and premums recevable and all other recevables that are subject to captal charges wthn the credt rsk charge shall be ncluded; (b) all accounts and premums recevable, rensurance balances recevables, all other recevables, and rensurance recoverable balances shall be reported on a bass consstent wth that used for purposes of statutory fnancal reportng; (c) collateralzed balances are assets pledged n favour of the nsurer relatng to accounts and premums recevable; (d) the net qualfyng exposure comprses of rensurance balances recevable and rensurance recoverable balances less the correspondng rensurance balances payable and other payables less the qualfyng collateral ssued n favour of the nsurer n relaton to the rensurance balances; (e) the net qualfyng exposure n nstructon (d) shall be subject to the prescrbed credt rsk captal factor; (f) the total captal requrement relatng to the rensurance balances shall be reduced by a dversfcaton adjustment of up to a maxmum of 40%; (g) the dversfcaton adjustment n nstructon (f) s determned as 40% multpled by 1 mnus the rato of the largest net rensurance exposure, on an ndvdual rensurer bass, to total net rensurance exposure; and (h) amounts are to be reported on an EBS Valuaton bass. 8. The long-term nsurance rsk - mortalty captal calculaton shall be establshed n accordance wth the followng formula 18

11 C LTmort α = α 1 + NAAR1 α 2 NAAR2 Where > 1 > 1 = captal factor for adjustable lfe nsurance busness as prescrbed n 1 Table 8; NAAR1 α 2 NAAR2 = the Net Amount at Rsk of all adjustable lfe nsurance busness. The statement source s Schedule VII, Column (9), Lne 1 of these Rules; = captal factor for non-adjustable busness as prescrbed n Table 6; and = the Net Amount at Rsk of all non-adjustable lfe nsurance busness. The statement source s Schedule VII, Column (10), Lne 1 of these Rules; Table 8 Captal charge factors for long-term nsurance rsk -mortalty Net Amount at Rsk NAAR1 or NAAR2 Captal Factor α 1 19 Captal Factor α 2 Frst $1 bllon Next $4 bllon Next $5 bllon Next $40 bllon Excess over $50 bllon The long-term nsurance rsk stop loss captal calculaton shall be establshed n accordance wth the followng formula = 50% x Net Annual Premum for stop loss covers as prescrbed n C LTsl Schedule VII, Column (11), Lne 14 of these Rules. 10. The long-term nsurance rsk rder charge calculaton for long-term busness shall be establshed n accordance wth the followng formula = 25% x Net Annual Premum for nsurance product rders not C LTr ncluded elsewhere as prescrbed n Schedule VII, Column (11), Lne 15 of these Rules. 11. The long-term nsurance rsk morbdty and dsablty captal calculaton shall be establshed n accordance wth the followng formula C LTmorb = ( a) + ( b) + ( c) + ( d) + ( e) Where: C LTmorb = (a) 7.00% x BSCR adjusted reserves for dsablty ncome clams n payment on waver of premum and long-term care as prescrbed n Schedule VII, Column (7), Lne 9 of these Rules plus (b) 10% x BSCR adjusted reserves for dsablty ncome clams n payment on other accdent and sckness products as prescrbed n Schedule VII, Column (7), Lne 10 of these Rules; plus ( c) = α NAP >1 Where α = captal charge factor as prescrbed n Table ;and NAP = the Net Annual Premum for dsablty ncome busness actve lves as descrbed n Table 9;

12 Net Annual Premum NAP Beneft perod less than or equal to two years, premum guarantee less than or equal to 1 year Beneft perod less than or equal to two years, premum guarantee of more than 1 year but less than or equal to 5 years Beneft perod less than or equal to two years, premum guarantee of more than 5 years Beneft perod less than or equal to two years, premum guarantee less than or equal to 1 year Beneft perod less than or equal to two years, premum guarantee of more than 1 year but less than or equal to 5 years Beneft perod less than or equal to two years, premum guarantee of more than 5 years Table 9 Captal charge factors for Statement Source These Rules NAP Captal Factor α 1 Schedule VII, Column (9), Lne 7(a) 9.0% Schedule VII, Column (9), Lne 7(b) 15.0% Schedule VII, Column (9), Lne 7(c) 22.5% Schedule VII, Column (10), Lne 7(a) 12.0% Schedule VII, Column (10), Lne 7(b) 20.0% Schedule VII, Column (10), Lne 7(c) 30.0% (d) 12% x net annual premums for dsablty ncome - actve lves for other accdent and sckness products as prescrbed n Schedule VII, Column (11), Lne 8; and plus ( e) = α1 + NAAR1 α 2 NAAR2 > 1 > 1 Where α 1 = captal factor as prescrbed n Table 10; NAAR1 = the Net Amount at Rsk of all adjustable crtcal llness nsurance busness n force as n Schedule VII, Column (9), Lne 2; α 2 = captal factor as prescrbed n Table 10; NAAR2 = the Net Amount at Rsk of all non-adjustable crtcal llness nsurance busness n force as n Schedule VII, Column (10), Lne 2. 20

13 Net Amount at Rsk NAAR1 Or NAAR2 Table 10 Captal charge factors for Captal Factor α 1 21 NAAR1 or NAAR2 Captal Factor α 2 Frst $1 bllon Next $4 bllon Next $5 bllon Next $40 bllon Excess over $50 bllon The long-term nsurance rsk longevty captal calculaton shall be establshed n accordance wth the followng formula C = α BAR Where: C LTlong α BAR > 1 BSCR adjusted reserves BAR = captal charge factor as prescrbed n Table 11; and = the BSCR adjusted reserves for longevty rsk as descrbed n Table 11. Table 11 Captal charge factors for Statement Source These Rules BAR Captal Factor Longevty (mmedate pay-out annutes, contngent annutes, penson blocks) Attaned age of annutant: 0-55 years Schedule VII, Column (7), Lne 3(a) 2.0% years Schedule VII, Column (7), Lne 3(b) 3.0% years Schedule VII, Column (7), Lne 3(c) 4.0% years Schedule VII, Column (7), Lne 3(d) 5.0% 81+ years Schedule VII, Column (7), Lne 3(e) 6.0% Longevty (deferred pay-out annutes, future contngent annutes, future penson payouts) Age at whch annuty benefts commence: 0-55 years Schedule VII, Column (7), Lne 4(a) 2.0% years Schedule VII, Column (7), Lne 4(b) 3.0% years Schedule VII, Column (7), Lne 4(c) 4.0% years Schedule VII, Column (7), Lne 4(d) 5.0% years Schedule VII, Column (7), Lne 4(e) 6.0% 76+ years Schedule VII, Column (7), Lne 4(e) 7.0% INSTRUCTIONS AFFECTING TABLE 11: Captal charge factors for α BAR For jont and survvor annutes, the youngest age should be used. 13. The long-term varable annuty guarantee rsk captal calculaton shall be establshed n accordance wth the followng formula LTVA Wheren: () = ether ( TotalBS Re q TotalBAR TotalGMBadj ) or( IMC Re qltva ) > 1 TotalBS Re q = hgher of (a) ( α 1 GV1 + α 2 GV 2 + α3 GV 3 ) and (b) ( 4 NAR1 + α5 NAR2 + α6 NAR3 ) α ;

14 ()TotalBAR () (v) TotalGMDB adj IMC Re qltva = the total BSCR adjusted reserves for varable annuty guarantee rsk. The statement source for TotalBAR s Schedule VII, lne 17, column (7) of these Rules; = the captal requrement charged on guaranteed mnmum death beneft (GMDB) polces multpled by the percentage of GMDB wth multple guarantees. The statement source for the percentage of GMDB wth multple guarantees s Schedule VIII, lne 32, column (4) of these Rules; = the captal requrement for varable annuty guarantee rsk determned n accordance wth an nsurance group s nternal captal model, f applcable. The statement source for IMC Re q LTVA s Schedule VIIIA, lne 1, column (7) of these Rules; 3, NAR1, NAR2, NAR 1 have the statement source dentfed n Table 12; and (v) ( α 1, α 2, α3, α 4, α5, α6 ) are the captal factors as prescrbed n Table 13. (v) ( GV, GV 2, GV 3 ) 22

15 Varable Annuty Beneft Type Guaranteed mnmum death beneft: Return of premum, ratchet and reset Guaranteed mnmum death beneft: Enhanced benefts (roll up) Guaranteed mnmum ncome beneft Guaranteed mnmum wthdrawal beneft Guaranteed enhanced earnngs beneft Guaranteed mnmum accumulaton beneft wth 1 year or less to maturty Guaranteed mnmum accumulaton beneft wth more than 1 year but less than or equal to 2 years to maturty Guaranteed mnmum accumulaton beneft wth more than 2 years but less than or equal to 3 years to maturty Guaranteed mnmum accumulaton beneft wth more than 3 years but less than or equal to 4 years to maturty Guaranteed mnmum accumulaton beneft wth more than 4 years but less than or equal to 5 years to maturty Guaranteed mnmum accumulaton beneft wth more than 5 years but less than or equal to 6 years to maturty Guaranteed mnmum accumulaton beneft wth more than 6 years but less than or equal to 7 years to maturty Table 12 Captal charge factors for ( GV1, GV 2, GV 3, NAR1, NAR2, NAR3 ) Statement Source These Rules GV1 Schedule VIII, lnes 1 and 16, column (2) Schedule VIII, Lnes 2 and 17, column (2) Schedule VIII, Lnes 3 and 18, column (2) Schedule VIII, Lnes 4 and 19, column (2) Schedule VIII, Lnes 5 and 20, column (2) Schedule VIII, Lnes 6 and 21, column (2) Schedule VIII, Lnes 7 and 22, column (2) Schedule VIII, Lnes 8 and 23, column (2) Schedule VIII, Lnes 9 and 24, column (2) Schedule VIII, Lnes 10 and 25, column (2) Schedule VIII, Lnes 11 and 26, column (2) Schedule VIII, Lnes 12 and Statement Source These Rules Schedule VIII, lnes 1 and 16, column (3) Schedule VIII, Lnes 2 and 17, column (3) Schedule VIII, Lnes 3 and 18, column (3) Schedule VIII, Lnes 4 and 19, column (3) Schedule VIII, Lnes 5 and 20, column (3) Schedule VIII, Lnes 6 and 21, column (3) Schedule VIII, Lnes 7 and 22, column (3) Schedule VIII, Lnes 8 and 23, column (3) Schedule VIII, Lnes 9 and 24, column (3) Schedule VIII, Lnes 10 and 25, column (3) GV 2 Schedule VIII, Lnes 11 and 26, column (3) Schedule VIII, Lnes 12 and Statement Source These Rules GV 3 Schedule VIII, lnes 1 and 16, column (4) Schedule VIII, Lnes 2 and 17, column (4) Schedule VIII, Lnes 3 and 18, column (4) Schedule VIII, Lnes 4 and 19, column (4) Schedule VIII, Lnes 5 and 20, column (4) Schedule VIII, Lnes 6 and 21, column (4) Schedule VIII, Lnes 7 and 22, column (4) Schedule VIII, Lnes 8 and 23, column (4) Schedule VIII, Lnes 9 and 24, column (4) Schedule VIII, Lnes 10 and 25, column (4) Schedule VIII, Lnes 11 and 26, column (4) Schedule VIII, Lnes 12 and Statement Source These Rules Nar1 Schedule VIII, lnes 1, column (5) Schedule VIII, Lnes 2, column (5) Schedule VIII, Lnes 3, column (5) Schedule VIII, Lnes 4, column (5) Schedule VIII, Lnes 5, column (5) Schedule VIII, Lnes 6, column (5) Schedule VIII, Lnes 7, column (5) Schedule VIII, Lnes 8, column (5) Schedule VIII, Lnes 9, column (5) Schedule VIII, Lnes 10, column (5) Schedule VIII, Lnes 11, column (5) Schedule VIII, Lnes Statement Source These Rules Nar2 Schedule VIII, lnes 1, column (6) Schedule VIII, Lnes 2, column (6) Schedule VIII, Lnes 3, column (6) Schedule VIII, Lnes 4, column (6) Schedule VIII, Lnes 5, column (6) Schedule VIII, Lnes 6, column (6) Schedule VIII, Lnes 7, column (6) Schedule VIII, Lnes 8, column (6) Schedule VIII, Lnes 9, column (6) Schedule VIII, Lnes 10, column (6) Schedule VIII, Lnes 11, column (6) Schedule VIII, Lnes Statement Source These Rules Nar3 Schedule VIII, lnes 1, column (7) Schedule VIII, Lnes 2, column (7) Schedule VIII, Lnes 3, column (7) Schedule VIII, Lnes 4, column (7) Schedule VIII, Lnes 5, column (7) Schedule VIII, Lnes 6, column (7) Schedule VIII, Lnes 7, column (7) Schedule VIII, Lnes 8, column (7) Schedule VIII, Lnes 9, column (7) Schedule VIII, Lnes 10, column (7) Schedule VIII, Lnes 11, column (7) Schedule VIII, Lnes 12, 23

16 Guaranteed mnmum accumulaton beneft wth more than 7 years but less than or equal to 8 years to maturty Guaranteed mnmum accumulaton beneft wth more than 8 years but less than or equal to 9 years to maturty Guaranteed mnmum accumulaton beneft wth more than 9 years to maturty Varable Annuty Beneft Type 27, column (2) 27, column (3) 27, column (4) 12, column (5) Schedule VIII, Lnes 13 and 28, column (2) Schedule VIII, Lnes 14 and 29, column (2) Schedule VIII, Lnes 15 and 30, column (2) Schedule VIII, Lnes 13 and 28, column (3) Schedule VIII, Lnes 14 and 29, column (3) Schedule VIII, Lnes 15 and 30, column (3) Schedule VIII, Lnes 13 and 28, column (4) Schedule VIII, Lnes 14 and 29, column (4) Schedule VIII, Lnes 15 and 30, column (4) Table 13 Captal charge factors for ( α 1, α 2, α3, α 4, α5, α ) Captal Charge α 1 6 Captal Charge α 2 Schedule VIII, Lnes 13, column (5) Schedule VIII, Lnes 14, column (5) Schedule VIII, Lnes 15, column (5) Captal Charge α 3 12, column (6) Schedule VIII, Lnes 13, column (6) Schedule VIII, Lnes 14, column (6) Schedule VIII, Lnes 15, column (6) Captal Charge α 4 Captal Charge α 5 column (7) Schedule VIII, Lnes 13, column (7) Schedule VIII, Lnes 14, column (7) Schedule VIII, Lnes 15, column (7) Guaranteed mnmum death beneft: Return of premum, ratchet and reset 0.25% 0.50% 0.75% 4.00% 8.50% 13.00% Guaranteed mnmum death beneft: Enhanced benefts (roll up) 0.75% 1.00% 1.25% 12.00% 16.50% 21.00% Guaranteed mnmum ncome beneft 5.00% 6.50% 8.00% % % % Guaranteed mnmum wthdrawal beneft 3.25% 4.25% 5.00% 60.00% 75.00% 90.00% Guaranteed enhanced earnngs beneft 0.00% 0.50% 1.00% 1.00% 9.00% 17.00% Guaranteed mnmum accumulaton beneft wth 1 year or less to maturty 3.20% 5.00% 9.00% 90.00% % % Guaranteed mnmum accumulaton beneft wth more than 1 year but less than or equal to 2 years to maturty 3.00% 5.00% 8.90% 80.00% % % Guaranteed mnmum accumulaton beneft wth more than 2 years but less than or equal to 3 years to maturty 3.00% 5.00% 8.90% 70.00% % % Guaranteed mnmum accumulaton beneft wth more than 3 years but less than or equal to 4 years to maturty 2.80% 5.00% 8.80% 60.00% 95.00% % Guaranteed mnmum accumulaton beneft wth more than 4 years but less than or equal to 5 years to maturty 2.40% 4.30% 8.00% 55.00% 85.00% % Guaranteed mnmum accumulaton beneft wth more than 5 years but less than or equal to 6 years to maturty 2.00% 3.50% 6.80% 50.00% 75.00% % Guaranteed mnmum accumulaton beneft wth more than 6 years but less than or equal to 7 years to maturty 1.70% 2.80% 5.90% 45.00% 65.00% 90.00% Guaranteed mnmum accumulaton beneft wth more than 7 years but less than or equal to 8 years to maturty 1.40% 2.10% 4.90% 40.00% 55.00% 80.00% Guaranteed mnmum accumulaton beneft wth more than 8 years but less than or equal to 9 years to maturty 1.10% 1.70% 4.30% 35.00% 50.00% 70.00% Guaranteed mnmum accumulaton beneft wth more than 9 years to maturty 1.00% 1.40% 3.90% 30.00% 45.00% 60.00% Captal Charge α 6 24

17 14. The long-term other nsurance rsk captal calculaton shall be establshed n accordance wth the followng formula C = α NetBAR Where: LToth α BAR > 1 BSCR adjusted reserves BAR = captal charge factor as prescrbed n Table 14; and = the BSCR adjusted reserves as descrbed n Table 14. Table 14 Captal charge factors for Statement Source These Rules BAR Captal Factor Mortalty (term nsurance, whole lfe, unversal lfe) Schedule VII, Column (7), Lne 1 2.0% Crtcal llness (ncludng accelerated crtcal llness Schedule VII, Column (7), Lne 2 2.0% products) Longevty (mmedate payout annutes, contngent Schedule VII, Column (7), Lne 3(f) 0.5% annutes, penson pay-outs) Longevty (deferred pay-out annutes, future contngent annutes, future penson Schedule VII, Column (7), Lne 4(g) 0.5% pay- outs) Annutes certan only Schedule VII, Column (7), Lne 5 0.5% Deferred accumulaton annutes Schedule VII, Column (7), Lne 6 0.5% Dsablty ncome: actve lves ncludng waver of premum and long-term Schedule VII, Column (7), Lne 7(d) 2.0% care Dsablty ncome: actve lves other accdent and Schedule VII, Column (7), Lne 8 2.0% sckness Dsablty ncome: clams n payment ncludng waver of premum and long-term Schedule VII, Column (7), Lne 9 0.5% care Dsablty ncome: clams n payment other accdent Schedule VII, Column (7), Lne % and sckness Group lfe Schedule VII, Column (7), Lne % Group dsablty Schedule VII, Column (7), Lne % Group health Schedule VII, Column (7), Lne % Stop loss Schedule VII, Column (7), Lne % Rder (other product rders not ncluded above) Schedule VII, Column (7), Lne % 15. The operatonal rsk charge calculaton shall be establshed n accordance wth the followng formula: C op ACov = ρ where α 25

18 ρ ACov = an amount between 1% and 10% as determned by the Authorty n accordance wth Table 15; and = BSCR after Covarance amount or an amount prescrbed by the Authorty. Table 15 Operatonal Rsk Charge for ρ Overall Score Applcable Operatonal Rsk Charge ρ <= % >5200 <= % >6000 <= % >6650 <= % >7250 <= % >7650 <= % >7850 <= % >8050 <= % >8250 <= % > % INSTRUCTIONS AFFECTING TABLE 15 In ths table, overall score means an amount equal to the sum of the aggregate score derved from each of tables 15A, 15B, 15C, 15D, 15E, and 15F. TABLE 15A Corporate Governance Score Table Crteron Implemented Score Board sets rsk polces, practces and tolerance lmts for all materal foreseeable operatonal rsks at least annually and 200 ensures they are communcated to relevant busness unts Board montors adherence to operatonal rsk tolerance lmts more regularly than annually 200 Board receves, at least annually, reports on the effectveness of materal operatonal rsk nternal controls as well as 200 management s plans to address related weaknesses Board ensures that systems and/or procedures are n place to dentfy, report and promptly address nternal control 200 defcences related to operatonal rsks Board promotes full, open and tmely dsclosure from senor management on all sgnfcant ssues related to operatonal 200 rsk Board ensures that perodc ndependent revews of the rsk management functon are performed and receves the 200 fndngs of the revew Total XX Comments INSTRUCTIONS AFFECTING TABLE 15A The total score s derved by addng the score for each crteron of an nsurer s corporate structure that the nsurer has mplemented. 26

19 TABLE 15B Rsk Management Functon ( RMF ) Score Table Crteron Implemented Score RMF s ndependent of other operatonal unts and has drect access to the Board of Drectors 150 RMF s entrenched n strategc plannng, decson makng and the budgetng process 150 RMF ensures that the rsk management procedures and polces are well documented and approved by the Board of 150 Drectors RMF ensures that the rsk management polces and procedures are communcated throughout the organzaton 150 RMF ensures that operatonal rsk management processes and procedures are revewed at least annually 150 RMF ensures that loss events arsng from operatonal rsks are documented and loss event data s ntegrated nto the 150 rsk management strategy RMF ensures that rsk management recommendatons are documented for operatonal unts, ensures that defcences have remedal plans and that progress on the executon of 150 such plans are reported to the Board of Drectors at least annually Total XX Comments INSTRUCTIONS AFFECTING TABLE 15B The total score s derved by addng the score for each crteron of an nsurer s rsk management functon that the nsurer has mplemented. 27

20 TABLE 15C Rsk Identfcaton Processes ( RIP ) Score Table Progresson Crteron Operatonal Rsk Areas Stage Scorng Fraud HR Outsourcng 1 50 RIP are ad hoc RIP have been mplemented but not standardzed across the organzaton RIP have been mplemented, well documented and understood by relevant staff, and standardzed across the organzaton Dstrbuton Channels Busness Processes Busness Contnuty IT Complance In addton to Stage 3, RIP are revewed at least annually wth the vew to assessng effectveness and ntroducng mprovements Total XX XX XX XX XX XX XX XX Comments INSTRUCTIONS AFFECTING TABLE 15C (a) the total score s derved by addng the ndvdual score for each operatonal rsk area correspondng to the stage of the nsurer s mplementaton n respect of ts RIP; (b) where the nsurer s assessment of the operatonal rsk area s between stages (.e. exceeds the crteron for each gven stage, whle only partally meetng the crteron of the next stage), the nsurer shall be deemed to have met the crteron of the lower stage; and (c) where an operatonal rsk area s not applcable to the nsurer s operatons, the nsurer shall record such fact and the reasons for arrvng at ths concluson n the comments secton and be deemed to have met the crteron of the hghest stage. 28

21 TABLE 15D - Rsk Measurement Processes ( RMP ) Score Table Progresson Crteron Operatonal Rsk Areas Stage Scorng Fraud HR Outsourcng 1 50 RMP are ad hoc Dstrbuton Channels Busness Processes Busness Contnuty IT Complance RMP have been mplemented but not standardzed across the organzaton RMP have been mplemented, well documented and understood by relevant staff, and standardzed across the organzaton In addton to Stage 3, RMP are revewed at least annually wth the vew to assessng effectveness and ntroducng mprovements Total XX XX XX XX XX XX XX XX Comments INSTRUCTIONS AFFECTING TABLE 15D (a) the total score s derved by addng the ndvdual score for each operatonal rsk area correspondng to the stage of the nsurer s mplementaton n respect of ts RMP; (b) where the nsurer s assessment of the operatonal rsk area s between stages (.e. exceeds the crteron for each gven stage, whle only partally meetng the crteron of the next stage), the nsurer shall be deemed to have met the crteron of the lower stage; and (c) where an operatonal rsk area s not applcable to the nsurer s operatons, the nsurer shall record such fact and the reasons for arrvng at ths concluson n the comments secton and be deemed to have met the crteron of the hghest stage. 29

22 TABLE 15E - Rsk Response Processes ( RRP ) Score Table Progresson Crteron Operatonal Rsk Areas Stage Scorng Fraud HR Outsourcng 1 50 RRP are ad hoc RRP have been mplemented but not standardzed across the organzaton RRP have been mplemented, well documented and understood by relevant staff, and standardzed across the organzaton Dstrbuton Channels Busness Processes Busness Contnuty IT Complance In addton to Stage 3, RRP are revewed at least annually wth the vew to assessng effectveness and ntroducng mprovements Total XX XX XX XX XX XX XX XX Comments INSTRUCTIONS AFFECTING TABLE 15E (a) the total score s derved by addng the ndvdual score for each operatonal rsk area correspondng to the stage of the nsurer s mplementaton n respect of ts RRP; (b) where the nsurer s assessment of the operatonal rsk area s between stages (.e. exceeds the crteron for each gven stage, whle only partally meetng the crteron of the next stage), the nsurer shall be deemed to have met the crteron of the lower stage; and (c) where an operatonal rsk area s not applcable to the nsurer s operatons, the nsurer shall record such fact and the reasons for arrvng at ths concluson n the comments secton and be deemed to have met the crteron of the hghest stage. 30

23 TABLE 15F - Rsk Montorng and Reportng Processes ( RMRP ) Score Table Progresson Crteron Operatonal Rsk Areas Stage Scorng Fraud HR Outsourcng 1 50 RMRP are ad hoc RMRP have been mplemented but not standardzed across the organzaton RMRP have been mplemented, well documented and understood by relevant staff, and standardzed across the organzaton Dstrbuton Channels Busness Processes Busness Contnuty IT Complance In addton to Stage 3, RMRP are revewed at least annually wth the vew to assessng effectveness and ntroducng mprovements Total XX XX XX XX XX XX XX XX Comments INSTRUCTIONS AFFECTING TABLE 15F (a) the total score s derved by addng the ndvdual score for each operatonal rsk area correspondng to the stage of the nsurer s mplementaton n respect of ts RMRP; (b) where the nsurer s assessment of the operatonal rsk area s between stages (.e. exceeds the crteron for each gven stage, whle only partally meetng the crteron of the next stage), the nsurer shall be deemed to have met the crteron of the lower stage; and (c) where an operatonal rsk area s not applcable to the nsurer s operatons, the nsurer shall record such fact and the reasons for arrvng at ths concluson n the comments secton and be deemed to have met the crteron of the hghest stage 16. The regulatory captal requrement for regulated non-nsurance fnancal operatng enttes shall be determned n accordance wth Schedule XVI - Schedule of Regulated Non-Insurance Fnancal Operatng Enttes. Ths amount shall be equal to the sum of the nsurer s proportonate share of each entty s regulatory captal requrement n accordance wth the applcable solvency laws of the jursdcton where the entty s lcensed or regstered The operatonal rsk charge calculaton shall be establshed n accordance wth the followng formula 31

24 SCHEDULE II (Paragraph 6) Schedule of fxed ncome and equty nvestments by BSCR ratng [blank] name of Company As at [blank] (day/month/year) All amounts are expressed n (currency used) Lne no. Descrpton (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Quoted and unquoted bonds and debentures 1 BSCR ratng 0 2 BSCR ratng 1 3 BSCR ratng 2 4 BSCR ratng 3 5 BSCR ratng 4 6 BSCR ratng 5 7 BSCR ratng 6 8 BSCR ratng 7 9 BSCR ratng 8 10 Total Quoted and unquoted equtes 11 BSCR ratng 1 12 BSCR ratng 2 13 BSCR ratng 3 14 BSCR ratng 4 15 BSCR ratng 5 16 BSCR ratng 6 Corporate and soveregn bonds Common stock (Form 4EBS, Lnes 2(c)() & 3(c)()) Resdental mortgagebacked securtes Preferred stock (Form 4EBS, Lnes 2(c)() & 3(c)()) Commercal mortgage-backed securtes/asset- backed securtes Equty mutual funds (Form 4EBS, Lnes 2(c)() & 3(c)()) Bond mutual funds Total (Form 4EBS, Lnes 2(b) & 3(b)) Total (Form 4EBS, Lnes 2(d) & 3(d)) 32

25 17 BSCR ratng 7 18 BSCR ratng 8 19 Quoted equty funds 20 Unquoted equty funds 21 Total Mortgage loans 22 Insured/ guaranteed mortgages 23 Other commercal and farm mortgages 24 Other resdental mortgages 25 Mortgages not n good standng 26 Total Mortgage loans (Form 4EBS, Lne 5(c)) INSTRUCTIONS AFFECTING SCHEDULE II: (a) fxed ncome nvestments, both quoted and unquoted, shall be categorzed nto corporate bonds and soveregn bonds, resdental mortgage-backed securtes, commercal mortgage-backed securtes/asset-backed securtes, and bond mutual funds and classfed by BSCR ratng; (b) equty nvestments, both quoted and unquoted, shall be categorzed nto common stock, preferred stock and equty mutual funds; (c) preferred stock shall be classfed by BSCR ratng; (d) the latest avalable AM Best, S&P, Moody s, or Ftch ratngs shall be used n determnng the approprate BSCR ratng of any fxed ncome securty or preferred stock; 33

26 (e) where the ratngs of a securty by dfferent ratng agences dffer, the nsurer shall classfy the securty accordng to the most conservatve ratng; (f) unrated securtes shall be assgned a BSCR ratng of 8; (g) soveregn debt ssued by a country n ts own currency that s rated AA- or better shall be classfed under BSCR ratng 0 whle all other soveregn bonds shall be classfed n a smlar manner as corporate bonds; (h) debt ssued by government-owned and related enttes that were explctly guaranteed by that government, wth the excepton of mortgage-backed securtes, shall be assgned a BSCR ratng of 0; () (j) bond mutual funds shall be classfed based on the underlyng bond ratngs as advsed by the fund managers; equty mutual funds shall be classfed n a smlar manner as drect equty nvestments whle money market funds shall be treated as cash and cash equvalents; and are to be reported on both an EBS Valuaton and unconsoldated bass. BSCR Ratng Standard & Poor s Moody s AM Best Ftch 1 AAA Aaa A++ AAA 2 AA+ to AA- Aa1 to Aa3 A+ AA+ to AA- 3 A+ to A- A1 to A3 A A+ to A- 4 BBB+ to BBB- Baa1 to Baa3 A- BBB+ to BBB- 5 BB+ to BB- Ba1 to Ba3 B++ to B BB+ to BB- 6 B+ to B- B1 to B3 B- to C+ B+ to B- 7 CCC+ to CCC- Caa1 to Caa3 C, C- CCC+ to CCC- 8 Below CCC- Below Caa3 Below C- Below CCC- 34

27 SCHEDULE IIA (Paragraph 6) Schedule of funds held by cedng rensurers n segregated accounts/trusts by BSCR ratng [blank] name of Company As at [blank] (day/month/year) All amounts are expressed n (currency used) Lne no. Descrpton (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Quoted and unquoted bonds and debentures 1 BSCR ratng 0 2 BSCR ratng 1 3 BSCR ratng 2 4 BSCR ratng 3 5 BSCR ratng 4 6 BSCR ratng 5 7 BSCR ratng 6 8 BSCR ratng 7 9 BSCR ratng 8 10 Total Quoted and unquoted equtes 11 BSCR ratng 1 12 BSCR ratng 2 13 BSCR ratng 3 14 BSCR ratng 4 15 BSCR ratng 5 16 BSCR ratng 6 17 BSCR ratng 7 Corporate and soveregn bonds Resdental mortgagebacked securtes Commercal mortgage-backed securtes/asset- backed securtes Bond mutual funds Common stock Preferred stock Equty mutual funds ( Other Investments Total Total 35

28 18 BSCR ratng 8 19 Quoted equty funds 20 Unquoted equty funds 21 Total Mortgage loans Mortgage loans 22 Insured/ guaranteed mortgages 23 Other commercal and farm mortgages 24 Other resdental mortgages 25 Mortgages not n good standng 26 Total Cash and cash equvalents Cash and cash equvalents INSTRUCTIONS AFFECTING SCHEDULE IIA: (a) All funds held by cedng rensurers (as reflected n Form 4EBS, Lne 12(c)) n segregated accounts/trusts wth dentfable assets, such as fxed ncome nvestments, equty nvestments, mortgage loans, and cash and cash equvalents, shall be ncluded here; (b) fxed ncome nvestments, both quoted and unquoted, shall be categorzed nto corporate bonds and soveregn bonds, resdental mortgage-backed securtes, commercal mortgage-backed securtes/asset-backed securtes, and bond mutual funds and classfed by BSCR ratng; (c) equty nvestments, both quoted and unquoted, shall be categorzed nto common stock, preferred stock and equty mutual funds; 36

29 (d) preferred stock shall be classfed by BSCR ratng; (e) the latest avalable AM Best, S&P, Moody s, or Ftch ratngs shall be used n determnng the approprate BSCR ratng of any fxed ncome securty or preferred stock; (f) where the ratngs of a securty by dfferent ratng agences dffer, the nsurer shall classfy the securty accordng to the most conservatve ratng; (g) unrated securtes shall be assgned a BSCR ratng of 8; (h) soveregn debt ssued by a country n ts own currency that s rated AA- or better shall be classfed under BSCR ratng 0 whle all other soveregn bonds shall be classfed n a smlar manner as corporate bonds; () (j) debt ssued by government-owned and related enttes that were explctly guaranteed by that government, wth the excepton of mortgage-backed securtes, shall be assgned a BSCR ratng of 0; bond mutual funds shall be classfed based on the underlyng bond ratngs as advsed by the fund managers; equty mutual funds shall be classfed n a smlar manner as drect equty nvestments whle money market funds shall be treated as cash and cash equvalents; (k) other nvestments shall nclude nvestments not reported as bond and debentures, common stock, preferred stock or equty mutual funds; and (l) amounts are to be reported both on an EBS Valuaton and unconsoldated bass. BSCR Ratng Standard & Poor s Moody s AM Best Ftch 1 AAA Aaa A++ AAA 2 AA+ to AA- Aa1 to Aa3 A+ AA+ to AA- 3 A+ to A- A1 to A3 A A+ to A- 4 BBB+ to BBB- Baa1 to Baa3 A- BBB+ to BBB- 5 BB+ to BB- Ba1 to Ba3 B++ to B BB+ to BB- 6 B+ to B- B1 to B3 B- to C+ B+ to B- 7 CCC+ to CCC- Caa1 to Caa3 C, C- CCC+ to CCC- 8 Below CCC- Below Caa3 Below C- Below CCC- 37