Bermuda s Support of European (Re)Insurance Markets Bradley Kading

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1 Bermuda s Support of European (Re)Insurance Markets Bradley Kading August 2013

2 Bermuda/Others: The Market Case for Third Country Equivalence Equivalence under Solvency II for Bermuda companies is beneficial for European insurers and policyholders Bermuda is committed to achieving regulatory equivalence

3 Association of Bermuda Insurers and Reinsurers 21 Companies Highly capitalized, distinct regulation 51 ($66.4) billion gross written premiums, 73 ($95.2) billion surplus Worldwide business enterprises Principal underwriting operations in Bermuda, Europe and the United States 2012 YE Data

4 Worldwide Rankings* Standard and Poor s reinsurer rankings: Bermuda 16 of the top 40 (2 in top 10) Europe 11 of the top 40; US 6 of the top 40 Premium: Europe 56%; US 19%; Bermuda 16%; Asia 9% 2012 reports; 2010 data; S & P NWP Life/P&C

5 Market Diversification Reinsurance European leaders 5X as big as largest Bermuda reinsurer Growth of Bermuda leads to market and risk diversification Bermuda carrier growth leads to market choice, less concentration Good for the European insurers and policyholders

6 Bermuda Capacity Needed We have a market that is international and that has capacity needs such as European wind exposure, so you need to have people who have an open exposure mind and this is what the Bermudians have... If they hadn t come in the community would not have been able to fulfill its function of covers 100%. - Jurgen Graber, COO Hannover Re, Reactions, October 2007

7 57% of Global Reinsurance Provided by Non-EEA Firms Switzerland 13% US 19% Australia 1% Bermuda 16% Other 4% Japan 4% Switzerland is included as a non-eea. Jurisdiction as identified by S&P Global Reinsurance Highlights Source: Standard and Poor s Global Reinsurance Highlights 2011, p 48 EEA 43%

8 Non-EEA Reinsurers have 51% of the Global P/C Reinsurance Market China RE 3% Partner RE 3% Transatlantic 3% Toa RE 2% General Ins. Corp. of India 2% MAPFRE RE 2% Everest RE 3% QBE 2% Korean RE 4% R+V Versicherung XL Group 2% 2% Axis 2% SCOR 4% MS&AD 1% Odyssey 1% Hannover 7% Munich Re 17% Berkshire Hathaway 8% Lloyd's 11% Swiss Re 14% Global Reinsurance Market Share by Property/Casualty Reinsurance Gross Premiums Earned (2011). Switzerland is included as a non-eea. Jurisdiction as identified by S&P Global Reinsurance Highlights Top 25 Global P/C Reinsurers listed as identified by AM Best. Source: AM Best, Best s Special Report: Global Reinsurance 2012 Market Review, September 3, Catlin 1% Caisse 1% Tokio 1% RenaissanceRe 1% Amlin 1%

9 Relative Importance of Bermuda to Euro Cedents Aon Benfield EMEA Premium Placed by Domicile France, Germany, Spain and Benelux offices contribute to around 80% of the Aon Benfield total premium placed in Bermuda Companies Around 25% of the total Aon Benfield premium emanating from Germany and Spain is placed with Bermuda Cos. & their subsidiaries, followed by around 18% from France and Benelux Countries Maximum amount of premium placed in Bermuda originates from AB France, followed by Germany and Spain

10 Bermuda Single Most Important Cat Market

11 2009 Windstorm Klaus: France and Spain Worst Storm Since 1999 s Martin Non-European Reinsurers Provided 30% of Coverage for Klaus French Loss Wind speed maps of Klaus (left) and martin (right) in km/h

12 Windstorm Klaus More than 500M of estimated French 1.8B loss to be paid by Non-EU reinsurers Klaus caused an estimated 2.5B loss January 2009; 1.8B in France and.7b in Spain Largest European catastrophe in 2009; Worst storm since Martin KMPH winds on Bordeaux Coast Market share loss estimate from AON Benfield Study 2009, Renewal of Catastrophe Reinsurance Programmes in France; Spanish Consorcio de Segues (CCS) had an estimated 15% of gross Spanish loss Sources: AXA, Large Loss Report Windstorm Klaus, Sept 2009; AON Benfield Event Recap Report, Windstorm Klaus-Jan 23-24, 2009; Extra Tropical Storm Klaus-France and Spain 24 January 2009, EQE Cat, ABS Consulting

13 Catastrophe Reinsurance Programs: France Dramatic variation year to year in reinsurance market choice The number of European leading reinsurer (excluding France) decrease. Whereas, French and Bermudian reinsurers both increase. Bermuda is contributing to greater capacity at a lower price Europe (without France) France USA Bermuda Untold No aperitor Non EU Reinsurers Provide 30% of the capacity in 2009

14 Catastrophe Reinsurance Programs in France French insurers have been purchasing higher amounts of cat cover in recent years; [1] The Market is purchasing about 9B in first event capacity; 8B in second event capacity [2] While capacity demands have increased, prices have fallen [3] Bermuda s share of this capacity has ranged from 4% to 20% during a four year period. The Bermuda share increased in 2009 from 2008 [4] [1] Aon Benfield Study 2009 Renewal of Catastrophe Reinsurance Programs in France p.2 [2] Aon Benfield Study 2009 Renewal of Catastrophe Reinsurance Programs in France p.3 [3] In last seven years, average increase in capacity has been 14.3% per year, p.2;. Cost of coverage as measured by rate online index has declined for seven years in a row, p.5 [4] Aon Benfield Study 2009, Renewal of Catastrophe Reinsurance Programs in France, p.6

15 Hurricane Xynthia Reported Losses - $3.4bn European Event Bermuda-domiciled entities reported contribution is emerging and already significant Source: Company Statements; Guy Carpenter

16 Windstorm Xynthia Bermuda contribution is two part: European subsidiary share Bermudian parent share Based on early loss estimates Bermuda aggregated share would be an estimated 37% of the losses Consistent with other analysis * EQECat loss estimates; Dowling and Partners, 4/1/10, Bermuda share $206 M of $560 Xynthia only loss reports; Europe 60%; EEA 40% combinations with Chile not included in the count; Ultimate parent; Loss Portugal, Spain, France, Germany, Benelux

17 Economic Impact: Third Country (Re)Insurers Note: Based on the geographical location of the ultimate holding companies of insurers with losses arising out of the operators liabilities from the Buncefield depot explosion in December 2005*. *2005 Hertfordshire Oil Storage Terminal (Buncefield), near London, UK. The fire and explosions were the largest of their kind in peacetime Europe. 2,700 insurance claims were filed. Insured liabilities are estimated at nearly $850M US.

18 Non-EU Insurers Have 55% of 2009 Air France Crash Liability Insurer Bermuda 222 US 212 Europe Asia Other 10 Total 1000 Share of theoretical $1bn market loss ($mm) Source: Insurance Insider, September 2009

19 Non-EU Insurers have 74% of Costa Concordia (Italy) Loss Costa Concordia cruise liner sinking in Italy (2012); Estimated losses now $1.7 billion; reported losses at $931 million 0% Reported Loss Share Totals (in $m) US 14% Europe 26% Other 10% Bermuda 50% Source: Insurance Insider July 2013

20 European Floods 2013 Flooding Germany, Austria, Czech Republic Insured loss estimates E3 to E6 billion EURO ABIR members reported loss estimates: $250 million Source: AIR estimates E (US 4-7); Company Loss Reports; Insurance Insider; Net Losses. Very preliminary loss estimates.

21 Not Just Reinsurance: EU Commercial Liability France: 1 of top 10 writers Non-EU Germany: 2 of top 10 writers Non-EU Italy: 1 of top 10 writers Non-EU United Kingdom: 6 of top 10 writers Non-EU Source: Swiss Re Sigma, No. 5/2009; Commercial Liability: A Challenge for Businesses and Their Insurers, ABIR Ultimate Parent Analysis

22 Aggregated Bermuda Capital Compared with Largest Insurance Group Capital Group capital FY11 (USD mn) Berkshire Hathaway Bermuda Re Composite Europe-based capital* 86.8 Allianz SE 61.2 Munich RE 30.2 Swiss Re 31.3 Lloyd s 28.2 Ace Limited 24.5 Assicurazioni Generali 23.5 Tokio Marine 14.0 MS&AD 13.1 NKSJ Holdings 12.2 Source: Source: AM Best, Best s Special Report: Global Reinsurance 2012 Market Review, September 3, 2012; jurisdiction as identified by S&P Global Reinsurance Highlights 2011.

23 EU Equivalency/Market Access Solvency II Bermuda and Switzerland chosen for assessment on three elements of equivalency Third countries supervisory regimes require a positive regulatory equivalence decision by Commission for equal treatment of reinsurers (Article 172); group solvency (227) and groups (Article 260) EIOPA completed first round; next round 2015?

24 Without Equivalence? Without equivalence: EU subsidiaries likely subject to additional capital requirements; group supervisor limited Credit for reinsurance may be reduced/collateral possible Regulatory inefficiencies result Capacity and competition diminished?

25 EEA Market Benefits EEA consumers benefit from Third Country (re)insurers: Competition and capacity Global coverage Diversification counter part risk

26 ABIR Members: 21 Member State Licenses 18 of 21 ABIR members have European subsidiaries; Member state licenses: Austria (2) Belgium (4) Czech Republic (1) Denmark (2) Finland (1) France (6) Germany (6) Gibraltar (1) Hungary (1) Ireland (11) Italy (4) Luxembourg (1) Malta (1) Netherlands (4) Norway (2) Poland (1) Portugal (2) Spain (5) Sweden (2) Switzerland (10) United Kingdom (16) Source: ABIR Economic Impact Survey 2013 for Calendar Year 2012; data provided based on reporting companies.

27 ABIR Members: 7,807 Employees in EEA 5,214 UK 852 France 542 Germany 293 Ireland 195 Italy 134 Netherlands 160 Portugal 188 Spain 88 Sweden Switzerland Source: ABIR Economic Impact Survey 2013 for Calendar Year 2012; data provided based on reporting companies.

28 ABIR Members ACE Allied World Alterra Arch Argo Group Aspen Assured Guaranty Axis Catlin Endurance Hiscox Lancashire Montpelier Re Partner Re Platinum Re Renaissance Re Third Point Re Tokio Millennium Re Torus Validus Re XL Group plc

29 ABIR Contacts Bradley Kading, President and Executive Director Leila Madeiros, Senior Vice President, Deputy Director and Corporate Secretary

30 Bradley Kading Association of Bermuda Insurers and Reinsurers