Asia Pacific. Evolving Criteria. September Empower Results

Transcription

1 Asia Pacific Evolving Criteria September 2013 Empower Results

2 Aon Benfield Contents 3 Executive Summary 4 Economic Growth 5 Regulatory Developments 11 Other Developments 12 Conclusion 13 Contact Information 7 Rating Agency Update 2

3 Evolving Criteria Executive Summary The Asia Pacific insurance markets have slowly recovered from the significant losses resulting from the natural disasters in 2011, as the incidence of large scale catastrophes has decreased allowing balance sheets to rebuild. Strong economic growth has also contributed to the Asia Pacific markets stability; albeit the results are shy of earlier expectations. High premium growth expectations due to current low insurance penetration rates, market liberalization and an inflow of investments resulting from risk diversification from existing mature markets to the developing markets help support the Asia Pacific insurance markets stable position. Offsetting these strengths, the low interest rate environment has been persistent. Tightened regulatory solvency requirements continue to put pressure on companies capitalization levels, and the possibility of an economic slowdown in China may affect many markets in the region. These factors create uncertainty for the markets and increase the difficulty of current operating conditions. These trends are evident in a five year view of S&P rating actions across Asia Pacific was dominated by downgrades, resulting from the 2011 catastrophic losses, but 2013 has seen a rebound in upgrades, reflecting re-strengthening of companies balance sheets. Exhibit 1: S&P Non-Life and Composite APAC Rating Changes Upgrades Downgrades

4 Aon Benfield Economic Growth A key risk for Asia Pacific economic growth is a potential continued decline in the Chinese economy. Recent thinning of margins on manufacturing business is resulting in a capital retreat, and the central government has yet to consider a material stimulus plan. In addition, export prospects and investment appetite have also dampened. S&P s most recent baseline forecast of China s GDP growth in 2013 and 2014 is 7.3 percent, which is lower than 2012 GDP growth of 7.8 percent. China s growth prospects have ramifications on other economies such as Australia s economy which is correlated with China mainly via the mining sector. Australia may also see slower GDP growth, as suggested by S&P s 2013 forecast of 2.5 percent, which is materially lower than its 2012 actual growth of 3.6 percent. Even though the economy is slowing, Asia Pacific s economy is still relatively strong. Developing countries in this region continue to invest in infrastructure projects, and the current low insurance penetration rate leaves the opportunity for significant insurance premium growth. According to S&P s most recent forecast for Asia Pacific insurance growth, the P&C insurance industry s expected nominal premium growth far exceeds the forecasted GDP growth in all countries studied. Exhibit 2: Standard & Poor s Economic Forecasts of Real GDP Growth (baseline) (%) 2012 actual 2013f 2014f Australia China India* Japan South Korea Hong Kong Indonesia Malaysia Philippines Singapore Taiwan Thailand Vietnam New Zealand Asia-Pacific Emerging Asia Newly industralized economies ASEAN Exhibit 3: Growth Forecasts for P&C Insurance (%) Nominal premium growth (F) Australia 4-7 China Hong Kong 5-10 Japan 2-4 Korea 9-12 Malaysia 7-8 New Zealand 3-4 Philippines Singapore (on shore) 5-6 Singapore (offshore shore)

5 Evolving Criteria Regulatory Developments Regulatory requirements are the driver behind capital requirements for most companies in Asia Pacific rather than rating agency requirements, which are generally the driver of capital requirements for companies in the U.S. and EMEA. This is due to the fact that relatively few Asia Pacific insurance companies are rated by one or more of the global rating agencies (A.M. Best, Fitch, Moody s, and S&P). The regulatory regimes are evolving rapidly in Asia Pacific, focusing on developing risk based capital (RBC) frameworks or strengthening existing solvency requirements. Countries are releasing or refining their criteria regularly, and companies are struggling to keep pace with the changes. Aon Benfield publishes an annual Asia-Pacific Solvency Regulation report, which details the non-life solvency requirements of 20 jurisdictions in Asia Pacific. See exhibit 9 for a full list of countries analyzed. This report also provides detailed information on recent regulatory developments. The 2013 edition is now available at Below are some highlights from the report. China China has made solid progress in upgrading its solvency regime when the China Insurance Regulatory Commission (CIRC) issued the Overall Framework of the Second-Generation Solvency Supervision System In China in May 2013, which set the objectives and framework and determined the technical guidelines. The second-generation solvency regime, officially named China Risk Oriented Solvency System (C-ROSS), has a three-pillar structure quantitative capital requirements, qualitative regulatory requirements or risk management, and market discipline or information disclosure. According to CIRC, the details of C-ROSS will not be available until the end of As such, it is too early to assess the change in capital requirements and subsequent impact on insurers; however, it is expected that C-ROSS will likely improve Chinese insurers enterprise risk management (ERM). In the last 12 months, the CIRC has also issued multiple new regulations aimed at easing restrictions of investment and pricing. More investment channels and classes are now allowed, which may help insurers improve their financial performance. Hong Kong In Hong Kong, where the current solvency requirement is too simple to appropriately reflect the risks insurers face, the regulator, OCI, has hired an external consultant to help produce an RBC framework for OCI to implement in approximately In addition, the initiative of establishing an Independent Insurance Authority (IIA) has passed the consultation stage. The IIA, anticipated to be in place in 2015, may help facilitate market innovation and sustainable development while enhancing regulatory activities. Australia Early 2009, the Australian Prudential Regulation Authority (APRA) initiated the Life and General Insurance Capital Review project (LAGIC), which has strong parallels to Solvency II. The new prudential standards became effective on January 1, 2013, and these have greatly enhanced the risk management practices by considering more risk types and adopting sophisticated calculation techniques. For general insurers, the most significant enhancement is to the insurance concentration risk charge (ICRC), which is the amount of capital to be held against the concentration of insurance risk for general insurers. The old ICRC requirement does not consider the risk that an insurer s capital position can be adversely affected over the year by the occurrence and aggregation of a number of smaller sized loss events, including the cost of purchasing additional reinstatements of reinsurance cover. The enhanced ICRC requirement features a horizontal requirement for exposures to natural perils and is intended to address this weakness. Based on the quantitative impact study performed, APRA estimates that the revision of the capital standards will reduce the overall level of solvency coverage as the general insurance industry would see an overall increase in capital requirements. Singapore In Singapore, the Monetary Authority of Singapore (MAS) issued a consultation paper discussing its plans for a review of the current RBC framework. In light of evolving market practices and global regulatory developments, the review will include the revised Insurance Core Principles and Standards issued by the International Association of Insurance Supervisors in The MAS aims to improve the risk coverage breadth and the risk sensitivity of the framework, and better define the MAS supervisory approach with the solvency intervention levels. In addition, with an increasing importance of ERM in today s complex risk environment, the MAS issued a new framework to improve ERM practice industry standards. With this framework in place, it hopes that insurers will better understand how risks impact business and implement risk management policies and practices for the benefit of long term business sustainability. Insurance Markets Liberalization Both developed and developing markets in Asia Pacific are accelerating liberalization of the markets to support the growth of insurance business. Myanmar recently opened its doors to private insurers for the first time in 50 years, driving great interest in the industry. As the country opens its doors to foreign investments, there has been an increase in infrastructure projects and manufacturing activities, resulting in increased demands for infrastructure and construction insurance. 5

6 Aon Benfield In September 2012, the government granted licenses to 12 private domestic companies allowing them to offer insurance services including life, nonlife and composite insurance in Myanmar. Prior to this, the industry was monopolized by stateowned Myanmar insurance. The Myanmar insurance market remains closed to foreign participation, as the country s regulator plans to establish and build the local insurance market initially, allowing the local insurers to pick up necessary knowledge and skills. With the establishment of the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) in 2015, it is expected that foreign insurers will participate either solely or through joint venture with one of the 12 private domestic insurers. The AEC Blueprint was signed by ASEAN member countries in The document is a master plan guiding the ASEAN members towards achievement of an integrated regional AEC market by 2015, with over 600 million people in its countries. The AEC was created in order to foster a competitive regional market of goods, services, investment capital, and skilled labor amongst all the member countries, achieving equitable economic development and reduced poverty and socioeconomic disparities. With the full implementation of the AEC, the regional market is expected to break down barriers for foreign participation, attracting more foreign investors. This regional market will become a strong force as it integrates with the global economy and increases its competitiveness with other countries, such as China and India. For the ASEAN insurance market, this means the insurance market will be able to benefit from increasing financial globalization with deeper regional economic integration. By 2015, the plan is to substantially remove restrictions for the insurance sector. However, the difference in maturity of each ASEAN member country and development of each market must be recognized and addressed. Different regulations exist in different regimes; there is a need to develop the financial framework, review and standardize regulations and standards as well as strengthen the countries insurance capacity, such as writing microinsurance business. The World Bank will develop and move the ASEAN countries in the same direction for the 2015 AEC. It has also been reported that The World Bank and Japan will promote Thailand as the insurance hub of ASEAN, and help train Thai personnel on various related areas. The World Bank will also give professional services and technical assistance, including knowledge and information, to the neighboring emerging markets of Myanmar, Laos, Cambodia, and Vietnam. Among the ASEAN countries, Singapore has the most developed insurance market, with its advanced regulatory regime and legal system, tax incentives, infrastructure and service, and diverse culture. It is a regional hub for reinsurance business, with an increasing number of reinsurers and underwriters setting up new operations. The government continues to promote this hub position; recently, the Ministry of Finance announced the enhancement of the tax exemption scheme for underwriting offshore specified insurance risk in the Singapore Budget The scheme previously covered terrorism, political, energy, aviation, and agricultural risks, and is now enhanced to include qualifying income derived from offshore catastrophe excess of loss reinsurance. This enhancement is believed to help attract more reinsurance business. Outside the ASEAN region, China also experienced notable liberalization, including opening Compulsory Third Party motor insurance to foreign insurers as well as liberalizing commercial motor insurance pricing. These moves may have a material impact on the long term growth of motor insurance, which is the largest insurance line in China and currently accounts for more than two-thirds of China s P&C business. 6

7 Evolving Criteria Rating Agency Update While the pool of global insurers in Asia Pacific is still small, the importance of an international rating is becoming widely accepted and acknowledged across the region. Accordingly, the rating agencies will likely play a greater role in the evolution of Asia Pacific insurance markets. The four global rating agencies continued the trend of expanding, clarifying and fine-tuning their published rating methodologies over the past 12 months. Numerous proposed and actual criteria updates, rating surveys and special reports were issued, but the greatest stir came from the release of S&P s new insurance carrier rating methodology in early May. While the updates and refinements are driven by various factors, the common theme is to ensure consistency and clarity in the application of rating agency methodology globally. This has required rated companies to disclose more non-public and granular data than ever before. S&P assessed the impact of the proposed new insurer rating methodology through a survey sent in late Standard & Poor s Insurers Rating Methodology Exhibit 4: Rating Updates from New Criteria Exhibit 5: S&P Insurance Ratings Framework Business Risk Profile Insurance Industry Country Risk Assessment (IICRA) ERM Anchor Rating Modifiers Holistic Analysis Rating Caps Financial Risk Profile Management and Governance Indicative Stand-alone Credit Profile Capital and Earnings Risk Position Financial Flexibility 8% 3% 5% 3% Rating Upgrade Rating Downgrade Affirmed Outlook Improved Affirmed Outlook Lowered Affirmed No Change Liquidity Risk Sovereign Risk Stand-alone or Group Credit Profile Group or Government Support Operating Company Issuer Credit Rating or Insurer Financial Strength Rating 81% On 7 May 2013, S&P released its new methodology on rating insurers with the goal to use a more transparent methodology, increase the specificity of rating factors and sub-factors, provide a more forward looking approach that increases comparability, and ensure consistency and centralizing insurance criteria framework in one single criteria document. The Business Risk Profile (BRP) score is determined through an analysis of country and insurance industry related factors and the company s competitive position within that country. Companies that operate in a country that is rated by S&P as Moderate Risk for insurance business have their Anchor rating capped at a+. For companies that operate in multiple countries, the rating is based on the premium weighted average of each country s score. Based on the new criteria, 81 percent of companies rated by them globally were affirmed and only 6 percent were either downgraded or had a negative outlook change. Looking specifically at the Asia-Pacific market, 90 percent of more than 190 insurers were affirmed, 7 percent were upgraded and 2 percent received a rating downgrade. Exhibit 5 shows S&P s Insurance Rating Framework. 7

8 Aon Benfield The following heat map illustrates how S&P views the APAC Market: Exhibit 6: IICRA Heat Map Property Casualty Country Australia China Hong Kong Japan Korea Malaysia IICRA Score Low Risk Intermediate Risk Low Risk Intermediate Risk Low Risk Intermediate Risk Country Risk Very Low Risk Moderate Risk Very Low Risk Low Risk Intermediate Risk Intermediate Risk Industry Risk Low Risk Low Risk Intermediate Risk Moderate Risk Low Risk Low Risk Country New Zealand Philippines Singapore Taiwan Thailand IICRA Score Intermediate Risk High Risk Low Risk Intermediate Risk Intermediate Risk Country Risk Low Risk High Risk Very Low Risk Intermediate Risk Moderate Risk Industry Risk Intermediate Risk Moderate Risk Intermediate Risk Low Risk Intermediate Risk Life Country Australia China Hong Kong Japan Malaysia IICRA Score Very Low Risk Intermediate Risk Low Risk Intermediate Risk Intermediate Risk Country Risk Very Low Risk Moderate Risk Very Low Risk Low Risk Intermediate Risk Industry Risk Low Risk Intermediate Risk Low Risk Intermediate Risk Low Risk Country New Zealand Singapore Taiwan Thailand IICRA Score Low Risk Low Risk Moderate Risk Intermediate Risk Country Risk Low Risk Very Low Risk Intermediate Risk Moderate Risk Industry Risk Low Risk Low Risk Moderate Risk Intermediate Risk Health Country Australia New Zealand IICRA Score Low Risk Intermediate Risk Country Risk Very Low Risk Low Risk Industry Risk Intermediate Risk Moderate Risk The Financial Risk Profile (FRP) score is based on an analysis of Capital and Earnings, Risk Position and Financial Flexibility. Capital and Earnings includes a forward looking perspective of an insurer s capital adequacy for the current year and two subsequent years. S&P has identified that APAC insurers capital is less robust than other regions, with many insurers falling below the USD1 billion and USD250 million thresholds which could leave them vulnerable to single event losses. Nevertheless, S&P commented that evolving changes implemented in various APAC regulatory regimes on capital level requirements has helped to account for the risks arising from rapid growth countries. 8

9 Evolving Criteria Exhibit 7: Capital & Earnings Assessment 30% 25% 20% 15% 10% 5% 0% Extremely Strong Very Strong Strong Global (all except APAC) Moderately Strong Upper Adequate Lower Adequate Less than Adequate APAC (all) Risk Position is intended to capture material risks that the capital model does not incorporate and specific risks that could make an insurer s capital significantly more volatile. Financial Flexibility incorporates qualitative and quantitative measures to estimate the balance between an insurer s sources and uses of external capital. The Anchor rating can be modified through an evaluation of an insurer s ERM and management and governance and through a holistic analysis. It can also potentially be capped due to a low liquidity ratio or sovereign rating. S&P expects most insurers will not be rated higher than the sovereign; given their assets are predominantly domestic government debt and domestic bank deposits and thus sensitive to sovereign risk, changes to regulatory environment and potential direct government intervention. S&P issued a Request for Comment for its criteria on ratings above the sovereign in April 2013 and expect to finalize the criteria by the end of the third quarter of The criteria would allow some insurers to be rated up to four notches above the sovereign foreign currency ratio and applies to companies globally; not just to those belonging to the European Monetary Union as is the case currently. For more detailed information on the new methodology, please contact us through your local Aon Benfield broker or one of the contacts listed on the back page. Weak ERM in S&P s New Rating Methodology A company can be assigned one of five ERM assessments very strong (formerly excellent), strong, adequate with strong risk controls, adequate and weak. In addition, the importance of ERM is evaluated as high or low, which determines the level of influence ERM has on the rating. As a modifier, especially for companies where the level of importance is high, S&P s view of ERM can have a significant impact on the rating. The ERM assessment is coupled with an evaluation of management and corporate governance and when combined can influence the rating anchor. For example, an ERM and management and corporate strategy score of very strong can lift the Anchor rating by one notch if the Anchor rating is a or below, while a score of weak caps the rating at bbb, even if the Anchor rating is aa+. The importance of ERM increases, for most companies, under S&P s methodology. Generally speaking, Asia Pacific insurers ERM lags the more developed markets with the exception of Australian and Japanese insurers. On a positive note, S&P commented in its report Asia Pacific Insurers Are On Firm Footing As Economic Conditions Shift dated September 3, 2013, that 26 percent of insurers ERM in APAC is better than adequate compared with 20 percent as of 2011 year end. Exhibit 8 shows the ERM distribution of Asia Pacific insurers as at 2011 year end and at July Regulators in markets such as Australia, Japan, Singapore, and Taiwan increased their focus on ERM, which should help strengthen Asia Pacific insurers. This will also help regional groups as they share experiences to improve ERM. Exhibit 8: Asia-Pacific ERM Distribution July 2013 versus End % 70% 60% 50% 40% 30% 20% 10% 0% Very strong Strong Adequate with strong risk control 2011 July 2013 Adequate Weak 9

10 Aon Benfield S&P Revised Criteria: Management and Governance S&P introduced revised criteria for evaluating management and corporate governance on November 13, The analysis of management and corporate governance is one of the most qualitative aspects of their rating methodology, and the revised criteria bring further transparency to their process. Management is evaluated on nine sub-factors and corporate governance is rated on seven. Within its rating reports, S&P will publish only the overall score for management and corporate governance. Individual sub-factors will be discussed in the report if the company has a strong or weak overall score to give context on how S&P arrived at its assessment. Various A.M. Best Updates A.M. Best released updates to 18 existing insurance criteria papers during the past 12 months, as part of its continual process of reviewing and refining its methodology. In the Universal BCAR model (used for GAAP or IFRS financials), risk adjusted asset risk factors have been included for individual countries. Countryspecific risk charges are applied based on the origin of the asset to account for the liquidity and volatility within the capital markets of the country. Previously, this would have been manually applied by analysts, so the change brings more consistency in BCAR modeling worldwide. In A.M. Best s view, overall for Asia Pacific, underwriting volatility will be less going forward; consequently, the investment markets, which are global in nature, will play a greater role in drawing the outlook for the region. However, Asia Pacific is a segmented market, and the outlooks of the different countries may vary. A.M. Best has released an Asia Pacific industry study as well as a number of country specific studies on Asia Pacific countries in 2013 alone. Below is a summary of the key findings. A.M. Best perceives that the strengths of the Asia Pacific market to include strong economic growth, low insurance penetration, and risk diversification from existing mature markets. These strengths are helping the insurance market to grow and expand with the economy. The Asia Pacific market also faces some challenges that may hinder growth, such as catastrophe exposure, solvency/ capital adequacy requirements, and the fragmented markets that exist in many countries. These challenges have resulted in regulation reform across much of the region. RBC changes are the primary focus of current reforms. Many countries have begun phasing in increased capital requirements to strengthen solvency requirements (which are documented in detail in Aon Benfield s Asia Pacific Solvency Regulation report). Regulators have also increased the maximum amount of foreign investment companies can receive in order to assist companies in obtaining more capital. Further, regulators are also hoping to increase M&A activity in Asia Pacific countries, as consolidation will improve market fragmentation. Below is a summary of A.M. Best s views on several of the countries examined: Thailand Thailand is undergoing significant regulation reform after the 2011 flooding in order to remain competitive amid the ASEAN free-trade agreement. The key issues being addressed are low capital requirements, poor underwriting performance due to catastrophes, and reliance on investment income, amongst others. The Office of Insurance Commission (OIC) will also be implementing solvency stress tests, begin focusing on enterprise risk management, and work towards a phased implementation of stricter RBC requirements. The basic requirement was increased to 140% as of January The OIC has also lifted foreign investment maximums of local writers from 25% to 49% in order to attract new capital after the 2011 floods. Indonesia Higher capital requirements in Indonesia have contributed to a decline in the number of non-life insurance writers in the country. The fragmented market also makes it difficult for the many small writers to get economies of scale, which increased the expense to operate in the market. Foreign investors are able to own up to 80% of an Indonesian company s shares, which gives writers a new opportunity for capital. China The Chinese market has experienced slow premium growth in 2012 after a three-year period of high premium growth between 2009 and This slowdown will hopefully help increase capital adequacy by generating ROE levels that are higher than the premium growth. This premium slowdown will also strengthen current competition and make it more difficult to improve operating costs. Many writers either increased their capital base or issued debt in order to support their recent premium growth. Regulators are expected to increase RBC requirements by 2015 or

11 Evolving Criteria Other Developments IFRS Development and the Convergence in Asia-Pacific On June 20, 2013, the International Accounting Standards Boards (IASB) released a revision to the 2010 Exposure Draft of a standard that would replace the existing IFRS 4 and apply to all insurance and reinsurance contracts. The latest draft allows a company to recognize any change in future cash flows to be earned over the earnings time period instead of when the change occurs. Other proposed changes include a) an exception related to contracts having cash flows that are linked to returns on the underlying assets, b) presentation of contract revenue in the income statement (similar to how earned premiums are presented by non-life companies) and c) the presentation of interest expense from insurance contracts in profit or loss, such that it reflects a cost-based measurement and that the balance sheet carrying amount for contracts reflects a current-value-based measurement. Comments on this Draft are being accepted until October 25, and the effective date of the new Standard will be approximately three years after the final is published. The move to adopt IFRS as a statutory requirement in certain countries in Asia Pacific is changing the way insurers present their businesses and how they are judged by analysts, investors and other key users of their accounts. Asia Pacific countries are currently at different stages of adoption of IFRS. Many of the Asia Pacific countries have been adopting IFRS, either directly or adopting it as their countries equivalent of the IFRS with some modifications. The remainder of countries is planning or has plans for convergence with IFRS at a later date. Catastrophe Risk The significant catastrophe losses in 2011 driven by the New Zealand earthquake, the Japanese Tohoku earthquake and tsunami, the Australian floods, and the Thai floods reaffirmed the industry s concerns over non-modeled perils, and revealed new issues such as liquefaction and business interruption risk. These issues present challenges to catastrophe model vendors, insurers and reinsurers alike. Model vendors have been making major investments in Asia Pacific to increase model coverage and introduce enhancements, but there are still considerable gaps in many countries available models. Insurers must plan to capture additional data and integrate catastrophe model loss potential information into their business plans. Reinsurers need to continuously improve their data quality and their use of catastrophe models. More than that, companies need to improve their overall management of catastrophe risk. This may include managing aggregate lossexposure accumulation, integrating the monitoring of exposure into the underwriting process and optimizing reinsurance arrangements. Regulators also learned lessons from the catastrophe events. Capital requirements linked to catastrophe risks in certain countries such as Australia and New Zealand are now stricter than they were two years ago, and other Asia Pacific countries may make similar adjustments as well. 11

12 Aon Benfield Conclusion Asia Pacific is a large and diverse market with significant challenges and opportunities for insurers. Strong economic growth and increasing insurance penetration across the region are creating many new opportunities, while risks possible stalled economic growth, persistent low interest rate environment and uncertain outcome of regulatory changes present challenges to all participants including insurers, regulators and rating agencies. All participants are on a high learning curve, but the joint efforts continue to help the Asia Pacific insurance industry continue to evolve to new stages. Exhibit 9: List of jurisdictions examined in the Asia Pacific Solveny Regulation Publication Australia Brunei China Hong Kong India Indonesia Japan Korea (Republic of) Macau Malaysia Myanmar New Zealand Pakistan Papua New Guinea Philippines Singapore Sri Lanka Taiwan Thailand Vietnam 12

13 Evolving Criteria Contact Information For additional information on this analysis or our analytical capabilities, please contact your local Aon Benfield Broker or a member of the Aon Benfield Analytics team, including: For more information on the Insurance Risk Study or our analytic capabilities, please contact your local Aon Benfield broker or: Patrick Matthews Head of Global Rating Agency Advisory patrick.matthews@aonbenfield.com Rade Musulin COO Aon Benfield Analytics, Asia Pacific rade.musulin@aonbenfield.com Sifang Zhang Rating Agency Advisory, Hong Kong sifang.zhang@aonbenfield.com David Teo Rating Agency Advisory, Singapore david.teo@aonbenfield.com Soichiro Makimoto Rating Agency Advisory, Tokyo soichiro.makimoto@aonbenfield.com Scan here to access Aon Benfield s latest reports. About Aon Benfield Aon Benfield, a division of Aon plc (NYSE: AON), is the world s leading reinsurance intermediary and full-service capital advisor. We empower our clients to better understand, manage and transfer risk through innovative solutions and personalized access to all forms of global reinsurance capital across treaty, facultative and capital markets. As a trusted advocate, we deliver local reach to the world s markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial and rating agency advisory. Through our professionals expertise and experience, we advise clients in making optimal capital choices that will empower results and improve operational effectiveness for their business. With more than 80 offices in 50 countries, our worldwide client base has access to the broadest portfolio of integrated capital solutions and services. To learn how Aon Benfield helps empower results, please visit aonbenfield.com. Aon Benfield Inc All rights reserved. This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. This analysis is based upon information from sources we consider to be reliable, however Aon Benfield Inc. does not warrant the accuracy of the data or calculations herein. The content of this document is made available on an as is basis, without warranty of any kind. Aon Benfield Inc. disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Members of Aon Benfield Analytics will be pleased to consult on any specific situations and to provide further information regarding the matters. 13

14 200 E. Randolph Street, Chicago, Illinois t: f: aonbenfield.com Copyright Aon Benfield Inc # /2013