Key ğ n d in gs 81% US$350bn. US$380bn 68% 89% 35% 23% 24% 16% 2 %

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4 Key ğ n d in gs approxim ately equa ls that of legacy liabilities for the US$350bn risen to be the prim a r y cha llenge to the ach ievement of respondents' run off plan s. The regulator y environ ment and access to exit m echa n ism s a re a lso prom inent cha llenges. It was encouraging to see Board level engagement for Legacy business drop out of the top three challenges since our last survey. Run-off objectives US$380bn A signiğcant proportion of Survey respondents in core territories think it likely or high ly likely that they will undertake restructuring or exit activity in the next Early Ƅnality Ch a llen ges t o s u ccessfu l a ch ievem en t o f o b ject ives Source: Pw C Over a th ird of a ll respondents expecting to u nderta ke restr ucturing activity in the next three years anticipate using insurance business transfers (IBT). This includes 41% of US respondents, despite a US IBT mechanism remaining untested. 68% 89% 81% 35% 2 % 16% 23% 24% 1

5 in the next two years. In the US, insurance business transfers were predicted to be inġuential whilst UK respondents were more concerned by the impact of political uncertainty, including Brexit, than their Continental European counterparts. Respondents were asked to consider disposa ls in 2018 a nd 2019, including their likely number and value. In terms of the number of deals, Continental Eu rope is expected to be the m ost active territor y, followed by the UK and US. La rger average deal sizes are anticipated in the US compared to Europe and respondents expect a wide spread of Macro economy Focus on core business Consolidation Capital availability Tr a n sfer solution s Dea l pr icin g Cost / returns pressure Politica l uncer ta int y Outsourcing and personnel Ad ver se cla im s d evelopm en t Solvency II Rein sur a nce solution s Em er gin g cla im s Run-off for sa le? two years? 61% 19 % 37 % UK a n d Con t in en t a l Eur ope 10 % 3 4% 55 % 37 % US 3 0 % 51% 17 % 16 % Mot or APH Specia list lines Gen er a l lia bilit y Med ica l m a lp r a ct ice Em p loyer s' lia bilit y P r op er t y & Ca su a lty Wor k er s' com p en sa t ion 2

6 The size of the global run-off market US Eu r ope Figure 1: North America (US$bn)

7 Europe (US$bn) The rest of the world Rest of the world (US$bn)

8 Figure 2: Where does run-off and legacy management feature on Board agendas? Con tin en ta l Eur ope UK US* Figure 3: What are the key objectives for run-off business? Ea r ly ğnality 0 anaging cla im V Yola tility 0 inimiving e[senvev and cla im Sa ym en tv 2rderly rxn off 5 elea Ving ca Sita l 5

9 Legacy management should be a deliberate and speciğc strategy, with a focus on optimising the balance sheet, by identifying Figure 4: What is the most signiƅcant challenge affecting the achievement of run-off objectives in 2018 and 2019? Regula tor y environment Ad ver se lo ss development Access to exit mechanisms 4 Pressure on costs Figure 5: three years? All respondents UK a nd Con tin en ta l European respondents US respondents UK a nd Con tin en ta l Eu r opea n respondents 6

10 Brexit restructuring and the future for run-off no one really sure ofits impact. 7

11 Figure 6: What do you think will be the most signiƅcant factors to inƅuence or impact the run-off sector in the next two years? Macro economy Focus on core business Tr a n sfer solution s Consolidation Ca pita l a va ila bility Dea l pr icin g Co st / r et u r n s p r essu r e Politica l uncer ta inty Outsourcing a nd per sonnel Adverse cla im s developm ent Solvency II Rein sur a n ce solution s Em erging claim s covering European risks if the UK is treated a s a 'third country' as 8

12 European deal activity before they come to market and, environment, margins are reducing Figure 7: 9

13 Sur vey respondents were a sked to consider what is the one thing they would like to change in the lega cy m a rket... Figure 8: 32% 30%...ğnd a way to move the reinsurance asset with European 22% 15% route to achieving ğnality "The run-off market is buoyant, particularly in Europe where insurance business transfer legislation is well-established, but also in Sellers are becoming more active in progressively managing both run-off portfolios and back books, with more and larger portfolios coming to market. Buyers are increa singly well-capitalised, mature in their operational capability and so able to take these larger portfolios. Meanwhile the regulatory bar keeps being raised such that extensive seller due diligence on ğnancial, conduct, claims handling, and operational issues, is critical to successful transactions." 10

14 US property & casualt y run-off deals grow. The market is becoming larger, more liquid and more sophisticated, Figure 9: How many insurance run-off disposal transactions do US respondents think there will be in the US over the next two years? 1-10 $ 56% % $ % $ >30 12% $ 11

15 Sur vey respondents were a sked t o con sid er w h a t i s t h e o n e t h in g t h ey w ou ld lik e t o ch a n ge in t h e lega cy market... restructuringobjectives. Figure 10: What will be the discontinued portfolio liability value most commonly disposed of in the US, over the next two years? 26% 26% 34% 14% < US$12.5m US$ m US$65-125m > US$125m 12

16 2017 legacy m arket h igh lights of AfƄrmative Insurance Co. of Michigan, a Jan 2017 Feb 2017 Mar 2017 Apr 2017 May 2017 Jun 2017 became the Ƅrst Rhode Island speciƅcally for providing run-off announced a Ƅrst and Ƅnal dividend UK n o t iğ ed t h e EU o f t h e intention to leave under Article 50. First round of Br exit n egot ia t ion s. of business. values, but also affecting UK asbestos reserves. 13

17 respect to its Ƅrst quarter 2017 and Jul 2017 Aug 2017 Sep 2017 Oct 2017 Nov 2017 Dec

18 Insurance business transfers in the US a new dawn? Figure 11: 1 Asb est os 2 Wor k er s' 3 Gen er a l com pen sa tion lia bility the need is increasing, and with it, I expect to 15

19 The US legacy m arket econom ic or legal ğ nality? Figure 12: would change is to ğnd a way to support 41% of business. 10% 22% 27% 16

20 Life run-off a wave of consolidation across Europe 17

21 Figure 13: What are the top three challenges facing the management of life run-off business? 3 Lack of skilled resources 1 Operational 2 Maximising costs including asset returns to managing meet guarantees overheads whilst minimising market risk Figure 14: Where do you see the most European life run-off restructuring activity occuring? 1 UK and Ireland =3 2 France and Benelux Germany =3 Italy 18

22 Spotlight on Bermuda, Middle East and Asia Ber m u d a t h e n e xu s o f ILS a n d (r e)in su r a n ce r u n -o ff The Middle Ea st a region r ipe for consolida tion? 19

23 that the beneğts achieved from successful legacy focussed capital, but how best legacy solutions can be deployed from a resource perspective, and how to Asia a sleepin g r u n -o ff gia n t? Su r vey r espon d en t s w er e a sk ed t o con sid er wh a t is t h e on e t h in g t h ey w ou ld like t o ch a n ge in t h e lega cy market... 20

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27 Dan Schwarzm an n Matt Hann Stephen Harrison Peter Greaves Stephen O Hearn Victor Nelligan Jane Portas Lu a n n Pe t r e llis An d r e w Wa r d Nick Watford Stephen Arnold Marc Oberholtzer Alan Augustin Hannah Vaughan Ba ljit Gor a ya Le s lie Fe n t o n Nigel Ra ckh a m Julie Pallister James Ferris Ritendra Roy To ğnd out more, plea se contact Dan Schwarzmann, Andrew Ward or Alan Augustin. For an electronic copy of this Survey visit: globalinsurancerunoffsurvey 24

28 At PwC, our purpose is to build trust in society and solve important problems. We re a network of Ƅrms in 157 countries with more than 223,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining speciƅc professional advice. No representation or 2018 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member Ƅrms, each of which is a separate legal entity. Please see for further details.