Chilean Insurance Market Overview. Jorge Claude Executive Vice President Chilean Association of Insurers (AACh)

Chilean Insurance Market Overview Jorge Claude Executive Vice President Chilean Association of Insurers (AACh) Santiago, April 12th, 2016

AGENDA 01 Chilean Economy & the Insurance Market 02 Non-Life Insurance Market 03 Life Insurance Market 04 Challenges & Opportunities 05 Risk Based Capital 06 Chilean Association of Insurers (AACh) 07 Conclusions

Asociación de Aseguradores de Chile AG The Chilean Association of Insurers (AACh) is the voice of the local industry. The AACh is a 118 years-old institution, representing: - 58 insurance companies - 99,3% of the Chilean Insurance gross premiums.

01 Chilean Economy & the Insurance Market

Chilean Economy 2016 Chilean Economy Inhabitants 18,2 Millions GDP US$ 250,6 billions GDP per capita US$ 13.773 PPP US$ 23.950 Main Cities: Santiago (Capital 7,5 Mill.); Valparaíso (1,8 Mill); Concepción (1,5 Mill); Antofagasta (1,0 Mill); Temuco (1,0 Mill.) Main Industrial & Economic Sectors: Mining (Cooper/Iron), Paper Pulp, Fishing, Agro-industry, Wine, Finance. Economic Freedom Index 2014: 76,5 10 th place Competitivity Index 2014: 4,6 35 th place Gini Index 2015: 0,495 pts. (1) The Heritage Foundation 2014 Index of Economics Freedom (2) World Economic Forum The Global Competiveness Report 2014-2015

Chilean Economy 10 Inflation 7,8 7,8 8 6 4,5 3,7 4 2,4 2,6 3 1,5 2-1,4 0-2 3 4,5 4,3 3,8 2,7 2,9 12 10 8 6 4 2 0 Unemployment 10 10 9,2 8,3 7,8 7,8 7,1 7,2 6,4 6,7 6,3 6,5 6,5 6,5 5,7 7 6 5 4 3 2 1 0-1 -2 6 5,5 4,6 4,6 GDP Growth 5,8 5,9 5,5 3,7-0,9 4,1 1,9 2,3 1,6 1,5 2,7 9 8 7 6 5 4 3 2 1 0 4,8 6,56 7,28 Interest Rate (real) 7,68 5,86 5,82 5,28 5,02 4,16 4,12 4,06 3,65 3,8 Source: Central Bank of Chile and SBIF

Chilean Insurance Market The Chilean Insurance Market is: - the 4 th largest in Latin America with the biggest insurance density (premium per capita) & penetration (Premiums in % of GDP) in the region. - Essential part of the Chilean economic strength, managing investments for more than US$ 54 billion in 2016 (equivalent to 21,9% of GDP). - Besides being an economically solid market; it has a Self-Regulation code in place for over 15 years and an active Council appointing an Ombudsman who receives less than 1.000 cases a year considering over 21,5 million claims paid by the industry, it has a strong credibility in the economy.

Chilean Insurance Market 2016 Life Insurance Companies 36 Non Life Insurance Companies 24 Credit Insurance Companies 6 Total 66 Insurance Brokers 2.562 Re Insurance Brokers 60 Adjusters 215 Source: AACh based on SVS data

Chilean Insurance Market Cumulative Growth Index Index 250 In 2016, the Chilean Insurance Market grew 9,0% in real terms, in a scenario of a 1,6% GDP Growth and 3,8% inflation rate. 200 213,4 179,4 150 132,8 100 Non-Life 50 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Life GDP Source: AACh based on Central Bank of Chile.

Chilean Insurance Market Chile Insurance Penetration (% of GDP) 5,5% 5,0% 5,0% 4,5% 4,0% 3,5% 3,0% 2,5% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: AACh based on SVS data and Central Bank of Chile

Latin American Insurance Industry: Premiums Per Capita 2015 800 2016 D: US$ 684 P: 5% MM: US$ 12.440 700 600 500 400 300 200 100 México D: US$ 198,3 P: 2,21% MM US$ 25.225 Perú D: US$ 115,2 P: 1,92% MM US$ 3.616 Uruguay D: US$ 368,7 P: 2,34% MM US$ 1.265 Ecuador D: US$ 138,3 P: 2,26% MM US$ 2.232 Argentina D: US$ 446,5 P: 3,26% MM US$ 19.410 Panamá D: US $356,4 P: 2,95% MM US$ 1.400 Colombia D: US$ 162,6 P: 2,64% MM US$ 7.844 Venezuela D: US$ 241,1 P: 3,95% MM US$ 7.500 Brasil D: US$ 332,1 P: 3,9% MM US$ 69.091 Chile D: US$ 630,3 P: 4,74% MM US$ 11.326 0 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00% Source: Sigma SwissRe

Chilean Insurance Market Direct Premiums Life & Non-life MM US$ 14.000 12.000 MM US$ 12.440 10.000 8.000 6.000 4.000 2.000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Non - Life Life Insurance Market Source: AACh based on SVS data

Chilean Insurance Market Number on Incurred Claims Life & Non-life Number in thousands 25.000 20.000 21.463 thousands 15.000 10.000 5.000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Non -Life Life Total Claims Incurred Source: AACh based on SVS data

Chilean Insurance Market Herfindahl Index 18% 16% 14% 12% 10% 8% 6% 9,2% 6,8% 4% 2% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Non - Life Life Source: AACh based on SVS data

Source: AACh based on SVS data UF converted to US$ to 31/Dec/2015 Chilean Insurance Market Sales Distribution Channels 2006-2015 MM US$ 6.000 5.000 4.000 3.000 2.000 1.000 0 Direct and Insurance Agent Legal Person Bancassurance Natural Person Retail Pension Advisor

Chilean Insurance Market Investments 21,9% of GDP MM US$ 60.000 MM US$ 54,829 50.000 40.000 30.000 20.000 10.000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Non- Life Life Insurance Market Source: AACh based on SVS data and Central Bank of Chile

02 Non-Life Insurance Market

Non-Life Insurance Market Premium 2016 MM US$ 3,4% 1,9% 1,1% 3,8% 3,5% 3,3% 4,2% 17,4% 28,2% 33,2% Property Motor Cargo Theft SOAP * Credit and Surety Liability Hull Engineering Property 1.221,4 Motor 1.039,3 Cargo 120,8 Theft 130,7 SOAP 68,2 Trade Credit and Surety 139,9 Liability 155,1 Hull 41,4 Engineering 124,3 Others 639,7 Others Total 3.680,8 Source: AACh based on SVS data

Non-Life Insurance Market Market Share by Company 2016 Property of insurance companies MM US$ % Suramericana (RSA) 504,5 13,7% BCI Seguros 437,3 11,9% Mapfre 367,3 10,0% HDI Seguros 348,6 9,5% Penta Generales 317,9 8,6% BNP Paribas Cardif 300,9 8,2% Liberty Seguros 248,6 6,8% Ace Seguros 206,2 5,6% Chilena Consolidada 193,3 5,3% AIG Chile 154,0 4,2% Consorcio Nacional 110,9 3,0% Zurich Santander 109,4 3,0% Orion Seguros 68,1 1,8% Continental Crédito 50,7 1,4% Renta Nacional 47,9 1,3% Others 215,1 6,0% Total 3.680,8 100% 43% International companies 57% Local companies Source: AACh based on SVS data

Non-Life Insurance Market Reinsurance 2016 41,4% Out of Gross Premiums are ceded Property The largest (in premiums) ceded line including CAT coverage 1.525 Ceded annual premiums in millions of USD Retained premiums by lines (% of Gross premiums) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Property Motor Hull Cargo Engineering Trade, Credit and Source: AACh based on SVS data Surety Liability

Non-Life Insurance Market Chilean Catastrophic Risks Convergence of Tectonic plates: Greatest risk: Seismic events due to subduction of the Nazca plate under the South American plate between Arica, from the north, and the triple junction close to the Taitao Peninsula, to the south. Valdivia 1960, M=9.5 Maule 2010, M=8.8

Non-Life Insurance Market Chilean Catastrophic Risks Since 27 February 2010, Maule Earthquake, Chilean insurance industry has been covering CAT losses close to 30% of every main event occurred in the country. San Antonio 1985 Maule 2010 Increase Iquique 2014* Total Loss (M US$) US$ 1.046 US$ 24.000 24 times US$ 400 Losses covered by Insurers (M US$) US$ 85 US$ 6.235 73 times US$ 130 Covered / Total Losses 8,13% 25,97% 3 times 32,5% Sources: El Mercurio, Münich Re, AACH estimates. * AACH estimates

Non-Life Insurance Market A new model for PML in Chile After 2010 Maule s earthquake, the industry, represented by the Chilean Association of Insurers (AACh), commissioned a team of specialists with the tasks to determine the theoretical basis to quantify the financial risks of exposed insured portfolios and to develop a tool to facilitate the evaluation of these risks, given Chile s particular seismic characteristics. AACh s main objectives are: To provide the industry with a tool to analyze and manage insured portfolios and associated risks based on parameters and data measured according to and calculated for Chile s characteristics. To provide the industry with a tool to analyze and negotiate coverage with reinsurers. To seek SVS acceptance for the tool as mandatory for calculating catastrophic reserves.

03 Life Insurance Market

Life Insurance Market Premium 2016 5,1% 3,7% Annuities 6,8% Unit Linked Disability and Survival 7,6% 47,2% Health 8,0% Mortgage Life 9,3% Pension Savings 12,2% Others MM US$ Annuities 4.135,3 Unit Linked 1.067,8 Disability and Survival 817,0 Health 701,0 Mortgage 668,0 Life 594,6 Pension Savings 451,1 Others 324, Total 8.759,5 Source: AACh based on SVS data

Life Insurance Market Market Share by Company 2016 MM US$ % MetLife 1.091,9 12,5% Consorcio Nacional 1.037,5 11,8% Penta Vida 757,1 8,6% Sura 712,9 8,1% Confuturo 631,8 7,2% BICE Vida 611,9 7,0% Security Previsión 522,3 6,0% Chilena Consolidada 497,8 5,7% Principal 415,2 4,7% EuroAmérica 326,3 3,7% BNP Paribas Cardif 216,2 2,5% CorpSeguros 189,5 2,2% BanChile 187.9 2,1% BCI Seguros Vida 179,5 2,0% CN Life 176,9 2,0% Others 1.204,5 13,8% Total 8.759.5 100% Property of insurance companies 44% 56% International companies Local companies Source: AACh based on SVS data

Life Insurance Market Investments 2016 3,0% 13,5% 25,4% 7,0% 51,1% Real State Fixed Income Stocks Foreign investment Others Source: AACh based on SVS data

04 Challenges and Opportunities

Challenges and Opportunities New Customer Chile has grown for 30 years, our customers have changed. They demand: more information, transparency, the fulfillment of promises, new technologies (self driving cars, Blockchain, Uber and Airbnb) The population is getting old and there is a demand for social equality in: the pension system the health sector

Challenges and Opportunities New & upcoming regulatory changes Tax reform Commission of Finance Market Labour reform Risk based capital law Consumer protection improvement to the current regulation Personal Data protection act Market Conduct regulations Approved Approved Approved In Congress In Congress In Congress Under review

Challenges and Opportunities New & upcoming regulatory changes Tax reform Commission of Finance Market Labour reform Risk based capital law Consumer protection improvement to the current regulation Personal Data protection act Market Conduct regulations Approved Approved Approved In Congress In Congress In Congress Under review

05 Risk Based Capital

Risk Based Capital Solvency in Chile PILLAR 2 SUPERVISION LEVEL: Risk evaluation process and mitigation activities Risk-based Supervision Corporate Governance Market conduct and disclosure PILLAR 1 REGULATORY LEVEL: Minimum Solvency Requirements Risk-based Capital New Investment System Valuation of assets and liabilities considering economic value The Risk supervision model adopted by the SVS is based on international solvency models (IAIS - International Association of Insurance Supervisors and UE - Solvency II). It covers 2 levels: Regulatory /quantitative: defines the standard methodology of the capital required (RBC). The 1 st exercise was on 2013, this year, the industry will deliver the 5 th QIS. Supervision / qualitative: complements the regulatory level, it focus on risk based supervision, ORSA (Own risk self assessment), corporate governments and market conduct.

Risk Based Capital Market Conduct Establish the principles which should guide the businesses made by insurance companies, brokers, adjusters and everyone working in the insurance sector. It is based on: 1. Fair treatment 2. Managing conflicts of interest 3. Data protection 4. Developing a transparent market which contributes to the financial education. 5. Reporting data to the market.

Risk Based Capital ORSA - Own Risk Self Assessment ORSA is a process designed for each insurance company to manage its own risks and capital, it is not only a report for the regulator. The process should be adjusted to the size, nature and the complexity of the insurance company. This process should be continuous and involve all the areas of the company. The purpose is that the risk capital required for each product is understood by the company. For example, if a company decides to invest in a new line of product, they should understand how much capital this decision means and be able to explain how they will get the capital required. Every insurance company will have to submit the 1 st ORSA report by 30-Sept-2017 and then, every year by the 30 th June. 1. Evaluating the own requirements 2. Continuous follow up the capital required to meet the business plan 3. Compare against the company risk profile and the risk based capital required by the regulator

06 Chilean Association of Insurers (AACh)

Chilean Association of Insurers (AACh) The role of the AACh Mission Giving financial protection Contributing to Chilean s development Promoting long-term saving Financing investment projects How does the AACh contributes to the Risk Based Supervision and Market Conduct? - The Self-Regulatory Council for Insurance Companies - The Chilean Ombudsman - Insurance school

Chilean Association of Insurers The role of the AACh The Self-Regulatory Council for Insurance Companies was founded on 2002. It ensures the accurate interpretation and application of the policies set by the Compendium of good corporate practices, in accordance with the statutes of the Chilean Insurance Association (AACh). When an insurance companies is incorporated to the AACh, it is compulsory to adhere to this compendium with the objective of promoting the development of the insurance market, in line with the principles of free market, good faith and diligent fulfillment of its obligations. The compendium consists of four sections: - General policies - Practices within the company - Practices between companies - Practices between companies and customers

Chilean Association of Insurers The role of the AACh The Chilean Ombudsman (DDA) is a private, autonomous and independent institution, which aims to resolve conflicts regarding insurance contracts, provision of services which were agreed with any insurance company. The service of the Ombudsman is free of charge for the customers and its resolutions are binding for the companies that belong to the Chilean Insurance Association (AACh).

Market conduct Number of Complaints 5.000 4.500 4.000 2016 21.463.098 of incurred claims an increase of 30% over 2015. And the complaints to the ombudsman are still less than a 1.000 4.373 3.500 3.000 2.500 2.000 2.417 1.500 1.000 500 0 2009 2010 2011 2012 2013 2014 2015 2016 699 174 Non -Life SVS Life SVS Non -Life DdA Life DdA 2009 2010 2011 2012 2013 2014 2015 2016 Complaints to regulator (SVS) 3.250 6.113 6.484 5.507 6.297 7.039 6.790 N/A Complaints to ombudsman (DdA) 369 711 619 700 720 811 778 873 N of incurred claims 7.783.207 9.536.814 11.026.652 12.676.539 15.152.359 16.946.634 16.620.658 21.463.098 Source: AACh based on SVS data

Market conduct Cause of Complaints received by Ombudsman Numbers 450 400 350 300 250 402 298 200 150 100 50 0 2009 2010 2011 2012 2013 2014 2015 2016 100 73 Source: DdA, AACH Denied claim Poor Service Resignation or other Unconformity with claim 2009 2010 2011 2012 2013 2014 2015 2016 % Cause 2016 Denied claim 134 163 171 236 238 367 328 402 46,0% Poor Service 113 284 302 295 325 268 284 298 34,5% Resignation or other 102 185 114 114 106 124 99 100 11,5% Unconformity with claim 20 79 32 55 51 70 83 73 8,4% Total 369 711 619 700 720 829 794 873 100%

Market conduct Complaints by Type of Intermediary received by Ombudsman Numbers 400 350 300 250 200 150 100 345 227 156 145 50 0 2009 2010 2011 2012 2013 2014 2015 2016 Source: DdA, AACH Insurance brokers Banks Insurance companies Retail 2009 2010 2011 2012 2013 2014 2015 2016 % Type of intermediary 2016 Insurance brokers 127 186 201 275 256 315 328 345 40% Banks 70 281 148 158 163 178 187 227 26% Insurance companies 104 120 139 163 167 185 154 156 18% Retail 68 124 131 104 134 151 125 145 17% Total 369 711 619 700 720 829 794 873 100%

Chilean Association of Insurers The role of the AACh The Insurance School was founded in 1978, with the mission to train professional, executive, technical and administrative who work in the insurance industry (the insurance and reinsurance companies, brokers, adjusters and others). It offers regular courses, both national and international. Furthermore, the Insurance School offers courses designed for specific topics, for example: - Online corporate governance for Directors of insurance companies: Legislation and regulation, finance and risk management. - Regulation and supervision of insurance markets. - Own Risk and Solvency Assessment (ORSA) challenges and processes.

07 Conclusions 11-04-2017 44

Conclusions The Chilean economy has positive macroeconomic indexes, a robust fiscal discipline and a clear legal environment. Our Insurance Market is competitive, opened and sophisticated, exposed to international compliance standards & regulations. Like risk based capital, market conduct, personal data & consumer protections. The Chilean Industry has been tested through natural catastrophes, economic crisis and it has proven its strength and trustworthiness to its customers. The insurance market has been pioneer working for the customers. Chile is a good place to do business.

Chilean Insurance Market Overview Jorge Claude Executive Vice President Chilean Association of Insurers (AACh) Santiago, April 12th, 2016 46