Session 407 Written & Unwritten Rules of Reinsurance Accounting

Session 407 Written & Unwritten Rules of Reinsurance Accounting Tuesday, June 9, 2015 11:00 am 12:00 pm IASA 87 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

The Written and Unwritten Accounting Rules of Reinsurance Accounting Provide an overview of the written and unwritten rules for reporting reinsurance recoverables on Schedule F in 2015 Provide an overview of collateral reform at the national level as well as an update on the state adoption of collateral reform Differences in the regulations among the states will be highlighted Introduce the more recent complications in reinsurance reporting and more importantly how to address the reporting of these complications Provide a brief overview of the reporting of recoverables from collateralized reinsurers

Agenda Tracker Section 1 Section 2 Section 3 Section 4 Introduction to Collateralized Reinsurance Collateralized Reinsurance Reporting Update on U.S. Collateral Reform Certified Reinsurer Reporting IASA 87 TH ANNUAL EDUCATIONAL CONFERENCE & BUSINESS SHOW

Traditional vs. Collateralized Reinsurer Category Traditional Reinsurer Collateralized Reinsurer Financial Statements Available Typically not available Financial Strength Ratings Rated Not rated Collateral For existing liabilities only Typically for the full limits of exposure Credit Risk Ceding insurer bears the credit risk that traditional reinsurer will post collateral and pay claims Regulation and Reporting High Low Sample Companies Arch Reinsurance Ltd. Aspen Bermuda Ltd. Everest Reinsurance Co. Credit risk is essentially eliminated Aeolus Capital Mgmt. Ltd. Aspen Capital Markets Mt. Logan Re Ltd.

Collateralized Reinsurance Structure Ceding Insurer Alternative Market / Collateralized Reinsurer Third Party Investors Reinsurance Agreement Trust Agreement Premium Losses Trustee Trust

Bermuda Collateralized Reinsurers

Class 3, 3A and 3B Entities May Be Used in Collateralized Re Transactions Bermuda has a multi-license system of regulation which categorizes general insurance companies into six classes Class 1: A single-parent captive insurance company Class 2: Multi-owner captives Class 3: Applies to companies not included in other classes Class 3A: Small commercial insurers Class 3B: Large commercial insurers Class 4: Insurers and reinsurers underwriting direct excess liability insurance and/or property catastrophe reinsurance risks

Bermuda Special Purpose Insurer (SPI) SPIs are Bermuda domiciled insurance companies designed to assume reinsurance risks (often shorter term vehicles lasting 2-3 years) There are two requirements that must be met to be licensed as a SPI The business the SPI writes must be fully-funded The parties to the transactions must be sufficiently sophisticated Lightly regulated Streamlined application process Minimum capital is $1 No investment restrictions No requirement for loss reserve opinions It is possible to waive the requirement to prepare audited financial statements and instead file unaudited management accounts

Bermuda Segregated Accounts Segregated Accounts Company (SAC) Bermuda domiciled (usually a SPI or Class 3, 3A or 3B) that is permitted to create separate segregated accounts and to write insurance / reinsurance Segregated account Collection of records detailing transactions related to each other Not a separate legal entity Assets and liabilities of each segregated account are intended to be walled off or statutorily segregated from the assets and liabilities of other segregated accounts and the general account of the SAC

Alternative Market Risk Bearing Counterparties Name of Grantors Schedule of Segregated Account Entities Which Comprise the Subscribing Reinsurer Aeolus Re Ltd. In respects of its Percentage Interest in Contract Underwriting Segregated Account 8.654% Keystone Segregated Account 87.367% Hotoru Re Segregated Account 1.764% QVT V Segregated Account 1.008% Pendulum Re II Ltd. (Special Purpose Insurer) 1.207% Total 100.000%

Investor Risk - Return Options Fund III High Return Investors Loss Free Yield Fund I Low Risk Investors Fund II Mid-Tier Investors Note: For Illustrative purposes only Expected Loss

Collateralized Reinsurance Alternative Market / Collateralized Reinsurer Risk-Bearing Entities Pendulum Re II Ltd (Special Purpose Insurer) Third Party Investors Aeolus Capital Management Ltd. (Licensed Insurance Manager) Typically no employees Risk-bearing counterparties Party to the Trust Agreement ( Grantors ) Typically very limited capital beyond the trusts Aeolus Re Ltd. (Class 3 and Segregated Account Company) Keystone Segregated Account Hotoru Segregated Account

Collateralized Reinsurance Structure with SPI Alternative Market / Collateralized Reinsurer Fees / Profits Third Party Investors Ceding Insurer Reinsurance Agreement Underwriting Sevices Agreement Special Purpose Insurer (Risk-Bearing Entity) Dividends Equity / Debt or other Financing Mechanism Trust Agreement Premium Losses Trustee Trust Cash and Assets (at Inception) Assets less Losses (upon release)

Collateralized Reinsurance Structure with Segregated Account Company Ceding Insurer Premium Losses Alternative Market / Collateralized Reinsurer Reinsurance Agreement Trust Agreement Trustee Trust Underwriting Sevices Agreement Cash and Assets (at Inception) Fees / Profits Segregated Accounts Company Segregated Account 1 Segregated Account 2 Management Fees into the General Account Assets less Losses (upon release) Third Party Investors Dividends Equity / Debt or other Financing Mechanism

Collateralized Reinsurance Reporting The risk bearing entities of collateralized reinsurers may be classified as unauthorized reinsurers. Premiums and recoverables due to/from the risk bearing entities of collateralized reinsurers should be reported on Schedule F, similar to other reinsurance counterparties Part 3 Ceded Reinsurance: If total premiums and/or recoverables are greater than USD 100K and/or any of the paid recoverables are over 90 days past due (otherwise they may be aggregated and not appear individually) Part 4 Aging of Ceded Reinsurance: If there are outstanding paid loss and paid LAE recoverables (i.e. if there is a balance appearing in columns 7 and/or 8 of Schedule F Part 3) Part 5 Provision for Unauthorized Reinsurers: If there are any outstanding recoverables due from the risk-bearing entity - The risk-bearing entity s share of collateral should be reported in column 11 of Part 5 (Trust Funds and Other Allowed Offset Items) to avoid a provision for reinsurance

Segregated Account Reinsurance Reporting Segregated accounts should be listed individually on Schedule F with their proportionate share of premiums, recoverables and collateral Ceding insurers should include the name of the SAC as well as the name of the segregated account in column 3 Ceding insurers should continue to list the Alien ID number of the associated SAC in column 1 of Schedule F - Parts 3, 4 and 5 2015 Statutory Annual Statement - Schedule F - Parts 3, 4 and 5 (Columns 1-3) 1 2 3 Federal ID Number AA-1111111 AA-1111111 AA-1111111 NAIC Company Code Name of Reinsurer.. ABC Reinsurance Ltd - Prime Segregated Account.. ABC Reinsurance Ltd - Prime II Segregated Account.. ABC Reinsurance Ltd - Prime III Segregated Account

Authorized vs. Unauthorized Reinsurers Authorized Reinsurers Reinsurers who are licensed to write reinsurance in a particular state Reinsurers who are licensed in a state with substantially similar credit for reinsurance regulation Reinsurers who have met the requirements to become Accredited, Trusteed or equivalent (the term varies by state) Accepted, Approved, Qualified In most cases, authorized reinsurers do not have to post collateral in order for ceding company to get credit for the reinsurance Unauthorized Reinsurers Reinsurers not licensed or who have not met the requirements to be Accredited, Trusteed or equivalent

Authorized vs. Unauthorized Reinsurers Unauthorized reinsurers are required to post collateral If the unauthorized reinsurer does not post collateral, a provision for reinsurance (penalty) will be calculated which offsets the value of the reinsurance recoverable asset Therefore, it is a standard practice in all U.S. reinsurance contracts that if the reinsurer is not authorized, they agree to provide collateral to the U.S. ceding insurer

Why is Collateral Required from Non-U.S. Reinsurers Collateral ensures collectability of recoverables due from non-u.s. reinsurers Without collateral insurers would have to litigate in the U.S. and then seek to enforce the judgment abroad (which may or may not be honored) Collateral is only required for the reinsurer s share of the liabilities of the ceding insurer (not the full limits of exposure) Paid losses and paid LAE Case reserves IBNR reserves (loss and LAE) Unearned premiums and contingent commissions

Multi-Beneficiary Trusts (MBTs) The use of MBTs requires state approval Reinsurers must apply and be approved in each state where they plan to use the MBT In order to get the MBT approved, reinsurers must agree to several requirements, including Increased reporting Agreement to collateralize 100% of recoverables due to ceding insurers in the state Meeting all these criteria results in the MBT being approved and reinsurer being granted authorized status ( Trusteed or Accredited status or equivalent) Recoverables should be reported as authorized

Multi-Beneficiary Trusts (MBTs) Upon Commissioner approval in each state, MBTs can be used to collateralize balances from reinsurance contracts that incept on or after the date of accreditation Reinsurers may also be able to roll-in balances from contracts that incepted prior to the date of MBT approval No additional regulatory approvals are required for the roll-in Typically, once the existing recoverables are rolled-in, the reinsurer will notify any impacted ceding companies that LOCs are no longer needed and can be released If the existing recoverables are rolled in to the MBT, it changes the reporting treatment of the recoverables All balances in the MBT are reported as authorized

MBT Permitted Assets Trust maintenance Updated on a quarterly basis Permitted assets (Same as a 114 single beneficiary trust) Cash Money market funds Government securities Municipals Investment grade securities Equities, not more than 10% of the total trust value Letters of credit, not more than 20% of the total trust value In the event of insolvency of the reinsurer, the U.S. regulator of the trust is entitled to take possession of the trust for the benefit of U.S. ceding insurers

Advantages and Disadvantages of Multi-Beneficiary Trusts (MBTs) Ceding Insurer Perspective Collateral Feature LOCs, SBTs MBTs Collateral Procurement + Collateral Buffer + Who Sets the Amount of Collateral + Commingling of Assets + Access to the Assets +

Reinsurers Using Multi-Beneficiary Trusts (MBTs) Aspen Bermuda Limited Aspen Insurance UK Limited AXIS Specialty Limited DaVinci Re Hannover Re (Germany) Lancashire Lloyd s Mapfre Re Montpelier Partner Re Renaissance Re

Collateral Reform Milestones Credit for Reinsurance Model Law (1984) Provides credit for ceded reinsurance if the reinsurer is licensed, accredited or provides sufficient collateral NAIC Credit for Reinsurance Model Law and Regulation is finalized (4th Quarter, 2011) Establishes new standards for collateral requirements Individual States Adopt Collateral Reform (2008 2015) 16 States have approved reinsurers for reduced collateral Additionally 12 States and D.C. have enacted the reduced collateral law NAIC & State Regulators Support Credit for Reinsurance Initiatives (2013-2015) Assists states in qualifying jurisdictions Assists states in reviewing reinsurers for certification

State Adoption of Collateral Reform Active Alabama California Connecticut Delaware Florida Georgia Iowa Louisiana Maine Maryland Missouri New Hampshire New Jersey New York Pennsylvania Virginia Active (State has Certified reinsurers) State has adopted Model Law (#785) State has adopted Law (#785) & Reg. (#786) Law (#785) & Reg. (#786) under consideration Adopted 785 & 786 Colorado Indiana Ohio Rhode Island Adopted 785 Arizona Arkansas District of Columbia Hawaii Massachusetts Nebraska North Dakota New Mexico Vermont

Certified Reinsurer Criteria Minimum Specified Amount of Capital and Surplus Domiciled in a Qualified Jurisdiction Maintain a Secure Rating from 2 Rating Agencies Set by each state s Insurance Commissioner Model Regulation specifies a minimum of USD 250M NAIC will publish a list of Qualified Jurisdictions Criteria to be considered includes regulatory system, reciprocity & information sharing Must be based on an interactive rating No public information (pi) ratings Model Regulation lists the following 4 rating Agencies: A.M. Best, Fitch, Moody s and S&P

Certified Reinsurer Requirements Application & Certification Eligible Contracts Must apply and be approved in each state The reinsurer s status in the ceding insurer s state of domicile governs the amount of collateral required (It does not matter where the loss occurs) If approved for reduced collateral, reinsurer becomes known as a certified reinsurer Only contracts that incept on or after the certification date are eligible for reduced collateral Reinsurers must collateralize gross liabilities Certified Reinsurer Reporting Certified reinsurers must submit audited financial statements and report on assumed and ceded reinsurance balances (similar to Schedule F) and keep Commissioners informed of significant changes in ratings, licensing etc.

Certified Reinsurers: Ratings Scale Ratings Collateral % A.M. Best Fitch/S&P Moody s Secure-1 0% A++ AAA Aaa Secure-2 10% A+ AA+, AA, AA- Aa1, Aa2, Aa3 Secure-3 20% A A+, A, A1, A2 Secure-4 50% A- A- A3 Secure-5 75% B++, B+ Vulnerable-6 100% Ratings B and below BBB+, BBB, BBB- Ratings BB+ and below Baa1, Baa2, Baa3 Ratings Ba1 and below

Rating Upgrades and Downgrades Certified reinsurer rating upgrades apply only on a prospective basis Certified reinsurer rating downgrades (and revocations) apply retroactively However, there is a three-month grace period for obtaining additional collateral Therefore, when the reporting date falls within the three month grace period, the ceding insurer may report collateral required based on the certified reinsurer s rating prior to the downgrade or revocation

Collateral Deferral for Catastrophe Losses Certified reinsurers are not required to post collateral for recoverables that originated form a recognized catastrophe loss The insurance department of each state determines whether any catastrophe loss is eligible for the collateral deferral The deferral applies to reinsurers at all certified rating levels The deferral lasts up to one-year after the ceding insurer posts its initial reserve for the loss

Florida Update Florida, which was the first to pass the law and regulation and still has significant differences from the Model Law and Regulation Below are changes that are being contemplated in FL (so they are more aligned with the Model Law and Regulation They expect to move forward with the changes in June 2015* Key Differences - Florida Original Proposed Name for Reduced Collateral Reinsurers Eligible Certified Amount of Collateral for A- Rated Reinsurers 20% 50% Eligible Lines of Business Collateral Deferral Applies Only to Acceptable Rating Agencies *Note: The Florida Office of Insurance Regulation put out the proposed changes for public comment. They received 3 responses. They will move forward with the proposed changes in June, unless the responses cause them to reconsider. Property Catastrophe Named Hurricanes Includes Demotech All Lines Named Hurricanes Includes Demotech

Florida Certified Reinsurers Eligible Reinsurer Uses MBT? Date of Certification Rating Collateral Required Eligible Lines 1 ACE Tempest Reinsurance Ltd No 10/06/10 Secure-3 20% Property Cat. Reins. Allied World Assurance Company Ltd No 03/01/11 Secure-3 20% Property Cat. Reins. Arch Reinsurance Ltd No 03/31/11 Secure-3 20% Property Cat. Reins. Aspen Bermuda Ltd Yes 05/06/11 Secure-3 20% Property Cat. Reins. AXIS Specialty Ltd Yes 05/23/11 Secure-3 20% Property Cat. Reins. DaVinci Reinsurance Ltd Yes 06/09/11 Secure-3 20% Property Cat. Reins. Endurance Specialty Insurance, Ltd No 05/31/12 Secure-3 20% Property Cat. Reins. Hannover Re (Bermuda) Ltd No 09/21/10 Secure-3 20% Property Cat. Reins. Hannover Rueck SE Yes 01/01/10 Secure-3 20% Property / Casualty Hiscox Insurance Company (Bermuda) Ltd No 11/04/10 Secure-3 20% Property Cat. Reins. Markel Bermuda Ltd (fka Alterra Bermuda Ltd) No 03/23/11 Secure-3 20% Property Cat. Reins. Montpelier Reinsurance Ltd Yes 03/17/11 Secure-3 20% Property Cat. Reins. MS Frontier Reinsurance Ltd No 06/13/13 Secure-3 20% Property Cat. Reins. Partner Reinsurance Company Ltd Yes 11/04/10 Secure-3 20% Property Cat. Reins. Platinum Underwriters Bermuda Ltd No 12/13/11 Secure-3 20% Property Cat. Reins. Renaissance Reinsurance Ltd Yes 12/29/10 Secure-3 20% Property Cat. Reins. Tokio Millennium Re Ltd 2 No 02/25/11 Secure-3 20% Property Cat. Reins. Underwriters at Lloyd s, London Yes 10/06/11 Secure-3 20% Property Cat. Reins. Validus Reinsurance Ltd. No 08/10/12 Secure-3 20% Property Cat. Reins. XL Re Ltd No 06/17/10 Secure-3 20% Property / Casualty

Florida Certified Reporting Guidance Eligible Reinsurer Date of Certification Date Trusteed MBT Rollin? Lines of Business Period Report Recoverables Aspen Bermuda Ltd 05/06/11 06/06/12 Yes All Lines Prior to Certification Authorized (fka Aspen Insurance Ltd) Property Cat Reins Post Certification Authorized 1 All Other Lines Post Certification Authorized Hannover Rueck SE 01/01/10 10/16/00 No All Lines Prior to Trusteed Unauthorized Montpelier Reinsurance Ltd Partner Reinsurance Company Ltd Renaissance Reinsurance Ltd Underwriters at Lloyd s, London All Lines Post Trusteed & Pre Cert Authorized Property / Casualty Post Trusteed & Post Cert Certified 2 All Other Lines Post Trusteed & Post Cert Authorized 03/17/11 03/17/11 Yes All Lines Prior to Cert. & Trusteed Authorized Property Cat Reins Post Cert & Trusteed Certified All Other Lines Post Cert & Trusteed Authorized 11/04/10 11/04/10 Yes All Lines Prior to Cert & Trusteed Authorized Property Cat Reins Post Cert & Trusteed Authorized 3 All Other Lines Post Cert & Trusteed Authorized 12/29/10 06/29/11 Yes All Lines Prior to Certification Authorized Property Cat Reins Post Certification Certified All Other Lines Post Certification Authorized 10/06/11 08/01/95 Yes All Lines Prior to Certification Authorized Property Cat Reins Post Certification Authorized 4 All Other Lines Post Certification Authorized XL Re Ltd 06/17/10 N/A N/A All Lines Prior to Certification Unauthorized Property / Casualty Post Certification Certified 2 All Other Lines Post Certification Unauthorized

New York Certified Reporting Guidance Certified Reinsurer Hannover Rueck SE Montpelier Reinsurance Ltd Partner Reinsurance Company Ltd Tokio Millennium Re AG (Excludes business written out of US branch) Underwriters at Lloyd s, London All Other New York Certified Reinsurers Date Of Certification Date Accredited MBT Roll-in? Lines of Business Period Report Recoverables 01/01/11 12/21/95 No All Lines Prior to Trusteed Unauthorized All Lines Post Trusteed & Pre Cert Authorized Certified Lines All Other Lines Post Trusteed & Post Cert Certified Post Trusteed & Post Cert Authorized 01/01/11 09/30/10 Yes All Lines Prior to Certification Authorized Certified Lines Post Certification Certified All Other Lines Post Certification Authorized 01/01/11 06/08/10 Yes All Lines Prior to Certification Authorized Certified Lines Post Certification Authorized All Other Lines Post Certification Authorized 07/01/11 N/A No All Lines Prior to Certification Unauthorized Certified Lines Post Certification Certified All Other Lines Post Certification Unauthorized 01/01/11 04/22/97 Yes All Lines Prior to Certification Authorized Certified Lines Post Certification Authorized All Other Lines Post Certification Authorized Varies N/A N/A All Lines Prior to Certification Unauthorized Certified Lines Post Certification Certified All Other Lines Post Certification Unauthorized

Certified Reinsurers: Sample Provision (Part 6 - Section 1) ABC Reinsurer is required to provide 20% collateral Ceding Insurer is due 1,000 from ABC Reinsurance If no collateral is provided, what is the provision for reinsurance? a) 200 (as only 200 is needed to meet full collateral requirements) b) 1,000 (as no collateral has been provided) In the same scenario, if ABC Reinsurer provided collateral of 150, what would be the provision for reinsurer a) 50 (as only 200 is needed to meet full collateral requirements) b) 250 (as 75% of required collateral has been provided)

Multi-Beneficiary Trusts for Certified Reinsurers Certified reinsurers may also use MBTs to collateralize their reduced collateral obligations However, the assets for the reduced collateral obligations must be in a separate MBT than the assets for the full (100%) collateral obligations The only difference between the full (100%) collateral MBT and the reduced collateral MBT is that the buffer layer in the reduced collateral MBT is only 10M If a certified reinsurer uses a full collateral MBT to collateralize recoverables eligible for reduced collateral, the balances should reported as authorized

Reporting Complications - Unwritten Rules Reporting Issue Changing Classification of Reinsurer Eligible Lines of Business Tracking Recognized Cats Collateral Bifurcation Rating Upgrades Rating Downgrades MBT Roll-ins Full Collateral MBTs for Certified Recoverables Impact on Schedule F Reinsurers may have balances reported in multiple sections of Schedule F under different classifications Not all lines may be certified, so the recoverables may need to be reported under different classifications Recoverables from Recognized Cats may need to be tracked and reported separately Collateral may need to be bifurcated to follow the recoverables Recoverables subject to different collateral requirements must be reported on separate lines May need to be reported at collateral percentage prior to the rating downgrade Changes the reporting to Authorized Changes the reporting to Authorized

Schedule F: Reinsurance (2011) Part 1: Assumed Reinsurance Part 2: Portfolio Reinsurance Part 3: Ceded Reinsurance Part 4: Aging of Ceded Reinsurance Part 5: Provision for Unauthorized Reinsurance Part 6: Provision for Overdue Authorized Reinsurance (Non-Slow Payers - Authorized reinsurers with less than 20% overdue) Part 7: Provision for Overdue Reinsurance (Slow Payers Authorized reinsurers with 20% or more overdue) Part 8: Restatement of Balance Sheet to Identify the Net Credit for Reinsurance

Schedule F: Reinsurance (2012 & Subsequent) Part 1: Assumed Reinsurance Part 2: Portfolio Reinsurance Part 3: Ceded Reinsurance Part 4: Aging of Ceded Reinsurance Part 5: Provision for Unauthorized Reinsurance Part 6: Provision for Reinsurance Ceded to Certified Reinsurers Section 1 for Uncollateralized Recoverables Section 2 for Overdue Recoverables (mimics Parts 7 & 8) Part 7: Provision for Overdue Authorized Reinsurance (Non-Slow Payers) Part 8: Provision for Overdue Reinsurance (Slow Payers) Part 9: Restatement of Balance Sheet to Identify the Net Credit for Reinsurance

Schedule F: Provision for Reinsurance The provision for reinsurance is calculated on Parts 5 8 of Schedule F There are three scenarios which may require a provision for reinsurance Recoverables in dispute Overdue recoverables Uncollateralized recoverables The size of the provision for each type of reinsurer reflects the regulator s view of the potential credit risk Unauthorized reinsurers may have the highest provision Slow paying authorized or certified reinsurers may have a higher provision than non-slow paying authorized or certified reinsurers

Schedule F: Parts 3-8

Size of the Provision Classification Under Collateralized (a) Overdue (b) Disputed (c) Total Provision Unauthorized 100% 20% 20% a + b + c Authorized (Non-Slow Payer) Authorized (Slow Payer) Certified Section 1 Certified Section 2 (Non-Slow Payer) Certified Section 2 (Slow Payer) 20% 20% b + c 20% 20% 20% Amount Provided / Amount Required Greater of a or b+c 20% 20% b + c 20% 20% 20% a Greater of a or b+c

Schedule F: Part 6 Section 1 SCHEDULE F - PART 6 - SECTION 1 Provision for Reinsurance Ceded to Certified Reinsurers as of December 31, Current year (000, OMITTED) 1 2 3 4 5 6 7 8 9 10 11 ID Number NAIC Company Code Certified Reinsurer Rating (1 through 6) Effective Date of Certified Reinsurer Rating Percent Collateral Required for Full Credit (0% - 100%) Net Amount Recoverable from Reinsurers (Sch. F Part 3 Col. 18) Catastrophe Recoverables Qualifying for Collateral Deferral Net Recoverables Subject to Collateral Requirements for Full Credit (Col. 8 - Col. 9) Dollar Amount of Collateral Required (Col. 10 x Col. 7) Name of Reinsurer Domiciliary Jurisdiction ABC Reins. Bermuda 3 01/01/12 20% 1,200 200 1,000 200 XYZ Re Bermuda 4 07/01/12 50% 3,000 0 3,000 1500 Collateral Provided 12 13 14 15 16 17 Funds Held by Company Multiple Under Beneficiary Reinsurance Trust Treaties Letters of Credit Issuing or Confirming Bank Reference Number (a) Other Allowable Collateral Total Collateral Provided (Col. 12+ 13+ 14+ 16) 18 19 20 21 Percent of Collateral Provided for Net Recoverables Subject to Collateral Requirements (Col. 17 / Percent Credit Allowed on Net Recoverables Subject to Collateral Requirements (Col. 18/Col. 7, not to Amount of Credit Allowed for Net Recoverables (Col. 9 + (Col. 10 x Provision for Reinsurance with Certified Reinsurers Due to Collateral Deficiency (Col. 8 - Col. 10) exceed 100%) Col. 19)) Col. 20) 0 0 150 001 0 150 15% 75% 950 250 1500 0 0 001 0 1500 50% 100% 3,000 0 Reinsurer Info Collateral Required Collateral Provided Provision Calculation

Schedule F: Part 6 Section 2 SCHEDULE F - PART 6 - SECTION 2 Provision for Overdue Reinsurance Ceded to Certified Reinsurers as of December 31, Current Year (000 OMITTED) 1 2 3 4 5 6 7 8 9 ID Number NAIC Company Code Note: If column 8 is less than 20%, enter zero in columns 12 and 13. Reinsurance Recoverable on Paid Loss and LAE More Than 90 Days Overdue (a) Total Reinsurance Recoverable on Paid Losses and LAE (b) Amounts Received Prior 90 Days Percent More Than 90 Days Overdue 20% of Amounts in Col.5 Name of Reinsurer Domiciliary Jurisdiction ABC Reins. Bermuda 300 500 100 50% 60 XYZ Re Bermuda 75 400 50 17% 15 10 11 Complete if Column 8 is 20% or Greater 15 12 13 14 20% of Amounts in Dispute Excluded from Col.5 Amount of Credit Allowed for Net Recoverables (Sch. F Part 6 Section 1 Col. 20) Total Collateral Provided (Sch F. Part 6 Section 1, Col. 17) not to exceed Col 11 Net Unsecured Recoverable for which Credit is Allowed (Col. 11 - Col. 12) Provision for Overdue Reinsurance Ceded to Certified Reinsurers (Greater of Col. 9 + Col 10 or Col. 14) Not to exceed Col. 11 20% of Col. 13 0 950 150 800 160 160 0 3,000 0 0 0 15 Slow Payers - GREATER OF + 20% of Uncollateralized Rec. OR + 20% of Rec. > 90 Days overdue + 20% of Disputed Recoverables Non-Slow Payers + 20% of Rec. > 90 Days overdue + 20% of Disputed Recoverables

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Contacts Mike McClane Aon Benfield Market Analysis, Americas +1.215.751.1596 michael.mcclane@aonbenfield.com

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