Lloyd s seminar Mumbai. Tuesday 7 February 2012

Lloyd s seminar Mumbai Tuesday 7 February 2012

The Lloyd s Offering to the Indian Insurance Market Jose Ribeiro, Director, International Markets - Lloyd s

Explaining the Lloyd s Model Ed Pennock, Manager, International Markets Lloyd s

Lloyd s - key characteristics Unlike other insurance brands, Lloyd s is not a company, it s a market where our members join together as syndicates to insure and reinsure risk We have a long history of risk taking, responding to change and customer demands The Lloyd s market insures complex and specialist risks from oil rigs to major airlines to natural catastrophes Lloyd s underwriters devise tailored innovative solutions for complex problems Lloyd s appetite for risk is guided by long experience and responsible risk taking

From Coffee house 1688 First known reference to Edward Lloyd s coffee house in Tower Street in (London Gazette 18-21 February 1688)

to every type of insurance and challenges 1887 1906 1911 1965

India - Trade Background

Lloyd s - key characteristics Unlike other insurance brands, Lloyd s is not a company, it s a market where our members join together as syndicates to insure and reinsure risk We have a long history of risk taking, responding to change and customer demands The Lloyd s market insures complex and specialist risks from oil rigs to major airlines to natural catastrophes Lloyd s underwriters devise tailored innovative solutions for complex problems Lloyd s appetite for risk is guided by long experience and responsible risk taking

Some of the more unusual risks we ve insured

Some Specialist insurance coverage provided at Lloyd s

The leading specialist insurance market Lloyd s provides insurance for the majority of the world s largest companies. 93% of Dow Jones Industrial Average companies 92% of FTSE 100 companies 86% of Fortune Top 50 European companies 81% of Fortune 500 US companies Top 7 Top 20 pharmaceutical companies banks Lloyd s has global reach and local depth providing business with insurance and reinsurance solutions in over 200 territories.

Lloyd s - key characteristics Unlike other insurance brands, Lloyd s is not a company, it s a market where our members join together as syndicates to insure and reinsure risk We have a long history of risk taking, responding to change and customer demands The Lloyd s market insures complex and specialist risks from oil rigs to major airlines to natural catastrophes Lloyd s underwriters devise tailored innovative solutions for complex problems Lloyd s appetite for risk is guided by long experience and responsible risk taking

Lloyd s Market Structure

Lloyd s market structure Corporation of Lloyd s Policyholders Direct Reinsurance Coverholders 178 Lloyd s Brokers Service Companies* Management 54 Managing Agents 83 Syndicates Underwriting Members Corporate Individual BUSINESS FLOW CAPITAL PROVISION SEE: www.lloyds.com/directories

Lloyd s market structure Members Corporate Individual CAPITAL PROVISION SEE: www.lloyds.com/directories

Sources of Capital by type & location 4% 9% 36% 17% 10% 24% Source: Lloyd s Annual Report 2010

Lloyd s market structure Corporation of Lloyd s Management 54 Managing Agents 83 Syndicates Underwriting Members Corporate Individual CAPITAL PROVISION SEE: www.lloyds.com/directories

Lloyd s market structure Corporation of Lloyd s Policyholders Direct Reinsurance Coverholders 178 Lloyd s Brokers Service Companies* Management 54 Managing Agents 83 Syndicates Underwriting Members Corporate Individual BUSINESS FLOW CAPITAL PROVISION SEE: www.lloyds.com/directories

Syndication of Risk Lloyd s Policy Syndicate Syndicate Policyholder Broker Syndicate Mutualised Security Fitch Ratings A+ (strong) Syndicate Standard & Poor s A+ (strong) A.M. Best A (excellent) Syndicate

Lloyd s market structure Corporation of Lloyd s Policyholders Direct Reinsurance Coverholders 178 Lloyd s Brokers Service Companies* Management 54 Managing Agents 83 Syndicates Underwriting Members Corporate Individual BUSINESS FLOW CAPITAL PROVISION SEE: www.lloyds.com/directories

Franchise management Performance Management Syndicate business planning/validation Underwriting Standards Monitoring / benchmarking Claims, reinsurance and run-off management Capital Management Syndicate capital Central assets Risk Management Realistic Disaster Scenarios Risk management framework Source: Lloyd s 21

Lloyd s Chain of security Lloyd s unique capital structure, often referred to as the Chain of Security, provides excellent financial security to policyholders and capital efficiency to members. The Corporation is responsible for setting both member and central capital to achieve a level of capitalisation that is robust and allows members the potential to earn superior returns. Several assets Mutual assets First Link Second Link Third Link Syndicate level assets $61,263m Members Funds at Lloyd s $21,716m Central Fund $2,017m Corporation $254m Subordinated debt/ securities $1,460m Callable layer $1,104m Source: Lloyd s Annual Report 2010. All figures as at December 31, 2010

Lloyd s Chain of security Lloyd s unique capital structure, often referred to as the Chain of Security, provides excellent financial security to policyholders and capital efficiency to members. The Corporation is responsible for setting both member and central capital to achieve a level of capitalisation that is robust and allows members the potential to earn superior returns. Several assets Mutual assets First Link Second Link Third Link Syndicate level assets $61,263m Members Funds at Lloyd s $21,716m Central Fund $2,017m Corporation $254m Subordinated debt/ securities $1,460m Callable layer $1,104m Source: Lloyd s Annual Report 2010. All figures as at December 31, 2010

Ratings Three of the world s leading insurance rating agencies recognise Lloyd s strengths and robust capitalisation and the financial strength of the market. In 2011, all three rating agencies reaffirmed our ratings. The Lloyd s financial strength ratings apply to every policy issued by every syndicate at Lloyd s since 1993. Fitch Ratings A+ (strong) Standard & Poor s A+ (strong) A.M. Best A (excellent) + Lloyd's Market Briefing

Reasons for doing business at Lloyd s Lloyd s financial strength is well recognized and tested S&P (A+), Fitch (A+) and A.M Best (A) ratings The Central Fund provides protection for policyholders Lloyd s works with brokers to build products for the needs of local markets, providing solutions that others won t Access to underwriter and subscription market allows bespoke approach Robust performance management framework Global network of licences Supporting education and training 320+ year history

role and benefits of the broker Grant Elliott, CEO Aon Global Insurance Brokers

Why use a Broker? Added value: Provide independent advice on Risk Benchmark Risk retention and transfer levels Ensure suitability of Transfer solutions Identify suitable Insurance and Reinsurance markets Minimise cost and maximise coverage Established relationships with key markets Knowledge of territories local & global An understanding of compliance issues and technical wording Highly regulated Product knowledge & innovation Work for the client A good Broker does not add cost- They add value!

India - Access to Lloyd s London Cedant Lloyd s Local RI Broker Lloyd s Platforms Cedant Local Broker Lloyd s Wholesale RI Broker Singapore

Why Lloyd s? Internationally recognised depth of expertise and experience Price, capacity, coverage and security Key market for specialised, tailor made, & bespoke risks Creative and Innovative Unique face-to-face negotiations Long term view, continuity of relationships Strong Market, regulation & controls

Benefits that Aon brings to its clients in India Direct access to market leading/ in-country technical specialists Through AGIB access to the world s largest owned global network of marketing, Technical and Geographical expertise in Insurance broking- represented by 61,000 people in 120 countries with 550 offices Access to the thought leadership and solution s driven research and development capability of one of the largest Risk and Human capital firms in the world

Aon Case Study I- Adding Values to Existing Benefits- Global IT Company A MNC IT firm with over 100000 employees across India and globally with a large presence in India at Chennai, Hyderabad Bangalore and other locations. Medical benefits were previously managed directly and the client had existing long relationships with the service providers. A high claims ratio coupled with medical inflation was leading to annual cost increases that was unmanageable. Aon Global conducted a detailed benefits study of the claims data to identify trends using internal claim benchmarks to identify embedded claim utilization patterns. This was followed by a formal RFP process with a detailed study of vendor capabilities to help the client to identify the right insurer / TPA combination Transition to new vendors happened smoothly and a co-insurance structure was identified that enabled the client to gain the best from the different vendors. Aon Global installed SLAs with the respective vendors and monitors SLA compliance and tracks claim utilization on a periodic basis to ensure compliance with processes. A comprehensive benefits manual has helped pre-empt benefits utilization queries leading to greater understanding of claim settlement processes and reducing employee dissonance.. A structured wellness program emphasizes the employee perceived value and is being rolled out at key employee locations.

Aon Case Study II- Managing Cost- Large Engineering Conglomerate Company Situation Previously Direct Multiple attachment data Some covers missing Aon Analysed current policies Carried out risk inspection Conducted Business interruption analysis Modified/Broadened covers Benefits Enhanced cover Competitive price No gaps/comprehensive cover Common renewal dates Significant reduction in number of policies

The Future of the Broker Brokers will continue to add value to the insurance buying process in India by: Acting as client advocates Developing an understanding of complex distribution channels Providing new solutions to meet clients needs Being fully appraised of enhanced international regulations Lloyd s has consistently stated that specialist brokers are a key factor in the achievement of its future strategy

working with the insurance market in india David Indge, Head of Class of Business Underwriting Performance Performance Management Directorate, Lloyd s

P&C Industry Outlook 1 Content Lloyd s Today lloyd s - future WORKING WITH THE INDIAN INSURANCE MARKET 2 3 4 Summary 5

1 P&C Industry Outlook

Lloyd s last 60 years Performance CHART: Lloyd s Performance Trend (1950 2010) 40% 20% 0% % -20% -40% -60% -80% 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 1950 Net UW Profit on NEP Investment Income %NEP Lloyd s Pre-Tax Profit % NEP Source: Lloyd's Annual Reports, Statistics relating to Lloyd's 2001; Lloyd s data for 1948 1999 on three year accounting (assuming written=earned premium and 18% brokerage), and from 2000 onwards on annual accounting basis. 37 Lloyd's Seminar, Mumbai

The Challenges in 2012 Industry continues to be competitive Investment returns on the decline Global economic environment weak Difficult claims environment Outlook unlikely to change in the foreseeable future 38 Lloyd's Seminar, Mumbai

2 Lloyd s - Today

Class of business Profile: Global CHART: CLASS PROFILE CHART: GEOGRAPHIC PROFILE 2010 Gross Written Premiums in % of total 2010 Gross Written Premiums in % of total Energy Motor 6% 5% Aviation 3% Central Asia & Asia Pacific 10% Rest of the World 4% Marine 7% 2010 Gross Written Premiums US$ 35.4bn* 37% Reinsurance Europe 16% 2010 Gross Written Premiums US$ 35.4bn* 43% US and Canada Casualty 20% 22% Property 20% United Kingdom 7% Other Americas Source: Lloyd s 2010 Annual Report; In 2010, the Lloyd s Market wrote 22.59bn, which equates to US$ 36bn worth of premiums using the principle exchange rate of 1.57. 40 Lloyd's Seminar, Mumbai

Class of business Profile: India CHART: CLASS PROFILE CHART: PLACEMENT PROFILE 2010 Gross Signed Premiums* in million US$ 2010 Gross Signed Premiums* in million US$ Property Treaty Property (D&F) 26.7 43.8 5% 10% Overseas Motor 0.0 Marine Energy Casualty Treaty 1.3 26.3 45.4 29% 56% Casualty 8.6 Aviation 22.6 Accident & Health 7.1 0 20 40 60 Direct Facultative Treaty Non-Proportional Treaty Source: 41 Lloyd s data is based on Xchanging REG 258, (2011); *unaudited figures based on country of origin and processing by calendar year; Indian business indicates policyholder based in India and may include business, which is not located nor transacted from India Lloyd's Seminar, Mumbai

Major claims: Lloyd s from India Cyclone at Kandla (1998) > Costs to Lloyd s: US$ 67m Bombay High North Platform (July 2005) > Costs to Lloyd s: US$ 250m Mumbai Flooding (July-August 2005) > Costs to Lloyd s: US$ 97m Source: Lloyd s, Claims, (2012) 42 Lloyd's Seminar, Mumbai

3 Lloyd s The future

Key Priorities Raise the levels of efficiency in the market: Claims Transformation Programme Market modernisation Increase the level of international involvement: Maximise the use of the broker distribution models Broaden the international diversity of underwriters and capital 44 Lloyd's Seminar, Mumbai

4 Working with the Indian Insurance Market

Major Classes: Lloyd s Global CHART: TOP CLASSES: PROPERTY 2010 Gross Signed Premiums* in million US$ Property D&F Property Cat XL Property Risk XS Property pro rata Terrorism Power Generation Difference in Conditions Engineering Livestock & Bloodstock Agriculture & Hail Nuclear Legal Expenses Lloyd's Japan Extended Warranty 0 1000 2000 3000 4000 5000 6000 Top Classes on Facultative Basis Property D&F* 1489.6 Terrorism 281.3 Power Generation 200.1 Property pro rata 138.7 Engineering 118.4 Difference in Conditions 90.9 Livestock & Bloodstock 19.5 Property Cat XL 12.9 Agriculture & Hail 12.2 Property Risk XS 8.3 Source: Lloyd s data is based on Xchanging REG 258, (2012); *unaudited figures based on country of origin and processing by calendar year; * D&F combined include: Property (direct & facultative), Property D&F (non-us binder); Property D&F (non-us open market); Property D&F (US binder), Property (US open market). 46 Lloyd's Seminar, Mumbai

Major Classes: Lloyd s Global CHART: TOP CLASSES: CASUALTY 2010 Gross Signed Premiums* in million US$ PI GI Medical Malpractice NM Casualty Treaty FI EL D&O BBB/ Crime Top Classes on Facultative Basis GI 206.8 BBB/ Crime 106.5 PI 92.8 M edical M alpractice 82.1 FI 70.4 D&O 26.0 EL 22.6 NM Casualty Treaty 1.7 0 500 1000 1500 2000 Source: Lloyd s data is based on Xchanging REG 258, (2012); *unaudited figures based on country of origin and processing by calendar year; * D&O = Directors & Officers + Directors & Officers (non-us) + Directors & Officers (US); EL = Employers Liability + Employers Liability / WCA (non-us) + Employers Liability / WCA (US); FI = Financial Institutions (non-us) + Financial Institutions (US); GI = NM General Liability (non-us direct) + NM General Liability (US direct); PI = Professional Indemnity + Professional Indemnity (non-us) + Professional Indemnity (US) 47 Lloyd's Seminar, Mumbai

Major Classes: Lloyd s Global CHART: TOP CLASSES: MARINE & ENERGY 2010 Gross Signed Premiums* in million US$ Energy Offshore Fine Art & Cargo Marine Hull Marine Liability Energy Onshore Marine XL War Political Risks Yacht Top Classes on Facultative Basis Energy Offshore 869.9 Marine Liability 395.7 Fine Art & Cargo 385.7 Energy Onshore 340.1 Marine Hull 278.8 War 241.7 Political Risks 28.8 Yacht 8.4 Marine XL 7.0 Source: 0 500 1000 1500 2000 2500 Lloyd s data is based on Xchanging REG 258, (2012); *unaudited figures based on country of origin and processing by calendar year; * Energy Offshore = Energy Offshore Liability + Energy Offshore Porperty; Energy Onshore = Energy Onshore Liability + Energy Onshore Property; Fine Art & Cargo includes Specie; Political Risks include Credit & Financial Guarantee. 48 Lloyd's Seminar, Mumbai

Major Classes: Lloyd s Global CHART: TOP 10 CLASSES: AVIATION 2010 Gross Signed Premiums* in million US$ Airline Top Classes on Facultative Basis General Aviation Airline 417.6 Aviation XL General Aviation 141.4 Aviation Products / Airport Liabilities Aviation Products/ Airport Liabilities 129.9 Space Space 71.6 Source: 0 100 200 300 400 500 600 700 Lloyd s data is based on Xchanging REG 258, (2012); *unaudited figures based on country of origin and processing by calendar year 49 Lloyd's Seminar, Mumbai

Major Classes: Lloyd s Global CHART: TOP 10 CLASSES: ACCIDENT & HEALTH 2010 Gross Signed Premiums* in million US$ Accident & Health (direct) Top Classes on Facultative Basis Contingency/ Other Pecuniary Accident & Health (direct) 205.1 Contingency/ Other Pecuniary 36.3 Medical Expenses Medical Expenses 32.0 Personal Accident XL Personal Accident XL 17.2 Term Life Term Life 11.9 Source: 0 200 400 600 800 1000 1200 Lloyd s data is based on Xchanging REG 258, (2012); *unaudited figures based on country of origin and processing by calendar year 50 Lloyd's Seminar, Mumbai

Examples of where Lloyd s could provide support The 2010-2020 Maritime Agenda which involves developing ports The ongoing programme for developing India s airport infrastructure India s expansion of its energy capabilities The Delhi / Mumbai Corridor project 51 Lloyd's Seminar, Mumbai

5 Summary

Summary Lloyd s recognises the industry s outlook, including India, remains challenging Lloyd s is taking step to ensure it remains the market of choice: Modernisation programme in place to improve efficiency Range of activities taking place to increase the level of international engagement in the market Lloyd s has significant capabilities to support the Indian Insurance industry in meeting the requirements of India s growing economy 53 Lloyd's Seminar, Mumbai

Lloyd s panel Chair: Jose Ribeiro, Lloyd s Ed Pennock, Lloyd s Grant Elliot, Aon David Indge, Lloyd s Chris London, Beazley

Closing remarks Jose Ribeiro, Director International Markets Lloyd s