REINSURANCE MARKET OVERVIEW Bucharest, 18 October 217
AVERAGE RATE MOVEMENTS BY LINE OF BUSINESS AT 1 JANUARY RENEWAL PROPERTY & CASUALTY US Property-Cat Western Europe Property-Cat Asia Pacific Property-Cat Middle East Property-Cat London Market Global Property Retrocession Property-Cat Industry Loss Warranties US Public Entity US Workers Compensation London Market Casualty 217 216 Western Europe GTPL Western Europe Motor Middle East Motor SPECIALTY Aviation Marine & Energy Terrorism Cyber -25% -2% -15% -1% -5% % 5% 1% Average rate change % (loss-free) 2
USD billion (inflation-adjusted) (RE)INSURED LOSSES FOLLOWING MAJOR CATASTROPHES 1 7, 6, 5, 4, 3, 2, 1, Hugo (1989) Andrew (1992) 9/11 attacks (21) 24 hurricanes Katrina (25) Ike (28) Harvey (217) E Irma (217) Maria (217) E E Insured loss Reinsured loss 1 Insured losses for hurricanes (recorded and estimated) exclude NFIP claims., Insurance Information Institute, Swiss Re, Wharton Risk Center, Disaster Insurance Project 3
197 1971 1972 1973 1974 1975 1976 1977 1978 1979 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Q3 217 E USD billion (inflation-adjusted) GLOBAL INSURED CATASTROPHE LOSSES 197 TO Q3 217 2 16 45 14 4 12 35 1 8 6 3 25 2 15 4 1 2 5 Seismic Meteorological Man-made 1-year moving average Number of events (RHS) 2 Includes NFIP insured losses., Swiss Re 4
1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 JLT RE S RISK ADJUSTED GLOBAL PROPERTY- CATASTROPHE RATE-ON-LINE (ROL) INDEX 1992 to 217 28 26 Katrina 24 211 losses* 22 2 9/11 Ike Sandy 18 16 14 12 Andrew 1 * Including * Including Christchurch Christchurch earthquake, earthquake, Tohoku earthquake, Tohoku earthquake, US tornadoes US tornadoes and Thai floods and Thai floods 5
USD billion (inflation-adjusted) PROTECTION GAP FOR SIGNIFICANT US HURRICANES 1992 to 217 18, 16, 14, 33% 12, 1, 8, 28% 47% 6, 27% 67% 4, 2, 58% 42% 47% 53% 33% 67% 73% 72% 53% Andrew (1992) Katrina (25) Hurrican Wilma (25) Ike (28) Superstorm Sandy (212) Harvey (217) E Irma (217) E Losses not covered by private market Private market losses, PCS, Munich Re, RMS 6
USD bilion DEDICATED REINSURANCE SECTOR CAPITAL AND ANNUALISED GROSS WRITTEN PREMIUMS 1998 to Q2 217E 35 325 3 275 25 225 2 175 15 125 1 75 5 25 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Q2 217E Traditional Alternative Catastrophe bonds Collateralised / sidecars Industry loss warranties Annualised gross premiums 7
1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 EXCESS CAPITAL RATIO AND GLOBAL PROPERTY-CATASTROPHE ROL INDEX CHANGE 1999 to 217 4% 3% 2% 1% % -1% -2% -3% -4% Excess capital ratio at previous year end Global property-catastrophe ROL change at 1.1 8
USD million USD million CATASTROPHE BOND ISSUANCE BY QUARTER 26 TO Q3 217 12, $35, 1, $3, 8, $25, $2, 6, $15, 4, $1, 2, $5, 26 27 28 29 21 211 212 213 214 215 216 Q3 217 Q1 Q2 Q3 Q4 Oustanding $ 9
1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 218 219 22 221 222 223 224 225 Percentage of property-catastrophe limit PROJECTIONS OF ALTERNATIVE CAPACITY AS A PERCENTAGE OF TOTAL PROPERTY-CATASTROPHE LIMIT 7% 6% 5% Other market estimates: ca. 4% by 22* 4% 3% 2% 1% JLT Re s-curve estimate: 25% - 3% in the 22s % *Some market participants have estimated that third-party capital could make up approximately 4% of global property-catastrophe limit by 22. 1
1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 Q3 217 E USD billion ANNUAL CHANGE IN INSURED CATASTROPHE LOSSES AND GLOBAL PROPERTY-CATASTROPHE ROL INDEX 15 2 18 1 16 5 14 12 1 8-5 6-1 4 2-15 Annual change in insured losses (LHS) Global property-cat ROL index (RHS)* * For the purposes of this chart, the ROL change applies on 31 December instead of 1 January so it aligns with insured catastrophe losses in each respective year. 11
PROJECTED ECONOMIC VALUE ADDED FOR TOP 22 REINSURERS IN 218 1% 8% 6% 4% 2% % -2% -4% -6% -8% 12
SIMPLE AVERAGE CESSION RATE OF TOP 2 GLOBAL P&C CARRIERS 27 to 217E 8.% 7.5% 7.% 6.5% 6.% 5.5% 5.% 4.5% 4.% 27 28 29 21 211 212 213 214 215 216 217E 13
CALENDAR YEAR RESERVE DEVELOPMENT BY QUARTER FOR TOP 3 GLOBAL P&C CARRIERS VERSUS ACCIDENT YEAR RESERVE EXPERIENCE 7% 14% 6% 5% Strengthening phase 13% 4% 3% 12% 2% 1% Overreation phase 11% % 1% -1% -2% -3% -4% Danger phase Windfall phase! 9% 8% -5% 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 217 7% Average quarterly calendar year reserve movements as % of equity (LHS) Accident year loss experience, all lines (RHS) 14
CONTACT David Flandro Global Head of Analytics Direct: +44 2 7466 1311 Mobile: +44 7775 757 979 Email: david.flandro@jltre.com The St Botolph Building 138 Houndsditch London EC3A 7AW www.jltre.com This presentation by JLT Re (North America) Inc. is intended to provide only general information based on sources we believe are reliable. JLT Re (North America) Inc. makes no representations or warranties, express or implied, as to the accuracy of any of the information herein, which is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Any statements concerning tax, accounting, legal or regulatory matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants. We are not tax, accounting, legal or regulatory professionals and any such information provided is not professional advice. These matters should be reviewed with your own qualified advisors in these areas. This document may not be copied or reproduced in any form without the express permission of JLT Re (North America) Inc., except that clients of JLT Re (North America) Inc. need not obtain such permission when using this report for internal business purposes. 15