Caucasus market Baku, June 19, 2014 By Thierry Pelgrin Reinsurance - PowerPoint PPT Presentation

Reinsurance Outlook for the Caucasus market Baku, June 19, 2014 By Thierry Pelgrin

Reinsurance Outlook for the Caucasus market Plan I. Presentation of our group: EVEREST RE II. Suggested Market & Reinsurance-Related Developments III. Reinsurance Challenges & Recommendations in Caucasus Key questions through our presentation: • What makes Caucasus attractive for Reinsurers? • Giving a market outlook for a better understanding of development issues. • Where can reinsurance be supportive of market developments and needs? 2

I. EVEREST RE - 40 years of presence in Europe ABILITY TO RESPOND TO GLOBAL OPPORTUNITIES MAJOR HUBS IN NEW JERSEY, BERMUDA, LONDON, TORONTO AND MIAMI REINSURANCE LOCATIONS INSURANCE LOCATIONS United States United States Bermuda London Canada Atlanta, GA Chicago, IL Belgium Singapore British Columbia, Canada Liberty Corner, NJ Liberty Corner, NJ Brazil Toronto, Canada New York, NY Miami, FL Canada Oakland, CA New York, NY Ireland Orange, CA Oakland, CA 3 Topeka, KS

FINANCIAL Highlights Development from 1996* to 2013 ($ in millions) 1996 2013 Financial Data: Equity 1,086.0 6,968.3 Assets 5,047.8 19,808.0 Gross Written Premium 1,044.0 5,218.6 GWP/Equity Ratio 96% 75% Financial Strength Ratings: AM Best A A+ S&P A+ A+ Moody’s A2 A1 * 1st year fo Everest Re operations after spin-off from Prudential Re 4

Diversity in Reinsurance Book (Worldwide figures) AMONGST THE MOST DIVERSIFIED REINSURANCE ORGANIZATIONS REINSURANCE PREMIUM BY GEOGRAPHY REINSURANCE PREMIUM BY LINE OF BUSINESS 2% 4% 4% 8% 25% 47% 49% 16% 28% 17% OTHER PROPERTY CASUALTY PROPERTY CAT XL WORLDWIDE MIDDLE EAST/AFRICA CANADA ASIA/AUSTRALIA EUROPE/UK LATIN AMERICA Multi product capability - Property/Casualty; Treaty/FAC; XOL/Prorata Broad Global Distribution Network Ability to adapt and react quickly to changing market dynamics Strong client/broker relationships 5

Diversity in Reinsurance Book (Eurasia) ERCIL* PORTFOLIO REINSURANCE PREMIUM BY REINSURANCE PREMIUM BY LINE GEOGRAPHY OF BUSINESS 7% 10% 17% 36% 29% 19% 12% 29% 26% 16% Property other than CAT Property CAT Other Scandinavia & Benelux Casualty & MTPL Specialty CEE France Germany/Austria/Switzerland Iberia 6 *Everest Re Company Ireland Limited

Ercil* EUROPE OUTLOOK Writing larger lines across all Non-Life Classes on Pro-rata or XL basis Bespoke solutions for Index Covers, ADC/LPT Covers, Multiline Aggregate XL, CAT Aggregate XL, Stop Loss Appetite for Specialty Lines** Increased profile as a Leader in Europe Easy Access to Decision-Makers in Europe *Everest Re Company Ireland Limited **Terrorism, Political Risks, Trade Credit/Single Risks and Bond, Engineering, Latent Defects, Kidnap & Ransom, Privacy, Product Contamination, Marine, Aviation, Agricultural and transport 7

II.Suggested Market & Reinsurance-Related developments PEST ANALYSIS 1. Political: regain of stability in the region (2008 - 2013) 2. Macro-Economic & Insurance Indicators 2.1 Macro-Economic Indicators 2.2 Insurance Indicators 3. Social & Legislation 3.1 Legislation 3.2 Social 4. Technological / Innovation - both for Insurance & Reinsurance 4.1 Development of existing core lines 4.2 Extending to other lines 8

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 2. Macro-Economic & Insurance Indicators 2.1 Macro-Economic Indicators Armenia - Market main indicators * Azerbaijan - Market main indicators * Georgia - Market main indicators * (EUR billion) 2009 2010 2011 2012 2013 (EUR billion) 2009 2010 2011 2012 2013 (EUR billion) 2009 2010 2011 2012 2013 GDP, current prices GDP, current prices GDP, current prices 5,79 7,19 7,58 7,51 7,67 7,43 8,33 11,24 11,99 11,25 30,96 40,21 50,26 52,01 53,53 (EUR billion) (EUR billion) (EUR billion) GDP per capita, GDP per capita, GDP per capita, current prices 1.783 2.204 2.314 2.289 2.332 current prices 1.695 1.990 2.515 2.666 2.510 current prices (EUR) 3.480 4.469 5.517 5.632 5.751 (EUR) (EUR) Insurance Insurance Insurance penetration degree 0,26 % 0,24 % 0,59 % 0,89 % 0,83 % 2 % 1.74% 1.32% 1.97% 1.75% penetration degree 0,46% 0,37% 0,42% 0,63% 0,70% penetration degree Insurance density Insurance density Insurance density 4,60 5,26 13,71 20,34 19,43 33,97 34,67 33,18 52,51 43,98 15,96 16,37 22,97 35,74 40,43 (EUR/capita) (EUR/capita) (EUR/capita) 9 *Source: Xprimm Insurance Report - CEE / SEE / CIS - FY 2013 - p. 68-79

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 2.1 Macro-Economic Indicators Georgia: GDP & Insurance Azerbaijan: GDP & Insurance Armenia: GDP & Insurance penetration degree * penetration degree * penetration degree * 0.89% 55.00 0.75% 12.00 2.00% 2.00% 11.99 9.00 0.90% 53.53 0.83% 1.95% 52.01 0.70% 11.25 11.24 50.26 48.75 0.65% 10.75 1.83% 8.13 0.71% 0.63% 1.75% 0.59% 1.74% 7.67 7.58 7.51 42.50 0.55% 9.50 1.65% 7.25 0.53% 7.19 40.21 8.83 0.46% 36.25 0.45% 8.25 1.48% 6.38 0.34% 0.26% 0.42% 0.24% 7.43 0.37% 30.96 5.79 1.32% 30.00 0.35% 7.00 1.30% 5.50 0.15% 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 GDP (EUR Billion) Penetration degree GDP (EUR Billion) Penetration degree GDP (EUR Billion) Penetration degree 10 *Source: Xprimm Insurance Report - CEE / SEE / CIS - FY 2013 - p. 68-79

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 2.1 Macro-Economic Indicators Armenia: GDP per capita & Azerbaijan: GDP per capita & Insurance Georgia: GDP per capita & Insurance Insurance density density density 2.40 21 20 6.00 45.00 2.80 55.00 53.00 19 5.750 40.43 2.332 5.631 2.314 2.666 5.516 2.289 2.23 17 2.50 47.50 5.25 37.50 35.74 2.515 2.510 2.204 44.00 14 2.05 13 2.20 40.00 4.50 30.00 4.469 35.00 34.00 33.00 22.97 1.990 1.88 9 1.90 32.50 3.75 22.50 3.479 16.37 1.783 15.96 5 5 1.60 25.00 1.70 5 1.659 3.00 15.00 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 GDP per capita (EUR) Insurance density (EUR/capita) GDP per capita (EUR) Insurance density (EUR/capita) GDP per capita (EUR) Insurance density (EUR/capita) 11 *Source: Xprimm Insurance Report - CEE / SEE / CIS - FY 2013 - p. 68-79

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 2.2 Insurance Indicators Azerbaijan: GWP and Claims Georgia: GWP and Claims Armenia: GWP and Claims evolution (EUR mil.) * evolution (EUR mil.) * evolution (EUR mil.) * 376 400 300 87.5 330 236 67 240 70 64 300 197 162 180 52.5 209 154 45 149 148 200 121 35 147 142 102 120 35 27 114 80 78 90 17 100 16 15 60 60 17.5 51 46 4 4 0 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 GWP Claims GWP Claims GWP Claims 12 *Source: Xprimm Insurance Report - CEE / SEE / CIS - FY 2013 - p. 68-79

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 2.2 Insurance Indicators Total Caucasus Non-Life GWP 2013 = 568,32 EUR Mio. Ratio of insurance premiums in the Gross Domestic Product = + 0,63% in 2012 Ratio of insurance premiums in the Gross Domestic Product = +0,70% in 2013 Average growth 2011-2013 = +56% Total Caucasus outward reinsurance 2012 = 60 EUR Mio. Client’s field = 73 13 *Source: Xprimm Insurance Report - CEE / Russia / SEE / CIS - 1H 2013 - p. 68-79

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 3. Social & Legislation 3.1 Legislation Differentiated state regulation and legislation • Pioneering example of Kazakhstan in CIS countries • Development of legislation in Caucasus: the examples of Azerbaijan and Georgia Trend for quality credit counter party risk (reinsurance rating) • Azerbaijan: Specific legislation for capital & separate licensing requirements Insurance Reinsurance Importance of high-rated reinsurers Diversification of exposures Diversification of panel of high-calibre reinsurers 14

II.Suggested Market & Reinsurance-Related developments What makes Caucasus attractive for Reinsurance ? Political Economical Social Technological (PEST) analysis 3. Social & Legislation 3.1 Legislation Mr Fuad KULIYEV, Chairman of the Management Board of AZ Re, analysed the effects of these changes into the market as follows: “ After the changes come into effect we expect that some of the insurance companies on the local market will have to quit the inward reinsurance business. On the other hand, the further increase in companies’ insurance premium income will naturally lead to more treaties to be bought by the local players as well as to the increase in the limits under the already existing treaty programs” *Source: Reinsurance in the CIS – The main trends and forecasts for 2014, 15 1asig.ro, http://www.x.primm.com/view2014, pp. 5 and 6/7