2017 Insurance Market Briefing – MENA - AM Best Company2017 Insurance Market Briefing – MENA . Fairmont Hotel, Dubai, United Arab Emirates . 4 October 2017

2017 Insurance Market Briefing – MENA

Fairmont Hotel, Dubai, United Arab Emirates

4 October 2017

2017 Insurance Market Briefing - MENA

Roger Sellek Chief Executive Officer, EMEA & Asia Pacific

Welcome

2017 Insurance Market Briefing - MENA October 4, 2017 1

Disclaimer © AM Best Company (AMB) and/or its licensors and affiliates. All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT AMB’s PRIOR WRITTEN CONSENT. All information contained herein is obtained by AMB from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. Under no circumstances shall AMB have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of AMB or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if AMB is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser. Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. Credit ratings do not address any other risk, including but not limited to, liquidity risk, market value risk or price volatility of rated securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY AMB IN ANY FORM OR MANNER WHATSOEVER. Each credit rating or other opinion must be weighed solely as one factor in any investment or purchasing decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its own study and evaluation of each security or other financial obligation and of each issuer and guarantor of, and each provider of credit support for, each security or other financial obligation that it may consider purchasing, holding or selling. Regulated by the Dubai Financial Services Authority as a Representative Office.


Disclaimer US Securities Laws explicitly prohibit the issuance or maintenance of a credit rating where a person involved in the sales or marketing of a product or service of the CRA also participates in determining or monitoring the credit rating, or developing or approving procedures or methodologies used for determining the credit rating.

No part of this presentation amounts to sales / marketing activity and A.M. Best’s Rating Division employees are prohibited from participating in commercial discussions.

Any queries of a commercial nature should be directed to A.M. Best’s Market Development function.


Agenda

14:05 Global Reinsurance Update Greg Carter, Managing Director,

Analytics – EMEA 14:35 Challenges Facing Middle

East (Re)insurers Mahesh Mistry, Senior Director,

Analytics

15:15 Update on A.M. Best's Credit Rating Methodology (BCRM) & the new Best's Capital Adequacy Ratio (BCAR) Model

Greg Carter, Managing Director, Analytics – EMEA

15:45

16:15 VAT Introduction in the GCC & Its Impact on the Insurance Market

Sanjay Jain, MENA Insurance Leader, Ernst & Young (EY)

Engela Wiid, Senior Manager, Insurance VAT Specialist , Ernst & Young (EY)

17:00 Significance of Rating Actions on (Re) Insurers

Vasilis Katsipis, General Manager, Market Development - MENA, South & Central Asia

17:45 Cocktail Reception



Global Reinsurance Update

Greg Carter Managing Director, Analytics - EMEA


Discussion Outline

Global Reinsurance Results and Trends

Market Capacity

Global Market Developments

Reinsurance Sector Outlook


Plus ça change…

Negative interest rates

The United States, the world’s largest economy, has debt/GDP over 100%

The United Kingdom voted to leave the European Union

Terrorism seems to be rampant around the world

Housing bubbles in many parts of the world

Stock Markets are hovering near all-time highs

…plus c’est la même chose


Global Reinsurance Results and Trends


Global Market Trends

60.2% 55.9% 56.2% 56.2% 60.6%

62.2%

57.8%

31.6% 31.9% 33.5% 34.8%

34.7% 32.6% 33.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

20%

40%

60%

80%

100%

2012 2013 2014 2015 2016 2017 Q2 5yr Avg

Expense Ratio

Loss Ratio

Loss ReserveDevelopment

Source: A.M. Best data and research


93% 87% 87%

91% 92% 93%

2012 2013 2014 2015 2016 2017Q2

91% 87% 88% 90%

98% 97%

2012 2013 2014 2015 2016 2017Q2


Combined Ratios by Reinsurance Sector

European “Big Four” U.S. & Bermuda Lloyd’s


91% 89%

92% 92% 96% 97%

0%

20%

40%

60%

80%

100%

120%

2012 2013 2014 2015 2016 2017Q2Loss Ratio Expense Ratio


Return on Equity (2012 to present) and Five-Year Average

12.4% 13.0%

11.6%

9.5%

8.2% 8.1%

0%

2%

4%

6%

8%

10%

12%

14%

2012 2013 2014 2015 2016 2017 Q2

Return on Equity Five-Year AverageSource: A.M. Best data and research





Return on Equity by Reinsurance Sector

13.0% 13.1%

11.0% 11.5%

9.7% 8.1%

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017Q2

10.6%

11.4%

10.9%

7.5% 6.8% 8.1%

2012 2013 2014 2015 2016 2017Q2

15.1% 16.2%

14.7%

8.9% 8.1% 8.9%

2012 2013 2014 2015 2016 2017Q2


Five-Year Average



10.9%

6.8%

0%

2%

4%

6%

8%

10%

12%

Five -Year Average Return on Equity Five -Year Average Return on Equity Excluding LossReserve Development


Global Reinsurance Market


Operating Cash Flow as a Percentage of Equity


15.0%

10.0%

13.3% 12.4% 12.4%

4.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

2012 2013 2014 2015 2016 2017 Q2





Operating Cash Flow as a Percentage of Equity by Reinsurance Sector


19.2%

11.4%

17.9% 17.1%

15.4%

5.5%

0%

5%

10%

15%

20%

2012 2013 2014 2015 2016 2017Q2

10.9% 10.4%

11.4%

9.7% 9.9%

2.9%

2012 2013 2014 2015 2016 2017Q2

13.2%

5.4% 6.0% 7.2%

10.9%

1.0%

2012 2013 2014 2015 2016 2017Q2


Market Capacity



Top 10 World's Largest Reinsurance Groups Reinsurance

Premiums Written Total Life & Non-Life

(USD m) Non-Life Only

(USD m) Shareholders’ Ratios

Gross Net Gross Net Funds Loss Expense Combined

Swiss Re Ltd. 35,622 33,570 21,878 21,430 35,716 61.3% 33.6% 94.8%

Munich Reinsurance Company 33,154 31,891 18,784 17,931 33,493 63.3% 32.4% 95.8%

Hannover Ruck SE 17,232 15,192 9,699 8,414 10,264 66.8% 27.2% 94.0%

SCOR S.E. 14,569 13,238 5,942 5,323 7,055 59.5% 33.6% 93.1%

Berkshire Hathaway Inc. 12,709 12,709 8,037 8,037 286,359 N/A N/A 89.4%

Lloyd's 11,576 8,694 11,576 8,694 34,101 53.2% 39.2% 92.3%

Reinsurance Group of America Inc. 10,107 9,249 N/A N/A 7,093 N/A N/A N/A

China Reinsurance (Group) Corporation 7,857 7,517 3,342 3,262 10,384 64.4% 37.5% 101.9%

Great West Lifeco 6,195 6,112 N/A N/A 13,857 N/A N/A N/A

Korean Reinsurance Company 5,554 3,903 4,880 3,312 1,755 81.7% 17.6% 99.2%

Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016



Swiss Re Ltd.

Munich Reinsurance Company

Lloyd's

Hannover Ruck SE

Berkshire Hathaway Inc.

SCOR S.E.

Transatlantic Holdings, Inc

Everest Re Group Ltd.

PartnerRe Ltd.

XL Group plc

Top 10 Global Reinsurance Groups – Non-Life

Top 10 Global Reinsurance Groups – Life

Source: A.M. Best data and research. Ranked by unaffiliated gross premium written in 2016

Munich Reinsurance Company

Swiss Re Ltd.

Reinsurance Group of America Inc.

SCOR S.E.

Hannover Ruck SE

Great West Lifeco

Berkshire Hathaway Inc.

Pacific LifeCorp

PartnerRe Ltd.

Assicurazioni Generali SpA



Life and Non-Life Reinsurance GPW Distribution by Ranking

Rank 1-10 68.6%

Rank 11-20 16.0%

Rank 21-30 7.6%

Rank 31-40 5.0%

Rank 41-50 2.8%



Estimate for Total Dedicated Reinsurance Capacity (USD billions)

320 340 332 345 355

48 60 68

75 80

2013 2014 2015 2016 2017E

ConvergenceCapacity

TraditionalCapacity

Notes and Sources: Estimates by Guy Carpenter and A.M. Best



0

10

20

30

40

50

60

70

80

90

Direct InstitutionalInvestors

Reinsurance SponsoredManagers

Dedicated Insurance-linkedsecurities (ILS) Managers

Convergence Capacity (2017 estimated) (USD billions)

Notes and Sources: Estimates by Guy Carpenter and A.M. Best


Global Market Trends Total Economic and Insured Losses – H1 2017 and H1 2016 (USD billions)

Source: Swiss Re Institute

H1 2017 H1 2016

Annual Change

(%) 10-Year Average

% of 10-Year Average

Economic Losses Economic Losses

Natural Catastrophe 41 110 -63 112

Man-made 3 7 -57 8

Economic Losses - Total 44 117 -62 120

Insured Losses

Natural Catastrophe 20 30 -33 29 26

Man-made 3 6 -50 4 50 Insured Losses - Total 23 36 -36 33 28


Global Market

Developments


Regulatory Uncertainty

Covered agreement

Potential U.S. tax reform

Has regulation peaked?



Client Agent & Broker

Primary Insurance Company Reinsurance Broker

Reinsurance Company

Convergence Capital

In A.M. Best’s opinion…

The market will continue to become more efficient as all players strive to become closer to the client



Potential Opportunities

Cyber Insurance Flood Mortgage Terrorism InsurTech


Reinsurance Sector Outlook

A.M. Best Maintains Negative Outlook

Capitalisation remains strong but…

Performance has been deteriorating and pressure on margins continues to mount

Returns for some reinsurance companies will fall short on a risk-adjusted basis

Headwinds

Convergence capital pressure

Intense competition

Earnings under pressure

Slippage in terms & conditions

Tailwinds

Favourable reserve development

Benign catastrophes

Increased cessions



Q&A Greg Carter

Managing Director, Analytics - EMEA



Challenges Facing Middle East (Re)insurers: Understanding the

Implication on Credit Quality

Mahesh Mistry Senior Director, Analytics


Why do Insurance Companies Fail?

Note: Exhibit percentages are based on companies where the cause of impairment was identified Source: A.M. Best data and research

Fraud - Adjudged or Alleged, 6.5% Affiliate Problems,

6.2%

Catastrophe Losses, 5.3%

Rapid Growth, 4.7%

Investment Losses, 3.3%

Reinsurance Failure, 0.3%

Unlicensed Insurance Product, 0.3%

General Business Failure (deficient loss reserve / inadequate

pricing), 73.4%

US Property / Casualty Impairment Causes (2000-2015)


Looking back…

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Lehman Brothers bankruptcy

Greek bailout

Sovereign Downgrades (USA, France, Italy, Spain, ME…)

Recession Europe

Brexit

Sterling /currency depreciation

Depressed oil prices

Emerging markets slowdown (China)

Liquidity Crisis Sovereign Debt Crisis Low Interest Rate Environment

Hurricanes Gustav & Ike Floods in Australia New Zealand EQ Japan EQ / Tsunami

European & Alberta Floods

German Hailstorms

Hurricane Sandy

Thai Floods

Fires in Southern CA

Chile EQ

European Storm Klaus

Zika Virus Tianjin

Ebola

Italian Earthquakes

European Storm Kyrill

Single Large Losses

Canadian Wildfires

Subprime crisis

US Elections

Geopolitical Tension

Mexico Earthquakes

Arab Spring

Hurricanes Harvey, Irma, Maria


Looking forward…

Insurance Pricing

Reserving Premium growth

Nat Cat Accumulation Concentration

Pandemic Terrorism

Man-made disasters Mortality / morbidity

Competition Excess capacity Climate change

Counter-party credit risk Management control

Political Brexit

Elections Instability / conflict

Change in government policies

Threats and Opportunities

Other Globalisation

Energy Medical advances

Power outages / blackouts

Economic Growth/slowdown

Interest rates Inflation Currency

Regulation Indirect exposures

(e.g. banking, affiliates)

Technology Distribution

Disruptive innovation Big data

Block chain Driverless cars

Cyber Drones


Market Challenges: MENA

Currency Risk

Regulation

Pricing

Inflation

Protectionism

Data Quality

Innovation

Investment

Oil Prices

Geopolitical Risk

Risk Management

Expertise

M&A

Reserving

VAT

Fiscal Deficits

Competition

Localisation


Global Premiums

Source: Swiss Re Institute Middle East & Central Asia


Financial Stability

Excessive growth is one of the main reasons for insurance failure

Growth Profitability

Financial Stability

The Right Balance

• Is growth important for insurers? • Is it sensible to grow in the current

economic environment? • Are there any opportunities to grow?

A few questions


Market growth (GDP Vs GWP)

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2011 2012 2013 2014 2015 2016

North America

-15%

-10%

-5%

0%

5%

10%

2011 2012 2013 2014 2015 2016

Europe

-25%-20%-15%-10%

-5%0%5%

10%15%20%

2011 2012 2013 2014 2015 2016

Oceania

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2011 2012 2013 2014 2015 2016

Latin America

-10%

-5%

0%

5%

10%

15%

2011 2012 2013 2014 2015 2016

Asia & Middle East

-10%

-5%

0%

5%

10%

15%

2011 2012 2013 2014 2015 2016

Africa

Notes: Gross Domestic Product (GDP) Gross Written Premium (GWP) (Unadjusted insurance growth) Source: A.M. Best data and research, Swiss Re sigma “World Insurance” series


Emerging markets represent opportunities

- 250 500 750

1,000 1,250 1,500 1,750

North America Latin America WesternEurope

Central andEastern Europe

Mature Asia Emerging Asia Middle Eastand Central

Asia

Africa Oceania

USD

mill

ions

Premium Development by Region (USDs) 2010

2011

2012

2013

2014

2015

2016

-10%

-5%

0%

5%

10%

15%

2010 2011 2012 2013 2014 2015 2016

Gro

wth

Growth: Mature Vs. Emerging Markets Life Mature

Life Emerging

Non-Life Mature

Non-Life Emerging

Source: A.M. Best data and research and Swiss Re Institute


MENA Growth

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Development of MENA Insurance Markets Compared to GDP (movements based on USD)

Year on Year Change in GDP Year on Year Change in Premium



Growth Opportunities: Low retention and penetration

Lowest premium retention; increasing due to introduction of mandatory covers

50%

55%

60%

65%

70%

75%

80%

85%

90%

2007 2008 2009 2010 2011 2012 2013 2014 2015

Estimated Non-life Premium Retention


0

2

4

6

8

10

12

Kuw

ait

Om

anQ

atar

Saud

i Ara

bia

UAE

Jord

anEg

ypt

Mor

occo

Tuni

sia

Alge

ria

Braz

ilM

exic

oIn

dia

Chin

aM

alay

sia

Sing

apor

e US

UK

Ger

man

ySp

ain

Aust

ralia

Insurance Penetration


The Protection Gap

• Rare events – reoccurrence rates between 30-50 years

• Consequences can be devastating

• Substantial global financial risk loss

• World Bank: USD 800 billion (1-10% of global GDP). Insurance loss is difficult to predict.

Pandemics

Unprecedented nature of catastrophes – reaching new highs Substantial gap between economic loss and insured loss

• Hurricanes Irma, Harvey, Maria, Earthquakes (Mexico)

• Significant uninsured losses • Difficult to predict despite

sophistication of modelling tools

Natural Catastrophes


The Protection Gap

Man-made losses

Single Loss Events Flood Risk

Catastrophe Models – Lloyd’s earthquake model

Impact Forecasting

Gulf Cooperation Council


Fragmented Market

39% 41% 44% 45% 43% 44%

61% 59% 56% 55% 57% 56%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 2016

United Arab Emirates - Market Share

Top 3 Others

-600-400-200

200400600

2011 2012 2013 2014 2015 2016

Share of Profit / Loss (USD millions)

Top 2 Others

-100

100

200

300

2011 2012 2013 2014 2015 2016

Share of Profit / Loss (USD millions)

Top 3 Others

34% 38% 36% 40% 42% 45%

66% 62% 64% 60% 58% 55%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 2016

Saudi Arabia – Market Share

Top 2 Others



Performance: GCC (USD millions)

-200

-100

0

100

200

300

400

500

2011 2012 2013 2014 2015 2016

United Arab Emirates

Underwriting Income Investment Income Market profit / loss

-600

-400

-200

0

200

400

600

800

2011 2012 2013 2014 2015 2016

Saudi Arabia


0

200

400

600

800

1,000

2011 2012 2013 2014 2015 2016

Qatar


• Market performance has been good • Performance remains volatile • UAE and Saudi Arabia undergone

pricing and reserving reviews • UAE, Qatar and Kuwait dependent on

investment income • Excludes movements through OCI

Source: A.M. Best data and research and Swiss Re Institute


Performance: Takaful

32%

74% 72% 80% 92%

77% 79% 74%

0%

20%

40%

60%

80%

100%

Abu DhabiNationalTakaful

ArabScandinavia

Takaful

Dar AlTakaful

DubaiIslamic

(AMAN)

Salama MethaqTakaful

NationalTakaful

(Watania)

TakafulEmarat

Loss Ratio

34% 27%

36%

53% 53%

30%

51%

36%

0%

10%

20%

30%

40%

50%

60%


ArabScandinavia

Takaful

Dar AlTakaful

DubaiIslamic

(AMAN)


NationalTakaful

(Watania)

TakafulEmarat

Expense Ratio

66%

101% 108%

132% 145%

107% 130%

109%

0%20%40%60%80%

100%120%140%160%


ArabScandinavia

Takaful

Dar AlTakaful

Dubai Islamic(AMAN)


NationalTakaful

(Watania)

TakafulEmarat

Combined Ratio

17%

10%

-4%

-14% -14%

1%

-15%

-3%

-20%-15%-10%

-5%0%5%

10%15%20%


ArabScandinavia

Takaful

Dar Al Takaful Dubai Islamic(AMAN)


NationalTakaful

(Watania)

TakafulEmarat

Return on Equity

Source: A.M. Best research and data


Performance: MENA Reinsurers

0%20%40%60%80%

100%120%140%160%

QatarReinsurance

Co. Ltd.

TrustInternationalInsurance &Reinsurance

Co BSC

MilliReasurans

Turk AnonimSirketi

SociétéCentrale deRéassurance

ArabInsurance

Group(B.S.C.) (C)

SaudiReinsurance

Co.

Hannover ReTakaful

B.S.C. (c)

KuwaitReinsuranceCo. K.S.C.P.

ArabReinsurance

Co. SAL

EmiratesRetakaful

Ltd.

SociétéTunisienne

deRéassurance

OmanReinsurance

Co. SAOC

Five-Year Average Technical Ratios Loss Ratio Combined Ratio

MENA Reinsurers underperform relative to global reinsurance peers 9%

8%

5% 4% 5%

0%

5%

10%

15%

2012 2013 2014 2015 2016

Return on Equity Ratios (2012-2016)

Notes: Excludes companies for whom financial data was not available. Source: A.M. Best data and research


Changing Market Landscape

First Insurance – Yarmouk Ins (Jordan) Bahrain Kuwait – Takaful International (Bahrain) Solidarity – Al Ahleia (Bahrain) Al Madina – Watania (UAE) Al Ahleia – Kuwait Re (Kuwait) GIG – AIG Sigorta

Acquisitions

Malath & Allied (Saudi Arabia) Gulf Union & Ahlia (Saudi Arabia)

Mergers

Arab German (Jordan) Takaful Re (UAE) Al Barakah (Jordan) Gulf Re (UAE) Saudi Cooperatives

Run offs/Closures

Orient UNB Takaful Medgulf UAE

New Entrants

Al Madina (Oman) Arab Scandinavian (UAE)

Conversion to Takaful

Capital / solvency requirements Suspension of licenses Oman IPOs


Energy: Oil Prices (USD per barrel)

20

30

40

50

60

70

80

90

100

110

120

Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017

Oil prices have fallen to their lowest position over the last decade

Notes: Europe Brent Spot Price (US Dollars per Barrel). Data to September 25, 2017. Source: United States Energy Information Administration


Energy: Fiscal Pressures

13% 12%

5% 4% 4%

3% 3% 3%

2% 2% 2% 2% 2%

Saudi ArabiaRussia

IraqIranUAE

BrazilKuwaitMexico

QatarNigeriaAngolaAlgeria

Kazakhstan

Contribution to World Oil Production (2015) (%)

93.0

105.7

46.5

80.1

54.6

93.7

58.6

50.1

61.6

0

20

40

60

80

100

120

Over 50% of oil production from emerging economies

Fiscal Breakeven (US Dollar per barrel)

Sources: U.S. Energy Information Administration, International Monetary Fund, IMF Regional Economic Outlook Middle East and Central Asia, April 2017, World Bank


Volatility of oil and stock indices

20

40

60

80

100

120

140

160

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Brent Baharain All Share Dubai General Kuwait Main Market

Qatar General Oman MSM 30 Main KSA All Tadawul Share

GCC Stock Markets and Brent Indexed to January 2014 = 100



Volatility oil and MENA Currencies

-

50

100

150

200

250

300

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17

Brent Algerian Dinar Jordan Dinar Egyptian Pound Moroccan Dirham Tunisian Dinar

Energy: Currency Risk MENA Country Currencies and Brent Crude Indexed to January 2014 = 100



Investment profile are concentrated and add volatility

High exposure to equities and real estate assets for UAE, Qatar and Kuwait insurers

41%

26%

16%

13% 6% 2016

Gradual shift towards low risk assets

37%

14% 24%

13%

12% 2011

Cash Bonds Equities Real Estate Other

27% 41%

60%

27%

65%

35%

54% 15%

5%

28%

23%

12%

12%

27% 17%

16%

6%

28%

7% 14% 24% 22%

5% 11% 4% 5% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bahrain Kuwait Oman Qatar SaudiArabia

UAE

Composition of Asset Allocation



Counterparty Credit Risk

Reinsurance Utilisation

Business Line Net Retention

Motor > 90%

Health 60% to 80%

A&L 40% to 60%

Marine 20% to 35%

Property < 15%

Engineering < 15%

Aviation < 5%

Energy < 2%

Motor 30%

Medical 42%

Other 28% Motor

36%

Medical 51%

Other 14%

Source: SAMA, JOIF, IA, EFSA, CBB, A.M. Best research and data Selected countries: Saudi Arabia, Jordan, UAE, Egypt, Bahrain

Retention is high on retail lines, with commercial lines ceded to reinsurers

Gross Written Premiums Net Written Premiums


Counterparty Credit Risk

-200

0

200

400

600

800

1000

0

200

400

600

800

1000

Earnings are generally driven by inward reinsurance commission

Note: Examples for illustration purposes. Actual data has not been used

Energy Motor


Navigating Regulation

Disclosures

Mandatory Business

Risk Management VAT

Investment Rules

Capital / Solvency

Pricing

Reserving

Strive for greater financial stability and transparency

Commissions


0%

5%

10%

15%

2011 2012 2013 2014 2015 2016

Leverage

Capital Management

0%20%40%60%80%

100%

Bahrain Kuwait Oman Qatar UAE SaudiArabia

Dividend Payout

Payout of profits over 5-year period

High dividend payout ratios in UAE, Oman and Kuwait Mainly still as a proportion of paid-up capital

Leverage is increasing, mainly due to operating leverage (borrowing to invest)

Market financial flexibility and liquidity has reduced, but remains strong



Final Thoughts….

THRE

AT /

RIS

K

OPPO

RTUN

ITY / BENEFIT

Low Oil Prices Growth

Geopolitical M&A

Protectionism Regulation

Currency Risk Competition Investment

Counterparty Risk Inflation

Reserving Innovation

Pricing Risk Management

Management and strategy

are key to navigating the

challenging operating

environment


Managing the Market Challenges

Critical to decision making and execution of strategy is “risk management”

Upside

Downside

Non-existent Reactive Proactive

Improves financial condition over time

Maintains financial condition over time

Financial condition can be subject to deterioration and shocks



Q&A Mahesh Mistry

Senior Director, Analytics



Update on Best's Credit Rating Methodology (BCRM) & the New Best's Capital Adequacy Ratio

(BCAR)

Greg Carter Managing Director, Analytics - EMEA


BCRM - Impetus for Change

• Transparency and consistency • A move towards best practices • A way to integrate new tools


BCRM

• Not a fundamental change to rating analysis

• Key rating drivers

remain the same – Balance Sheet

Strength – Operating

Performance – Business Profile – Enterprise Risk

Management


BCRM • BCRM has been reorganized into 4 sections

– Part I: Introduction – Part II: Rating Units – Part III: The Rating Process – Part IV: Insurance Holding Company and Issue

Credit Ratings • Part III: The Rating Process outlines A.M. Best’s

building block approach


BCRM Building Blocks


BCRM

Balance Sheet Strength • Rating unit balance sheet strength assessment

– BCAR – Other qualitative and quantitative factors

• Holding company impact assessment • Country risk impact


BCRM

Balance Sheet Strength: Rating Unit


What is BCAR?

Best’s Capital Adequacy Ratio (BCAR) • A comprehensive quantitative tool that

evaluates many of the risks to the balance sheet simultaneously

• Generates an overall estimate of the required level of capital to support those risks and compares it with available capital


Model Changes New Metric

Calculation of BCAR Score

How Many BCAR Scores & What VaR Levels

Overview of Available Capital & Risk Categories

Treatment of Natural Catastrophe PMLs

Stochastic-based

What-if Testing

BCAR Guidelines


New Metric VaR (Value at Risk)

VaR does not tell us about what’s in

the tail so we need to look at more than one

VaR

VaR 99.0

VaR 99.5


Calculation of BCAR Score • New formula

𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀 𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐀𝐀 − 𝐍𝐍𝐀𝐀𝐂𝐂 𝐑𝐑𝐀𝐀𝐑𝐑𝐑𝐑𝐀𝐀𝐑𝐑𝐀𝐀𝐑𝐑 𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀𝐀 𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐂𝐂𝐀𝐀𝐀𝐀

× 𝟏𝟏𝟏𝟏𝟏𝟏


Multiple BCAR Scores and VaR Levels

Using Value at Risk (VaR) metric VaR levels: 95, 99, 99.5, 99.6

Return Period (Years)

Annual Probability (%)

Confidence Level (%)

20 5.0 95.0

100 1.0 99.0

200 0.5 99.5

250 0.4 99.6

VaR 99.8 also modeled but not included in balance sheet assessment VaR 99.8 included in ERM assessment


Net Required Capital = + (B7)(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + (B5)]2 + (B6)2 + (B8)2

Restructuring of Risk Categories

Available Capital (AC) Reported Capital (PHS) Equity Adjustments:

Unearned Premiums (DAC) Assets Loss Reserves Reinsurance

Debt Adjustments: Surplus Notes Debt Service Requirements

Other Adjustments: Future Operating Losses Goodwill & Intangible Assets Other

Net Required Capital Gross Required Capital (GRC): (B1) Fixed Income Securities (B2) Equity Securities (B3) Interest Rate (B4) Credit (B5) Loss and LAE Reserves (B6) Net Premiums Written (B7) Business Risk (B8) Potential Catastrophe Loss

Covariance Adjustment

Net Required Capital (NRC)*

BCAR = ( Available Capital - Net Required Capital) x 100 Available Capital


B.1_BCAR Formula

A.M. Best’s Capital Adequacy Ratio

BCAR =( Available Capital - Net Required Capital) x 100

Available Capital

Available Capital Components:Net Required Capital (NRC) Components:Net Required Capital (NRC) Components:

Reported Capital (Surplus)(B1) Fixed-Income Securities(B1) Fixed-Income Securities

Equity Adjustments:(B2) Equity Securities(B2) Equity Securities

Unearned Premiums(B3) Interest Rate(B3) Interest Rate

Assets(B4) Credit(B4) Credit

Loss Reserves(B5) Net Loss and LAE Reserves(B5) Reserves

Reinsurance(B6) Net Premiums Written(B6) Net Premiums Written

Debt Adjustments:(B7) Business Risk(B7) Business Risk

Surplus Notes(B8) Potential Catastrophe Losses(B8) Potential Catastrophe Losses

Debt Service Requirements

Other Adjustments:CovarianceCovariance

Future Operating Losses

Goodwill & Intangibles

Available Capital

Net Required Capital =(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + (B5)]2 + (B6)2 + (B8)2 + (B7)

Revised_A.1



Available Capital

Available Capital Components:Net Required Capital (NRC) Components:

Reported Capital (Surplus)(B1) Fixed-Income Securities

Equity Adjustments:(B2) Equity Securities

Unearned Premiums(B3) Interest Rate

Assets(B4) Credit

Loss Reserves(B5) Net Loss and LAE Reserves

Reinsurance(B6) Net Premiums Written

Debt Adjustments:(B7) Business Risk

Surplus Notes(B8) Potential Catastrophe Losses


Other Adjustments:Covariance



Available Capital

Net Required Capital =(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + (B5)]2 + (B6)2 + (B7) + (B8)

A.1- structural overview



Available Capital

Available Capital Components:Net Required Capital (NRC) Components:

Reported Capital (Surplus)(B1) Fixed-Income Securities

Equity Adjustments:(B2) Equity Securities

Unearned Premiums(B3) Interest Rate

Assets(B4) Credit

Loss Reserves(B5) Net Loss and LAE Reserves

Reinsurance(B6) Net Premiums Written

Debt Adjustments:(B7) Business Risk

Surplus Notes(B8) Potential Catastrophe Losses


Other Adjustments:Covariance



NRC =(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + B5]2 + (B6)2 + (B7) + (B8)

B.1-Exhibit 1

Exhibit 1: Best’s Capital Adequacy Model

Composition of gross required capital— 2013 industry aggregates.

CreditLoss/LAE ReservesWritten PremiumsPotential Large LossOff-Balance SheetInvestments in AffiliatesInterest RateNon Affiliated StocksAll Othercheck:

526269114298100

bcar criteria says the B1 thru B7 categories collectively make up 99% of the GRC.

(B7 is the last 1%)

source is PC BCAR data extracted into "mydocs/articles/2015/new bcar/Industry GRC with B8 cat risk.xlsx"

percentages shown on labels need to be changed manually.

Credit5%

Loss/LAE Reserves26%

Written Premiums26%

Potential

Large Loss9%

Investments in Affiliates 14%

Interest Rate2%

Non Affiliated Stocks9%

Investments33%

CreditLoss/LAE ReservesWritten PremiumsPotential Large LossOff-Balance SheetInvestments in AffiliatesInterest RateNon Affiliated StocksAll Other526269114298

B.2_Sample BCAR Calc

Exhibit B.2: Sample BCAR Calculation

Best's Capital Adequacy Model

Sample Rating Unit

($ Thousands)

RECAP of NET REQUIRED CAPITAL (NRC)

VaR 95VaR 99VaR 99.5VaR 99.6

Risk ComponentRequired% GrossRequired% GrossRequired% GrossRequired% Gross

CapitalRequiredCapitalRequiredCapitalRequiredCapitalRequired

Asset Risk:AmountCapitalAmountCapitalAmountCapitalAmountCapital

(B1)Fixed Income Securities Risk24,760827,721728,671629,2166

(B2)Equity Securities Risk59,0252077,4751984,5251786,05516

Investment Risk83,78528105,19626113,19623115,27122

(B3)Interest Rate Risk9,201312,990314,614315,1553

Subtotal92,98631118,18629127,81026130,42625

(B4)Credit Risk10,012311,846313,842314,9263

Total Asset Risk102,99834130,03232141,65229145,35228

Underwriting Risk:

(B5)Loss & LAE Reserves Risk69,88623105,55126119,71525124,17524

(B6)Net Written Premiums Risk61,7792193,67423106,27822110,23321

Total Underwriting Risk131,66544199,22549225,99347234,40845

(B7)Business Risk3,08013,08013,08013,0801

(B8)Catastrophe Risk62,0002177,00019115,00024140,00027

Gross Required Capital (GRC)299,743100409,337100485,725100522,840100

Less: Covariance Adjustment164,46655221,58254261,77254279,70953

Net Required Capital (NRC) 135,27845187,75546223,95246243,13147

RECAP of AVAILABLE CAPITAL (AC)% to

Reported

Capital & Capital AdjustmentsAmountCapital

Reported Capital (Surplus)180,000100

Equity Adjustments:

Provision for Reinsurance1,0001

Unearned Premium Reserve Equity16,2509

Loss Reserves Equity15,4339

Fixed Income Equity14,4008

Other Adjustments:

Surplus Notes00

Off-Balance Sheet Losses00

Future Dividends00

Protected Cell Surplus00

Goodwill & Intangibles00

AVAILABLE CAPITAL (AC)227,083126

Effective Tax Rate = 20.0%

Best's Capital Adeqacy RatioVaR 95VaR 99VaR 99.5VaR 99.6

BCAR = (AC - NRC) / AC40.417.31.4-7.1

B.4_NRC Formula



Available Capital

Available Capital Components:Net Required Capital (NRC) Components:Net Required Capital (NRC) Components:

Reported Capital (Surplus)(B1) Fixed-Income Securities(B1) Fixed-Income Securities

Equity Adjustments:(B2) Equity Securities(B2) Equity Securities

Unearned Premiums(B3) Interest Rate(B3) Interest Rate

Assets(B4) Credit(B4) Credit

Loss Reserves(B5) Net Loss and LAE Reserves(B5) Reserves

Reinsurance(B6) Net Premiums Written(B6) Net Premiums Written

Debt Adjustments:(B7) Business Risk(B7) Business Risk

Surplus Notes(B8) Potential Catastrophe Losses(B8) Potential Catastrophe Losses


Other Adjustments:CovarianceCovariance



Available Capital

Net Required Capital =(B1)2 + (B2)2 + (B3)2 + (.5 * B4)2 + [(.5 * B4) + (B5)]2 + (B6)2 + (B8)2 + (B7)

B.7_VaR Loss Amount

(1)(2)(3)(4)(5)(6)

(1) * (4)100.0% - (3)

Statement AmountMetricConfidence LevelCapital FactorLoss Amount at Confidence LevelExceedance Probability*

100,000VaR95.0%0.2323,0005.0%

VaR99.0%0.3030,0001.0%

VaR99.5%0.3434,0000.5%

VaR99.6%0.3535,0000.4%

VaR99.9%0.4141,0000.1%

*Probability that an actual observed loss will exceed the loss amount of the confidence level.

B.8_BCAR Assessment

VaR Confidence Level (%)BCARBCAR Assessment

99.6> 30 at 99.6Strongest

99.6> 10 at 99.6 & ≤ 30 at 99.6Very Strong

99.5> 0 at 99.5 & ≤ 10 at 99.6Strong

99> 0 at 99 & ≤ 0 at 99.5Adequate

95> 0 at 95 & ≤ 0 at 99Weak

95≤ 0 at 95Very Weak

B.3-Exhibit 3

MetricConfidence Level (%)BCARImplied Balance Sheet Strength

ImpliedVaR99.9> 0 at 99.9Strongest

ConfidenceBalance SheetVaR99.8> 0 at 99.8 & ≤ 0 at 99.9Very Strong

MetricLevel (%)BCARStrengthVaR99.5> 0 at 99.5 & ≤ 0 at 99.8Strong

VaR99.9Greater than 0StrongestVaR99> 0 at 99 & ≤ 0 at 99.5Adequate

VaR99.8Greater than 0Very StrongVaR95> 0 at 95 & ≤ 0 at 99Weak

VaR99.5Greater than 0StrongVaR95≤ 0 at 95Very Weak

VaR99Greater than 0Adequate

VaR95Greater than 0Weak

VaR95Less Than 0Very Weak

* BCAR is not the sole determinant of a rating.

C.1_Sample Bond

VaR 99

VAR 99VAR 99.5VAR 99.6VAR 99.8Rating1 Year3 Year5 Year 7 Year10 Year

1 YEARaaa0.00%0.00%0.00%0.00%aaa0.00%0.04%0.11%0.16%0.23%

aa0.11%0.16%0.18%0.23%aa0.11%0.44%0.71%0.88%1.02%

a0.48%0.56%0.58%0.66%a0.48%1.43%2.08%2.43%2.69%

bbb1.15%1.27%1.32%1.45%bbb1.15%3.24%4.57%5.34%5.87%

bb2.59%2.74%2.82%2.96%bb2.59%6.99%9.98%11.80%13.30%

b+ to b-7.07%7.34%7.43%7.61%b+ to b-7.07%17.65%24.28%28.09%30.37%

ccc+ to ccc-25.06%25.35%25.46%25.67%ccc+ to ccc-25.06%44.06%47.13%45.51%41.17%

2 YEARaaa0.00%0.03%0.05%0.09%

aa+0.14%0.20%0.21%0.27%

aa0.27%0.37%0.40%0.47%

aa-0.45%0.57%0.59%0.68%

a+0.81%0.95%0.99%1.09%

a0.99%1.14%1.18%1.29%

a-1.20%1.37%1.42%1.53%

bbb+2.02%2.25%2.31%2.49%

bbb2.29%2.53%2.61%2.80%

bbb-2.85%3.11%3.19%3.40%

bb+4.33%4.67%4.76%5.02%

bb4.95%5.30%5.40%5.66%

bb-8.99%9.36%9.48%9.81%

b+ to b-12.91%13.33%13.44%13.83%

ccc+ to ccc-37.91%38.23%38.31%38.57%

cc to c44.23%44.60%44.69%45.00%

d50.55%50.97%51.08%51.43%

3 YEARaaa0.04%0.09%0.11%0.15%

aa+0.25%0.34%0.37%0.45%

aa0.46%0.60%0.64%0.76%

aa-0.73%0.89%0.92%1.06%

a+1.25%1.44%1.50%1.67%

a1.51%1.72%1.78%1.96%

a-1.82%2.05%2.12%2.30%

bbb+3.00%3.31%3.41%3.68%

bbb3.39%3.72%3.81%4.11%

bbb-4.20%4.54%4.63%4.94%

bb+6.31%6.69%6.84%7.18%

bb7.17%7.56%7.72%8.09%

bb-12.59%13.04%13.22%13.63%

b+ to b-17.65%18.13%18.29%18.76%

ccc+ to ccc-44.06%44.37%44.42%44.63%

cc to c51.40%51.77%51.82%52.06%

d58.74%59.16%59.23%59.50%

4 YEARaaa0.09%0.14%0.16%0.22%

aa+0.37%0.46%0.50%0.62%

aa0.67%0.80%0.86%1.03%

aa-1.00%1.16%1.23%1.43%

a+1.67%1.87%1.96%2.20%

a2.00%2.22%2.33%2.59%

a-2.40%2.65%2.75%3.03%

bbb+3.92%4.29%4.40%4.77%

bbb4.41%4.83%4.93%5.30%

bbb-5.40%5.86%5.94%6.38%

bb+8.07%8.56%8.69%9.18%

bb9.13%9.59%9.77%10.26%

bb-15.67%16.13%16.31%16.84%

b+ to b-21.42%22.00%22.13%22.60%

ccc+ to ccc-46.60%46.81%46.84%46.98%

cc to c54.36%54.61%54.64%54.81%

d62.13%62.41%62.45%62.64%

5 YEARaaa0.13%0.20%0.22%0.30%

aa+0.47%0.59%0.64%0.79%

aa0.83%1.00%1.06%1.28%

aa-1.24%1.43%1.51%1.75%

a+2.06%2.28%2.38%2.67%

a2.45%2.70%2.81%3.13%

a-2.93%3.22%3.35%3.65%

bbb+4.73%5.17%5.29%5.72%

bbb5.28%5.78%5.89%6.36%

bbb-6.49%6.94%7.08%7.53%

bb+9.58%10.07%10.28%10.85%

bb10.79%11.31%11.51%12.11%

bb-18.08%18.68%18.93%19.46%

b+ to b-24.28%24.90%25.09%25.69%

ccc+ to ccc-47.13%47.26%47.30%47.40%

cc to c54.99%55.14%55.18%55.30%

d62.84%63.02%63.06%63.20%

6 YEARaaa0.18%0.27%0.29%0.36%

aa+0.59%0.71%0.76%0.93%

aa1.01%1.21%1.25%1.49%

aa-1.48%1.72%1.75%2.01%

a+2.39%2.70%2.76%3.07%

a2.85%3.20%3.25%3.58%

a-3.39%3.77%3.84%4.17%

bbb+5.50%5.99%6.10%6.55%

bbb6.15%6.64%6.80%7.31%

bbb-7.44%8.00%8.14%8.63%

bb+10.90%11.52%11.70%12.19%

bb12.23%12.84%13.04%13.53%

bb-20.06%20.70%20.91%21.40%

b+ to b-26.49%27.08%27.25%27.70%

ccc+ to ccc-46.60%46.69%46.71%46.77%

cc to c54.37%54.47%54.49%54.57%

d62.13%62.25%62.27%62.36%

7 YEARaaa0.21%0.32%0.36%0.44%

aa+0.70%0.85%0.90%1.07%

aa1.18%1.41%1.46%1.68%

aa-1.69%1.97%2.04%2.26%

a+2.73%3.08%3.16%3.41%

a3.24%3.62%3.71%3.99%

a-3.84%4.26%4.33%4.63%

bbb+6.18%6.66%6.85%7.21%

bbb6.89%7.39%7.63%8.00%

bbb-8.34%8.85%9.06%9.48%

bb+12.09%12.70%12.84%13.38%

bb13.49%14.09%14.29%14.81%

bb-21.69%22.25%22.47%22.97%

b+ to b-28.09%28.67%28.79%29.31%

ccc+ to ccc-45.51%45.57%45.59%45.63%

cc to c53.10%53.17%53.18%53.23%

d60.69%60.76%60.78%60.84%

8 YEARaaa0.27%0.38%0.43%0.58%

aa+0.79%0.96%1.02%1.22%

aa1.32%1.56%1.64%1.92%

aa-1.90%2.17%2.26%2.56%

a+3.03%3.36%3.46%3.78%

a3.59%3.94%4.05%4.40%

a-4.23%4.64%4.74%5.13%

bbb+6.75%7.29%7.43%7.98%

bbb7.52%8.11%8.25%8.84%

bbb-9.09%9.63%9.82%10.41%

bb+13.08%13.68%13.86%14.55%

bb14.54%15.16%15.32%16.07%

bb-22.91%23.52%23.72%24.24%

b+ to b-29.28%29.77%29.93%30.39%

ccc+ to ccc-44.16%44.20%44.21%44.23%

cc to c51.52%51.56%51.58%51.61%

d58.88%58.93%58.94%58.98%

9 YEARaaa0.31%0.45%0.48%0.64%

aa+0.88%1.08%1.14%1.35%

aa1.46%1.71%1.80%2.08%

aa-2.09%2.37%2.45%2.78%

a+3.30%3.63%3.73%4.09%

a3.89%4.25%4.37%4.73%

a-4.57%4.97%5.09%5.52%

bbb+7.29%7.81%7.97%8.54%

bbb8.11%8.64%8.80%9.41%

bbb-9.72%10.25%10.42%11.08%

bb+13.82%14.51%14.66%15.43%

bb15.35%16.05%16.18%16.96%

bb-23.85%24.47%24.63%25.20%

b+ to b-29.93%30.48%30.61%31.04%

ccc+ to ccc-42.68%42.71%42.71%42.73%

cc to c49.80%49.83%49.83%49.85%

d56.91%56.94%56.95%56.97%

10 YEARaaa0.35%0.51%0.58%0.74%

aa+0.96%1.19%1.26%1.50%

aa1.57%1.88%1.96%2.25%

aa-2.23%2.57%2.65%2.98%

a+3.52%3.92%4.02%4.38%

a4.14%4.57%4.67%5.03%

a-4.88%5.33%5.42%5.80%

bbb+7.72%8.32%8.45%9.02%

bbb8.56%9.17%9.33%9.90%

bbb-10.24%10.83%11.00%11.58%

bb+14.54%15.17%15.35%15.96%

bb16.12%16.75%16.92%17.55%

bb-24.55%25.11%25.32%25.83%

b+ to b-30.37%30.82%30.95%31.39%

ccc+ to ccc-41.17%41.18%41.18%41.19%

cc to c48.03%48.04%48.05%48.06%

d54.89%54.91%54.91%54.92%

C.3_Common Stocks

(1)Metric(2)Confidence Level(3)Baseline Capital Factor

VaR95.0%25%

VaR99.0%38%

VaR99.5%43%

VaR99.6%44%

*Traded in U.S. Stock Markets

C.4_Sample Investment Risk Calc

Exhibit 12

Investment Risk (B1 & B2)

($ Thousands)

Capital FactorsRequired Capital Amount

(1)(2)(3) (4)(5)(6)(7)(9)(10)(11)(12)

(1) + (2)(3) * (4)(3) * (5)(3) * (6)(3) * (7)

StatementAdjusted

InvestmentsStatement ValueAdjustmentAdjusted AmountVaR 95VaR 99VaR 99.5VaR 99.6VaR 95VaR 99VaR 99.5VaR 99.6

Bonds:

U.S. Gov't.90,000090,0000.00.00.00.00000

Class 1343,0000343,0000.60.91.01.12,0583,0873,4303,773

Class 2110,0000110,0003.34.34.64.73,6304,7305,0605,170

Class 320,000020,0009.911.211.611.71,9802,2402,3202,340

Class 45,00005,00020.922.322.822.91,0451,1151,1401,145

Class 54,00004,00042.142.442.642.71,6841,6961,7041,708

Class 62,00002,00054.254.654.754.81,0841,0921,0941,096

Affiliated3,00003,000100.0100.0100.0100.03,0003,0003,0003,000

Total Bonds577,0000577,0002.52.93.13.214,48116,96017,74818,232

Preferred Stocks:

Non-affiliated (Public)20,000020,00025.038.043.044.05,0007,6008,6008,800

Class 114,000014,0000.60.91.01.184126140154

Class 212,000012,0003.34.34.64.7396516552564

Class 310,000010,0009.911.211.611.79901,1201,1601,170

Class 49,00009,00020.922.322.822.91,8812,0072,0522,061

Class 58,00008,00042.142.442.642.73,3683,3923,4083,416

Class 66,00006,00054.254.654.754.83,2523,2763,2823,288

Non-Affiliated (Private)5,00005,000100.0100.0100.0100.05,0005,0005,0005,000

Affiliated (Public)4,00004,00025.038.043.044.01,0001,5201,7201,760

Affiliated (Private)3,00003,000100.0100.0100.0100.03,0003,0003,0003,000

Total Preferred Stocks91,000091,00026.330.331.832.123,97127,55728,91429,213

Common Stocks:

Non-Affiliated (Public)80,000080,00025.038.043.044.020,00030,40034,40035,200

Non-Affiliated (Private)5,00005,000100.0100.0100.0100.05,0005,0005,0005,000

Money Market Funds25,000025,0000.30.30.30.375757575

Affiliated (Public)10,000010,00025.038.043.044.02,5003,8004,3004,400

Affiliated (Private)5,00005,000100.0100.0100.0100.05,0005,0005,0005,000

Total Common Stocks125,0000125,00026.135.439.039.732,57544,27548,77549,675

Mortgage Loans1,00001,0003.34.95.45.633495456

Real Estate:

Company Occupied30,000030,00012.017.519.520.23,6005,2505,8506,060

Investments10,000010,00012.017.519.520.21,2001,7501,9502,020

Total Real Estate40,000040,00012.017.519.520.24,8007,0007,8008,080

Contract Loans1,00001,0005.05.05.05.050505050

Cash & Cash Equivalents25,000025,0000.30.30.30.375757575

Short-Term Investments15,000015,0001.01.01.01.0150150150150

Derivative Asset3,00003,000100.0100.0100.0100.03,0003,0003,0003,000

Securities Lending Reinvested Collateral9,00009,00010.010.010.010.0900900900900

Other Investments10,000010,00027.541.847.348.42,7504,1804,7304,840

Other Assets5,00005,00020.020.020.020.01,0001,0001,0001,000

Total Investments902,0000902,0009.311.712.512.883,785105,196113,196115,271

Multiply by: Spread of Risk Factor1.001.001.001.00

Investment-Risk Required Capital83,785105,196113,196115,271

C.5_Interest Rate Risk

Exhibit 13

Interest Rate Risk (B3)Interest Rate Risk (B3)

($ Thousands)($ Thousands)

(1)(2)(3)(4)(5)(6)(7)(8)(1)(2)(3)(4)(5)(6)(7)

Market Decline due to 170 BP RiseMarket Decline due to 240 BP RiseMarket Decline due to 270 BP RiseMarket Decline due to 280 BP RiseMarketMarket Decline due to 170 BP RiseMarket Decline due to 240 BP RiseMarket Decline due to 270 BP RiseMarket Decline due to 280 BP Rise

Average Contract MaturityEstimated DurationMarket ValueDecline due toAverage Contract MaturityEstimated DurationMarket Value

Fixed Income310 BP RiseFixed Income

Security(2) * (3) * 1.7%(2) * (3) * 2.4%(2) * (3) * 2.7%(2) * (3) * 2.8%(2) * (3) * 3.1%Security(2) * (3) * 1.7%(2) * (3) * 2.4%(2) * (3) * 2.7%(2) * (3) * 2.8%

Bonds43.5600,00035,70050,40056,70058,80065,100Bonds43.5600,00035,70050,40056,70058,800

Preferred Stocks87.6100,00012,92018,24020,52021,28023,560Preferred Stocks87.6100,00012,92018,24020,52021,280

Mortgage Loans109.52,000323456513532589Mortgage Loans109.52,000323456513532

Totals702,00048,94369,09677,73380,61289,249Totals702,00048,94369,09677,73380,612

Catastrophe Exposure Percentage Calculation:VaR 95VaR 99VaR 99.5VaR 99.6VaR 99.9Catastrophe Exposure Percentage Calculation:VaR 95VaR 99VaR 99.5VaR 99.6

Gross PML =150,000150,000150,000150,000600,000Gross PML =150,000150,000150,000150,000

Liquid Assets =800,000800,000800,000800,000800,000Liquid Assets =800,000800,000800,000800,000

PML To Liquid Assets Percentage (10% minimum) =18.818.818.818.875.0PML To Liquid Assets Percentage (10% minimum) =18.7518.7518.7518.75

(B3) Interest Rate Risk Required Capital Amount = 9,20112,99014,61415,15566,937(B3) Interest Rate Risk Required Capital Amount = 9,17712,95614,57515,115

(= 18.8% * 48,943)(= 18.8% * 69,096)(= 18.8% * 77,733)(= 18.8% * 80,612)(= 75.0% * 89,249)(= 18.8% * 48,943)(= 18.8% * 69,096)(= 18.8% * 77,733)(= 18.8% * 80,612)

C.6-C.9_Credit Risk Factors

Exhibit 5

Reinsurance Recoverables Credit Risk Factors - VaR 95VaR 95VaR 99VaR 99.5VaR 99.6VaR 99.8

Best's ICRReinsurer Impairment Factors Reinsurer Impairment Factors Reinsurer Impairment Factors Reinsurer Impairment Factors Reinsurer Impairment Factors

Best's ICR of ReinsurerFSRYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10

aaaA++0.3%0.4%0.5%0.6%0.6%0.7%0.8%0.9%1.0%1.0%aaa0.0025000.0036000.0045000.0055000.0063000.0073000.0081000.0089000.0097000.0103000.0123000.0136000.0148000.0159000.0168000.0177000.0186000.0194000.0201000.0207000.0172000.0189000.0204000.0218000.0231000.0242000.0252000.0261000.0269000.0276000.0177000.0198000.0216000.0232000.0246000.0258000.0268000.0278000.0286000.0293000.0196000.0224000.0250000.0274000.0293000.0306000.0318000.0328000.0337000.034400

aa+A++0.5%0.6%0.7%0.8%0.8%1.0%1.1%1.2%1.3%1.4%aa+0.0049000.0059000.0068000.0077000.0084000.0097000.0108000.0119000.0129000.0138000.0147000.0165000.0181000.0196000.0210000.0226000.0240000.0253000.0265000.0276000.0196000.0218000.0238000.0255000.0272000.0290000.0306000.0320000.0333000.0344000.0209000.0231000.0252000.0271000.0288000.0306000.0322000.0338000.0350000.0362000.0245000.0272000.0296000.0317000.0335000.0355000.0372000.0387000.0401000.041300

aaA+0.7%0.8%0.9%1.0%1.1%1.2%1.4%1.5%1.6%1.7%aa0.0074000.0083000.0091000.0099000.0105000.0121000.0136000.0149000.0161000.0172000.0172000.0194000.0215000.0234000.0251000.0274000.0294000.0313000.0330000.0344000.0221000.0248000.0273000.0296000.0314000.0339000.0360000.0380000.0398000.0413000.0239000.0266000.0290000.0312000.0330000.0355000.0377000.0397000.0415000.0431000.0294000.0319000.0341000.0361000.0377000.0403000.0426000.0447000.0466000.048200

aa-A+1.0%1.1%1.3%1.4%1.5%1.6%1.7%1.9%2.0%2.1%aa-0.0098000.0112000.0125000.0136000.0147000.0161000.0174000.0186000.0197000.0207000.0196000.0224000.0250000.0274000.0293000.0322000.0349000.0373000.0394000.0413000.0245000.0283000.0317000.0349000.0377000.0403000.0426000.0447000.0466000.0482000.0270000.0306000.0340000.0370000.0398000.0423000.0446000.0466000.0484000.0499000.0343000.0377000.0408000.0436000.0461000.0484000.0504000.0522000.0537000.055100

a+A1.2%1.5%1.7%1.9%2.1%2.3%2.4%2.5%2.7%2.8%a+0.0123000.0147000.0170000.0191000.0210000.0226000.0240000.0253000.0265000.0276000.0221000.0254000.0284000.0311000.0335000.0371000.0403000.0432000.0459000.0482000.0294000.0342000.0386000.0426000.0461000.0492000.0519000.0544000.0566000.0586000.0319000.0366000.0409000.0448000.0482000.0514000.0542000.0569000.0591000.0612000.0392000.0437000.0477000.0513000.0545000.0580000.0612000.0641000.0666000.068900

aA1.5%1.8%2.0%2.3%2.5%2.7%2.9%3.1%3.3%3.4%a0.0147000.0177000.0204000.0229000.0251000.0274000.0294000.0313000.0330000.0344000.0245000.0295000.0341000.0383000.0419000.0451000.0480000.0507000.0530000.0551000.0343000.0401000.0453000.0501000.0545000.0580000.0612000.0641000.0666000.0689000.0368000.0427000.0482000.0532000.0577000.0613000.0646000.0674000.0701000.0723000.0441000.0507000.0568000.0622000.0671000.0709000.0744000.0775000.0802000.082700

a-A-2.0%2.4%2.7%3.1%3.4%3.7%4.0%4.3%4.6%4.8%a-0.0196000.0236000.0272000.0305000.0335000.0371000.0403000.0432000.0459000.0482000.0294000.0354000.0408000.0458000.0503000.0548000.0589000.0626000.0659000.0689000.0392000.0471000.0544000.0610000.0671000.0709000.0744000.0775000.0802000.0827000.0429000.0510000.0584000.0651000.0712000.0750000.0783000.0812000.0838000.0861000.0539000.0625000.0704000.0775000.0838000.0870000.0899000.0924000.0946000.096500

bbb+B++2.5%3.2%3.9%4.5%5.0%5.6%6.2%6.7%7.2%7.6%bbb+0.0245000.0319000.0385000.0447000.0503000.0564000.0620000.0671000.0717000.0758000.0392000.0471000.0544000.0610000.0671000.0741000.0806000.0864000.0917000.0965000.0490000.0589000.0680000.0763000.0838000.0903000.0961000.1013000.1060000.1102000.0528000.0628000.0720000.0804000.0880000.0943000.1000000.1051000.1096000.1137000.0637000.0743000.0840000.0928000.1006000.1064000.1116000.1162000.1204000.124000

bbbB++2.9%4.0%5.0%5.9%6.7%7.6%8.4%9.1%9.7%10.3%bbb0.0294000.0401000.0499000.0588000.0671000.0758000.0837000.0909000.0974000.1033000.0490000.0589000.0680000.0763000.0838000.0935000.1023000.1103000.1175000.1240000.0588000.0707000.0816000.0915000.1006000.1096000.1178000.1252000.1318000.1378000.0637000.0754000.0861000.0959000.1048000.1136000.1217000.1289000.1354000.1412000.0784000.0896000.0997000.1090000.1173000.1257000.1333000.1401000.1462000.151600

bbb-B+3.9%5.4%6.8%8.1%9.2%10.2%11.0%11.8%12.5%13.1%bbb-0.0392000.0542000.0680000.0806000.0922000.1016000.1100000.1177000.1247000.1309000.0588000.0731000.0861000.0981000.1090000.1193000.1286000.1371000.1447000.1516000.0784000.0919000.1043000.1155000.1257000.1354000.1441000.1520000.1591000.1653000.0833000.0966000.1088000.1199000.1299000.1394000.1480000.1557000.1626000.1688000.0981000.1108000.1224000.1329000.1425000.1515000.1596000.1669000.1734000.179100

bb+B5.9%7.5%9.1%10.5%11.7%12.9%14.0%14.9%15.8%16.5%bb+0.0588000.0754000.0907000.1046000.1173000.1290000.1395000.1490000.1576000.1653000.0883000.1037000.1179000.1308000.1425000.1531000.1627000.1714000.1791000.1860000.1079000.1226000.1360000.1482000.1593000.1693000.1782000.1863000.1935000.1998000.1128000.1273000.1405000.1526000.1634000.1733000.1821000.1900000.1970000.2032000.1275000.1414000.1541000.1656000.1760000.1854000.1937000.2012000.2078000.213600

bbB8.8%10.6%12.2%13.7%15.1%16.3%17.4%18.3%19.2%20.0%bb0.0883000.1061000.1224000.1373000.1509000.1628000.1736000.1833000.1920000.1998000.1177000.1344000.1496000.1634000.1760000.1870000.1968000.2057000.2135000.2205000.1373000.1532000.1677000.1809000.1928000.2031000.2123000.2206000.2278000.2342000.1422000.1579000.1723000.1852000.1970000.2071000.2162000.2243000.2314000.2377000.1569000.1721000.1859000.1983000.2096000.2192000.2278000.2355000.2422000.248000

bb-B-11.8%13.7%15.4%17.0%18.4%19.3%20.2%20.9%21.5%22.1%bb-0.1177000.1367000.1541000.1700000.1844000.1934000.2015000.2086000.2150000.2205000.1471000.1650000.1813000.1961000.2096000.2176000.2247000.2310000.2364000.2411000.1667000.1839000.1995000.2136000.2263000.2337000.2402000.2459000.2508000.2549000.1716000.1886000.2040000.2179000.2305000.2378000.2441000.2496000.2544000.2584000.1863000.2027000.2176000.2310000.2431000.2498000.2557000.2608000.2651000.268700

b+C++14.7%16.3%17.7%19.0%20.1%21.0%21.7%22.4%22.9%23.4%b+0.1471000.1626000.1768000.1896000.2012000.2096000.2170000.2235000.2293000.2342000.1765000.1909000.2040000.2158000.2263000.2337000.2402000.2459000.2508000.2549000.1961000.2098000.2221000.2332000.2431000.2498000.2557000.2608000.2651000.2687000.2010000.2145000.2267000.2375000.2473000.2539000.2596000.2645000.2687000.2721000.2157000.2286000.2402000.2506000.2598000.2660000.2712000.2757000.2794000.282500

bC++17.7%18.9%20.0%20.9%21.8%22.6%23.3%23.9%24.4%24.8%b0.1765000.1886000.1995000.2092000.2179000.2257000.2325000.2385000.2436000.2480000.2059000.2169000.2267000.2354000.2431000.2498000.2557000.2608000.2651000.2687000.2255000.2357000.2448000.2528000.2598000.2660000.2712000.2757000.2794000.2825000.2304000.2404000.2493000.2572000.2640000.2700000.2751000.2794000.2830000.2859000.2451000.2546000.2629000.2702000.2766000.2821000.2867000.2906000.2938000.296200

b-C+19.6%20.7%21.8%22.7%23.5%24.2%24.8%25.3%25.8%26.2%b-0.1961000.2074000.2176000.2267000.2347000.2418000.2480000.2534000.2579000.2618000.2255000.2357000.2448000.2528000.2598000.2660000.2712000.2757000.2794000.2825000.2451000.2546000.2629000.2702000.2766000.2821000.2867000.2906000.2938000.2962000.2500000.2593000.2674000.2746000.2808000.2861000.2906000.2943000.2973000.2997000.2648000.2734000.2810000.2877000.2934000.2982000.3022000.3055000.3081000.310000

ccc+ and Lower49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%ccc+ and lower0.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.344500

Not Rated by A.M. Best49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%Not Rated by A. M. Best0.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.3445000.4903000.4714000.4533000.4359000.4191000.4030000.3875000.3726000.3583000.344500

*Includes reinsurance recoverables on paid loss & LAE, known case loss & LAE reserves, IBNR loss & LAE reserves, and unearned premium.

Exhibit 5

Reinsurance Recoverables Credit Risk Factors - VaR 99

Best's ICR

Best's ICR of ReinsurerFSRYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10

aaaA++1.2%1.4%1.5%1.6%1.7%1.8%1.9%1.9%2.0%2.1%

aa+A++1.5%1.7%1.8%2.0%2.1%2.3%2.4%2.5%2.7%2.8%

aaA+1.7%1.9%2.2%2.3%2.5%2.7%2.9%3.1%3.3%3.4%

aa-A+2.0%2.2%2.5%2.7%2.9%3.2%3.5%3.7%3.9%4.1%

a+A2.2%2.5%2.8%3.1%3.4%3.7%4.0%4.3%4.6%4.8%

aA2.5%3.0%3.4%3.8%4.2%4.5%4.8%5.1%5.3%5.5%

a-A-2.9%3.5%4.1%4.6%5.0%5.5%5.9%6.3%6.6%6.9%

bbb+B++3.9%4.7%5.4%6.1%6.7%7.4%8.1%8.6%9.2%9.7%

bbbB++4.9%5.9%6.8%7.6%8.4%9.4%10.2%11.0%11.8%12.4%

bbb-B+5.9%7.3%8.6%9.8%10.9%11.9%12.9%13.7%14.5%15.2%

bb+B8.8%10.4%11.8%13.1%14.3%15.3%16.3%17.1%17.9%18.6%

bbB11.8%13.4%15.0%16.3%17.6%18.7%19.7%20.6%21.4%22.1%

bb-B-14.7%16.5%18.1%19.6%21.0%21.8%22.5%23.1%23.6%24.1%

b+C++17.7%19.1%20.4%21.6%22.6%23.4%24.0%24.6%25.1%25.5%

bC++20.6%21.7%22.7%23.5%24.3%25.0%25.6%26.1%26.5%26.9%

b-C+22.6%23.6%24.5%25.3%26.0%26.6%27.1%27.6%27.9%28.3%

ccc+ and Lower49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%

Not Rated by A.M. Best49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%


Exhibit 5

Reinsurance Recoverables Credit Risk Factors - VaR 99.5

Best's ICR


aaaA++1.7%1.9%2.0%2.2%2.3%2.4%2.5%2.6%2.7%2.8%

aa+A++2.0%2.2%2.4%2.6%2.7%2.9%3.1%3.2%3.3%3.4%

aaA+2.2%2.5%2.7%3.0%3.1%3.4%3.6%3.8%4.0%4.1%

aa-A+2.5%2.8%3.2%3.5%3.8%4.0%4.3%4.5%4.7%4.8%

a+A2.9%3.4%3.9%4.3%4.6%4.9%5.2%5.4%5.7%5.9%

aA3.4%4.0%4.5%5.0%5.5%5.8%6.1%6.4%6.7%6.9%

a-A-3.9%4.7%5.4%6.1%6.7%7.1%7.4%7.8%8.0%8.3%

bbb+B++4.9%5.9%6.8%7.6%8.4%9.0%9.6%10.1%10.6%11.0%

bbbB++5.9%7.1%8.2%9.2%10.1%11.0%11.8%12.5%13.2%13.8%

bbb-B+7.8%9.2%10.4%11.6%12.6%13.5%14.4%15.2%15.9%16.5%

bb+B10.8%12.3%13.6%14.8%15.9%16.9%17.8%18.6%19.4%20.0%

bbB13.7%15.3%16.8%18.1%19.3%20.3%21.2%22.1%22.8%23.4%

bb-B-16.7%18.4%20.0%21.4%22.6%23.4%24.0%24.6%25.1%25.5%

b+C++19.6%21.0%22.2%23.3%24.3%25.0%25.6%26.1%26.5%26.9%

bC++22.6%23.6%24.5%25.3%26.0%26.6%27.1%27.6%27.9%28.3%

b-C+24.5%25.5%26.3%27.0%27.7%28.2%28.7%29.1%29.4%29.6%

ccc+ and Lower49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%



Exhibit 5

Reinsurance Recoverables Credit Risk Factors - VaR 99.6

Best's ICR


aaaA++1.8%2.0%2.2%2.3%2.5%2.6%2.7%2.8%2.9%2.9%

aa+A++2.1%2.3%2.5%2.7%2.9%3.1%3.2%3.4%3.5%3.6%

aaA+2.4%2.7%2.9%3.1%3.3%3.6%3.8%4.0%4.2%4.3%

aa-A+2.7%3.1%3.4%3.7%4.0%4.2%4.5%4.7%4.8%5.0%

a+A3.2%3.7%4.1%4.5%4.8%5.1%5.4%5.7%5.9%6.1%

aA3.7%4.3%4.8%5.3%5.8%6.1%6.5%6.7%7.0%7.2%

a-A-4.3%5.1%5.8%6.5%7.1%7.5%7.8%8.1%8.4%8.6%

bbb+B++5.3%6.3%7.2%8.0%8.8%9.4%10.0%10.5%11.0%11.4%

bbbB++6.4%7.5%8.6%9.6%10.5%11.4%12.2%12.9%13.5%14.1%

bbb-B+8.3%9.7%10.9%12.0%13.0%13.9%14.8%15.6%16.3%16.9%

bb+B11.3%12.7%14.1%15.3%16.3%17.3%18.2%19.0%19.7%20.3%

bbB14.2%15.8%17.2%18.5%19.7%20.7%21.6%22.4%23.1%23.8%

bb-B-17.2%18.9%20.4%21.8%23.1%23.8%24.4%25.0%25.4%25.8%

b+C++20.1%21.5%22.7%23.8%24.7%25.4%26.0%26.5%26.9%27.2%

bC++23.0%24.0%24.9%25.7%26.4%27.0%27.5%27.9%28.3%28.6%

b-C+25.0%25.9%26.7%27.5%28.1%28.6%29.1%29.4%29.7%30.0%

ccc+ and Lower49.0%47.1%45.3%43.6%41.9%40.3%38.8%37.3%35.8%34.5%



C.10_Sample Credit Risk Calc

Credit Risk (B4) Example

($ Thousands)

Credit Risk Capital FactorsRequired Capital Amount for Credit Risk

(1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12)

Increase(4) * (5)(4) * (6)(4) * (7)(4) * (8)

ForAdjusted

StatementReserveOtherAmount

Receivable Balances:ValueDeficiencyAdjustments(1)+(2)+(3)VaR 95VaR 99VaR 99.5VaR 99.6VaR 95VaR 99VaR 99.5VaR 99.6

Gross Agents' Balance (1)90,000-090,0005.05.05.05.04,5004,5004,5004,500

Reinsurance Recoverables:

Affiliated10,000422010,4223.45.06.77.5354521698782

Less: Funds Held2,000002,0003.45.06.77.568100134150

Less: LOCs & Trusts (2)3,000003,0003.14.56.06.893135180204

Unaffiliated150,0006,3240156,3243.45.06.77.55,3157,81610,47411,724

Less: Funds Held30,0000030,0003.45.06.77.51,0201,5002,0102,250

Less: LOCs & Trusts (2)20,0000020,0003.14.56.06.86209001,2001,360

Net Reinsurance Recoverables105,0006,7460111,7463.55.16.87.63,8685,7027,6488,542

All Other Receivables (1)1,809-01,8094.54.54.54.581818181

Company Totals196,8096,7460203,5554.25.16.06.48,44910,28312,22913,123

Required Capital Amount for Reinsurance DependenceTotal Required Capital Amount

(13)(14)(15)(16)(17)(18)(19)(20)(21)(22)(23)(24)

SelectedMinimum

IndicatedAdjustment toReinsuranceRequired

ReinsuranceReinsuranceDependenceCapital for

DependenceDependenceFactorVaR 95VaR 99VaR 99.5VaR 99.6ReinsuranceVaR 95VaR 99VaR 99.5VaR 99.6

Receivable Balances:FactorFactor(13) + (14)(9)*[(15) - 1.0](10)*[(15) - 1.0](11)*[(15) - 1.0](12)*[(15) - 1.0]Dependance(9)+Max((16),(20))(10)+Max((17),(20))(11)+Max((18),(20))(12)+Max((19),(20))

Gross Agents' Balance (1)---000004,5004,5004,5004,500

Reinsurance Recoverables:

Affiliated1.0000.0001.00000000354521698782

Less: Funds Held1.0000.0001.0000000068100134150

Less: LOCs & Trusts (2)1.0000.0001.0000000093135180204

Unaffiliated1.2000.0001.2001,0631,5632,0952,3451,5636,8789,37912,56914,069

Less: Funds Held1.1500.0001.15015322530233801,0201,5002,3122,588

Less: LOCs & Trusts (2)1.1500.0001.1509313518020406209001,3801,564

Net Reinsurance Recoverables8171,2031,6131,8031,5635,4317,2659,26110,345

All Other Receivables (1)---0000081818181

(B4) Total Credit Risk Required Capital Amount:

Company Totals---8171,2031,6131,8031,56310,01211,84613,84214,926

Notes:

(1) Reflects a blended capital factor because of multiple categories that that were collapsed for presentation.

(2) Credit for acceptable letters of credit & trusts. Analysis performed by reinsurer and credit cannot exceed amount of uncollateralized recoverable.

Risk charge for acceptable letters of credit and trusts capped a 90% of the risk factor charged to the corresponding recoverables.

C.11_Sample Reserve Risk Calc

Exhibit 15

Loss & Loss Adjustment Expense Reserve Risk (B5)

($ Thousands)

(1)(2)(3)(4)(5)(6)(7)(8)(9)

Carried Net Loss and LAE Reserves

StatementAllocatedManualAdjustedDeficiencyDiscountAdjusted FactorAdjusted Reserves

Schedule P Line%$AmountAdjustmentAdjustment(2) + (3) + (4)FactorFactor(6) * (7)(5) * (8)

Homeowners/Farmowners1.76,000006,0001.000.9420.9425,652

Personal Auto Liability5.520,0000020,0001.000.9410.94118,813

Commercial Auto Liability5.219,0000019,0001.050.9300.97718,556

Workers Compensation11.040,0000040,0001.150.8240.94737,886

Commercial Multiperil4.115,0000015,0001.100.9050.99514,927

Medical Prof Liab - Occurrence5.018,0000018,0001.000.8820.88215,873

Medical Prof Liab - Claims Made6.122,0000022,0001.000.9110.91120,039

Special Liability3.312,0000012,0001.000.9140.91410,969

Other Liability - Occurrence9.133,0000033,0001.100.8560.94231,071

Other Liability - Claims Made7.728,0000028,0001.100.8910.98027,449

Products Liability - Occurrence3.613,0000013,0001.100.8320.91511,900

Products Liability - Claims Made4.416,0000016,0001.100.8750.96315,406

Property2.59,000009,0001.000.9530.9538,581

Auto Physical Damage1.76,000006,0001.000.9790.9795,871

Fidelity & Surety / Guaranty2.28,000008,0001.000.9250.9257,398

Other1.97,000007,0001.000.9520.9526,663

International3.011,0000011,0001.000.9440.94410,381

Reinsurance A3.312,0000012,0001.000.9230.92311,074

Reinsurance B8.029,0000029,0001.100.8430.92726,882

Reinsurance C1.76,000006,0001.000.9140.9145,482

Warranty1.97,000007,0001.000.9760.9766,833

Long Duration Contract UPR6.925,0000025,0001.001.0001.00025,000

Total100.0362,00000362,0001.060.8960.947342,709

Capital FactorsRequired Capital Amount

(10)(11)(12)(13)(15)(16)(17)(18)

(9) * (10)(9) * (11)(9) * (12)(9) * (13)

Schedule P LineVaR 95VaR 99VaR 99.5VaR 99.6VaR 95VaR 99VaR 99.5VaR 99.6

Homeowners/Farmowners0.2420.3640.4120.4261,3682,0572,3292,408

Personal Auto Liability0.1690.2500.2810.2913,1794,7035,2865,475

Commercial Auto Liability0.1940.2890.3260.3383,6005,3636,0496,272

Workers Compensation0.2230.3340.3770.3908,44812,65414,28314,775

Commercial Multiperil0.2390.3600.4060.4223,5685,3746,0606,299

Medical Prof Liab - Occurrence0.2990.4560.5200.5404,7467,2388,2548,571

Medical Prof Liab - Claims Made0.2510.3810.4320.4485,0307,6358,6578,978

Special Liability0.2000.2990.3380.3502,1943,2803,7083,839

Other Liability - Occurrence0.2830.4300.4870.5078,79313,36115,13215,753

Other Liability - Claims Made0.2880.4380.4970.5167,90512,02313,64214,164

Products Liability - Occurrence0.3650.5580.6340.6584,3446,6407,5457,830

Products Liability - Claims Made0.2890.4410.5010.5194,4526,7947,7187,996

Property0.2430.3660.4150.4302,0853,1413,5613,690

Auto Physical Damage0.1880.2790.3140.3251,1041,6381,8441,908

Fidelity & Surety / Guaranty0.2520.3810.4330.4481,8642,8193,2043,315

Other0.2060.3070.3460.3591,3732,0462,3062,392

International0.2390.3590.4060.4222,4813,7274,2154,381

Reinsurance A0.2560.3870.4400.4562,8354,2864,8735,050

Reinsurance B0.3320.5080.5770.5998,92513,65615,51116,102

Reinsurance C0.2740.4170.4740.4911,5022,2862,5992,692

Warranty0.1880.2790.3140.3261,2851,9072,1462,228

Long Duration Contract UPR0.1700.2500.2900.3004,2506,2507,2507,500

Total0.2490.3760.4270.44285,331128,878146,172151,618

Diversification Factor:x0.780.780.780.780.85

Growth Factor:x1.051.051.051.051.05

(B5) Reserve Risk Required Capital Amount:=69,886105,551119,715124,175164,564

C.12_Reserve Correlation Matrix

LARGE

Exhibit 6HOPALCALWCCMPMPLOCCMPLCMSPECLIABOLOCCOLCMPRODOCCPRODCMPROPPHYSFSFGMGOTHERINTLREINAREINBREINCWTY

Industry Reserve Development Correlation MatrixHO10.5976340.4651970.2295770.5876960.274740.2785150.6102130.2107880.2312650.2610210.2476350.6186210.4610300.2233300.6145020.2283830.2346620

PAL0.59763410.8050870.7090540.8286380.7755750.7676960.783260.6937660.7234730.7372890.4476350.7486330.7402550000.4255810.7411280.455960

MPLMPLSPECOLOLPRODPRODPHYSCAL0.4651970.80508710.6652140.8940940.8538820.8905540.8958940.6600930.6685180.8631270.2411080.7675610.7562250000.4712910.7141160.4766870

HOPALCALWCCMPMPLOCCMPLCMSPECLIABOLOCCOLCMPRODOCCPRODCMPROPPHYSDAMF&SOTHERINTLREIN AREIN BREIN CWTYWC0.2295770.7090540.66521410.8116280.8024070.8038590.6072380.8645360.889150.8149080.4607560.6532010.6710070.445969000.0647020.8314850.4358260

HO1.000.610.470.230.600.280.280.620.220.240.270.250.630.470.000.230.000.630.230.240.00CMP0.5876960.8286380.8940940.81162810.8476920.8458660.8396820.7529690.7900240.8218450.4505090.8227750.7316380.253813000.4484190.7942550.4641970

PAL0.611.000.820.720.850.790.780.800.710.740.750.460.760.760.000.000.000.430.760.470.00MPLOCC0.274740.7755750.8538820.8024070.84769210.9309740.7707280.7989380.7926610.8634040.2449960.7763170.7263460.249306000.4158920.8009360.4797510

CAL0.470.821.000.680.910.870.910.910.670.680.880.250.780.770.000.000.000.480.730.490.00MPLCM0.2785150.7676960.8905540.8038590.8458660.93097410.8085810.7904470.7477520.8667730.242810.773720.7292890.243629000.41790.8064330.4765290

WC0.230.720.681.000.830.820.820.620.880.910.830.470.670.680.460.000.000.070.850.440.00SPECLIAB0.6102130.783260.8958940.6072380.8396820.7707280.80858110.5019340.4862710.7686080.2452770.8128980.7387740000.6342440.6056180.4883820

CMP0.600.850.910.831.000.860.860.860.770.810.840.460.840.750.260.000.000.460.810.470.00OLOCC0.2107880.6937660.6600930.8645360.7529690.7989380.7904470.50193410.9124070.8197840.2511750.6758730.6614570.4525270000.8158470.2393510

MPL-OCC0.280.790.870.820.861.000.950.790.820.810.880.250.790.740.250.000.000.420.820.490.00OLCM0.2312650.7234730.6685180.889150.7900240.7926610.7477520.4862710.91240710.7622310.4894670.6340790.6806640.4674280000.8277770.2429570

MPL-CM0.280.780.910.820.860.951.000.830.810.760.880.250.790.740.250.000.000.430.820.490.00PRODOCC0.2610210.7372890.8631270.8149080.8218450.8634040.8667730.7686080.8197840.76223110.2389830.7372650.7510990.239326000.2426560.7943060.4621210

SPEC LIAB0.620.800.910.620.860.790.831.000.510.500.780.250.830.750.000.000.000.650.620.500.00PRODCM0.2476350.4476350.2411080.4607560.4505090.2449960.242810.2452770.2511750.4894670.23898310.2278950.2408610.2356440000.45982100

OL-OCC0.220.710.670.880.770.820.810.511.000.930.840.260.690.670.460.000.000.000.830.240.00PROP0.6186210.7486330.7675610.6532010.8227750.7763170.773720.8128980.6758730.6340790.7372650.22789510.8218820.228816000.5595550.5101040.257150

OL-CM0.240.740.680.910.810.810.760.500.931.000.780.500.650.690.480.000.000.000.840.250.00PHYS0.461030.7402550.7562250.6710070.7316380.7263460.7292890.7387740.6614570.6806640.7510990.2408610.82188210.208362000.2636090.4936560.2357530

PROD-OCC0.270.750.880.830.840.880.880.780.840.781.000.240.750.770.240.000.000.250.810.470.00FSFGMG0000.4459690.2538130.2493060.24362900.4525270.4674280.2393260.2356440.2288160.20836210000.42204500

PROD-CM0.250.460.250.470.460.250.250.250.260.500.241.000.230.250.240.000.000.000.470.000.00OTHER0.2233300000000000000100000

PROP0.630.760.780.670.840.790.790.830.690.650.750.231.000.840.230.000.000.570.520.260.00INTL000000000000000010000

PHYS DAM0.470.760.770.680.750.740.740.750.670.690.770.250.841.000.210.000.000.270.500.240.00REINA0.6145020.4255810.4712910.0647020.4484190.4158920.41790.634244000.24265600.5595550.26360900010.2111610.4414230

FID & SURETY0.000.000.000.460.260.250.250.000.460.480.240.240.230.211.000.000.000.000.430.000.00REINB0.2283830.7411280.7141160.8314850.7942550.8009360.8064330.6056180.8158470.8277770.7943060.4598210.5101040.4936560.422045000.21116110.4732910

OTHER0.230.000.000.000.000.000.000.000.000.000.000.000.000.000.001.000.000.000.000.000.00REINC0.2346620.455960.4766870.4358260.4641970.4797510.4765290.4883820.2393510.2429570.46212100.257150.2357530000.4414230.47329110

INTL0.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.001.000.000.000.000.00WTY000000000000000000001

REIN A0.630.430.480.070.460.420.430.650.000.000.250.000.570.270.000.000.001.000.220.450.00

REIN B0.230.760.730.850.810.820.820.620.830.840.810.470.520.500.430.000.000.221.000.480.00

REIN C0.240.470.490.440.470.490.490.500.240.250.470.000.260.240.000.000.000.450.481.000.00MEDIUM

WTY0.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.000.001.00HOPALCALWCCMPMPLOCCMPLCMSPECLIABOLOCCOLCMPRODOCCPRODCMPROPPHYSFSFGMGOTHERINTLREINAREINBREINCWTY

HO10.5925230.45950.2263990.5840350.2673520.2709280.6041220.2088730.2278790.25480.2425240.6120320.45425300.22050200.607450.2257530.230830

PAL0.59252310.7936920.7004750.8140890.7650430.7585760.7734910.6883040.7154490.7268230.442290.7402060.7323440000.4216430.7365390.4499160

CAL0.45950.79369210.6544470.886820.8403730.8832170.8868170.6504160.6642450.8535960.2364720.7578690.7464520000.4657930.7074290.4693660

WC0.2263990.7004750.65444710.8025630.7925660.7957520.6038950.8555870.8786420.8018540.4545010.6486180.6595610.440256000.0597730.8220710.4316850

CMP0.5840350.8140890.886820.80256310.8394810.8357030.8284620.7477710.7778630.8100650.4459740.8126950.7212940.249272000.4424650.7856240.4580850

MPLOCC0.2673520.7650430.8403730.7925660.83948110.9146670.7611650.7892440.7822430.848980.2398120.7657560.7165030.24385000.4127820.7921480.4710620

MPLCM0.2709280.7585760.8832170.7957520.8357030.91466710.7985160.7834630.7350560.8505860.238760.7651760.7192450.239751000.4143090.7978080.4687760

SPECLIAB0.6041220.7734910.8868170.6038950.8284620.7611650.79851610.4913420.4765550.759240.2401820.8033780.7284820000.6264840.6010860.4786840

OLOCC0.2088730.6883040.6504160.8555870.7477710.7892440.7834630.49134210.8988520.8108720.2450060.6701170.6515810.4463360000.8098250.2342120

OLCM0.2278790.7154490.6642450.8786420.7778630.7822430.7350560.4765550.89885210.748760.4808650.6272850.6683250.4612910000.8173630.2385490

PRODOCC0.25480.7268230.8535960.8018540.8100650.848980.8505860.759240.8108720.7487610.2353780.7306820.7389390.235577000.2380370.7856780.4555630

PRODCM0.2425240.442290.2364720.4545010.4459740.2398120.238760.2401820.2450060.4808650.23537810.2245040.236650.2314420000.45356400

PROP0.6120320.7402060.7578690.6486180.8126950.7657560.7651760.8033780.6701170.6272850.7306820.22450410.809840.225396000.5564350.4994310.2515250

PHYS0.4542530.7323440.7464520.6595610.7212940.7165030.7192450.7284820.6515810.6683250.7389390.236650.8098410.206919000.2572890.4836510.2317980

FSFGMG0000.4402560.2492720.243850.23975100.4463360.4612910.2355770.2314420.2253960.20691910000.4188200

OTHER0.22050200000000000000100000

INTL000000000000000010000

REINA0.607450.4216430.4657930.0597730.4424650.4127820.4143090.626484000.23803700.5564350.25728900010.2086850.4360660

REINB0.2257530.7365390.7074290.8220710.7856240.7921480.7978080.6010860.8098250.8173630.7856780.4535640.4994310.4836510.41882000.20868510.46590

REINC0.230830.4499160.4693660.4316850.4580850.4710620.4687760.4786840.2342120.2385490.45556300.2515250.2317980000.4360660.465910

WTY000000000000000000001

SMALL

HOPALCALWCCMPMPLOCCMPLCMSPECLIABOLOCCOLCMPRODOCCPRODCMPROPPHYSFSFGMGOTHERINTLREINAREINBREINCWTY

HO10.5846720.4482910.2213980.5778960.2559910.2591360.5946590.2058560.2223730.2452460.2347250.6016810.44396500.21622600.5966350.2217370.2250080

PAL0.58467210.7728230.6871820.7904950.7488750.7433140.7581130.6798280.7011920.7100550.434220.7271710.720240000.4155160.7295140.4407540

CAL0.4482910.77282310.6373410.8647880.8176380.8609640.8651760.6346050.6463710.8299920.229660.7414820.7269860000.4540090.6939590.4564430

WC0.2213980.6871820.63734110.7858220.7776680.7804220.5975370.8419320.8582050.7798280.4451790.6418530.6416150.431837000.0519120.8073660.4253550

CMP0.5778960.7904950.8647880.78582210.8244930.8205690.8113180.7373980.7599170.7924130.4378820.7947010.7050510.241183000.4332810.7712230.4480340

MPLOCC0.2559910.7488750.8176380.7776680.82449310.8871910.7454690.7745420.7628710.8252910.2322160.7497670.7012110.235913000.4076830.7786010.4579020

MPLCM0.2591360.7433140.8609640.7804220.8205690.88719110.7831830.7702570.7164750.8262250.2316440.7495740.7034340.232658000.4087810.7833560.4562130

SPECLIAB0.5946590.7581130.8651760.5975370.8113180.7454690.78318310.4741420.4622340.7451720.2320090.7875640.7127560000.6146190.5938120.4636930

OLOCC0.2058560.6798280.6346050.8419320.7373980.7745420.7702570.47414210.8741870.7954520.2359090.6615220.636180.4371570000.8003950.2264770

OLCM0.2223730.7011920.6463710.8582050.7599170.7628710.7164750.4622340.87418710.7286670.4659130.6137020.6486720.4497410000.7993420.2310550

PRODOCC0.2452460.7100550.8299920.7798280.7924130.8252910.8262250.7451720.7954520.72866710.2292340.7188640.7202320.229019000.231180.7717560.4451350

PRODCM0.2347250.434220.229660.4451790.4378820.2322160.2316440.2320090.2359090.4659130.22923410.2196440.2301820.2253010000.44408600

PROP0.6016810.7271710.7414820.6418530.7947010.7497670.7495740.7875640.6615220.6137020.7188640.21964410.7910540.220559000.5511770.4830010.2430440

PHYS0.4439650.720240.7269860.6416150.7050510.7012110.7034340.7127560.636180.6486720.7202320.2301820.79105410.204595000.2477040.4683720.2258060

FSFGMG0000.4318370.2411830.2359130.23265800.4371570.4497410.2290190.2253010.2205590.20459510000.41393200

OTHER0.21622600000000000

Documents

2017 Insurance Market Briefing – MENA - AM Best Company2017 Insurance Market Briefing – MENA . Fairmont Hotel, Dubai, United Arab Emirates . 4 October 2017