The Hurdles and Challenges of Placing Reinsurance for Russian Aviation Insurers

1. The Hurdles and Challenges of Placing Reinsurance for Russian AviationInsurers Presented by Paul D. Smith Partner – JLT Re RAASI XV Aviation and Space Insurance Conference

2. Mark ThurgoodGlobal Aviation Reinsurance Practice Leader Broking Client Support Client Services Consultancy Services Paul Smith Chris Eaton Mark Pitts Andy Poulton Financial Support Colin Dipple Bill Morritt Mike Grout Steve Watts Francesca Hearfield Jonathan Harris Nigel Baker Michele Smith Ian Cutting Technical Support Claims Support Barry Keegan Alan Jelley Paul Dixon Trevor Knights Chris Peddy Stephanie Grace Grant Sanders Dominic Riley JLT Reinsurance Brokers Limited Gary Morton One America Square London EC3N 2JL Telephone 020 7466 1300 Facsimile 020 7466 1469 Website www.jltre.com JLT Re - Aviation Reinsurance Team

3. A Selection of JLT Re Clients

4. Agenda • Previous Hurdles and Challenges • Current Hurdles and Challenges • The Russian Market • Reinsurance • Sanctioned Business • Summary

5. Previous Hurdles and Challenges • Millennium Clauses in 1999 / 2000 • Man power resource / intellectual capital • 11th September 2001 • War policies cancelled • XS AV52 write backs removed from Excess of Loss • Losses Occurring During cover only available • Massive increase in pricing • Markets bankrupt or withdraw • Industry changing event • Hurricane Katrina • US$ 80bn + event • Affected aviation pricing • Industry changing event

6. Current Hurdles and Challenges • The Russian Market • Reinsurance • Sanctioned Business

7. The Russian Market • A reducing client base, due to:- • The Global Financial Crisis • European legislation • Leasing companies • European minimum limits • Russian Air Code • Retrocessional arrangements with domestic markets

8. Reinsurance • Proportional Treaty • Excess of Loss • Risk Excess

9. Proportional Treaty • Hull Quota Share Treaties • Poor hull loss record in Russian Market • Reinsurers reluctant to provide capacity for old Russian hulls • Quality of hull fleet improving • Leasing companies will not accept due to part order • Quota Share means paying away lots of income in an improving hull environment

10. Excess of Loss Reinsurance • Cheaper than proportional – retained income • Reinsurers prefer Excess of Loss as they miss attritional losses • Hull capacity available • Cost of capital

11. The Cost of Capital Defined as:- “Minimum return that investors expect for providing capital to the Company” OR ‘The rate of return that capital could be expected to earn in an alternative investment of equivalent risk’

12. Risk Excess • Hull Risk Excess – capacity • Liability Risk Excess – capacity

13. Sanctioned Business • Not a new subject • Recent USA and EU Iranian Sanctions • Reinsurance market reaction

14. Summary • There are always new challenges • Massive opportunity for all • Profitable business • Consolidation of Airlines and Insurers • Improved airport infrastructure • General Aviation opportunities • Inflation • Competition