Asia, the New West

1. Asia, the New West GRM 010 April 29, 2014

2. Claude F. Gallello • Managing Director – Willis International/New YorkGlobal Network Practice Leader responsible for sales & servicing of cross-border retail accounts in 130 countries. • Reginald Peacock • Asia Pacific Head of Customer, Distribution & Marketing – Zurich Insurance Company/Hong KongAn Asia market veteran, leading Zurich's Broker and Customer relationship management in Asia Pacific since the establishment of the Zurich Global Corporate business in AsiaPac in 2007.  • Suresh Krishnan • Executive Vice President & Global Accounts Division Leader – ACE Group/New York • Responsible for managing ACE’s large multinational Latin America & Asia Pacific clients with complex insurance programs

3. What to Expect • At the end of this session, you will: • Know what the key Asian insurers, current market conditions and local policy issues are. • Understand what the key regulatory and compliance issues in Asia are. • Know how and when to utilize the local markets in support of a global program.

4. Asia OverviewClaude GallelloGlobal Network Practice Leader&Managing DirectorWillis International

5. ASIA 30% of the Earth’s Land Area 60% of the Earth’s Human Population

6. CURRENT MARKET CONDITIONS • Protected Marketplaces • Markets and regulations differ across Territories • Significant levels of underwriting autonomy • Accelerating Inflation levels a threat to insurance profitability • Big capacity in all classes in Asia – recovered quickly after the Cat losses in 2011 • Not very litigious…Yet! • Market growth in all classes but predominantly P&C Market • All major players represented (Ins / RE) • Ace • AIG • Allianz • Zurich are some of the Global players

7. SINGAPORE A well-established business hub for SE Asia • Big Reinsurance presence – 28 Reinsurers - US $2.6 bn • Growth of Lloyds Asia Platform (18 Syndicates) – staff 200 people • 62 Captive insurance companies • GWP US $10.4 bn (Singapore and regional risks – direct markets) • Total insurers – 168 • Property capacity – US$ 3.5 bn • Liability capacity – US$ 700 m • A US $5 bn Property Risk (Full Value) 100 % was recently placed

8. Willis Perspective on Current Markets Lead Markets Current Trends Opportunities Property & Business Interruption • Reductions in premium • Improved Terms and Conditions • Multi Year Placements • Low Claims bonus provisions Continuously softening market driven by over capacity and competition in the Region ACE, AIG, Generali, MSIG, QBE, RSA, Zurich Workers’ Compensation ACE, AIG, ASIA, MSIG, QBE, RSA, Zurich Market is hardening (5% plus increases), much higher if claims experience has been poor • Alternative placement structures ? • Self Insured Retention • Reductions in premium • Improved Terms and Conditions • 18 Months Placements • Combined Policies for Crime and PI Continuously softening market driven by over capacity and competition in the Region Financial Lines/ D&O ACE, AIG, Allianz, Chubb, MSIG, Zurich • Premium reductions if warranted • Improved Terms and Conditions • Multi Year Placements • Low Claims bonus provisions Market is currently stable, awards are typically increasing so limits are under review Casualty ACE, AIG, Chubb, Liberty, QBE, RSA, XL, Zurich • Reductions in premium • Improved Terms and Conditions • CAR plus first year PAR / BI • available Market is stable, reductions available for proven Contractors Construction ACE, AIG, Catlin, Munich Re, SCOR, RSA, Zurich

9. Underwriter View – International Programs & Structural IssuesReg PeacockHead of Customer, Distribution & Marketing Zurich – Global Corporate in Asia Pacific

10. Asia Pac remains leading Region for FDI FDI Intelligence Report 2013 Zurich’s Received portfolio reflects following leagues: Absolute Nos: China Japan & India Australia 3 Year % Growth: India Singapore & Hong Kong Malaysia & Indonesia • China & India are the two Regional leaders in that order • Indonesia & Australia are the most consistent, stable & growing Markets

11. CHINA • Contract Certainty • Good standard of Local Policies registered. • Exported Wording is allowed – ostensibly. It is subject to translation and CIRC Approval and can take up to 6 months for a decision. Same applies for extensions • Non-Admitted / Reinsurance Restrictions • Non-Admitted is not permitted • Maximum cession of 80% • Tax • Insurance Premium Tax of 6.5% or 6.9519% • Comments • Tax and regulatory implications are serious, but limited application to date • Claims process on domestic programmes

12. AUSTRALIA • Contract Certainty • Good standard of Local Policies registered. • Exported Wording is allowed, but significant regulatory challenges so not preferred. • Non-Admitted • Non-Admitted is allowed for Corporations • Tax • Yes, and payable on non-admitted (OOT Tax) • Comments: • Tax compliance on OOT needs proper structuring, payment and audit trail by your carrier

13. INDONESIA • Contract Certainty • Good standard of Local Policies registered. • Exported Wording is extremely challenging. It is subject to translation and Regulator Approval and can take up to 12 months for a decision • Non-Admitted Reinsurance Restrictions • Not allowed, but with some exceptions which – in turn – will impact Risk Engineering and Loss Adjustment. • Tax • No direct premium tax, but there is stamp duty and reinsurance tax • Comments • New tariff and invigorated regulator. • Transfer pricing scrutiny can be a factor.

14. Lessons Learned and Trends IdentifiedSuresh KrishnanGlobal Accounts LeaderAsia Pacific—Latin AmericaACE Group

15. Trends Identified • “Redefinition”risk—intention v. interpretation? • Insurance Contract Certainty—Is course of conduct (behavior) consistent with terms of policy? • Compliance—Regulatory and Tax Consequences? Consider this REPORTwhen underwriting cross border insurance ----------------------------------------------------------------------------------------------------- • R eputation—brand risk/headline exposure • E xecution—role of insured, broker, insurer • P lacement—need for local policy/excess policy—where? • O perations—policy obligations, claims adjustment and payment, local certification—Accurate Documentation? • R egulation—insured, broker, insurer • T ax—premium tax, income tax

16. Lessons Learned • Lesson—Identify where claim is best paid and not paid • Claims: Where do you want your claim paid? • Property– 2011 Thai Floods • CBI--2011 Japan Tsunami • Lesson—Cover gaps in local policies even if locally compliant • Local Regulation: Use of local DIC-DIL • Environmental—2013 China • Lesson—Insuring personal liability will be the key decision point for D&O • Asking the right questions for D&O indemnification • D&O—2013 India • Lesson—Non-insurance contracts influence what is or is not covered • Contract Certainty: More than the insurance policy • Policy Interpretation—2014 USA • Lesson—Beyond Property and Liability Insurance • Local Performance: Travel Accidental Death and Dismemberment local policies • Business Travel Accident—2014 Malaysia--China • -------------------------------------------------------------------------------------------------------- • Point—Decision making team in multinational programs: International Broker, Risk Manager, Treasurer, Tax, Compliance, International Insurer

17. Questions?

18. Contact Information***Claude F. GallelloTEL: +1-212-915-7745EMAIL: claude.gallello@willis.com***Reg PeacockTEL: +852-2-977-0650EMAIL: reg.peacock@zurich.com***Suresh KrishnanTEL: +1-212-209-2291EMAIL: suresh.krishnan@acegroup.com