THE ASIAN INSURANCE MARKET Roger Wilkinson Chairman

THE ASIAN INSURANCE MARKET Roger Wilkinson Chairman & CEO, Asia Pacific, Middle East and Africa Willis International

DEMOGRAPHIC OVERVIEW It’s bigger than Texas! 60% of the Earth’s Human Population 30% of the Earth’s Land Area 44, 579, 000 km 2 (17, 212, 000 sq mi) Population 3, 879, 000 (1 st) Pop. density 87/km 2 (225/sq mi)

ASIA MARKET OVERVIEW Asian market has grown over the last decade ● ● ● 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 – the brakes are on since 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 • Allianz • Chartis • Zurich are some of the Global players ● Full Range of products on offer Singapore is a hub, with large markets in China, Japan, South Korea & India

SINGAPORE A well established business hub for SE Asia ● Big Reinsurance presence – 28 Reinsurers - US $2. 6 bn ● Growth of Lloyds Asia Platform (Currently 22 Syndicates and US $250 -$300 m of written premium) – employing ~ 200 people ● 61 Captive insurance companies ● GWP US $7 bn (Singapore and regional risks – direct markets) A US $5 bn Property Risk (Full Value) 100 % was recently placed Large Insurers Total Insurers Property Capacity Liability Capacity Motor % All the usual suspects 151 62 Direct 65 Brokers US $3. 5 bn US $700 m -

CHINA China is there for China! Highly Protected ● Fastest premium growth (28%) ● A full pipeline of infrastructure projects ● Foreign Companies still only make up 1. 8% of the non life market ● Increasing interest in D&O – Mostly related to US IPOs Large Insurers Total Insurers Property Capacity Liability Capacity Motor % 3 Giants 59 38 Domestic 21 Foreign US $1 bn US $10 m 74. 4%

JAPAN Very much their own market ● # 1 in Asia for Total premium, # 2 in the world behind the US ● # 1 in Asia for Non Life premium, # 3 in the world behind the US & Germany ● Market share of the top 3 Insurance Groups = 80% ● Insurance losses were modest pre March 2011 Tohoku Earthquake – Household EQ & Nuclear Losses will be largely covered by Japanese Government, Private Insurers face billions on Property and Business interruption claims. ● Reconstruction will aid economic growth ● Insurers taking stock and reviewing insurance coverage in light of CAT events Large Insurers Total Insurers Property Capacity Liability Capacity Motor % 3 Giants 50 US $850* m US $242* m 46. 1 *Excluding Flood Earthquake, Tsunami & Special Risk

SOUTH KOREA Very much their own market Dominated by large domestic insurers ● Market share of top 5 insurers: 78% ( Samsung 25. 8%, Hyundai: 15. 7%, Dongbu: 15. 3%, LIG: 13. 7%, Meritz: 7. 5%) ● GWP US $50 bn ● Recently introduced revised motor pricing scheme to reign in claims escalation ● Increasing demand for long term products has driven growth, in concert with growing industrial and commercial construction markets, a positive outlook for GDP growth and increased penetration of insurance products. ● The South Korean insurance regulatory authority introduced a new risk-based capital (RBC) solvency regime in April 2011 designed to increase insurance companies’ capital requirements, allowing them to assume higher risk and improve their financial stability. Large Insurers Total Insurers Property Capacity Liability Capacity Motor % 5 domestic multiline 19 US $1. 2 bn US $100 m 23. 5 9 domestic multiline, 4 direct motor, 1 State owned credit 5 foreign

INDIA Highly regulated – Future government divesting of public insurers ● 4 State owned Insurers – US 5 bn GWP ● Private Insurers – US 3. 5 bn GWP ● Foreign ownership cap of 26% ● Solid year on year premium growth led by the strong performing motor and property businesses ● Foreign insurers reviewing market entry ● Slight hardening due to RI terms and regulatory measures Large Insurers Total Insurers Property Capacity Liability Capacity Motor % 4 Large domestic 24 US $180 m US $50 m 40

MARKET TRENDS & CAPACITY By 2015, approximately 39% of the world's economy is predicted to be in the Asia-Pacific region 1 ● Huge capacity in the region ● Increased interest in liability coverage ● Improvements in domestic markets & increased sophistication in regulation ● Expect expansion of some of the larger Chinese players (already amongst the worlds largest) both in Asia Pac and globally 1 Source: Ernst & Young Analysis – International Monetary Fund, United Nations Statistics Division, World Wealth Fund, Swiss RE Sigma 2005

MARKET COMPETITIVENESS ● During the growth of the regional market in Asia it has often offered more competitive solutions than the international markets ● Asian clients like a quick turn-around in the same time-zone ● By being based in the region (Re)insurers can benefit from lower acquisition costs on some business ● Building local knowledge of risk profiles and business practice in the region can allow adaption of underwriting models to fit Asia

ECONOMIC LOSSES ● 2/3 of US $380 bn 1 Economic Loss in 2010 attributed to Japan Earthquake / Tsunami & NZ Earthquake ● Japan may cost Insurers as much as US $35 bn 2 – Huge amount of reinsurance protection – high losses to property market • Thailand Floods may cost as much as US $12 bn 3 – This was a loss that was • Zenkyoren – the ‘Farmers Mutual’ of Japan – estimated losses US $7. 9 bn 4 neither modelled nor anticipated – Thailand was previously considered a Non CAT zone 1 Source: Munich RE 2 & 3 Swiss RE – Sigma #2 / 2012 4 Towers Watson – Insights, Insurance Industry Impact and Risk Management Lessons