The International Association of Engineering Insurers TM

Engineering InsuranceMarkets Overview

Presented by •

•22 – 24 September 2014•Cannes-Mandelieu, France

Allianz Global Corporate & Specialty

• •2

Which mega trends for our environment ?Uncertainties, risks, opportunities

Global economic situation, developed economies versus developing countries (growth).

Climate changeRisks & Opportunities.

Arabic spring in 2011, social networks, political risks(« les indignés »), geopolitical or social instability.

Global financial fragility, volatility in exchange rates, capital flows/outflows to/from emerging markets.

Volatile commodity prices, energy, raw material, water will be part of main topics.

Unemployment in developed countries (business and consumer confidence).

Uncoordinated rebalancing of the world economy (fiscal and monetary policies, large swings in exchange rates).

Ethical pressuretowards international companies (internet).

Demography (old-age pension systems and health systems).

Sovereign debts, fiscal austerity, low growth in developed countries.

Talent management and retention will be a crucial topic.

Huge cities with Environment and

security problems.

Challenges in the future in our business

Construction projects, a world of opportunities…

Volume of construction will grow by more than 70% to $15 trillion worldwide by 2025China, India and U.S. will account for almost 60% of all global growthConstruction market in Western Europe will be almost 5% smaller by 2025 than 2007Significant opportunities have arisen for a new generation of ‘Asian Tigers’. Indonesia, Vietnam and the Philippines are becoming increasingly attractive for export-oriented manufacturing and represent a $350 billion construction market growing at more than 6% annually.

• The key area of construction growth in emerging countries will be infrastructure: transport, energy, social infrastructure, schools, hospitals, government accommodation, water, defense infrastructure and natural resources. These projects are expected to increase by 130% in developing countries by 2020 but by only 20% in developed countries.

• Amongst developed countries North America is will see the highest growth rate mostly in residential construction which will grow at double digits annually. South and Central America, the Middle East and Africa will grow moderately with Western Europe seeing the lowest growth.

• Eastern Europe and Russia are expected to expand construction by 100% primarily led by Poland and Russia by 2020.

NORTH AMERICA : CANADA & US

• Canada economy is expected to weaken slightly in 2014 (1,9% growth vs 2%) . The cyclical downturn in residential construction is expected to continue in 2014 and the growth of government spending is also limited. Lack of investment in mining sector. The expected strengthening in the US will provide some support for exports. Engineering business continues slightly to grow 2,4% in 2013, which was marked by massive floods and storms.

• Economical situation in US continues to improve slowly (2,5% in 2014). Premium growth has continued to increase and losses decrease. Less losses for Natcat. Investment in Oil&gas, power and infrastructure is increasing-

• Economy expects to grow by 3,2% in 2014. Engineering premium grew of 5,4% in Mexico, infrastructure projects and PEMEX, but losses and LR increased in 2013.

SOUTH AMERICA

• Economy in Central America is growing (US impact). By contrast, growth in South America is decelerating (2,1% in 2014). Argentina and Venezuela slowdown. Bolivia, Colombia and Peru continue on a more solid growth path.

• Growth in the Caibbean is expected to accelerate to 3,6% in 2014.

• Brazil’s economy continues to expand at a very moderate rate of 1,7% in 2014. Engineering premium decreased 3,5% in 2013 in Brazil, losses increased of 73% and LR 78%.

EUROPE

• Europe emerged from recession and expects a growth of 2,4% in 2014 but the recovery remains weak. Investment should also pick up gradually.• Engineering premium decreased in 2013 in most of the countries and globally due to a lack of investment (public and private), Germany (2,78%), Finland (1,75%), Sweden (1,8%), Austria (0,69%), UK (0%), Spain (-4%), Nederlands (-5,6%), Switzerland (-5,31%), Italy (-9,8%) France (-11%).• Eastern Europe (Poland) shows a better situation with Power and infrastructure investments.

AFRICA

• Africa growth is projected to accelerate to close to 5% in 2014 even 5,8% in sub-saharan but less in South Africa (2,7%).

• More than 222bUSD is being invested in African infrastructure projects, energy, power, transport, mining, real estate and water, followed by oil&gas.European/US contractors are building around 37% of projects and Chinese 12%.

• Engineering premium in South Africa shows 9,3% growth in 2013 (21,6% EAR, 16,3% CAR).

MIDDLE EAST

• The economy of the Middle East is very diverse and shows disparity in term of growth. The political & violence situation in some countries impacts heavily the development of infrastructure..

• Turkish economy grew by 4% in 2013 and expects to grow in 2014 at the same level. Engineering premium grew significantly in 2013 (34%), specifically EAR (46%) CAR(52%) improving also the loss ratio.

CIS

• CIS region continues to face a challenging international environment. Several large CIS economies stagnats in 2014. Growth in Russia, which has a strong influence, is expected to be very low, despite fiscal expenditure on a number of infrastructure projects. The conflict around Crimea and economic sanctions have led to a massive outflow of capital.

• Engineering premium in Russia slightly declined by 3,9% in 2013. Loss ratio doesn’t include a large loss (sept 2013 Zagorsk) estimated at around 300 mioUSD.

ASIA

• East Asia is expected to see robust growth 6% in 2014 (China 7,3% vs 7,7% in 2013).South Asia 4,6%, India‘s 5%, Taiwan 3%.

• Construction spending in China reached 1,78 trillion last year, followed by Japan, India Indonesia, South Korea and is forcasted to grow at 7,3% per year in China, 7% in India, …

• Engineering premium has grown in India 1,41% in 2013, biggest part is EAR. The LR increased by 4,58%. Future prospects look positive.

• Japan engineering premium grew 2,8% in 2013 due to CAR business. Claims decreased. Renewal energy and power increase.

• South Korea shows a decreasing of the premium in 2013.

• Taiwan shows an eng premium decreasing of 5,3%, lower LR due to no major Typhoon and natcat.

PACIFIC

• Australian economy saw a tapering of the mining sector in 2013, investment in ressources sector is fading.

• Natural cat events had a moderate impact on the general insurance industry in 2013.

• 2014 seems to be better in term of investment in non residential building, also utilities projects.

• Engineering premium grew 6% in 2013, and losses recorded higher than 2012. (+6%).