international rating agency advisory...

International Rating Agency Advisory NewsletterNovember 2012 UpdateWelcome to Aon Benfield’s updated Rating Agency Advisory Newsletter. In this edition, matters of interest include rating agencies global reinsurance and country risk outlooks, as well as our regular features on :

� Selected regulatory activities or updates throughout APAC and EMEA.

� List of rating actions in APAC and EMEA during the 3rd quarter.

� Links to reports released by Aon Benfield Analytics.

We will continuously scan for new content to provide greater value to our clients. We will be glad to hear your feedback so that we can continue to provide the most relevant ratings news and information in future editions.

Rating Agency Activity (Data source: Standard & Poor’s, A.M.Best, Fitch, and Moody’s)

Standard & Poor’s � Numerous market participants provided feedback on S&P’s proposed criteria for rating insurers, “Request for

Comment: Insurers Rating Methodology”, published 9 July 2012.

S&P has stated in its recent report “S&P Summarizes Submissions On Request For Comments” on 18 October 2012 that it received formal feedback from about 100 market participants, varying from rated insurers, insurance brokers, rating advisors, and industry trade associations.

S&P is not yet in a position to comment on the final criteria. However S&P expects to respond to the comments in one of three ways: by changing the proposed criteria, by explaining the original proposals more clearly to remove ambiguity, or by leaving the proposal unchanged.

S&P states that it is in the process of analyzing the feedback and testing the impact of various alternatives. It expects to complete the development of the revised criteria and to publish it to the market in about six months.

Further to this report, S&P published its criteria for evaluating enterprises’ management and governance credit factors in an article titled “Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers” on 13 November 2012. Through these criteria, S&P wants to bring enhanced transparency by discussing how it scores this category of analysis.

� S&P announced on 2 November 2012 that it expects Hurricane Sandy to have a limited impact on the ratings on U.S. property/casualty (P/C) insurers, global reinsurers, and certain catastrophe bonds. Although the losses from this event will affect (re)insurers’ fourth-quarter earnings in 2012, S&P views that for most (re)insurers the hit will be offset by strong capital bases and strong earnings through the first three quarters of 2012. The event is unlikely to materially affect premium rates in loss-affected lines.

Proprietary & Confidential

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International Rating Agency Advisory Newsletter

� “Diverging Models Shape the Growth Prospects for Takaful” was released by S&P on 24 September 2012 to discuss its concerns on this growing industry. S&P is seeing a widespread use of high risk investment strategies by takaful providers, as well as lack of accounting standards and Sharia compliance. Consequently S&P is uncertain of long-term profitability, particularly in the Gulf Cooperation Council region. However, Malaysia, which is the largest takaful market in South East Asia, appears to be in a more healthy state with supportive, sophisticated regulatory oversight and a stronger investment profile in the industry .

� Another S&P report entitled “Breaking Out of the Holding Pattern: Which Way Now for Global Reinsurance?” was published on 4 September 2012. The report discusses the current state of the global reinsurance market, where excess capital, modest rate rises and macroeconomic uncertainty are its key features. It added that S&P expects reinsurers to seek new areas for generating profitability or risk being marginalized should there be changes in the market. S&P added that it could consider raising the ratings on some of the reinsurers if they are able to position themselves to exploit a widespread turn in the market. However it warned that following the herd mentality could put capital levels at risk if firms entered into lines of business when the prices do not adequately reflect the risks.

� On 4 September 2012, S&P published a report discussing its analysis on which factors it expects to drive reinsurers’ ratings. Based on its analysis of a peer group that writes about 75% of global net reinsurance premium, S&P commented that capitalization, liquidity, and enterprise risk management (ERM) continue to be strengths to the sector. Meanwhile, financial flexibility and operating performance are relative weaknesses, which supports its view that profitability will come under pressure in the next two to three years as underwriting and investment returns are likely to remain low and exposed to volatility.

� “How Regional Reinsurers are Evolving in Search of a Winning Formula” was published on 4 September 2012 discussing the strategies regional reinsurers could take to counter challenges posed by primary markets and global reinsurance peers.

S&P believes that companies with well-thought-out strategies for future development are better placed than those relying on their existing position. It added that successful regional reinsurers think through a range of options available to them and determine a clear strategy for future development. Inactivity by others could be detrimental to their business position and ultimately could lead to lower ratings.

� On 4 September 2012, S&P published a report “A Cluster of Catastrophes: What Lessons Can Reinsurers Draw from the Natural Catastrophes Events of 2011” discussing the impact of the natural catastrophe on reinsurers. S&P expects reinsurers to adapt to new information by increasing the sophistication of current models used to assess risk exposures. It added that the extent to which companies are prepared for and learn from such events can affect their ratings.

The report also pointed out that reinsurers in a globalized world must keep up with changes in natural catastrophe risk modeling. Embedding those tools in ERM and understanding the models’ limitations will be ever more critical for reinsurers.

From a rating perspective, S&P comments that its assessment of risk culture and ERM will be even more necessary when risks and businesses are global.

� In September, S&P published a few other reports relating to Catastrophe Risk, which highlights the importance it places on this issue:

� Catastrophe Risk Insurance : Just How Much Capital is at Risk?

� Asia-Pacific Reinsurers Are Still Coming to Terms with Last Year’s Calamities

� Natural and Financial Catastrophes Fail to Rock Global Reinsurers and Their ERM Scores

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A.M. BestSeveral special reports were released by AM Best during the quarter:

� “New Zealand Navigates Regulatory Reform Amid Recovery from Epic Disaster” was released on 12 November 2012 where A.M. Best discussed the state of New Zealand’s insurance industry following regulatory reforms and the two earthquakes in the Canterbury region that occurred less than six months apart.

� On 8 November 2012, due to the evolving Eurozone financial crisis, A.M. Best released a report clarifying the risk weighting given to sovereign creditworthiness in assigning Insurer FSRs.

� On 16 October 2012, “European Non-Life Sector Faces Further Economic Uncertainty” was released, discussing the impact of the Eurozone financial crisis on insurers.

� On 15 October 2012, “Rates Rise, but Economic Conditions Place Pressure on Performance” was released discussing the challenging market conditions for UK non life insurers due to the difficult economic environment.

� On 11 October 2012, “Germany Non-Life Insurers’ Focus on Rates Improve Profitability” was released. A.M. Best commented that the German non-life insurance market has continued to prove to be resilient with robust growth.

� On 10 October 2012, “France’s Non-Life Sector Resilient Despite Economic Difficulties” was released where A.M. Best discussed the market situation in France.

� “Italy’s Non-Life Insurance Sector Faces Shifting Landscape” was released on 9 October 2012 and discussed the changes facing the Italian non-life insurance market.

� “Spanish Non-Life Insurance Sector Profitable, But Challenges Lie Ahead” was released on 8 October 2012 discussing how the Spanish non-life insurance sector is facing challenging growth due to one of the bleakest economic environments since the 1930s.

� On 8 October 2012, “The China Market in Transition: Sharpening for Sustainability” was released. In the report, A.M. best discussed how the Chinese regulator is rolling out plans for sustainable and healthy growth in coming years.

� “Regional Cat Losses Drive Asian Reinsurers to Focus on Profitability, Capital Strength” was released on 24 September 2012. In the report, A.M. Best discussed how Asia-Pacific reinsurers were adversely affected by the large scale catastrophes in 2011 and how they have restored their capital position in 2012.

� “Reinsurers Show Resilience Under Weight of Catastrophes, Economic Woes” was released on 3 September 2012. In the report, A.M. Best discussed the financial position of the top 50 global reinsurers as they emerged from 2011, which was one of the costliest catastrophe years in history.

Fitch � On 5 November 2012, Fitch commented that it believes the global reinsurance industry’s strong capitalization can

absorb material expected losses from Hurricane Sandy. It added that it does not anticipate substantive negative rating actions on a broad cross section of global reinsurers as a result of this event. However, due to the scale and complexity of the event, the ultimate level of insured losses remains highly uncertain. The potential implications to reinsurers will be looked into as developments relating to the event are being monitored.

� On 15 October 2012, Fitch commented in a new report “2013 Outlook : Indonesian Insurance” that the rating outlooks for Indonesia’s life and non-life insurance sectors are stable, underpinned by a developing domestic market, sustainable growth in premiums, and strengthening regulatory requirements.

� A special report “How Sovereign Ratings Relate to Other Asset Class Ratings in the Eurozone” was released on 3 October 2012, discussing the impact of sovereign ratings on various classes of ratings.

� 3 special reports discussing the French, UK and German Non-Life Insurance Sectors were released on 1 and 2 October 2012. All 3 sectors were reported to be in a Stable Outlook position.

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� On 19 September 2012, Fitch reported that it has completed its periodic review and published an updated version of its criteria for insurance entities. The criteria report is titled ‘Insurance Rating Methodology’ and replaces the previous version dated 22 September 2011. The update is not expected to result in changes to any ratings.

� On 17 September 2012, Fitch commented that the Italian insurance sector’s rating outlook remains negative as it believes that growth will continue to be sluggish in 2012 and 2013 even though non-life segment is seeing recovery in profitability. This is due to premium rates flattening out in motor third-party liability and premium levels for other motor products dropping as households reduce cover and new car sales languish.

� On 11 September 2012, Fitch commented that it is maintaining a stable rating outlook for Dutch Insurance Sector. The main risks it sees is to the failure in the industry to report adequate operating profits, most likely caused by an inability to cut costs, and potentially unsustainable price competition.

� Fitch published “Global Reinsurance Guide 2013” on 4 September 2012. The guide contained a few research reports:

� Fitch published its “Global Reinsurance Outlook”, describing the basis for its stable rating outlook for the sector

� “Global Reinsurers’ Midyear 2012 Financial Results”, commenting on operating performance of global reinsurers’ monitored by Fitch

� “Alternate Reinsurance Market Update”, discussing developments in the alternative reinsurance market, such as catastrophe bonds and the use of side cars

� “Reinsurers More Risk-Focused for Next Asian Catastrophe”, a market update in the wake of Asia-Pacific catastrophes in the past 2 years

� Summary reports on selected reinsurers, outlining key rating drivers

� On 4 September 2012, Fitch commented in a new report “New Solvency Margin Reveals Interest Rate Risks”, that the introduction of a new solvency margin regulatory framework in Japan in the near future may lead to both positive and negative rating changes, depending on the individual characteristics of each insurer and its management of the transition to the new regime.

� On 21 August 2012, Fitch commented that insurers operating in China’s compulsory motor insurance market (CMIM) face further significant underwriting losses in the next one to two years due to rising claims, tightly regulated pricing, and the potential for further competition, which could result in a negative outlook for the sector if the competition were to lead to a big drop in operating margins.

Moody’s � Moody’s released a report “How Further Sovereign Stress Would Affect European Insurers and Their Ratings” on

1 October 2012, where it highlighted the potential impact of three sovereign-related stress events on European insurers’ credit quality and ratings. The report presents the likely consequences of these events assuming they would occur in isolation, although in practice they might occur simultaneously or subsequently.

The three sovereign-related stress events analysed by Moody’s are:

1) Greece (C no outlook) defaults again and exits from the euro area;

2) The credit quality of Spain (Baa3 review for downgrade) and Italy (Baa2 negative) further deteriorates;

3) A modest deterioration in the creditworthiness of large Aaa-rated EU sovereigns (to levels consistent with upper- or mid-range Aa sovereign ratings)

� On 4 September 2012, Moody’s released “ Global Reinsurance Outlook”, commenting that the outlook for the global reinsurance industry remaining stable.

� On 5 July 2012, Moody’s revised its outlook for the Japanese P&C insurance industry to stable from negative. The revised position is covered in a report “Japanese Property and Casualty Insurance Industry - Returns to Stable Outlook: Recovery in Profitability in Sight”. The change mainly reflects Moody’s expectation that underwriting profits will recover through changes to pricing strategies and reductions in costs.

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Regulator Activity - APAC

Region Regulatory Update

China � In October 2012, China’s Insurance Regulatory Commission (CIRC) introduced various policy liberalizations on investments directed at Chinese domestic insurers, which have struggled with low investment returns and asset depreciation in 2012.

India � In July 2012, the Insurance Regulatory and Development Authority announced that it is planning to introduce guidelines for the micro-insurance segment in the country to ensure the growth of the business.

� The Union Cabinet approved necessary official amendments in the Insurance Laws (Amendment), Bill 2008 on 4 October 2012, pending in the Rajya Sabha for parliamentary approval.

The overall objective is to further deepen the reform process which is already underway in the insurance sector.

Various amendments were approved. Of particular interest was the foreign equity cap, which is proposed to be kept at 49 per cent as provided in the Insurance Laws (Amendment) Bill, 2008 as against the 26 percent. This is done in order to meet the growing capital requirement of insurance companies.

Japan � In July 2012, the Japanese cabinet enforced an order regarding the easing of regulations on insurance group operations in order to facilitate foreign M&A activities.

Malaysia � Bank Negara Malaysia introduced The Internal Capital Adequacy Assessment Process (ICAAP) with effect from 1 September 2012. By this date, insurers are expected to have in place appropriate policies and procedures, supported by proper documentation and systems to enable effective on-going implementation of ICAAP.

The Internal Capital Adequacy Assessment Process (ICAAP) is the overall process (including oversight and operational frameworks and processes) by which an insurer ensures adequate capital to meet its capital requirements on an ongoing basis.

Philippines � It was reported in Philippines media on 18 August 2012, The Financial Sector Forum (FSF), composed of the Insurance Commission, Bangko Sentral ng Pilipinas (BSP), the Securities and Exchange Commission, and the Philippine Deposit Insurance Corp have agreed to develop common governance standards and to implement measures to tighten the supervision and governance of financial conglomerates in the country.

Pakistan � On 16 July 2012, Securities and Exchange Commission of Pakistan (SECP) announced that conventional insurance companies are allowed to conduct Takaful business by taking benefit from Takaful Rules 2012. These rules replace all other previous provisions regarding Takaful, specifically the Takaful Rules 2005, allowing conventional insurance companies to offer Shariah-compliant and conventional products side by side, provided client money is segregated.

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Vietnam � In July 2012, the Ministry of Finance issued the Circular No. 124/2012/TT-BTC (“Circular 124”) guiding the implementation of a number of articles of Decree No. 45/2007/ND-CP and Decree No. 123/2011/ND-CP. The Circular 124 makes detailed provisions on conditions and procedures for establishment of insurance joint-stock companies, insurance limited liability companies, and branches of foreign non-life insurers in Vietnam. The circular also specifies the qualification of the contributing organization and individuals.

� In July 2012, the Ministry of Finance also issued Circular No. 125/2012/TT-BTC (“Circular 125”) guiding the financial regime applicable to insurers, reinsurance businesses, insurance brokers, and branches of foreign non-life insurers. According to Circular 125, one shareholder as an organization may possess up to 20% of charter capital of a joint stock insurance company, except under certain circumstances specified by this circular. Before the strategic shareholder conducts the contribution of over 20% of charter capital, the insurance company must submit application to the Ministry of Finance and get approval.

The Circular 124 and the Circular 125 take effect beginning 1 October 2012.

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Regulator Activity - EMEA


Solvency II � Insurers have been given more time by the Financial Services Authority (FSA) to prepare for Solvency II in anticipation of further delays to its implementation.

Solvency II had been scheduled for implementation on 1 January 2014, but the vote on Omni-bus II - a package of key changes to the directive - has been put back to March 2013, meaning implementation may be delayed by up to two years.

The head of the FSA’s insurance unit Julian Adams said firms will have until the end of 2015, rather than 2013 as planned, to develop models to calculate their capital requirements.

IFRS � The IASB expects to publish a revised Exposure Draft (ED) in the first half of 2013. Although the deliberations on the project are not complete, in the interest of providing greater certainty to the market and given the late stage of the deliberations, the Board has already concluded that the proposals should be re-exposed with feedback being sought only on a limited range of questions. The targeted questions in the new ED will relate to:

� Treatment of participating contracts

� Presentation of premiums in the statement of comprehensive income

� Treatment of the unearned profit in an insurance contract

� Presenting, in other comprehensive income, the effect of changes in the discount rate used to measure the insurance contract liability

� The approach to the transition

The current status of the discussions indicates that IFRS Insurance Contracts will not become effective before 2018 (see timeline below). Insurers will still have to be prepared to apply IFRS 9 (Financial Instruments) from 2015.

H1 2013Publish targeted exposure draft

H2 2014 publish IFRS

Q4 2013 begin redeliberations

Proposed effective date 1 January 2018

Source: IFRS.org

Insurance Contracts Timeline

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Solvency II Capital SolutionsWithin Aon Benfield Analytics we have a dedicated Risk and Capital Strategy team which sits alongside our main Actuarial, Catastrophe Management, and Software teams.

Its focus is to provide sustainable solutions that will improve capital efficiency on an immediate and ongoing basis to meet the requirements of Solvency II. The goal of Solvency II capital planning is to:

� Identify your firm’s target Solvency II ratio that provides a sufficient safety buffer

� Develop an implementation plan to satisfy this in the context of your business plan

Our service offering spans all aspects of capital planning under Solvency II from reinsurance strategy to investment strategy to capital markets. In addition, we can offer a complete advisory service for Solvency II covering all aspects of the new regulation including use of our market leading internal modelling platform ReMetricaTM.

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Third Quarter 2012 Ratings Actions(Rating Action key: - downgrade or negative outlook, + upgrade or positive outlook, = ratings affirmation).

APAC: S&P

Name of (Re)Insurer Current FSR Previous FSRCreditWatch /

OutlookDomicile Rating Action

Asterton Life Ltd A+ - Stable New Zealand New

Cathay Century Insurance Co. Ltd. A- A- Negative Taiwan -

Cathay Life Insurance Co. Ltd. A- A- Negative Taiwan -

Dhipaya Insurance Public Co. Ltd. BBB BBB+ Negative Thailand -

Fubon Insurance Co. Ltd. A- A- Negative Taiwan -

Fubon Life Insurance Co. Ltd. A- A- Negative Taiwan -

Health Service Welfare Society Ltd. BB+ Stable New Zealand New

Lloyd's Insurance Co. (China) Ltd. A+ A+ Positive China +

MARAC Insurance Ltd. BB+ Stable New Zealand New

Ping An Property & Casualty Insurance Co. of China Ltd. A A Negative China -

QBE General Insurance (Hong Kong) Ltd. A+ A+ Stable Hong Kong -

Quest Insurance Group Ltd. CC CCC- Negative New Zealand -

SCOR Global Life Australia Pty Ltd. A+ Stable Australia New

Seoul Guarantee Insurance Co. A A- Stable Korea, Republic Of +

Shin Kong Life Insurance Co. Ltd. BBB BBB Negative Taiwan -

Taiwan Life Insurance Co. Ltd. BBB BBB Negative Taiwan -

APAC: A.M. Best



ACS (NZ) Limited B- B+ Developing New Zealand -

Asian Reinsurance Corporation B+ B++ Negative Thailand -

Beneficial Insurance Limited B+ Stable New Zealand New

BEST RE B++ A- Negative Malaysia -

BEST RE Family (L) Limited B++ A- Stable Malaysia -

BOC Group Life Assurance Company Ltd A Stable Hong Kong New

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CBL Insurance Ltdx B+ B+ Positive New Zealand +

China Taiping Insurance (NZ) Ltd B+ B++ Stable New Zealand -

Jubilee General Insurance Company Ltd B++ Stable Pakistan New

Kiwi Insurance Limited A- Stable New Zealand New

New Zealand Local Government Ins Corp Ltd B++ B++ Negative New Zealand -

NIPPONKOA Insurance Company Ltd A+ A Stable Japan +

Pinnacle Life Insurance Partnership B Stable New Zealand New

TOWER Medical Insurance Limited A- Stable New Zealand New

Wing Lung Insurance Co Ltd B++ B++ Positive Hong Kong +

APAC: Fitch



AFLAC Japan AA- AA- Stable Japan =

American International Assurance Company Limited, Thailand Branch AAA(tha) AAA(tha) Stable Thailand =

Etiqa Insurance Berhad A A Stable Malaysia =

Fukoku Mutual Life Insurance Co A A Stable Japan =

Lloyd's Insurance Company (China) Ltd A+ A+ Stable China =

Meiji Yasuda Life Insurance Company

A A Stable Japan =

Mitsui Life Insurance Company Limited BBB BBB- Stable Japan +

PT Asuransi Sinar Mas AA+(idn) AA+(idn) Stable Indonesia =

PT Avrist Assurance AA-(idn) AA- (idn) Stable Indonesia =

PT Tugu Pratama Indonesia AA-(idn) AA-(idn Stable Indonesia =

QBE Hongkong & Shanghai Insurance Limited

A+ A+ Stable Hong Kong =

QBE Insurance (Australia) Limited A+ A+ Stable Australia =

QBE Insurance (International) Ltd. A+ A+ Stable Australia =

QBE Lenders' Mortgage Insurance Limited

AA- AA- Stable Australia =

Sumitomo Life Insurance Company A A Stable Japan =

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EMEA: S&P



Aviva Assurances S.A. A+ AA- Stable France -

Aviva Insurance Ltd. A+ AA- Stable United Kingdom -

Aviva International Insurance Ltd. A+ AA- Stable United Kingdom -

Aviva Life & Pensions UK Ltd. A+ AA- Stable United Kingdom -

Aviva Vie S.A. A+ AA- Stable France -

Axeria Prevoyance A- A- Negative France -

Axeria Re Ltd. A- Negative Malta New

Congregational & General Insurance PLC

BBB- BB+ Stable United Kingdom +

Financial Assurance Co. Ltd. A- A- Negative United Kingdom -

Financial Insurance Co. Ltd. A- A- Negative United Kingdom -

Fondiaria-SAI SpA B+ B Watch Pos Italy +

Irish Life Assurance PLC BBB+ BBB- Negative Ireland +

Jupiter Insurance Ltd. A A Positive Guernsey +

Kobstaedernes Forsikring (Unsolicited Ratings)

BBpi BBBpi - Denmark -

La Mondiale BBB+ A- Negative France -

Lloyd's A+ A+ Positive United Kingdom +

Milano Assicurazioni SpA B+ B Watch Pos Italy +

Oman United Insurance Co. S.A.O.G.

BBB- BBB- Positive Oman +

Pozavarovalnica Sava d.d. BBB+ A- Negative Slovenia -

Q Life & Medical Insurance Company LLC

A Stable Qatar New

QBE Re (Europe) Ltd. A+ Stable United Kingdom New

SIAT - Societa Italiana Assicurazioni e Riassicurazioni pA

B+ B Watch Pos Italy +

Sveriges Angfartygs Assurans Forening (The Swedish Club) BBB+ BBB Stable Sweden +

Towarzystwo Ubezpieczen i Reasekuracji WARTA S.A. A BBB+ Stable Poland +

Triglav Insurance Co. Ltd. A- A Negative Slovenia -

Triglav Re, Reinsurance Co. Ltd. A- A Negative Slovenia -

Unipol Assicurazioni SpA BBB BBB+ Watch Neg Italy -

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Volkswagen Insurance Co. Ltd. A- A- Positive Ireland +

W.R. Berkley Insurance (Europe) Ltd. A+ A Stable United Kingdom +

Warba Ins. Co. K.S.C. BBB Stable Kuwait New

EMEA: A.M. BestName of (Re)Insurer Current FSR Previous FSR

CreditWatch / Outlook

Domicile Rating Action

Al Fajer Retakaful Ins Co KSC B++ B++ Negative Kuwait -

Al Ittihad Al Watani Soc Gen Asr Proche

B+ B+ Negative Lebanon -

Al-Sagr National Insurance Company PSC B+ Stable United Arab Emirates New

Atradius Credit Insurance N.V. A Stable Netherlands New

Atradius Reinsurance Limited A Stable Ireland New

AXIS Re SE A A Positive Ireland +

AXIS Specialty Europe SE A A Positive Ireland +

Compania ES Seg Reas CreditoCaucion

A Stable Spain New

E+S Rueckversicherung AG A+ A Stable Germany +

Eni Insurance Limited A Stable Ireland New

Hannover Life Reassurance (UK) Limited A+ A Stable United Kingdom +

Hannover Re (Ireland) Plc A+ A Stable Ireland +

Hannover Rueckversicherung AG A+ A Stable Germany +

Hannover Re (Bermuda) Ltd A+ A Stable Bermuda +

Hannover Rueckversicherungs AG A+ A Stable Canada +

Hannover Life Reassurance Co of America A+ A Stable United States +

International Ins Co of Hannover Limited

A+ A Stable United Kingdom +

Kuwait Reinsurance Company KSC A- A- Negative Kuwait -

Life Insurance Corp B++ B++ Negative Bahrain -

National Life & General Ins Co B++ B++ Negative Oman -

Sunderland Marine Mutual Ins Co Ltd

A- A- Negative United Kingdom -

Unity Reinsurance Company Ltd B+ B+ Positive Russia +

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EMEA: Fitch


OutlookDomicile

Rating Action

AMANAT Insurance B- B- Stable Kazakhstan +

AXA Belgium AA- AA- Negative Belgium -

AXA Corporate Solutions Assurance AA- AA- Negative France -

AXA France IARD AA- AA- Negative France -

AXA France Vie SA AA- AA- Negative France -

AXA Insurance UK plc AA- AA- Negative United Kingdom -

AXA Krankenversicherung AG AA- AA- Negative Germany -

AXA Leben (Switzerland) AG AA- AA- Negative Switzerland -

AXA Lebensversicherung AG AA- AA- Negative Germany -

AXA PPP Healthcare Limited AA- AA- Negative United Kingdom -

AXA Versicherung (Germany) AG AA- AA- Negative Germany -

AXA Versicherung (Switzerland) AG AA- AA- Negative Switzerland -

AachenMuenchener Lebensversicherung AG A- A- Negative Germany =

AachenMuenchener Versicherung AG A- A- Negative Germany =

Allianz Elementar Versicherungs-AG AA AA Stable Austria =

Allianz IARD S.A. AA AA Stable France =

Allianz Insurance Plc AA AA Stable United Kingdom =

Allianz Lebensversicherungs-AGAA AA Stable Germany =

Allianz Private Krankenversicherungs-AG

AA AA Stable Germany =

Allianz SEAA- AA Stable Germany =

Allianz Versicherungs-AGAA AA Stable Germany =

Allianz Vie S.A.AA AA Stable Germany =

Arch Insurance Company (Europe) Limited

A+ A+ Stable United Kingdom =

Assicurazioni Generali SpAA- A- Negative Italy =

Central Krankenversicherung AGA- A- Negative Germany =

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OutlookDomicile

Rating Action

Chartis Europe LimitedA A Stable United Kingdom =

Chartis MEMSA Insurance Company Limited

A A Stable United Arab Emirates =

Condor Lebensversicherungs-Aktiengesellschaft

A+ A+ Stable Germany =

Cosmos Lebensversicherungs-AGA- A- Negative Germany =

Cosmos Versicherung AGA- A- Negative Germany =

DBV Deutsche Beamten Versicherung AG

AA- AA- Negative Germany -

DBV Deutsche Beamtenversicherung Lebensversicherung AG

AA- AA- Negative Germany -

DEVK Allgemeine Lebensversicherungs-Aktiengesellschaft


DEVK Allgemeine Versicherungs-Aktiengesellschaft


DEVK Deutsche Eisenbahn Versicherung Lebensversicherungsverein a.G.


DEVK Deutsche Eisenbahn Versicherung Sach- und HUK-Versicherungsverein a.G.


DEVK Krankenversicherungs-Aktiengesellschaft


DEVK Rechtsschutz-Versicherungs-Aktiengesellschaft


DEVK Rueckversicherungs-und Beteiligungs-Aktiengesellschaft A+ A+ Stable Germany =

Echo Rueckversicherungs-AG BBB+ BBB+ Positive Switzerland +

Flagstone Reassurance Suisse SA A- A- Watch Switzerland

Garant Versicherungs Aktiengesellschaft Vienna

A- NR Stable Austria New

Generali Deutschland Holding AG A- A- Negative Germany =

Generali Deutschland Pensionskasse AG

A- A- Negative Germany =

Generali Espana, S.A. de Seguros Y Reaseguros A- A- Negative Spain =

Generali Iard A- A- Negative France =

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OutlookDomicile

Rating Action

Generali Lebensversicherung AG A- A- Negative Germany =

Generali Versicherung AG A- A- Negative Germany =

Generali Versicherung AG (Austria) A- A- Negative Austria =

Generali Vie A- A- Negative France =

Gothaer Allgemeine Versicherung AG

A A Stable Germany =

Gothaer Lebensversicherung AG A A Stable Germany =

Hiscox Insurance Company (Guernsey) Limited

A+ A Stable United Kingdom +

Hiscox Insurance Company Limited A+ A Stable United Kingdom +

ITAS Mutua BBB BBB Negative Italy =

JBC Insurance Company NOMAD Insurance B B- Stable Kazakhstan +

KBC Group Re A- A- Stable Luxembourg =

KBC Verzekeringen N.V. (KBC Insurance)

A- A- Stable Belgium =

Kompetenz Joint Stock Company B NR Stable Kazakhstan New

Legal & General Assurance Society Ltd AA- AA- Stable United Kingdom =

Lloyd's of London A+ A+ Stable United Kingdom =

Prudential Assurance Co. Ltd AA AA Stable United Kingdom =

QBE Insurance (Europe) Limited A+ A+ Stable United Kingdom =

QBE Reinsurance (Europe) Limited A+ A+ Stable Ireland =

Reale Seguros Generales SA BBB+ BBB+ Negative Spain =

SIGNAL IDUNA Rueckversicherungs AG A- A- Stable Switzerland =

Sanlam Developing Markets Limited AA+(zaf) AA+(zaf) Stable South Africa =

Sanlam Life Insurance Limited AA+(zaf) AA+(zaf) Stable South Africa =

Santam Limited AA+(zaf) AA+(zaf) Stable South Africa =

Sirius International Insurance Corporation

A A- Stable Sweden +

Societa Reale Mutua Di Assicurazioni

BBB+ BBB+ Negative Italy +

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OutlookDomicile

Rating Action

Stewart Title Limited BBB BBB Stable United Kingdom =

Swiss Reinsurance Company Ltd A+ NR Stable Switzerland =

VOLKSWOHL BUND LEBENSVERSICHERUNG a.G. AA- AA- Stable Germany =

VTB Insurance Limited BBB- BBB- Stable Russia =

Zurich Insurance Company ltd AA- A+ Stable Switzerland +

Where Rating Agency Advisory Can Assist

Financial Planning and Analysis � Review, testing, and forecasting of client financials

� M&A and capital markets support

� IFRS and SII related reporting insight

� Ceded ROE and reinsurance impact evaluation

ERM and ECM Analysis � Risk tolerance and risk appetite support

� SII (pillar 2 and pillar 3) preparation, testing, and benchmarking

� General risk / modelling framework benchmarking and gap analysis

� Asset / credit risk modelling

Ratings Support � Ratings capital modelling and optimizing

� Establish new ratings, protect existing ratings, support upgrades

Research and Training � Bespoke white papers

� Client training, conference, and seminars

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Sovereign Ratings as at 6 November 2012

Sovereign S&P Fitch Moody’s A.M. Best

Australia AAA AAA Aaa CRT-1

Austria AA+ AAA Aaa CRT-1

Belgium AA AA Aa3 CRT-1

Brunei Darussalam CRT-4

Bulgaria BBB BBB- Baa2

Cambodia B B2

China AA- A+ Aa3 CRT-3

Cook Islands B+

Cyprus B BB+ B3 CRT-3

Czech Republic AA- A+ A1

Denmark AAA AAA Aaa CRT-1

Egypt B B+ B2 CRT-5

Estonia AA- A+ A1 -

Finland AAA AAA Aaa CRT-1

Fiji Islands B1

France AA+ AAA Aaa CRT-1

Germany AAA AAA Aaa CRT-1

Greece CCC CCC C

Hong Kong AAA AA+ Aa1 CRT-2

Hungary BB+ BB+ Ba1

India BBB- BBB- Baa3 CRT-4

Indonesia BB+ BBB- Baa3 CRT-4

Ireland BBB+ BBB+ Ba1 CRT-2

Italy BBB+ A- Baa2 CRT-2

Japan AA- A+ Aa3 CRT-1

Korea (Republic of) A+ A+ Aa3 CRT-2

Latvia BBB- BBB- Baa3

Lithuania BBB BBB Baa1

Luxembourg AAA AAA Aaa CRT-1

Malta A- A+ A3 CRT-3

18


Sovereign S&P Fitch Moody’s A.M. Best

Malaysia A- A- A3 CRT-3

Mongolia BB- B+ B1

Netherlands AAA AAA Aaa CRT-1

New Zealand AA AA Aaa CRT-2

Norway AAA AAA Aaa CRT-1

Pakistan B- Caa1 CRT-5

Papua New Guinea B+ B1

Philippines BB+ BB+ Ba1 CRT-4

Poland A- A- A2 CRT-3

Portugal BB BB+ Ba3

Romania BB+ BBB- Baa3

Russia BBB BBB Baa1 CRT-4

Singapore AAA AAA Aaa CRT-1

Slovak Republic A A+ A2

Slovenia A A- Baa2 CRT-2

Spain BBB- BBB Baa3 CRT-2

Sri Lanka B+ BB- B1

Sweden AAA AAA Aaa CRT-1

Switzerland AAA AAA Aaa CRT-1

Taiwan AA- A+ Aa3 CRT-2

Thailand BBB+ BBB Baa1 CRT-3

United Kingdom AAA AAA Aaa CRT-1

USA AA+ AAA Aaa CRT-1

Vietnam BB- B+ B2 CRT-5

Data source: Standard & Poor’s, Fitch,Moody’s & A.M.Best; Red denotes negative outlook; Green denotes positive outlook

19


Appendix 1: Aon Benfield Thought Leadership

“Asia Pacific Solvency Regulation” outlines the non-life solvency requirements for selected countries/regions in Asia Pacific. It provides an understanding and benchmarking of the existing methodologies adopted by regulators. The 2011 report has been updated recently to reflect developments in 2012. Considering the many changes that are expected to these regulations in coming years, the team will continue to periodically update this report to reflect new conditions

Click on picture to open the link

“S&P Market Update” focuses on the eurozone: de-mystifying the notchingbetween Standard & Poor’s sovereign and financial strength ratings


“CRO Guide to Solvency II” aims to help chief risk officers maintain a competitive position and financial strength under the proposed regulation by providing practical advice on the journey to a successful implementation.


“October 2012 Global Catastrophe Recap” reviews the natural disaster perils that occurred worldwide during October and reveals that Hurricane Sandy will become one of the costliest natural disasters in U.S. history after causing extensive damage with 113 dead. In addition, four other tropical cyclones also caused impacts around the globe during the month of October.


http://thoughtleadership.aonbenfield.com/Documents/201211_if_monthly_cat_recap_october.pdf

http://thoughtleadership.aonbenfield.com/Documents/201210_asia_pacific_solvency_regulation.pdf

http://thoughtleadership.aonbenfield.com/Documents/20121023_standard_poors_market_update.pdf

http://thoughtleadership.aonbenfield.com/Documents/201210_cro_solvency_II.pdf

20


“Lloyd’s Update - 1H 2012” covers the market’s interim 2012 financial results and business position going into 2013.


“September 2012 Global Catastrophe Recap” reviews the natural disaster perils that occurred worldwide during September and reveals that seasonal monsoonal rains caused significant flooding across parts of Asia.


“Evolving Criteria - Looking Back to Anticipate Change Moving Forward” reviews the latest developments in rating agency protocol and examines important regulatory issues affecting the industry.


“Credit Risk of Property Catastrophe Reinsurers” assesses the creditworthiness of the global reinsurance industry through a series of comprehensive analytical techniques. It reveals that catastrophe losses have led to reinsurers defaulting on just 0.1 percent of their obligations since the year 2000 – a level of realized credit losses consistent with AA rated corporate bonds.


http://thoughtleadership.aonbenfield.com/Documents/201210_lloyds_1h_2012.pdf

http://thoughtleadership.aonbenfield.com/Documents/20121004_if_global_cat_recap_september.pdf

http://thoughtleadership.aonbenfield.com/Documents/20121004_if_global_cat_recap_september.pdf

http//thoughtleadership.aonbenfield.com/Documents/20120910_ab_analytics_evolving_criteria.pdf

http://thoughtleadership.aonbenfield.com/Documents/20120910_ab_analytics_evolving_criteria.pdf

http://thoughtleadership.aonbenfield.com/Documents/20120910_ab_analytics_credit_risk_of_property_cat_reinsurers.pdf

21


The seventh edition, “Insurance Risk Study” continues to provide detailed underwriting risk volatility benchmarks that are a valuable resource to chief risk officers, actuaries and other economic capital modeling professionals. Risk benchmarks are provided for 48 countries and key business lines, representing more than 90% of global premium.


“Reinsurance Market Outlook - Record Reinsurance Performance and Capital” report examines the trends seen in the global reinsurance industry during the first half of 2012. It reveals that reinsurer capital had reached a new all time high of USD480 billion by the end of the period, having risen by five percent over year end 2011..


“August 2012 Global Catastrophe Recap” reviews the natural disaster perils that occurred worldwide during August.


“The Aon Benfield Aggregate - 1H 2012” assesses the financial performance of 31 of the world’s leading reinsurers in the first six months of 2012.


For more Aon Benfield Thought Leadership articles, click here.

http://thoughtleadership.aonbenfield.com/Documents/20120910_ab_analytics_credit_risk_of_property_cat_reinsurers.pdf

http://thoughtleadership.aonbenfield.com/Documents/20120909_ab_analytics_insurance_risk_study.pdf

http://thoughtleadership.aonbenfield.com/Documents/20120909_ab_analytics_reinsurance_market_outlook_external.pdf

http://thoughtleadership.aonbenfield.com/Documents/201209_if_monthly_cat_recap_august.pdf

http://thoughtleadership.aonbenfield.com/Documents/201209_marketanalysis_1h_2012.pdf

http://thoughtleadership.aonbenfield.com/Documents/201209_marketanalysis_1h_2012.pdf

http://thoughtleadership.aonbenfield.com/

22Aon Benfield | Rating Advisory Service

Appendix 2: Reinsurer Ratings Position as at 9 Nov 2012

Sources: AM Best, Standard & Poors

Whilst care has been taken in the production of this report and the information contained within it has been obtained from sources that Aon Benfield believes to be reliable, Aon Benfield does not make any representation as to the accuracy of this report and accepts no liability for any loss incurred by any person who may rely on it. In any case, any recipient shall be entirely responsible for their use of this report. It has been confirmed that the above security ratings are in line with those recorded on the Aon Market Security Database.

* INDICATES RATINGS BASED ON PUBLIC INFORMATIONBLACK INDICATES NEGATIVE, STABLE OR POSITIVE OUTLOOKS/IMPLICATIONS

RED INDICATES CREDIT WATCH / UNDER REVIEW

Rating Rating

Caisse Centrale de Reassurance National Indemnity Company Tokio MarineChubb General Reinsurance Tokio Millennium Re

Faraday Re Samsung Fire & Marine Ins. Co. LtdCaisse Centrale de Reassurance Faraday Re General Reinsurance

National Indemnity CompanyAce Limited Hannover Re Sompo Japan Insurance

Allianz Re HCC International Insurance Co PLC Top Layer Re Arch Re Hannover Re (Bermuda) Swiss Re Chubb Allianz Re Munich Re Toa Re

Berkley Re Australia Partner Re Top Layer ReBerkley Re Hong Kong Renaissance Re Zurich InsBerkley Re Singapore

Everest ReAce Limited R+V Tokio Millennium Re

Hannover Re Renaissance Re Tokio MarineMunich Re Swiss Re Zurich Ins

Arch Re Everest Re Samsung Fire & MarineAxis Specialty Limited Lloyd's Scor Reinsurance Asia Pacific Allied World Assurance CPCR / China Re Group MarkelBerkley Re Australia Mitsui Sumitomo Reinsurance Ltd Sompo Japan Insurance Alterra Excess and Surplus Insurance Co Da Vinci Montpelier Re

Berkley Re Hong Kong MS Frontier Reinsurance Ltd Toa Re Amlin Bermuda Endurance Specialty MS Frontier Reinsurance LtdBerkley Re Singapore Partner Re Transatlantic Re Argo Re Ltd First Capital (Singapore) Odyssey

Da Vinci QBE Re Vienna Insurance Group Aspen Insurance Ltd (Bermuda) Hiscox Ins Co PlatinumAspen Insurance UK Ltd Hiscox Insurance Co (Bermuda) PMG Bermuda

Allied World Assurance Company Catlin Insurance Co (Bermuda) Lansforsakring Sak Forsakringsaktiebolag Axis Specialty Limited Korean Re QBE ReAlterra Excess and Surplus Insurance Co Chartis Qatar Insurance Company Catlin Insurance Co (Bermuda) Lancashire Insurance Scor Reinsurance Asia Pacific

Amlin Bermuda Endurance Specialty Validus Re Catlin Insurance Co (UK) Lloyd's Sirius International Insurance CorpAspen Insurance UK Ltd Hiscox Ins Co XL Re Central Re Taiwan Maiden Insurance Transatlantic Re

Chartis Mapfre Re Validus ReXL Re

African Re Fuji Fire & Marine Insurance Platinum Re ACR ReTakaful SEA Berhad Flagstone Reassurance Malaysian ReAsia Capital Reinsurance Group Helvetia Odyssey ACR Malaysia Sdn Berhad Fuji Fire & Marine Insurance New India Assurance Co. Sydney

Bangkok Insurance Korean Re Sirius International Insurance Corp ACR ReTakaful MEA General Insurance Corp of India Polish ReBest Re (L) Ltd Lancashire Insurance Co Taiping Re African Re IGI (Bermuda) Sava Re

Central Re Taiwan Montpelier Re Triglav Slovenia American Agricultural Insurance Co IPC Re Singapore ReAriel Reinsurance Kuwait Re Taiping Re

Asia Capital Reinsurance Group Labuan Re Ltd Torus Insurance (Bermuda) LtdLIG Trust International

IGI (Bermuda) Maiden Insurance Sava Re Al Fajer Re PT Asuransi Jasa Indonesia (Persero) Kuwait Re Mapfre Re Thai Re Arab Insurance Group Philippine Re Qatar Gen Ins

LIG Polish Re BEST RE (L) Limited (BEST RE Non-life) Tugu Ins (HK)

Atradius Takaful Re Qatar Gen Ins * PVI Insurance Co. Milli Re (Turkey) Russian ReDhipaya Insurance Asian Reinsurance Corporation PVI Re Tunis Re

NR CPCR / China Re Group American Agricultural Insurance Co NR

A-A-

Standard & Poors AM Best

A+

BBB+ B++

BBB B+

AA+

A+

AA

AAA A++

A

A

AA-

23

Contact Information About Aon Benfield Analytics’ Rating Agency Advisory

Aon Benfield Analytics Rating Agency Advisory began providing rating advisory services from 2000 and formally established a Global Rating Agency Practice in 2005. David Teo, Sifang Zhang, Soichiro Makimoto and Rade Musulin are the local representatives available to assist Asia Pacific insurers and reinsurers achieve the best possible result from their interaction with Standard & Poor’s, AM Best, Fitch, and Moody’s. Mark Cunliffe is the local representative available to assist insurers and reinsurers in Europe, Middle East and Africa. We have assisted our clients with developing comprehensive cases to rating agencies that have improved their rating or resulted in downgrades being avoided.

For detailed information, please contact us or the local Aon Benfield office in your region.

© Aon Benfield 2012. All rights reserved.No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder.

About Aon Benfield

Aon Benfield, a division of Aon plc, is the world’s leading reinsurance intermediary and full-service capital advisor. We empower our clients to better understand, manage and transfer risk through innovative solutions and personalized access to all forms of global reinsurance capital across treaty, facultative and capital markets. As a trusted advocate, we deliver local reach to the world’s markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial and rating agency advisory. Through our professionals’ expertise and experience, we advise clients in making optimal capital choices that will empower results and improve operational effectiveness for their business. With more than 80 offices in 50 countries, our worldwide client base has access to the broadest portfolio of integrated capital solutions and services. To learn how Aon Benfield helps empower results, please visit aonbenfield.com.

David Teo, [email protected]

Sifang Zhang, CPA, [email protected]

Soichiro Makimoto+ [email protected]

Rade [email protected]

APAC

EMEA

Mark [email protected]

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