Global ReInsurance

Global Reinsurance Segment Review
The Capital Challenge
September 2013
www.ambest.com
Exhibit 12
Brazil Reinsurance Ceded as a Percentage of
Primary Market's Direct Premium (2008-2012)
10
80
BESTS SPECIAL REPORT
70
Premium (BRL Billions)
Our Insight, Your Advantage.
50
The Capital Challenge: Reinsurance

Capacity Overshadows Market
40
30
20
10
3
2
(% of Direct Premium)
Segment Review
August 26, 2013
60
Global Reinsurance
Despite
0 a subpar operating climate, global reinsurers have managed to squeeze out0
2008
2011
2012*
relatively reasonable
returns 2009
on capital and 2010
compensate investors
while sustaining
Direct Premium
Ceded Reinsurance Premium
Reinsurance Premium as % of Direct Premium
organic growth in capacity. Quite an accomplishment, especially considering all the
* 2012 isobstacles
gross of reinsurance
932.2 million).
various
they commission
have and(BRL
continue
to navigate.
Source: SUSEP website (Statistics System); data reflects industry totals and financial statements available
Third-party
capital
intensifies
competition.
from SUSEP as of July 12, 2013.
Over the past two-and-a-half years, catastrophes worldwide have inflicted approximately
USD
Exhibit
13190 billion in insured losses, according to Swiss Res Sigma. For global
reinsurers,
these events
wereSegment
primarily aProfit/Loss
drag on earnings,
as balance sheets remained
Brazil Local
Reinsurer
(2008-2012)
robust.
The Resseguros'
challenge of monopoly
managing ended
loss accumulation
globalacatastrophes
was eviIRB Brasil
in 2007, but itfrom
maintains
dominant
dent
in of
2011,
and since
2008 reinsurers
have margin.
faced numerous hurdles due to a weakshare
the local
reinsurance
market's profit
ened global economy: deteriorating investment returns; more volatile investments; sup2012
pressed
growth opportunities; increased client retentions and competitive pricing.
2011
Contents
Top 50 . . . . . . . . . . . . . . 7
Top 50 Ranking. . . . . . . . 8
Lloyds Trends. . . . . . . . 11
Brazil & Latin America . . 12
Asia/Pacific. . . . . . . . . . 17
Middle East & North Africa .20
Regulation. . . . . . . . . . . 24
Outlook. . . . . . . . . . . . . 26
Now another hurdle has materialized on the horizon in the form of third-party capital.
With
excess capacity prevalent among the traditional reinsurers, pricing in the market
2010
is already very competitive.This is most evident in longer tail casualty classes, leaving
IRB
only
mar2009shorter tail specialty and property classes up for the chase. While the capital Other
kets historically have provided capacity out on the tail for property/catastrophe risk,
2008
generally
in the form of catastrophe bonds, industry loss warranties (ILWs) and other
collateralized
structures,
it now 200
appears investors,
asset managers
and bankers
are
0
100
300
400
500
600
showing more interest in the lower layers ofBRLcatastrophe
programs,
as
well
as
in
other
Millions
specialty
andwebsite
casualty
classes.
Source: SUSEP
(Statistics
System); data reflects financial statements available as of July 12, 2013.
Various reinsurance brokers have reported that as much as USD 45 billion of additional
capacity has entered the reinsurance market in recent years, representing 14% of the
current global property limit. Hedge funds, pension funds, endowments and trusts
looking for a bigger slice of the pie are lured by the relatively favorable returns, float
Exhibit 1
Global Reinsurance Shareholders Equity Plus Share Repurchases
(2008-2Q 2013 YTD)
250
Total Shareholders' Funds
Share Repurchases
Analytical Contacts
Robert DeRose
+1 (908) 439-2200 Ext. 5453
Robert.DeRose@ambest.com
Greg Reisner
+1 (908) 439-2200 Ext. 5224
Greg.Reisner@ambest.com
Editorial Management
Al Slavin
USD Billions
200
150
25.8
6.3
16.3
20.4
2009
2010
2011
29.8
4.0
100
50
0
2008
Note: Excludes Lloyd's in all years and Alterra in 2Q 2013 YTD.

Source: A.M. Best data & research
2012
2Q 2013
YTD
Copyright 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED. No part of this report or document may be distributed
in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of the A.M. Best
Company. For additional details, refer to our Terms of Use available at the A.M. Best Company website: www.ambest.com/terms.
Exhibit 2
Exhibit 1
Global Reinsurance Shareholders Equity Plus Share Repurchases
(2008-2Q 2013 YTD)
Special Report
250
Total Shareholders' Funds
USD Billions
200
150
Global Reinsurance
Share Repurchases
and uncorrelated risk that the reinsurance business offers.

However, industry headlines
25.8
29.8
may be aggrandizing
the true
reinsurance20.4
appetite of this third-party capital.
Front-line
6.3
16.3
sources indicate that capital is entering methodically and precisely, not just rushing in
4.0blindly.
100
A few hedge funds have chosen to enter the reinsurance market directly by forming new
reinsurance companies, which certainly has drawn attention. However, with hedge-fund50
backed companies, not all of the capital is dedicated to providing reinsurance capacity.A
substantial portion of that capital supports investment risk. Other investors have found it
0
easier to collaborate with traditional reinsurers or collateralized facilities that already have
2008
2009
2010
2011
2012
2Q 2013
operational
infrastructure,
relationships and, most important,
the intellectual
YTD
Note: Excludesthe
Lloyd's
in all years and
Alterra in 2Q 2013 established
YTD.
Source: A.M. Best
data &to
research
capital
succeed at building a profitable underwriting portfolio.
Over the past year, numerous new sidecars have been formed by traditional reinsurers.Third party or managed capital is
being spun as affording additional financial
and operational flexibility.This source of
250
capital provides additional underwriting
200
capacity to better serve clients and com150
plements the traditional balance sheet and
100
risk appetite. Managed capital therefore
50
0
should allow the reinsurer greater flexibil2007
2008
2009
2010
2011
2012
ity with capital resources throughout the
NPW
Shareholders' Equity
underwriting cycle and provides a low-risk
source of income in the form of management fees and profit sharing.This revenue
offsets fixed operating costs that otherwise would fall to the bottom line.
(USD Billions)
Exhibit 2
Global Reinsurance Net Premium vs.
Shareholders Equity (2007-2012)
PH3
Stickiness of Some Capacity Questionable
Exhibit 3The bad news is that more capacity only makes reinsurance pricing more competitive, especially
demand for
cover
is declining.
Global Reinsurance
when
Year-to-Date
Stock
Price
ChangeThe
for stickiness
Select of this capacity also
remains
questionable.
The
traditional
market
has
long
prided
itself on enduring, deep
Reinsurers (2013)
(% Change)
Should this additional source of capacity decide to exit quickly, the

Prices as client
of Aug.relationships.
5, 2013
500 seriously contemplated

YTD %
Price some
Change explaining
Avg Reinsurers
% Change
underwriter might
have
to do!
ReinsurersS&P
have
65
58.6
60
57.5
this reputational risk and should continue
to do so. As is the case with SAC Re, a com55
panys affiliation can greatly influence its destiny.
50
45
Some market observers believe that hedge funds are the biggest36.8
influence on the rein40
35
32.5 likely pension funds, which control vast amounts of
surance market.
Actually, its more
32.3 33.9
30
26.7 in the27.9
capital.24.4
These funds have been quietly involved
reinsurance sector26.3
for some time.
23.3
23.1
25 22.9
22.8
21.9
20.4gain
20.4
They have slowly taken
18.5 the time to learn the industry, accumulate knowledge and
20
15.9
15.6
14.7
19.7
some comfort with the sectors cyclical12.2
characteristics and profitability.
In addition,
13.5
15
10.3
8.8
10
pension
funds are6.6typically long-term investors, which is5.8more in line with reinsur5
ance market1.6
fundamentals. Hedge funds typically are deemed to be1.6fast money, but that
0
should not be construed as
criticism. Many hedge funds, not necessarily all, dart in and
-5
-3.0 -0.4
Ar
As ch
pe
Am n
lin
Be
rk
Al
sh
lie
ire
d
Ha Axi
th s
aw
a
En Ca y
du tli
ra n
Ge nce
Gr ner
Ha een ali
nn lig
ov ht
Ko er R
re e
an
M Re
ap
M fre
M aid
on en
tp
el
M ier
M S&
un A
i D
Pa ch R
rtn e
e
Pl r Re
at
inu
m
Ev Q
er BE
es
tR
Re
e
nn
ais RG
an A
ce
R
SC e
To Swi OR
kio ss
M Re
ar
in
Va e
W
lid
hit
us
e
Al Mou X
leg n L
ha tain
ny s
Co
rp
.
out of markets as opportunities arise and are careful not to overstay their welcome.
That strategy has its place in the markets, and the key differences need to be understood. Many market observers would expect that over time the vast majority of hedge
fund participants will move in and out of the reinsurance sector, while a minority of
hedge
funds may make a longer term commitment.
Source: A.M. Best
research
2
(USD Billions
(USD Billions)
200
150
100
50
0
Global Reinsurance
2007
2008
2009
2010
2011
2012
NPW
reinsurers perspective, this just might be the wave of the future
where
capital
2007
2008
2009
2010
2011 Source:
2012
A.M. Best data & research
management includes managing third-party capital.The jury is still out on this, but tradiNPW
tional reinsurers that dont
have
a long history of managing third-party capital are wading
into the water.This suggests that management teams believe third-party capital likely could
linger in the reinsurance sector for some time, and that they understand a basic tenet the
best money managers attract the most capital.PH3
This subtle variation paints a different mind3
set than the disposable reinsurers established Exhibit
after Hurricanes
Katrina, Rita and Wilma in
PH3
Global Reinsurance Year-to-Date Stock Price Change for
Exhibit 3
Reinsurers (2013)
Global Reinsurance Year-to-Date Stock
Price
Select
Prices
as Change
of Aug. 5,for
2013
YTD % Price Change
Avg Reinsurers % Change
65
Reinsurers (2013)
58.6
60
57.5
55
S&P 500
YTD % Price Change
Avg Reinsurers % Change
50
58.6
57.5
45
40
35
32.5
32.3 33.9
30
27.9
26.7
36.8
24.4
23.3
23.1
22.9
25
20.4
32.5
32.3 33.9
18.5
20
27.9
15.6
14.7 12.2
26.7
26.3
15
24.4
23.3
23.1
22.9
22.8
10.3
21.9
8.8
20.4
20.4
10
18.5
6.6
15.9
15.6
14.7 5 12.2
19.7
1.6
13.5
10.3
0
8.8
6.6
5.8
-5
-3.0 -0.4
1.6
1.6
(% Change)
65
60
55
50
45
40
35
30
25
20
15
10
5
0
-5
Ar
As ch
pe
Am n
lin
Be
rk
Al
sh
lie
ire
d
Ha Axi
th s
aw
a
En Ca y
du tli
ra n
Ge nce
Gr ner
Ha een ali
nn lig
ov ht
Ko er R
re e
an
M Re
ap
M fre
M aid
on en
tp
el
M ier
M S&
un A
i D
Ar
Pa ch R
rtn e
As ch
er
pe
Pl Re
at
Am n
inu
lin
Be m
Al
Ev rksQ
l
i
er hBirE
ed
es e
t R H Ax
Re
a
e
nn
th is
aw
ais RG
a
A
an
ce End Ca y
Re u tlin
ra
SC
n
To Swi OR Ge ce
kio ss G ne
M ReH reen rali
ar an li
in n g
Va e ove ht
W
lid K r R
hit
us ore e
e
an
Al Mou X
leg n L M Re
a
ha tain
ny s M pfre
Co M aid
rp on en
. tp
el
M ie
M S& r
un A
i D
Pa ch R
rtn e
e
Pl r Re
at
inu
m
Ev Q
er BE
es
tR
Re
e
nn
ais RG
an A
ce
(% Change)
Prices as of Aug. 5, 2013
-3.0 -0.4
Source: A.M. Best research
2005. Currently, the traditional reinsurers

move is both defensive and offensive.
Exhibit 4
Reinsurers want to demonstrate success
Global Reinsurance Issued Sidecars and Cat
at
managing
Exhibit
4 third-party capital, because
Bonds (2006-2013 YTD)
ifGlobal
the market
continues
toIssued
evolve in
that
Reinsurance
Sidecars
and12Cat
direction, they need the ability to point to
Bonds
(2006-2013
YTD)
Cat Bonds
Sidecars
an
established
track record.
10
12
USD Billions
Cat Bonds
Sidecars
8
A year
10 ago,A.M. Best stated that overall,
the (re)insurance market seems to be
6
8
functioning
in solid though unspectacular
fashion,
a statement that is still valid today.
4
6
Can a transition to easier days with hand2
4 pay take place without it first getsome
ting worse? It will continue to take a great
0
2
2006
2007
2008
2009
2010
2011
deal of discipline.Traditional reinsurance
companies
may be able to emerge from
0
2007
2010by 2011
2012
2013
this soft2006
market
in a 2008
strong2009
position
YTD
sharing
the
brunt
of
any
future
losses
with
third-party capital, a vast majority of which then quickly exits.That will be the trial by fire.
Until the staying power of recent third-party capital is tested by the wrath of a major loss,
reinsurers will jockey for position to make sure they have a horse in that race.
USD Billions
Special
250
200
Report 150
100
50
From0a
2012
2013
YTD
Special Report
Global Reinsurance
Given the greater pricing pressure that abundant capacity has placed on some of the
most attractive margin business, A.M. Best can only contemplate the near-term effect
to be thinner underwriting profits.That, combined with lackluster investment yields,
makes achieving a reasonable return on equity a challenging proposition.There is the
hope that fee income and profit share on managed capital may help close the gap. It
is argued that while pricing is under pressure, perhaps the traditional reinsurers have
commanded too much rate on line.This new capacity may cut off the peaks and bring
greater stability to pricing for the foreseeable future.Time will tell.
While the January and April renewal period seemed to progress in orderly fashion, June
and July renewals in Florida and southern states gave way to the pressure of excess
capacity and stagnant demand. U.S. property catastrophe pricing is reported to be off
by as much as 20%.This class and region has been the bread and butter for the traditional reinsurance sector since the hard market peaked in 2006, and it remains a leading
opportunity relative to other classes and regions in the world. Historical results demonstrate that global reinsurers have done a commendable job in cycle management since
9/11. It now seems this endeavor will become even more challenging.
Cycle Management: The Key to Long-Term Success

In this challenging market environment, prudent cycle management remains the most
important factor to long-term success.This cannot be overemphasized. Global reinsurers have successfully executed on this strategy in recent years, perhaps because of the
Exhibit 5
Global Reinsurance US/Bermuda, European Big Four & Lloyds Trend
Summary (2008-2Q 2013 YTD)
(USD Billions)
2008
NPW (Non-Life only)
Net Earned Premiums (Non-Life only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
Net Income
2009
2010
2011
2012
$119.5 $120.9 $128.0 $137.0 $146.6

116.9 127.8 126.7 133.4 143.7
25.9
31.0
24.3
26.0
27.3
(12.3)
(4.2)
10.6
2.4
7.6
175.1 206.0 227.9 226.4 250.4
2Q 2013 5yr Avg

YTD*
$59.2 $130.4
55.4 129.7
10.9
26.9
(4.4)
0.8
102.8 217.1
3.4
24.1
20.3
4.9
24.9
10.7
15.5
141.5
184.3
193.9
194.3
218.4
174.3
186.5
Loss Ratio
Expense Ratio
Combined Ratio
65.2%
29.8%
95.0%
58.9%
30.6%
89.5%
63.8% 76.1%
31.6% 31.3%
95.4% 107.4%
60.7%
31.3%
92.0%
59.2%
30.1%
89.3%
64.9%
30.9%
95.9%
Favorable Loss Reserve Development
-7.6%
-3.9%
-4.9%
-6.3%
-6.1%
-4.5%
-5.8%
Net Investment Ratio

Operating Ratio
22.2%
72.8%
24.2%
65.3%
19.2%
76.2%
19.5%
87.9%
19.0%
72.9%
19.6%
69.6%
20.7%
75.1%
Return on Equity (Annualized)

Return on Revenue (Annualized)
2.1%
1.9%
14.6%
11.7%
10.6%
8.9%
2.5%
2.2%
12.1%
12.5%
12.0%
20.8%
8.3%
7.1%
NPW (Non-Life only/Annualized) to Equity (End of Period)

Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
84%
357%
405%
66%
297%
332%
66%
293%
327%
71%
298%
327%
67%
264%
293%
68%
299%
325%
70%
298%
332%
Note: 2Q 2013 YTD data excluded Lloyds and Alterra.

Non-Life Gross Pr
Global Reinsurance
5.1
4.3
er
es
Re
Ko
re
a
Ev
S.
E
wa
at
ha
er
ov
Be
rk
s
hir
eH
nn
Ha
SC
OR
Re
's
yd
Llo
Re
ss
Sw
i
M
un
ich
Re
tough lessons learned in the late 1990s. Many reinsurers were badly burned by the
severe financial and operational ramifications of adverse loss-reserve development that
0
resulted from poorly underwritten and priced casualty business written during that
period.The bleeding that emerged from that time continued into the first half of the
next decade and strained some balance sheets, so much so that some reinsurers could
not participate fully in the subsequent hard casualty cycle that began in 2001. For those
reinsurers that were able to leverage capacity in the following years, the opportunity
A.M.form
Best data
research
was enormous and continues to pay dividendsSource:
in the
of &favorable
reserve runoff.
Over the past five years, favorable reserve development has cumulatively contributed
approximately $37 billion to the bottom
line for the segment and added approxiExhibit 6
mately four points to the average annual
Global Reinsurance Return on Equity
return on equity (ROE). It would be foolUS/Bermuda, Lloyd's & European Big Four
ish to believe this benefit will continue
(2008-2Q 2013 YTD)
indefinitely, but the roller-coaster ride of
US & Bermuda Market
European "Big Four"
30
the past serves as a powerful reminder
Five-Year Average
Lloyd's
that reinsurers must continue to care25
fully chart their course.
20
(%)
Reinsurers have used several key cycle

15
management strategies to manage or
10
improve capital efficiency in the current market dynamic.Third-party capital
5
seems to be emerging as a predomi0
nant tool in todays tool box. Mergers
and acquisitions have been used, but
-5
2008
2009
2010
2011
2012
2Q 2013 YTD
in a limited way to build larger balance sheets, augment the top line and
Note: Excludes Lloyd's 2Q 2013 YTD; data unavailable at date of publication.
Big Four includes Munich Re, Swiss Re, Hannover Re and SCOR.
repatriate excess capital to investors.
Expansion or diversification into fledgling business opportunities also has
Exhibitassociated
9
increased as companies look to offset the pressures
with excess capacity
Global
Total Shareholders'
Funds
chasing fewer opportunities in mature markets.
ShareReinsurance
repurchases continue
to be the
most favored capital management tool, providing
reinsurers
with a throttle on available
by Region*
(2012)
capacity suitable to current market conditions. Since 2008, there have been approximately $30 billion of share repurchases through June 30, 2013.
Other
Markets
10%Re/IPC
transactions: Validus
Germany
10%
Flagstone,
There have been relatively few visible M&A

and
Transatlantic Re/Alleghany, Harbor Point/Max Re and Alterra/Markel. Each transaction
Switzerland
expanded the scope of existing businesses. LowBermuda
shareMarket
valuations, difficulty in structur13%
10%
ing mutually agreeable terms and conquering cultural issues remain as key obstacles
to additional deals. Still, A.M. Best does expect activity to increase as share valuations
improve and excess capacity builds, further fueling competition as the global economy
continues to stabilize.
Some reinsurers have placed small bets on new ventures or classes of business such as
Asia - Pacific
agriculture (crop) insurance, accident and health, mortgage
insurance, or even entered
22%
emerging markets such as Latin America, China, the Middle East and Africa, either directly
Americas*
or through investments and joint ventures.These opportunities generally present diversifi- 28%
cation benefits and help stabilize the top line as core businesses come
under competitive
London
pricing pressure and shrinking demand. It appears management is doing
7%its homework
before making these strategic decisions, assessing downside risks and acquiring the
Note: Region determined by the domicile of ultimate parent.
*Americas includes the United States, Canada and Latin America. Americas
5 Total Shareholders' Funds excludes non -reinsurance subsidiaries of Berkshire

Hathaway.
4.2
rR
Pa
rtn
e
6.1
aR
e
9.7
Ch
in
10.2
10
tR
e
(USD Billions)
Special Report
15
Special Report
Global Reinsurance
needed expertise to profitably manage these operations and investments.These steps are
necessary to assure the bottom line does not suffer as a consequence.
As previously discussed, reinsurers feeling the competitive pressure from capital market
participants increasingly have sought to partner with this capacity rather than fight it.
Using this lower cost capacity has enabled reinsurers to better control market share, if
not retain or gain it. Sourcing profitable risk is the main value-added quality that traditional reinsurance companies provide to third-party capital.These days, sourcing risk is
just as hard, if not harder, than sourcing capital.The added revenues from management
fees and profit sharing from these ventures, while not a fortune, enhance reinsurers
earnings and solidify the overall client relationship by affording additional capacity at
pricing that otherwise would not be obtainable.
Special Report
Global Reinsurance
The Top 50 Reinsurers: Reserve Releases,

Diversity Drive Results
There was some movement among the ranks of global reinsurers during 2012, as premium growth was mixed compared with 2011.
Despite a number of loss events in 2012 (including Superstorm Sandy, U.S. tornadoes, wildfires and severe droughts), most reinsurers delivered underwriting profits
and solid earnings. Combined ratios for most were below 100, driven in part by
continued reserve releases and well-diversified books of business. Capacity for the
industry remains strong, as outside investors continued to pour money into catastrophe bonds, sidecars and other structured products. In 2012, close to $8 billion in
capital went into sidecars and cat bonds alone, compared with about $6 billion in
2011. Such investments in 2013 are on track to beat 2012 figures.
Some noted movements within the ranking included Arch Capital Group Ltd., which
moved up five spots in 2012 to reach No. 30. The company increased premiums by
28%, mainly on growth across all reinsurance lines of business, but particularly due
to the full year of premiums from other lines, which included mortgage reinsurance and significant growth in property, excluding cat and casualty reinsurance.
These opportunities are somewhat unique, but being selective and opportunistic is
in Archs DNA.
Lloyds secured fourth place, moving up from fifth in 2011, as premiums grew 16%,
an increase attributed to growth in treaty reinsurance and facultative property. At
the same time, Berkshire Hathaway slipped to fifth place, in part due to the end of
its 20% quota-share agreement with Swiss Re. The full impact of that change was
tempered by new opportunities Berkshire found in Asia after the cat losses in 2011.
Tokio Marine moved up four spots in 2012 to reach No. 22. The company continued
to focus on growing international business, particularly in commercial specialty and
in standard reinsurance lines in the United States.
Also worth noting in the ranking are companies that lowered premiums slightly
in 2012, likely through continued underwriting discipline under current market
conditions. American Agricultural Insurance Co., Axis Capital, Maiden Holdings,
MS&AD, Validus and Platinum Underwriters all dropped several spots in the ranking as they employed cycle management and elected to slightly reduce premiums
compared with 2011. Companies that exited the ranking included Flagstone, which
was acquired by Validus, and Ariel, which was sold in pieces to several companies. It
appears that Enstar a significant run-off specialist will enter reinsurance through
its recently announced acquisitions of Arden Re (formerly Ariel) and Torus. It will
be interesting to see how much scale Enstar can gain. Newcomers to the top 50
include Milli Re from Turkey and Wilton Re.
Given the abundant capacity in the industry heading into 2013, rates continue to be
under some pressure, particularly for areas that have experienced no losses over the
past few years. Overall returns are increasingly dependent on underwriting as interest rates remain at historical lows and pricing continues to show signs of softness.The
Jan. 1 renewal season saw pricing flat to increasing in the low single digits. April pricing was up slightly, particularly for loss-impacted contracts. However, June1 renewals
7
Special Report
Global Reinsurance
Exhibit 7
Top 50 Global Reinsurance Groups
Ranked by gross premium written in 2012.

(USD millions)
2013
Ranking
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Company
Munich Reinsurance Co.2
Swiss Reinsurance Co. Ltd.
Hannover Rueckversicherung AG 2
Lloyds 3,4
Berkshire Hathaway Inc. 5
SCOR S.E.
Reinsurance Group of America Inc.
China Reinsurance (Group) Corp.
Korean Reinsurance Co. 6
PartnerRe Ltd.
Everest Re Group Ltd.
Transatlantic Reinsurance Co.
London Reinsurance Group Inc.
Assicurazioni Generali SpA
General Insurance Corporation of India 6
XL Group plc
QBE Insurance Group Ltd.
MAPFRE RE, Compania de Reaseguros, S.A. 7
The Toa Reinsurance Co., Ltd. 6,8
Odyssey Re Holdings Corp.
R+V Versicherung AG 9
Tokio Marine Holdings, Inc. 6,8
Catlin Group Ltd.
Axis Capital Holdings Limited
Caisse Centrale de Reassurance
MS&AD Insurance Group Holdings, Inc. 6,8,10
Amlin plc
RenaissanceRe Holdings Ltd.
IRB - Brasil Resseguros S.A.
Arch Capital Group Ltd.
Deutsche Rueckversicherung AG
Aspen Insurance Holdings Ltd.
White Mountains Insurance Group, Ltd.
Validus Holdings, Ltd.
Endurance Specialty Holdings, Ltd.
ACE Ltd.
American Agricultural Insurance Co.11
Alterra Capital Holdings Ltd.
Pacific LifeCorp
Maiden Holdings, Ltd.
ACR Capital Holdings Pte, Ltd. 6
Allied World Assurance Co. Holdings, AG
Montpelier Re Holdings Ltd.
African Reinsurance Corp.
NKSJ Holdings, Inc. 6,8
Milli Reasurans Turk Anonim Sirketi 12
Platinum Underwriters Holdings Ltd.
Wilton Re Holdings Ltd.
W.R. Berkley Corp.
Central Reinsurance Corp.
Reinsurance Premiums Written

Life & Non-Life
Non-Life only
Gross
$37,251
31,723
18,208
15,785
15,059
12,576
8,233
6,708
5,113
4,712
4,311
3,577
3,319
2,979
2,776
2,364
2,265
2,256
2,155
2,044
2,017
1,966
1,860
1,830
1,719
1,700
1,592
1,552
1,365
1,282
1,280
1,228
1,179
1,154
1,119
1,070
955
899
882
864
765
760
735
648
608
576
570
542
509
495
Net
$36,167
25,344
16,231
11,371
15,059
11,286
7,907
6,471
3,390
4,567
4,081
3,456
3,268
2,979
2,534
2,209
1,675
1,953
1,821
1,916
1,972
1,579
1,614
1,815
1,719
N/A
1,278
1,103
792
1,227
819
1,157
948
1,009
1,087
1,025
284
727
882
765
389
748
616
586
501
518
565
502
477
462
Gross
$22,539
19,468
10,201
15,770
9,668
6,146
4,184
5,113
3,910
4,311
3,577
43
958
2,758
2,008
2,265
1,890
2,155
2,044
1,981
1,966
1,860
1,830
1,645
1,700
1,592
1,552
1,301
1,282
1,221
1,228
1,179
1,154
1,119
1,070
955
899
864
765
760
735
618
608
565
570
509
344
Net
$22,038
15,117
9,060
11,358
9,668
5,558
4,090
3,390
3,768
4,081
3,456
43
958
2,520
1,885
1,675
1,850
1,821
1,916
1,955
1,579
1,614
1,815
1,595
N/A
1,278
1,103
745
1,227
772
1,157
948
1,009
1,087
1,025
284
727
765
389
748
616
562
557
508
565
477
316
Total
Shareholders
Funds
$36,248
34,026
8,909
31,204
191,588
6,358
6,910
7,026
1,275
6,934
6,734
4,331
715
29,830
5,012
11,856
11,417
1,280
2,157
3,679
2,527
35,196
3,512
5,780
2,330
28,740
2,411
3,507
1,140
5,169
273
3,488
4,258
4,455
2,711
27,531
440
2,840
9,497
1,015
699
3,326
1,629
609
19,857
548
1,895
1,540
4,336
477
Ratios1
Loss
61.2%
53.1
70.7
56.0
N/A
65.4
N/A
58.6
79.7
58.5
65.9
70.6
N/A
62.3
82.1
58.4
67.1
67.3
80.4
57.0
74.1
N/A
63.5
61.5
52.5
N/A
59.6
30.4
67.2
50.9
72.0
56.1
58.4
55.5
62.8
55.2
86.3
57.8
N/A
73.4
73.2
69.0
46.5
60.2
N/A
77.2
32.4
N/A
60.5
81.1
Expense Combined
30.0%
91.2%
30.0
83.1
25.4
96.0
34.9
91.0
N/A
99.9
29.0
94.3
N/A
N/A
41.7
100.4
18.1
97.9
29.3
87.8
27.9
93.8
20.3
90.9
N/A
N/A
23.7
86.0
22.7
104.8
28.6
86.9
32.1
99.2
29.6
97.0
27.6
108.0
27.6
84.6
24.5
98.6
N/A
N/A
19.9
83.4
27.9
89.4
12.0
64.5
N/A
N/A
27.3
86.9
27.4
57.8
44.8
112.0
29.3
80.2
28.6
100.6
29.3
85.4
31.9
90.3
23.1
78.6
32.0
94.8
22.3
77.4
13.1
99.4
33.7
91.5
N/A
N/A
29.1
102.5
29.4
102.7
26.1
95.1
34.5
81.0
32.0
92.2
N/A
N/A
30.0
107.2
30.1
62.5
N/A
N/A
40.0
100.5
26.2
107.3
Note: Premium figures for all companies exclude affiliated business.

1 Non-life only.
2 Net premiums written data not reported, net premiums earned substituted.
3 Lloyds premiums are reinsurance only. GPW for certain groups within the rankings also may include Lloyds Syndicate GPW when applicable.
4 Total shareholders funds includes Lloyds members assets and Lloyds central reserves.
5 Loss reserve and expense ratio detail not available on a GAAP basis.
6 Fiscal year-end March 31, 2013.
7 Total shareholders funds, life & non-life NPW and non-life NPW figures were revised after report published on Aug. 26, 2013.
8 Total shareholders funds includes catastrophe and price fluctuation reserves.
9 Ratios are as reported and calculated on a gross basis.
10 Non-affiliated reinsurance information only available on a gross basis.
11 Data and ratios based on U.S. statutory filing.
12 Total shareholders funds includes equalization and unexpired risk reserve.
N/A Information not applicable or not available at time of publication.
Global Reinsurance
Exhibit 8
Global Reinsurance Market Top 15 Ranked on
Non-Life
Exhibit
6 Gross Premium Written (2012)
Global Reinsurance Return on Equity 120%
25
22.5
108.0
104.8
US/Bermuda,
Lloyd's
& European
Big Four
99.9
100.4
99.2
97.9
96.0
94.3
93.8
100%
91.2
19.5
90.9
87.8
91.0
(2008-2Q 2013 YTD)
20
84.6
15
25
Non-Life
Gross Premium
10.2
6.1
5.1
4.3
60%
40%
15
10
4.2
3.9
3.6
2.8
2.3
2.2
20%
2.0
2009
2010
2011
yR
e
se
ys
Od
GI
of
To
aR
e
QB
E
Ind
ia
sR
e
Tr
an
rtn
e
2008
2012
2Q 2013 YTD
Be
rk
rR
e
Re
-5
Pa
ina
Ch
er
es
tR
e
Re
an
OR
re
S.
E
.
Ko
Ev
ire
0%
sh
SC
Ha
th
a
er
ov
nn
Ha
wa
Re
's
yd
Llo
Re
iss
Sw
un
ich
Re
YE 2012 Combined Ratio
20
9.7
(%)
10
US & Bermuda Market

Five-Year Average 80%
European "Big Four"

Lloyd's
30
15.8
Combined Ratio
(USD Billions)
83.1
Note: Excludes Lloyd's 2Q 2013 YTD; data unavailable at date of publication.

(%)
saw prices decline as much as 20% for

some programs.The bright spot remains
Exhibit 6some specialty lines such as marine
and offshore energy.
Property
cat pricGlobal Reinsurance
Return
on Equity
ing is expected
remain under
US/Bermuda,
Lloyd's &toEuropean
Bigsome
Four
pressure absent any major event. In an
(2008-2Q 2013 YTD)
attempt to improve returns,
companies
US & Bermuda Market
European "Big Four"
30
continue
to
strategically
shift
of
Five-Yearportions
Average
Lloyd's
their investment portfolios into higher
25
return investments, which includes alter20
native investments.
Exhibit 9
Global Reinsurance Total Shareholders' Funds
by Region* (2012)
Other
Markets
10%
Germany
10%
Switzerland
13%
Bermuda Market
10%
15
Some companies continued to repurchase their own shares during 2012,

5
although not at the same pace as in
previous years. Companies thus far
0
Asia - Pacific
in 2013 are again aggressively buying
22%
-5
back 2009
shares and
increasing
dividends.
2008
2010
2011
2012
2Q 2013 YTD
Americas*
Valuations, although better than one
28%
Note: Excludesor
Lloyd's
2013 YTD;
dataare
unavailable
date of publication.
two2Qyears
ago,
still at
below
the
London
industrys
long-term average. For
Source: A.M. Best
data & research
7%
those companies still below book
Region determined by the domicile of ultimate parent.
Exhibit 9value, share buybacks remain a way to Note:
improve valuations and earnings per
Global Reinsurance
Total
Shareholders'
Funds Total Shareholders' Funds excludes non -reinsurance subsidiaries of Berkshire
share. Merger
and acquisition
(M&A)
Hathaway.
by Region*
(2012)
activity
is expected to remain muted.
10
Other
Looking
forward, the overall market
Germany
Markets
environment remains challenging,
and companies for the most part are realistic
10%
10%
about the returns they can achieve in theExhibit
current 10
market. Pricing is not expected
to
improve
for
the
Jan.
1
renewal,
absent
any
major
event. Management
teams
Switzerland
Global Reinsurance
Gross Premium
Written
Bermuda Market
10%
13%
by Region* (2012)
Americas*
Other
1%
Switzerland
Pa
rt
Ch
er
Ev
Ko
r
SC
O
Ha
nn
Be
o
rk
sh
ire
Ha
t
Sw
M
un
Special Report
* Americas includes the United States, Canada and Latin America, and
gross premium of National Indemnity & General Re Corp. (subsidiaries
of Berkshire Hathaway).
Special Report
Global Reinsurance
Exhibit 10
Global Reinsurance Non-Life Gross Premium
Written by Region (2012)
agree that reinsurance pricing still

needs to improve, particularly for
some casualty business where rates
remain below profitable levels.
London
13%
Switzerland
14%
Reinsurers thus far have maintained

a rational and disciplined approach
to the market. Returns are expected to
be around 8% to 10% for the next 12
months, and companies certainly will
strive to deliver results at the doubledigit end of that range. Performance
anxiety is real, and that round number
of 10% continues to be a threshold that
is both tangible and psychological. Companies seem to be focused on profitable
underwriting and strong enterprise risk
management, as opposed to gaining
market share and growing premium.
Some M&A activity continued as 2012
saw a number of deals create stronger
and more diversified companies. Managing risk exposure however, should
remain the focus for the combined entities to avoid the past missteps by some
that led to higher than expected losses
for certain events.
Other Markets
9%
Asia-Pacific
14%
Bermuda
Market
14%
Americas
12%
Germany
24%
also includes GPW of National Indemnity & General Re Corp. (subsidiaries of
Berkshire Hathaway).
Exhibit 17
Global Reinsurance Premium Cession Rates in
Select Regions (2002-2011)
60
GCC
50
40
Far East
30
Indian Subcontinent
Levant
20
Developed
10
CIS
2002
2003
2004
2005
2006
2007
GCC (Bahrain, KSA, Kuwait, Oman, Qatar, UAE)

Indian Subcontinent (India, Pakistan)
Far East (Malaysia, Thailand, Vietnam)
Source:
2008
2009
2010
2011
Levant (Jordan, Lebanon, Turkey)

CIS (Kazakhstan, Russia, Ukraine)
Developed (France, Germany, UK)
Best's Statement File Global
Exhibit 11
Brazil Reinsurance Local Reinsurer Market Share (2008-2012)
Admitted and occasional reinsurers have gained a larger share
of ceded
10
premium since Brazil's reinsurance market opened in 2008.
(BRL Billions)
Special Report
Global Reinsurance
Lloyds Premium Up; Market

Eyes Developing Countries
Lloyds is a significant writer of catastrophe and reinsurance business, with reinsurance representing 38% of gross premium in 2012 and direct insurance accounting
for the balance. Reinsurance premiums increased nearly 11% in 2012, supported
by rate increases in areas exposed to the natural catastrophes of 2011. While these
losses led to a firming of reinsurance rates in loss exposed regions of the world,
excess reinsurance capacity prevented a broader market hardening.
At the beginning of 2013, general market conditions were similar to those prevailing at the start of 2012 with excess capacity and a generally difficult rating environment overall, albeit with another strong improvement in catastrophe-affected
areas of business. At the same time, there are few signs of recovery in the global
economy, and weak conditions persist in the more developed economies, reducing
the demand for some lines of insurance and continuing the prospect of increased
recession-related claims.
Lloyds goal is that by 2025 the portion of its business from developing economies
will exceed 25% of gross written premiums. This new strategic direction is part of
Vision 2025, an approach launched in May 2012 that aims to position Lloyds as
the global centre for specialist insurance and reinsurance. Based on its analysis of
potential growth in developing countries, Lloyds has identified Mexico, India and
Turkey as priority countries, alongside Brazil and China, where Lloyds already has
reinsurance licenses. Subject to market demand, the initial focus will be on these
countries, but Lloyds has indicated that other, smaller developing countries, such as
Colombia, Vietnam and Poland, may present attractive opportunities.
2012 Performance Boosted by Prior-Year Reserve Development

In contrast to 2011s series of natural catastrophes in the Asia-Pacific region, 2012 had
few major catastrophe events, apart from the grounding of the Costa Concordia, an
earthquake in Northern Italy and Hurricane Isaac until Superstorm Sandy struck the
eastern seaboard of the United States and became the most costly U.S. catastrophe
since Hurricane Katrina in 2005. Losses from these events were the main drivers of an
accident-year combined ratio of 97.9 for Lloyds reinsurance sector. On a calendar-year
basis, the combined ratio was reduced to 91.0 by favorable development of prior years
reserves.
Positive reserve development reduced combined ratios for Lloyds main classes of
business. For property and reinsurance, prior-year releases improved the combined
ratio by 8.2 and 6.9 percentage points respectively. Reserves for the 2011 catastrophes
remained stable overall in 2012.
Lloyds U.S.-domiciled business consists primarily of reinsurance and surplus lines. In
Canada, Lloyds writes primarily direct business, with reinsurance accounting for a
much smaller share. In 2012, as measured by combined ratio, Lloyds outperformed the
U.S. property and casualty industry, U.S. reinsurers and comparable European reinsurers,
while performance was comparable to that of a peer group of Bermudian reinsurers.
11
Exhibit 17
Special Report
Global Reinsurance
Despite a Crowded Market,

Brazil Is Still a Draw
60
GCC
50
Abundant
40
reinsurance capacity and the prevalence of coinsurance agreements in

Brazils primary market are softening the near-term growth outlook for its reinsurFar East
ers. A sense of weariness
exists among underwriters contemplating profitability in
30
a crowded
reinsurance
segment
that has weakened pricing. Yet the increasing preIndian Subcontinent
Levant
mium
volume
in
Latin
Americas
largest primary market still is proving difficult to
20
resist.
Developed
CIS
10
Brazils
to catastrophe
such2009
as hurricanes
or earthquakes, leaves
2002 limited
2003 exposure
2004
2005
2006
2007risks,
2008
2010
2011
it well positioned
as
a
diversity
play
relative
to
other
emerging
markets
in Latin AmerGCC (Bahrain, KSA, Kuwait, Oman, Qatar, UAE)
Indian
Subcontinent
(India,
Pakistan)
CIS
(Kazakhstan,
Russia,
Ukraine)
ica. Perhaps more important, the countrys need to build out infrastructure before hostEast (Malaysia, Thailand, Vietnam)
ing theFar
2014
FIFA World Cup and 2016 Olympic
Games remains a catalyst in the overall
Source:
economy. Low insurance penetration, vast offshore oil reserves and a growing middle
class also factor into long-term growth forecasts for insurers and reinsurers.
Exhibit 11
Brazil Reinsurance Local Reinsurer Market Share (2008-2012)
Admitted and occasional reinsurers have gained a larger share of ceded
premium since Brazil's reinsurance market opened in 2008.
(BRL Billions)
6
Local Reinsurers
Admitted & Occassional
4
3
2
1
0
2008
2009
2010
2011
2012
Source: SUSEP website (Statistics System); data reflects industry totals and financial statements available
from SUSEP as of July 12, 2013. Individual breakout of admitted and occassional figures not available.
Premium (BRL Billions)
(% of Direct Premium)
Pricing
Exhibitaround
12 Julys renewal season was flat to down 5%, with insurers able to
secure
additional
capacity
on aas
treaty
basis underofterms unavailable a year ago. This
Brazil Reinsurance
Ceded
a Percentage
reflects the growth in their own portfolios. It is not yet clear whether an imbalance
Primary Market's Direct Premium (2008-2012)
exists between this years reinsurance premium prices and the amount of coverage
10
80
being purchased, which in some cases may be excessive for underlying risk. The
9
70
existence
of coinsurance arrangements also has generated potential accumulation
8
risks60for reinsurers placing treaty-based cover under this scenario, should a signifi7
cant50event coincide across separate treaties within a single reinsurers portfolio.
6
While
5
40 reinsurers would prefer facultative coverage, demand for this is driven downward30 by abundant capacity for treaty business.
4
20
These
developments outline the growth trajectory of Brazils reinsurance market 2since
10 opened five years ago, ending the monopoly held by IRB Brasil Resseguros1 S.A.
it first
0
2008
Direct Premium
2009
2010
12
Ceded Reinsurance Premium
* 2012 is gross of reinsurance commission (BRL 932.2 million).
0
2011
2012*
Reinsurance Premium as % of Direct Premium
Special Report
Exhibit
Exhibit 11
11
Global Reinsurance
Brazil
Brazil Reinsurance
Reinsurance Local
Local Reinsurer
Reinsurer Market
Market Share
Share (2008-2012)
(2008-2012)
Admitted
and
occasional
reinsurers
have
larger
Admitted
and
occasional
reinsurers
have gained
gained aa
larger share
share
of
ceded in 2010 with
since
1939.
The
road to an
open reinsurance
market
tookof
a ceded
detour
premium
since
Brazil's
reinsurance
market
opened
in
2008.
premium
since
Brazil's
reinsurance
market
opened
in
2008.
legislation
that required 40% of reinsurance premium be ceded to locally based
(BRL
(BRLBillions)
Billions)
reinsurers. Insurers also are prohibited from ceding more than 20% of premium to off66
shore
reinsurance affiliates, but a key exception involves the surety business, a line that
factors heavily
into Brazils build
out.
Local
Admitted
&&Occassional
LocalReinsurers
Reinsurers
Admitted
Occassional
55
44 Should Tick Upward

M&A
There are now 14 local reinsurers approved to operate in Brazil, with the balance of
3
the3 reinsurance market composed of admitted and occasional reinsurers, and the latter
primarily
serving in a retrocession role.There is a market expectation that merger and
22
acquisition activity will tick upward in this admitted and occasional segment, which
11
includes
more than 100 registered companies and 15 to 20 Lloyds syndicates. Smaller
companies
contending with administrative costs and competitive pricing may be forced
00
2008
2010
2011
2012
2008
2009
2010
2011
2012
to find local partners or2009
exit the market. Local
players seeking cheaper
capital also may
Source:
SUSEP
website
(Statistics
System);
data
reflects
industry
totals
and
financial
statements
available
Source:
SUSEP
website
(Statistics
System);
data
reflects
industry
totals
and
financial
statements
available
benefit
by pairing
with
aIndividual
foreign
reinsurer
thatandhas
a less figures
formidable
market presence.
from
breakout
occassional
not
fromSUSEP
SUSEPas
asof
ofJuly
July12,
12,2013.
2013.Individual
breakoutof
ofadmitted
admittedand
occassionalfigures
notavailable.
available.
Exhibit
Exhibit 12
12
Brazil
Brazil Reinsurance
Reinsurance Ceded
Ceded as
as aa Percentage
Percentage of
of
Primary
Primary Market's
Market's Direct
Direct Premium
Premium (2008-2012)
(2008-2012)
10
10
99
80
80
88
77
60
60
50
50
66
55
40
40
44
33
30
30
20
20
22
11
10
10
00
2008
2008
Direct
DirectPremium
Premium
2009
2010
2009
2010
Ceded
CededReinsurance
ReinsurancePremium
Premium
(%of
ofDirect
DirectPremium)
Premium)
(%
Premium(BRL
(BRLBillions)
Billions)
Premium
70
70
00
2011
2012*
2011
2012*
Reinsurance
ReinsurancePremium
Premiumas
as%
%ofofDirect
DirectPremium
Premium
**2012
2012isisgross
grossof
ofreinsurance
reinsurancecommission
commission(BRL
(BRL932.2
932.2million).
million).
Source:
Source:SUSEP
SUSEPwebsite
website(Statistics
(StatisticsSystem);
System);data
datareflects
reflectsindustry
industrytotals
totalsand
andfinancial
financialstatements
statementsavailable
available
from
SUSEP
as
of
July
12,
2013.
from SUSEP as of July 12, 2013.
Exhibit
Exhibit 13
13
Brazil
Brazil Local
Local Reinsurer
Reinsurer Segment
Segment Profit/Loss
Profit/Loss (2008-2012)
(2008-2012)
IRB
IRB Brasil
Brasil Resseguros'
Resseguros' monopoly
monopoly ended
ended in
in 2007,
2007, but
but itit maintains
maintains aa dominant
dominant
share
share of
of the
the local
local reinsurance
reinsurance market's
market's profit
profit margin.
margin.
2012
2012
2011
2011
2010
2010
IRB
IRB
Other
Other
2009
2009
2008
2008
00
100
100
200
200
300
300
BRL
BRLMillions
Millions
400
400
500
500
Source:
Source:SUSEP
SUSEPwebsite
website(Statistics
(StatisticsSystem);
System);data
datareflects
reflectsfinancial
financialstatements
statementsavailable
availableas
asof
ofJuly
July12,
12,2013.
2013.
13
600
600
Special Report
Global Reinsurance
Local reinsurers have maintained a steady market position with 59% of the BRL 5.53
billion in reinsurance premium generated in 2012 (see Exhibit 11), according to data
from Superintendencia de Seguros Privados (SUSEP). In 2011, local reinsurers held a
57% share of the BRL 5.52 billion in reinsurance premium. As an aside, reinsurance commissions totaled BRL 932 million in 2012 (a comparable figure for 2011 was unavailable), according to SUSEP. It should be noted that some reporting and accounting anomalies may exist within publicly available SUSEP data.
The level of reinsurance premium as a percentage of the primary markets direct premium has hovered at just under 9% since 2008, according to an A.M. Best review of
company financial statements filed with SUSEP.This level of reinsurance penetration
held steady as direct market premium climbed from BRL 42.9 billion in 2008 to BRL
73.2 billion in 2012, a cumulative increase of 70% (see Exhibit 12).This illustrates how,
despite a modest percentage of ceded reinsurance premium, the overall premium volume in Brazils insurance market remains attractive.
IRB Still Dominates, Preps for Expansion

Despite the opening of Brazils local reinsurance market to competition, IRB has maintained a dominant market position and held its No. 29 spot in A.M. Bests 2012 global ranking of top 50 reinsurers based on gross premium written. IRB generated gross premiums of
BRL 2.4 billion in 2012, which was equivalent to 37% of the reinsurance premium ceded
from Brazils direct market. IRBs
Exhibit 14
share of the local reinsurance segBrazil Local Reinsurers Earned Premium & Loss
ment in 2012 was far more proRatios (2012)
nounced at slightly more than 65%.
(BRL Millions)
The company notched a net profit
Earned Premium
Claims Incurred
Loss Ratio
of BRL 397.1 million in 2012, which
Y/Y % Market
Y/Y %
Rank Company
2012 Change Share
2012 Change 2012 2011 was 79.3% of the overall net profit
1
IRB
1,850.7
10.9
62.2
1,664.5
40.0 89.9 71.2 generated from the local reinsurer
2
Munich Re
354.9
-22.5
11.9
307.2
-17.6 86.6 81.4
segment (see Exhibit 13), according
3
Ace
206.8
37.9
6.9
90.3
22.3 43.6 49.2
4
Mapfre
190.7
18.4
6.4
302.9
145.7 158.8 76.5 to SUSEP filings.
5
6
7
8
9
10
11
J. Malucelli
XL
Austral
AIG
Swiss Re*
Alterra*
Terra Re*
Total
172.8
89.9
82.8
16.2
6.4
4.9
0.1
2,976.2
4.1
7.1
700.9
1,852.4
n/a
n/a
n/a
10.3
5.8
3.0
2.8
0.5
0.2
0.2
0.0
143.2
68.4
83.2
8.5
1.6
3.9
0.1
2,673.5
579.4
1.2
778.1
2,144.7
n/a
n/a
n/a
44.0
82.9
76.1
100.4
52.1
24.7
79.0
67.2
89.8
12.7
80.6
91.6
45.3
n/a
n/a
n/a
68.8
Note: 2012 financial statements on file with SUSEP for Allianz Global Corporate & Specialty
Resseguros Brasil and Zurich Resseguradora Brasil S.A. reflect no earned income. BTG
Pactual received SUSEP authorization on Feb. 26, 2013.
* 2011 financial statements unavailable through SUSEP website.
Source: SUSEP website (Statistics System); data reflects financial statements available as
of July 12, 2013.
IRBs earned premium increased

almost 11% to BRL 1.9 billion in
2012, more than five times the
earned premium of the secondlargest local reinsurer, Munich Re
(see Exhibit 14). IRB also reported
a return on equity of 18.7% last year,
lower than the 23.7% reported for
2011.
IRB has continued with its transition into a competitive market environment and has cleared necessary regulatory hurdles
to privatize. This move coincides with IRBs plan to expand beyond Brazils borders and
provide an international reinsurance platform for multinational insurers operating within
Brazil.This has required IRB to dedicate a team to catastrophe assessment and to license
catastrophe modeling software, an operational aspect that required less emphasis given the
less volatile catastrophe exposures in a Brazil-focused portfolio. In June 2012, IRB acquired
a 4.8% stake in Africa Re.A.M. Best understands the relationship between IRB Brasil-Re and
Africa Re to be strategic, owing to the reciprocal arrangement between the two entities to
support development in their corresponding markets.
14
Special Report
Global Reinsurance
In addition to operating in Argentina, IRB has signed up as a reinsurer in Peru, Mexico,

Colombia, Paraguay, Uruguay and Ecuador, and is in the process of obtaining registration in
Venezuela, according to the companys annual report.The challenge in this next phase will
be gaining scale as a foreign reinsurer without strong brand awareness or the transitional
glide path to market competition that IRB experienced under legislation in Brazil.
Brazils local reinsurance market added a few new players in 2012, some of which had
familiar corporate brands such as Allianz Global Corporate and Specialty Resseguros
Brasil S.A.; Alterra Resseguradora Do Brasil S.A. (since acquired by Markel); Swiss Re Brasil Resseguros S.A.; and Zurich Resseguradora Brasil S.A.Two additional new players
Terra Brasis Re and BTG Pactual Resseguradora S.A. have added distinctive local flavor
to Brazils reinsurance market.
Two New Reinsurers Bring Local Touch

Terra Brasis is a privately owned, start-up reinsurance company domiciled in the country. Brazil-based financial conglomerate Brasil Plural is the majority shareholder, and the
World Banks International Finance Corp. is a minority shareholder.Terra Brasis has a
modest level of market-facing capacity, starting with BRL 100 million in policyholders
surplus.The company was licensed on Oct. 4, 2012 and is focused on writing a diverse
book of property, casualty and life reinsurance business as a local reinsurer in Brazil.
BTG Pactual, which was authorized as a local reinsurer on Feb. 26, 2013, is a subsidiary of Banco BTG Pactual, a leading Latin America investment bank founded in Rio de
Janeiro. BTG will target the primary insurance market with cover for engineering and
oil projects, in addition to civil liability on construction projects.The company also has
indicated it will partner with international reinsurers on products.
As Brazils reinsurance market matures, customer loyalty and personal relationships still
have a role but may have become less crucial for insurers seeking the most profitable
path to deploy capital. Reinsurers have grown stricter on requiring data, the quality of
which continues to improve.
As Brazil and other Latin America countries move to align their respective regulatory
schemes with international standards, added capital requirements are expected to generate opportunity for reinsurers in the form of higher cession rates and needed technical expertise. Non-life cession rates on a regional basis had declined over the past decade,
driven down by softer rates and companies shifting to nonproportional schemes. Reinsurers
also stand to benefit from rising cession rates in reinsurance-intensive lines of business such
as surety and engineering.
Exhibit 15
Latin America A.M. Best-Rated Reinsurance Companies
Ratings as of Aug. 16, 2013.
Domicile
Brazil
Brazil
Mexico
Panama
Panama
Source:
Company
IRB-Brasil Resseguros S.A.
Terra Brasis Resseguros
Reaseguradora Patria, S.A.B.
Barents Re Reinsurance Co. Inc.
QBE del Istmo Reinsurance Co. Inc.
AMB #
085590
092722
086054
091083
078448
Bests Statement File Global
15
Bests
Financial
Strength
Rating (FSR)
AB++
AAA-
Bests LongTerm Issuer

Credit
Rating (ICR)
abbb
aaa-
Bests FSR &

ICR Outlook
Stable
Stable
Positive
Positive
Stable
FSR & ICR

Rating
Action
Affirmed
Assigned
Affirmed
Affirmed
Affirmed
Rating
Effective Date
Dec. 19, 2012
May 9, 2013
July 31, 2013
Sept. 27, 2012
Jan. 10, 2013
Special Report
Global Reinsurance
Low Penetration Persists in Latin America

With the exception of Chiles mature market, the level of insurance penetration in Brazil
and other Latin America markets remain below 3%, and in some cases even below 2%.These
positive growth indicators are bolstered further by the infrastructure gap that Latin America
countries are trying to bridge via spending projects.Yet this upside for reinsurers is tempered by challenges to profitability that arise from competitive pressure on underwriting
results, the low interest rate environment and pockets of regulatory uncertainty.
According to Guy Carpenter & Co., rates in Latin America and the Caribbean decreased
at July 1 renewal because of a high level and diversity of reinsurer offerings.The
exception noted by Guy Carpenter was Argentina, where market conditions were
affected by heavy flooding in April and regulatory restrictions. Argentinas insurance
market remains susceptible to political volatility.This was evident during 2011from government actions that prohibited insurers from ceding business to foreign reinsurers. A
subsequent regulation required all insurers to liquidate and transfer foreign investments
back to Argentina, while reinsurers were allowed to keep a level of foreign investments
and capital not to exceed 50% of the companys total capital.
Venezuela represents another market where an expanding middle class can fuel the
industrys growth, but it is subject to political dynamics.Yet some reinsurers still pursue
these markets with eyes wide open, hoping to be agile enough to skillfully build market
share despite the potential for more fluid market dynamics.
Like Brazil, Mexico represents a significant portion and more established component of
Latin Americas insurance industry.An insurance law adopted this year marks further progress in efforts to modernize the countrys regulatory scheme.A strong element of risk management based principles will foster stronger capital and reserve measures. Mexicos primary market remains soft but is viewed as stable and increasingly professional. New capital
requirements are expected to increase demand for reinsurance coverage and spur merger
and acquisition activity.
With insurance penetration of just 2.12%, Colombias market has demonstrated its potential with growth of 14.9% in 2012. Non-life business accounted for 54% of $8.76 billion in
premium written last year. Colombias insurance market is opening to nonadmitted writers
under a bilateral free-trade agreement reached with the United States, an aspect that underscores Latin Americas business friendly environment. Government officials announced
plans in April for a $2.7 billion stimulus package that would drive economic growth and
create an estimated 300,000 new jobs. Projected spending on construction projects is $630
million, generating reinsurance opportunities in construction risks and surety bonds.
16
Special Report
Global Reinsurance
Asias Reinsurers Are

Looking to Grow Again
Reinsurers in Asia have resorted to capital replenishment following large catastrophe
losses while the regions growth prospects remain a lure for many reinsurers.
Most Asian reinsurers results turned negative following large-scale catastrophes, particularly the 2011 Thailand flooding. Singapore, a major reinsurance hub in Asia-Pacific,
reported significant deterioration in the combined ratio of reinsurers to 239.8 in 2011
from 95.1 in 2010.
Natural catastrophes in 2011 brought significant losses to many Asian reinsurers. Interestingly, many of these reinsurers, except for a few players, quickly restored their balance sheet strength in terms of risk-based capital through raising new capital, issuing
subordinated debt or reducing asset risks. Companies have also avoided writing pure
catastrophe business.
Capitalization of Asias reinsurers significantly eroded in 2011, with the widest capital and surplus drop of 86% and 57% for the Thailand-based Thai Re and Asian Re,
according to A.M. Best data. Nevertheless, most reinsurers restored capital, changed
their risk appetite and focused on underwriting and financial strength during the
past year.
Exhibit 16
Asia/Pacific A.M. Best-Rated Reinsurance Companies
Domicile
Australia
Australia
China
China
China
Hong Kong
Hong Kong
India
Japan
Malaysia
Malaysia
Malaysia
Malaysia
Philippines
Singapore
Singapore
Singapore
Singapore
South Korea
Taiwan
Thailand
Vietnam
Company
General Reinsurance Australia Ltd.
General Reinsurance Life Australia Ltd.
China Life Reinsurance Co. Ltd
China Reinsurance (Group) Corp.
China P&C Re
Peak Reinsurance Company Ltd.
Taiping Reinsurance Company Limited
General Insurance Corp. of India
The Toa Reinsurance Co. Ltd.
ACR ReTakaful Berhad
Asia Capital Reinsurance Malaysia Sdn
Labuan Reinsurance (L) Ltd.
Malaysian Reinsurance Berhad
National Reinsurance Corp. of Philippines
Asia Capital Reinsurance Group Pte. Ltd.
Samsung Reinsurance Pte Ltd
SCOR Reinsurance Asia-Pacific Pte Ltd
Singapore Reinsurance Corp. Ltd.
Korean Reinsurance Co.
Central Reinsurance Corp.
Asian Reinsurance Corp.
PVI Reinsurance Company
AMB #
086052
086652
090957
090955
088692
091406
085029
086041
085179
090060
090756
086913
078303
086771
078461
091577
088684
085224
085225
086496
085568
091541
Bests
Financial
Strength
Rating (FSR)
A++
A++
A
A
A
AAAA+
AAAAB++
AA
A
AA
A
B- u
B+
u Denotes rating under review

Bests Statement File Global
Source:
17

Credit
Rating (ICR)
aa+
aa+
a
a
a
aaaaaaaaabbb
aa
a+
aa
a
bb- u
bbb-
Bests FSR &

ICR Outlook/
Implications
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Developing
Positive
FSR & ICR

Rating
Action
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Assigned
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Downgraded
Affirmed
Rating
Effective Date
June 11, 2013
June 11, 2013
Sept. 12, 2012
Sept. 12, 2012
Sept. 12, 2012
Dec. 28, 2012
Oct. 18, 2012
Feb. 21, 2013
May 30, 2013
Dec. 20, 2012
Dec. 20, 2012
Dec. 12, 2012
Dec. 13, 2012
April 18, 2013
Dec. 20, 2012
Nov. 15, 2012
May 2, 2012
Nov. 21, 2012
Feb. 28, 2013
July 30, 2013
June 13, 2013
April 11, 2013
Special Report
Global Reinsurance
For instance, Japans Toa Re took a series of capital replenishment actions, including issuance of 30 billion yen (US$302 million) in subordinated notes in March 2012,
reducing risk exposures in its investment assets and underwriting portfolio. Korean Re
enhanced its capital position with a disposal of its treasury stocks worth around 134
billion won (US$120.3 million), together with reduction of underwriting risks during its
2011 fiscal year.
Malaysias Labuan Re restored its financial position through issuance of US$55 million
subordinated bonds and revisions of underwriting guidelines, risk control and further risk retrocession. For new capital investment, Canadas Fairfax Financial Holdings
acquired around 25% of Thai Re for US$70 million in January 2012. Japans leading trading company, Marubeni Corp., invested about a 22% stake in Singapore-based ACR Capital Holdings to become one of its major shareholders in May 2012.
Companies became quite proactive in anticipation of a hardening market. Credit awareness in the market has also increased substantially over the years and those reinsurers
worked quickly to avoid a downgrade in credit quality.
However, with additional reinsurance capital, the hardening of the market was less than
many would have expected, except in catastrophe business.
Capital deployment into the reinsurance industry has grown, with a recent influx of
capital estimated in the double-digit range.
Asias increased capacity has come from both newly established regional writers and
regional expansion from existing global reinsurers. Bermuda reinsurers and Lloyds have
also become notable additions to the Singapore market over the past two years.
In the past, a clear softening would be visible after a benign catastrophe year, such as
2012 in Asia with additional capacity, but companies are more underwriting focused,
and the extent of softening is mild. Asia players have been quite disciplined for terms
and conditions, which differs from previous cycles of strong capital influx. Current
conditions could be explained by low investment return, along with the expectation of
a continuing low-yield environment, which has made companies more underwritingfocused.This will reduce the volatility of operating performance, although there would
not be a steep increase in profitability as the companies could expect.
Asia Growth and Challenges

Strong economic growth, low insurance penetration and risk diversification from existing mature markets leave Asias emerging markets well positioned to attract industry
players.
Buyers have increasingly used reinsurance as a form of risk transfer and commission
gearing, as well as part of their capital management on balance sheets, in solvency transactions and loss portfolio transfers.
More direct insurance companies are looking to diversify their reinsurers, thus increasing demand and a greater awareness of credit risk.
Credit risk associated with reinsurance recoverables is a substantial factor for direct
insurers, particularly in the wake of catastrophe loss. For instance, continuous deterioration of underwriting results of Malaysia-based Best Re has led to a rise of credit risk
18
Special Report
Global Reinsurance
on its buyer, South Koreas Hanwha General Insurance. Hanwha Insurance recorded
a sharp increase in credit risk associated with reinsurance recoverables due to the
downward rating of Best Re on Dec. 18, 2012.
Global reinsurers see Asia as a diversification play given their peak exposures in the
United States, Europe and Japan, along with Australia as an additional increasingly aggregated peak zone.
The 2011 catastrophes highlighted the need of reinsurers to quantify exposures in a
region that lacks the full suite of vendor catastrophe models and where data transparency can often be lacking.
Natural disasters are a challenging factor for Asia-Pacific writers and have affected a
large population in Asia but the corresponding insurance impact remains comparatively
low.The industry is in need of products that improve penetration levels on a widespread basis across emerging Asia.
Capacity and Competition

Asia-Pacific accounted for 14% of total global nonlife reinsurance gross written premium, according to A.M. Bests 2012 ranking on global reinsurers. China Re (No. 8) and
Toa Re (No. 19) each held their respective ranking from the prior year, while Korean Re
moved up one spot to No. 9.
Much of Asian reinsurers premium growth is driven by market growth rather than
competition, yet a growing number of players with a regional focus in Asia have limited
impact on reinsurance terms and conditions.
Terms and conditions are still driven more by total capacity allocated to the region
by local and global players. In aggregate, an oversupply of capacity has generally kept
prices competitive for ceding companies.
19
Special Report
Global Reinsurance
MENA Reinsurance Demand Continues

Despite Shift Toward Higher Retentions
International reinsurers play an important role in the Middle East and North Africa (MENA)
insurance markets, providing capacity and technical expertise to local market participants,
particularly on high-value risks. Primary insurers dependence on reinsurance support remains
high among companies based in the region.
MENA insurance markets generated more than USD 30 billion of premiums in 2012, with the
vast majority of high-value commercial risks ceded into the international reinsurance market.
Despite the regions economic slowdown in recent years, owing to depressed world financial
markets, potential growth in commercial risks, such as infrastructure and energy, is expected
to remain and continue to create opportunities for reinsurers.
Most markets within the MENA region are open, with limited restrictions on reinsurance
activities. However, there are initiatives to foster growth and retain business within the region.
Mandatory cessions are important to the dynamics of some markets, such as in Algeria and
Morocco. In these countries, local players are obliged to cede a proportion of their reinsured
premiums to the state reinsurers.This emphasizes the states involvement and intention to
retain some of the risks within a country, or to support the country in case of natural catastrophes.
Another mechanism in place to encourage retention is the establishment of long-standing
local and regional reinsurance companies, in addition to reinsurance pools, whereby shareholders or pool members are largely local or regional insurance companies. In these cases, the
companies may have vested interests in serving the local market and supporting the regional
reinsurance markets.
Some jurisdictions, such as Saudi Arabia, are introducing specific rules whereby an increasing
proportion of total premiums must be retained within the country.This encourages higher
participation in risks among local participants. Moreover, in many jurisdictions, most business
must be placed through a local participant or sponsor.
Despite these market dynamics, the MENA insurance markets are still young and depend on
international reinsurance support, with local and regional reinsurers generally acting as followers in such markets.
Primary insurers have tended to maintain low retentions, relying heavily on the reinsurance
market, in particular for commercial risks.This is in part a result of insurers encountering challenges in developing technical expertise, and partly due to the increased reinsurance commissions available.They have tended to be risk averse in part, while reinsurance commissions
received have tended to cover the majority, if not all, of the commissions that insurers have
been required to pay to agents. Despite insurers beginning to retain increasing amounts of
business in recent years, the dependence on reinsurance remains high, with many risks being
fronted locally and ceded to the international market.
For international reinsurers with greater capacities and expertise, the MENA insurance
market has presented opportunities to diversify risk into countries perceived to have
low exposures to natural catastrophes. Although there are indications that some reinsurers have more recently been seeking to reduce their exposure to the region, plenty
of reinsurance capacity remains in the market. Furthermore, the expansion of regional
20
Germany
27%
Special Report
Global Reinsurance

* Americas includes the United States, Canada and Latin America, and
players operating within the Indian
subcontinent,
the Asia-Pacific
territories
gross premium
of National Indemnity
& General Re Corp.
(subsidiariesand Africa
of
Berkshire
Hathaway).
has brought additional capacity to the market.
MENA Market Strategies Vary

Strategies adopted by reinsurers to penetrate the MENA markets vary considerably. Five years
10 with the vast majority of commercial risks
ago, reinsurers tended to operateExhibit
from a distance,
placed through the London market.
However,
the dynamics
of the landscape
have changed
Global
Reinsurance
Non-Life
Gross Premium
materially. The introduction of financial
free
zones,
such
as
the
Dubai
International
Financial
Written by Region (2012)
Centre (DIFC) and Qatar Financial Centre (QFC), have helped open the market and encouraged international participants to establish operations
in the region.This
has been the case
London
Switzerland
13%
14% major insurance institutions
in particular for reinsurers and brokers, with most
having some
form of regional presence.
Other Markets
Proximity to the market is seen asAsia-Pacific

increasingly important to understanding the markets
char9%
14% companies and cedents; and demonstrating a keen
acteristics; creating closer ties between
willingness to support the market.While some reinsurers have left the market, overall the
number of participants and capacity continue to increase. A growing amount of business is
being placed directly within the MENA region, with this trend likely to continue.Bermuda
For reinsurMarket
ers, risk selection is critical, with risk management practices of clients and cedents 14%
being
important to the quality of risk underwritten.
Americas
Cession rates vary significantly among 12%
MENA insurers, although in general the level of busi-
ness ceded has gradually decreased in the past few years.A.M. Bests analysis of 130 companies based in the Gulf Cooperation Council (GCC) countries ofGermany
Bahrain, Kuwait, Oman, Qatar,
24%
Saudi Arabia and the United Arab Emirates (UAE) shows that in 2002 more than 60% of direct
premiums written were ceded (see Exhibit 17). However, in 2011, cession rates for compaNote: Region determined by the domicile of ultimate parent.
nies in this data set were less than*Americas
40% ofincludes
risks. the United States, Canada and Latin America. Americas
also includes GPW of National Indemnity & General Re Corp. (subsidiaries of
Berkshire Hathaway).
change
in Best
the data
markets
mix of business, with health care
Source: A.M.
& research
The reduction in part indicates a

playing an increasingly important role in insurers profiles. The retention on medical remains
high, and therefore primary
insurers have improved
Exhibit 17
their overall retention. For
commercial risks, retention
is gradually improving as
companies seek to increase
expertise and retain larger
60
lines, yet insurers are still
GCC
largely dependent on rein50
surers.
A.M. Bests analysis compares the performance of
1,766 companies in 19
countries over nine years.
The data show that while
GCC companies have
improved retention ratios,
they continue to cede the
largest proportion of their
premiums compared with
other markets. Premium
40
Far East
30
Indian Subcontinent
Levant
20
Developed
10
CIS
2002
2003
2004
2005
2006
2007
GCC (Bahrain, KSA, Kuwait, Oman, Qatar, UAE)

Indian Subcontinent (India, Pakistan)
Far East (Malaysia, Thailand, Vietnam)
Source:
21
2008
2009
2010

CIS (Kazakhstan, Russia, Ukraine)
2011
Special Report
Global Reinsurance
cession levels are approximately double those of the 111 companies that comprised the data
set for the Commonwealth of Independent States (CIS) Kazakhstan, Russia and Ukraine
and the 1,191 entities analysed in the developed markets of France, Germany and the United
Kingdom.
The MENA market largely utilizes proportional reinsurance, although there has been
a gradual shift toward nonproportional cover in recent years. Within the region there
is extensive use of bouquet treaties, whereby most non-life lines are placed together
under the same treaty to service group multirisk accounts.This makes pricing the treaty
for the whole portfolio more critical, factoring in both under- and overperforming
lines. In most cases, health care is placed separately. Historically, MENA insurers have
benefited from reinsurance rates that have been among the lowest in emerging markets. While reinsurance prices have been under pressure in recent years, it is likely that
prices are starting to increase in the short term. For rates to materially increase there
would need to be a major shock to the reinsurance market.This could be triggered by a
major catastrophe in the region, or a series of large losses on high-value risks, such as in
energy and infrastructure risks.
Medical business has historically been written on a proportional basis. However, the
level of competition in medical has contributed to losses among many insurers and
reinsurers.The latter may have suffered more in some instances because of the outwards commission structures attached to these treaties. As a result, reinsurers are dictating terms more aggressively as they threaten to remove capacity, move from treaties
to excess-of-loss cover, reduce commissions or shift to sliding-scale commissions.The
dominance of medical in the region makes it important for the markets to have reinsurers continued support.
In the medium term, MENA insurers are under pressure to maintain greater focus on technical profitability, given depressed investment returns.There is pressure from reinsurers to
increase rates, enforce stricter terms or reduce commission levels, which will further encourage companies to concentrate more on gross rather than net profitability. Furthermore, insurers are taking active steps to improve profitability, with increased retentions as one measure.
They are also performing back-testing (sometimes with the assistance of third parties) on their
reinsurance utilization to see the overall benefits of reinsurance coverage, aiming to leverage
their positions to negotiate improved terms and conditions.
Retakaful Trends
Retakaful operators represent an important sector of the MENA reinsurance market,
although these tend to be young companies finding it difficult to establish themselves
and create a balance between market franchise and profitability. Rather than distinguish
themselves through targeting new, untapped market segments, Retakaful operators tend to
compete directly with their conventional counterparts. Given that some existing conventional
reinsurers benefit from strong reputations and economies of scale, Retakaful operators find it difficult to establish profitable operations. Moreover, pressure from shareholders to service capital
can lead to the pursuit of premium income through pricing practices.
Retrocession should ideally be placed with Retakaful companies, but in reality, a lot of the risk
is ceded to conventional reinsurers, as Retakaful operators have insufficient capacity to support
large and volatile commercial risks or lack the ratings required by the ultimate insureds.
Ratings Issues for MENA Reinsurers

All A.M. Best-rated reinsurers based in the MENA region have secure Financial Strength Ratings
22
Special Report
Global Reinsurance
(FSRs).The highest rating achieved at present is an FSR of A (see Exhibit 18). In all but two
instances, the outlook for the FSR and Issuer Credit Rating (ICR) is stable.
Most reinsurers in the MENA countries are now underwriting business outside of the region.
While the markets continue to expand, reinsurers will find opportunities to grow but need to
ensure underwriting is adequately controlled.
MENA insurers operating in countries that have suffered from regional political and economic
instability have seen their top lines affected. However, many A.M. Best-rated Middle Eastern reinsurers have shown resilience in their operating performances due to their diversified portfolios
and flexible business continuity plans. Reinsurers have felt obliged to support affected markets
during the turbulent period however, after the initial unrest, policy wording has materially tightened in the region, driven by the international reinsurance markets desire to alleviate uncertainty or conflict arising from strike, riot and civil commotion (SRCC) definitions.
Furthermore, in relation to the uncertainty of natural catastrophes across the world and the
increased frequency of regional catastrophe events, focus has increased on introducing event
limits in the region.This should provide further protection to reinsurers in the event of a major
adverse loss scenario.These issues over the past few years have highlighted the need for greater
transparency in policy wording and conditions offered in MENA markets.
MENA markets allow reinsurers to diversify into relatively less catastrophe-prone territories.While insurers seek to increase their retention levels, reinsurers will continue to play
an important role in the market. As the complexity of the market develops, the presence
of reinsurers and proximity to clients in the region will remain important.
Exhibit 18
Middle East & North Africa A.M. Best-Rated Reinsurance Companies
Domicile
Algeria
Bahrain
Bahrain
Bahrain
Kuwait
Kuwait
Lebanon
Morocco
Qatar
Tunisia
Turkey
United Arab Emirates
Source:
Company
Compagnie Centrale de Reassurance
ACR ReTakaful MEA B.S.C. (c)
Arab Insurance Group (B.S.C.)
Trust International Insurance & Reinsurance Co. B.S.C. (c) Trust Re
Al Fajer Retakaful Insurance Co. K.S.C. (Closed)
Kuwait Reinsurance Co. K.S.C. (Closed)
Arab Reinsurance Co. S.A.L.
Societe Centrale de Reassurance
Q-Re LLC
Societe Tunisienne de Reassurance
Milli Reasurans Turk Anonim Sirketi
Gulf Reinsurance Ltd.
Bests Statement File Global; Ratings as of Aug. 16, 2013.
23
AMB #
090777
090059
085013
086326
088954
085585
089190
084052
092611
083349
085454
088930
Bests
Financial
Strength
Rating
(FSR)
B+
AB++
AB++
AB+
B++
A
B+
B+
A-

Credit
Rating (ICR)
bbbabbb+
abbb+
abbbbbb
a
bbbbbba-
Bests
FSR &
ICR
Outlook
Stable
Stable
Stable
Stable
Stable
Stable
Stable
Negative
Stable
Stable
Negative
Stable
FSR & ICR

Rating
Action
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Affirmed
Assigned
Affirmed
Affirmed
Affirmed
Rating
Effective Date
July 18, 2013
Dec. 20, 2012
Dec. 18, 2012
Aug. 30, 2012
July 10, 2013
April 25, 2013
Dec. 11, 2012
July 10, 2013
Nov. 26, 2012
July 10, 2013
April 5, 2013
Aug. 2, 2013
Special Report
Global Reinsurance
Offshore Reinsurance Tax Plan

Still Bears Watching
In April 2013, a proposal to end some tax benefits enjoyed by most international (re)
insurers doing business in the United States found its way into President Obamas budget.
A month later, a bill to enact a similar measure was again introduced in the U.S. House and
Senate.This long-standing tussle among domestic and foreign reinsurers can be characterized by one of baseball philosopher Yogi Berras famed quotes:its dj vu all over again.
This subject has been argued for at least a decade, with very intense positions on
both sides. What has changed is the charged political atmosphere surrounding this
chapter in the ongoing debate. The thirst for reducing effective corporate tax rates is
far from limited to the insurance industry or even U.S. soil.
As momentum for tax reform in the United States builds, so does concern among offshore interests that the loophole benefiting foreign reinsurers with U.S. affiliates may
be tightened within broader tax-reform legislation, as opposed to a stand-alone bill.
Another new aspect is the evolving presence of third-party capital as a reinsurance
solution, and whether this may quiet a rallying cry that foreign reinsurers capital is
needed to help sustain affordable pricing levels in catastrophe-prone areas.
Exhibit 19
Global Reinsurance U.S. & Bermuda Market Trend Summary
(2008-2Q 2013 YTD)
(USD Billions)
2008
$51.6
52.1
7.6
(6.0)
55.9
2009
$50.3
51.1
8.2
0.8
63.1
2010
$52.6
52.4
8.1
2.2
65.7
2011
$55.0
54.4
7.6
(0.1)
64.6
2012
$56.7
55.5
7.1
2.2
68.6
2Q YTD
2013*
$31.1
26.3
3.1
0.2
33.3
5yr Avg
$53.2
53.1
7.7
(0.2)
63.6
Net Income
(0.5)
12.4
11.2
0.9
10.1
5.7
6.8
Shareholders Equity (End of Period)
67.6
88.4
95.1
93.7
101.7
96.5
89.3
Loss Ratio
Expense Ratio
Combined Ratio
64.2%
29.4%
93.6%
56.1%
29.7%
85.8%
61.8%
30.9%
92.7%
77.3%
30.0%
107.3%
63.4%
29.8%
93.1%
56.1%
30.6%
86.7%
64.7%
30.0%
94.7%
Favorable Loss Reserve Development
-7.3%
-6.1%
-6.2%
-6.0%
-5.8%
-6.3%
-6.3%
Net Investment Ratio

Operating Ratio
14.6%
79.0%
16.0%
69.8%
15.4%
77.3%
14.0%
93.3%
12.7%
80.4%
11.8%
74.9%
14.5%
80.1%
Return on Equity (Annualized)

Return on Revenue (Annualized)
-0.7%
-0.9%
16.0%
19.7%
11.9%
17.1%
1.0%
1.5%
10.6%
14.8%
11.8%
34.6%
7.7%
10.8%
76%
57%
55%
59%
56%
64%
60%
168%
215%
134%
167%
128%
158%
138%
169%
130%
158%
134%
160%
138%
171%
NPW (Non-Life only)

Net Earned Premiums (Non-Life only)
Net Investment Income
Realized Investment Gains / (Losses)
Total Revenue
NPW (Non-Life Only/Annualized) to Equity (End

of Period)
Net Reserves to Equity (End of Period)
Gross Reserves to Equity (End of Period)
* 2Q 2013 YTD excludes Alterra.
24
Special Report
Global Reinsurance
Although this legislative issue warrants ongoing surveillance, A.M. Best does not believe
the matter will lead to any ratings revisions over the near term. Depending on the final
outcome, companies likely will continue to seek operating alternatives to ensure tax
and capital efficiency if and when the tax benefits for foreign companies are eliminated.
Some companies already have reacted, while others will continue to take steps that
mitigate the impact of any potential tax exposure.
The current administration has tried but failed to eliminate this tax benefit in
previous budget proposals. The opposition on this issue has the support of many
members of Congress, particularly from states that have considerable exposure to
natural catastrophes. Their concern is the possibility that a tax increase could lead
to increased costs for (re)insurance coverage or possibly a decrease in allocated (re)
insurance capacity for less profitable risks. Accordingly, any resolution of this issue
still could be years away.
Over the past several years, there have been various initiatives to increase insurance
capacity for catastrophe-prone states, the most recent being the relaxation of collateral
requirements in some states for foreign (re)insurers operating within those jurisdictions.The proposed elimination of the existing tax benefits would be in direct opposition to such initiatives.
25
Special Report
Global Reinsurance
Global Re Outlook Remains Stable;

Industry Positioned to Bear Uncertainty
Despite increasing challenges, the rating outlook on the global reinsurance segment is
being held at stable, supported by continued strong risk-adjusted capitalization, judicious enterprise risk management practices and a slow improvement in the global economic environment, underpinned by the United States, which represents the worlds
largest insurance market. A disciplined underwriting posture has enabled reinsurers to
produce reasonable underwriting profits and benefit from favorable loss-reserve development, while helping to mitigate the continuing weakness in investment earnings.
From a capital perspective, global reinsurers are well capitalized and capable of absorbing significant losses from a combination of events.The fragility in the global economy
continues to present a meaningful level of uncertainty and challenges. Assuming continued stabilization in the global economy and a normal level of global catastrophe losses,
A.M. Best expects reasonable organic growth in reinsurers capital for 2013, supported
by core earnings and new opportunities presented by their primary insurance and specialty (re)insurance operations, and tempered by mark to market adjustments due to rising interests rates and capital management strategies.
However, A.M. Best remains concerned that reinsurance pricing, terms and conditions
may come under increasing pressure as excess capacity continues to build and the convergence between capital market capacity and traditional reinsurance capacity evolves.
Furthermore, while loss-reserve releases have helped to bolster profits and likely will
continue to do so, this crutch will provide steadily decreasing support.
The continuing low interest-rate environment, however, appears to be reinforcing a
focus on underwriting discipline, which should translate into a positive for the segment. Pricing, terms and conditions are important aspects of the overall equation, given
that operating performance helps drive balance sheet strength. With operating returns
pressured by low investment yields, underwriting profits must drive overall earnings for
the foreseeable future.
26
Special Report
Global Reinsurance
Contributors
Robert DeRose, Oldwick

Greg Reisner, Oldwick
Scott Mangan, Oldwick
Mariza Costa, Oldwick
Al Slavin, Oldwick
Mahesh Mistry, London
Published by A.M. Best Company
Special Report
Chairman & President Arthur Snyder III
Executive Vice President Larry G. Mayewski
Executive Vice President Paul C. Tinnirello
Senior Vice Presidents Manfred Nowacki, Matthew Mosher,
Rita L. Tedesco, Karen B. Heine
A.M. Best Company
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Phone: +971 43 752 780
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David Drummond, London
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Vasilis Katsipis, Dubai
Iris Lai, Hong Kong
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Jersey 08858. ALL RIGHTS RESERVED. No part of this report or document may
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Any and all ratings, opinions and information contained herein are provided as is, without any
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A Bests Financial Strength Rating is an independent opinion of an insurers financial strength
and ability to meet its ongoing insurance policy and contract obligations. It is based on a comprehensive quantitative and qualitative evaluation of a companys balance sheet strength, operating performance and business profile. The Financial Strength Rating opinion addresses the
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Global ReInsurance

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Global Reinsurance Segment Review

The Capital Challenge

BESTS SPECIAL REPORT

Premium (BRL Billions)

Our Insight, Your Advantage.

The Capital Challenge: Reinsurance

from SUSEP as of July 12, 2013.

Note: Excludes Lloyd's in all years and Alterra in 2Q 2013 YTD.

Total Shareholders' Funds

and uncorrelated risk that the reinsurance business offers.

Should this additional source of capacity decide to exit quickly, the

500 seriously contemplated

Prices as of Aug. 5, 2013

Source: A.M. Best research

Source: A.M. Best research

2005. Currently, the traditional reinsurers

Cycle Management: The Key to Long-Term Success

$119.5 $120.9 $128.0 $137.0 $146.6

2Q 2013 5yr Avg

Favorable Loss Reserve Development

Net Investment Ratio

Return on Equity (Annualized)

NPW (Non-Life only/Annualized) to Equity (End of Period)

Note: 2Q 2013 YTD data excluded Lloyds and Alterra.

Reinsurers have used several key cycle

There have been relatively few visible M&A

5 Total Shareholders' Funds excludes non -reinsurance subsidiaries of Berkshire

The Top 50 Reinsurers: Reserve Releases,

Ranked by gross premium written in 2012.

Reinsurance Premiums Written

Note: Premium figures for all companies exclude affiliated business.

Source: A.M. Best data & research

YE 2012 Combined Ratio

US & Bermuda Market

European "Big Four"

Note: Excludes Lloyd's 2Q 2013 YTD; data unavailable at date of publication.

Source: A.M. Best data & research

saw prices decline as much as 20% for

Some companies continued to repurchase their own shares during 2012,

agree that reinsurance pricing still

Reinsurers thus far have maintained

GCC (Bahrain, KSA, Kuwait, Oman, Qatar, UAE)

Levant (Jordan, Lebanon, Turkey)

Best's Statement File Global

Lloyds Premium Up; Market

2012 Performance Boosted by Prior-Year Reserve Development

Despite a Crowded Market,

reinsurance capacity and the prevalence of coinsurance agreements in

Admitted & Occassional

Premium (BRL Billions)

* 2012 is gross of reinsurance commission (BRL 932.2 million).

44 Should Tick Upward

IRB Still Dominates, Preps for Expansion

IRBs earned premium increased

In addition to operating in Argentina, IRB has signed up as a reinsurer in Peru, Mexico,

Two New Reinsurers Bring Local Touch

Bests Statement File Global

Bests LongTerm Issuer

Bests FSR &

FSR & ICR

Low Penetration Persists in Latin America

Asias Reinsurers Are

u Denotes rating under review

Bests LongTerm Issuer