GroupRe Plus Serving the Reinsurance Needs of Smaller Insurance Companies Robert Lumia, FSA, MAAA Assistant Vice President & Director Group Reinsurance Plus October 19, 2011

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 2 Discussion Overview For Smaller Insurance Companies: What are some issues that can drive the need for reinsurance? What are some possible areas where reinsurers can provide solutions? What are some different reinsurance structures that can suit different needs?

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 3 Key Needs of Smaller Insurance Companies What Events Can Drive The Need For Reinsurance?  Entry into a new product line  Earnings stability  Capital management  Redeployment of workforce

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 4 How Can Reinsurers Provide Solutions? Risk Management Services Expertise

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 5 How Can Reinsurers Provide Solutions? Two Main Reinsurance Models in Group Pure Risk TransferPrivate Label  Main objective of reinsurance is financially focused Maximize earnings Reduce earnings volatility  Reinsurance typically structured on an excess basis  Ongoing interactions between insurer and reinsurer likely centered on facultative exceptions, quality management and experience discussions.  Reinsurance pricing based mainly on anticipated claims cost  Multiple benefits include: Maximize and / or stabilize earnings Receive a specified level of functional servicing Underwriting Claims Actuarial  Reinsurance typically structured on a quota share basis  Likely more touchpoints between insurer and reinsurer on day to day case level issues  Reinsurance pricing contains servicing element

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 6 How Can Reinsurers Provide Solutions? Risk Management  Risk Transfer  Pricing  Capital Management  Facultative Underwriting  QM / Audit Programs  Reporting / Monitoring

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 7 How Can Reinsurers Provide Solutions? Expertise  Market Knowledge  Market Scans  Contracts  Underwriting / Pricing  Product Development  Training  Claims Management

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 8 How Can Reinsurers Provide Solutions? Services  Case Level Underwriting  Claims Adjudication  Actuarial Support  Filing Support  Training

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 9 How Can Reinsurers Provide Solutions? Risk Management Services Expertise Reinsurance Arrangements Can Provide Multiple Solutions to Smaller Insurers

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 10 Possible Decision Points o Will this line of business be a long term strategic driver of future business? o How quickly does the insurance company wish to be up and running? o How large of an investment does the insurance company want to make into this line of business? o Resources o Expertise o How complex is the product that is being offered?

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 11 Possible Long Term Decision Making o Reinsurance on a new product line May need to develop expertise and resources Private Label can allow quicker product implementation and growth Insurance company can develop expertise and resources at a reasonable pace and assume functional responsibilities longer term o Reinsurance on an inforce product line that is looking to grow Insurance company likely has expertise in-house already. Traditional reinsurance may be best solution o Reinsurance on an inforce product line that the current carrier is looking to exit If looking to completely exit but have ongoing liability, may choose Reserve Buyout If looking to exit in an effort to redeploy workforce to other lines, may select private label

GroupRe Plus Copyright © 2011 by The Hartford. Confidential. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 12 Summary Private LabelTraditional / Financial Minimize internal resources + Minimize cost + Ability to gain expertise +++ Potential speed to market for new product + Reinsurers can provide great value to smaller insurance companies. Reinsurance arrangements can encompass varying degrees of financial and service solutions. Optimal choice of reinsurance structure dictated by ceding company strategic direction and resources.

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