INDONESIAN PROFESSIONAL REINSURERS DOMESTIC CAPACITY OPTIMIZATION BY INDONESIAN PROFESSIONAL REINSURERS Presentation by Robby Loho - President Director PT Maskapai Reasuransi Indonesia, Tbk. Yogyakarta , 27 – 29 July 2017

INSURANCE SHARING MECHANISM Reinsurance Coinsurance Insurance cover shared between two or Transferring a portion of risk to reduce the more insurers to spread the potential risks associated with underwritten policies liability in very large risks. Insurer remains into reinsurer. Legal rights of the insured liable to the insured for insurance policy are in no way affected by reinsurance benefits and claims Insurer Insured Insurer Insurer Insured Insurer Reinsurer Insurer

REINSURANCE PROCESS Transfer of Risk INSURED INSURER REINSURER RETROCESSIONAIRE Vehicle Life Satellite Insurance Company Reinsurance Company Retrocession Company Marine Insurance Broker Reinsurance Broker Health Property Transfer of Risk

PURPOSE OF REINSURANCE Increase confidence both on the part of investors in the insurer and customers of the insurer Allows the insurer to manage the performance of its portfolio of risk and that of its asset base Provides tax advantages since premiums ceded to reinsurers are tax deductible Provides cash flow advantages since the insurer can make a cash call upon the reinsurer when losses occur Influences corporate strategy as assists the insurer in deciding what proportion of its assets it is prepared to put at risk from one or series of related losses Provides protection against the consequences of unexpected material losses Spreads risk by involving other insurers and reinsurers throughout a variety of different geographical areas Increases capacity by permitting an insurer to accept more business than it is comfortable with at a gross level Provides security by relieving the insurer of some of the uncertainty of loss Increases stability in result by smoothing the net loss experience of the insurer from year to year

RETROCESSION When a reinsurer buys further protection from another reinsurer the resulting transaction is referred to as a retrocession Retrocession contracts are standard reinsurance contract and are traded in global reinsurance markets Definition Retrocession & Retrocessionaire The buying reinsurer is referred to as the retrocession The selling reinsurer is referred to as the retrocessionaire Retrocession are remote from the original insured business and so it is difficult for the retrocessionaire to identify and quality its exposures accurately

REINSURANCE BROKERS Preparing and Collecting Claims Reinsurance Brokers Roles Reinsurance Brokers Services Preparing and Collecting Claims Providing Market Intelligence Arranging Reciprocity Checking The Security Offered by Reinsurers Providing Documentary and Analytical Services The broker involved in a reinsurance transaction brings parties together with to enter into a reinsurance contract The broker is usually acting for the party seeking reinsurance but might also be acting for the seller it, for example, the broker has been given a measure of authority to underwrite and accept risk Brokers acquire business in a number of different ways including direct approaches to potential clients and through developing innovative new types of contracts

RISK CATEGORY FREQUENCY SEVERITY HIGH LOW HIGH 1 2 LOW 3 4

RISK TREATMENT – INSURED PERSPECTIVE AVOID PREVENT LIMIT TRANSFER ACCEPT LIVE IN A CAVE FIRE ESTINGUISHER PUT UP WITH A LOSS SOLID CONSTRUCTION INSURE

FIX RETENTION & LIMIT OF INSURANCE RISK TREATMENT – INSURER PERSPECTIVE RISK AVOID PREVENT LIMIT TRANSFER ACCEPT DECLINE RISK FIX RETENTION & LIMIT OF INSURANCE ADD WARANTIES PUT UP WITH A LOSS REINSURE

TYPE OF REINSURANCE Reinsurance Facultative Treaty Non- Proportional Quota Share Excess of Loss Excess of Loss Surplus Quota Share Stop Loss 10

INDUSTRY LANDSCAPE No Insurance Sectors 2015 2016 1 Asuransi Umum 80 2 Total No Insurance Sectors 2015 2016 1 Asuransi Umum 80 2 Asuransi Umum Syariah 3 Unit Syariah Asuransi Umum 23 4 AsuransiJiwa 54 5 Asuransi Jiwa Syariah 6 Unit Syariah Asuransi Jiwa 19 7 Perusahaan Reasuransi 8 Perusahan Reasuransi Syariah - 9 Unit Syariah Perusahaan Reasuransi 10 Broker Asuransi 166 11 Broker Reasuransi 37 12 Adjuster 28 76 4 29 50 6 21 5 1 2 165 42 27

INDONESIAN PROFESSIONAL REINSURANCE (IPR) Indonesia Sovereign Credit Rating Indonesia IPR’s Rating (Fitch Ratings) BBB- Stable Outlook A+(Idn) / BB(Intl) Stable Outlook A- (Idn) Stable Outlook A+(Idn) Stable Outlook BBB- Positive Outlook Baa3 Positive Outlook AA(Idn) Stable Outlook AA- (Idn) Stable Outlook

INSURANCE POTENTIAL GROWTH Non-Life Insurance % GDP Non-Life Insurance % GDP Non-Life Insurance Premium 2017 Expected to Growth Between 15 – 20%. Indonesia Maritime Development such as “Tol Laut” & “Roll-on Roll-off Cargo Route” will boost the growth of marine hull & cargo insurance. With over than 250 million people and Indonesia Middle Income awareness about Life Insurance, Indonesia Life Insurance Sector still wide open to develop market and grow rapidly. 4.1 2.5 1.7 1.8 1.7 1.6 1.7 0.7 0.7 0.5 0.5 Non-Life 2017 Expected Growth Life CAGR Expected Growth COB Life CAGR (%) New Premium Marine Hull Aviation Engineering Liability Credit Suretyship Miscellaneous Energy On Shore Energy Off Shore Marine Cargo Property Motor Vehicle P/A Health Satellite High High High High High High High Medium Medium Medium Medium Low Low Low Negative General 16.153 22.54 18.21 Life Insurance % GDP Advanced 19.08 Premium 14.78 Individual 11.96 Insured 9.32 8.3 7.3 5.6 Group Insured 9.26 8.44 3.4 3.7 3.6 2.7 2005 - 2015 2016 - 2020 1.9 1.4 1.3 0.8

REINSURANCE – DIRECTIVE New Rules on Self-Retention and Domestic Reinsurance Support POJK No.14/POJK.05/2015 Reinsurance Support for Simple Risk Coverage On November Authority (“OJK”) issued regulation 10th 2015, the Financial Services Insurance companies (conventional and syariah) must have 100% domestic reinsurance support for products that cover “simple risks”. A “simple risks” can be assessed base on among other things the value of the coverage amount and/or the insured object, e.g., motor vehicle insurance, health insurance, personal accident insurance, credit insurance, life insurance, and suretyship. No.14/POJK.05/2015 on Self-Retention and Domestic Reinsurance Support. Local Capacity Optimalisation Policy Business Line OJK ceding rules to domestic reinsurers Motor, Health, Personal Accident, Credit, Life and Suretyship 100% Other insurance business ("non-simple risks") Minimum 25% and up to 75% offshore reinsurers Catasthropic Protection minimum 1 in 250 years Retrocessionaire rating minimum BBB

LOCAL CAPITAL (ASSET & EQUITY) in million rupiah as at December 2016 Reinsurer Equity Asset Indonesia Re 2,350,694 7,102,553 Maskapai Reasuransi Indonesia 746,338 1,833,551 Reasuransi MAIPARK Indonesia 368,773 513,507 Reasuransi Nasional Indonesia 1,418,496 4,779,749 Tugu Reasuransi Indonesia 754,147 2,721,225 Total 5,638,448 16,950,585

DOMESTIC REINSURANCE CAPACITY No Class of Business Treaty Facultative 1 Harta Benda 200 600 2 Kendaraan Bermotor 55 3 Pengangkutan 160 245 4 Rangka Kapal 93 145 5 Rangka Pesawat 70 180 6 Satelit 40 7 Energi Offshore 115 265 8 Energi Onshore 9 Rekayasa 10 Tanggung Gugat 100 110 11 Kematian 65 12 Kecelakaan Diri 140 305 13 Kesehatan 195 14 Kredit 80 15 Suretyship 16 Aneka 355 Treaty Proportional Non Proportional Non Marine Marine 200 160 175 150 in billion16rupiah

REINSURANCE INDUSTRY KEY RATIOS Indonesia Reinsurance Industry Indonesia Reinsurers 2016 Indonesia's reinsurance industry experienced a IPR 1 IPR 2 IPR 3 IPR 4 IPR 5 significant growth both in premium and equity with last 5 years average growth 34% and 41%. While combined ratio has slightly improved from 97% (loss 88% and expense 9%) in 2012 became 92% in 2016 (loss 84% and expense 8%). Rating A+ AA AA- A+ A- (Fitch) ROA 8.91% 3.90% 7.53% 7.75% 13.78% ROE 21.29% 12.53% 25.80% 28.57% 20.23% Reinsurance Industry Premium Growth & Equity Profit Margin 10.05% 5.65% 6.88% 8.54% 27.72% Retention Ratio 70.27% 76.18% 50.75% 65.22% 73.39% 14,000 100.00% Loss Ratio Net 85.16% 85.14% 84.49% 81.26% 35.92% Expense Ratio 7.80% 11.19% 5.91% 7.50% 27.91% 12,000 75.00% 10,000 Combined 92.96% 96.33% 90.40% 88.76% 63.83% Ratio 8,000 50.00% Premi CAGR (2012 - 2016) 19.12% 38.98% 50.35% 34.08% 14.27% 6,000 4,000 Profit CAGR (2012 - 2016) 10.85% 27.54% 64.29% 43.08% 18.09% 242.18% 314.15% 163.93% 166.64% 891.94% 25.00% 2,000 RBC Kecukupan Investasi - 0.00% 137.72% 179.60% 135.18% 127.00% 458.51% 2012 2013 2014 2015 2016 Premium Growth Hasil Investasi : Premi Neto Premum Equity 6.88% 8.29% 8.55% 10.00% 15.27%

REINSURANCE INDUSTRY 9% 8% 7% 90% 88% 89% 85% 84% Reinsurance Industry Premium & Retention Ratio Reinsurance Industry Combined Ratio Net 14,000 100.00% 100.00% 9% 8% 7% 90% 88% 89% 85% 84% 12,000 80.00% 75.00% 10,000 60.00% 8,000 50.00% 6,000 40.00% 4,000 25.00% 20.00% 2,000 - 0.00% 2012 2013 2014 2015 2016 0.00% 2012 2013 Loss Ratio 2014 2015 Expense Ratio 2016 Premum Retention Ratio

REINSURANCE INDUSTRY IPR’s RBC (%) IPR’s Equity (in bio) 900.00 750.00 600.00 450.00 300.00 150.00 0.00 2,500.0 2,000.0 1,500.0 1,000.0 500.0 - 2014 2015 IPR’s Retention Ratio 2016 2014 2015 IPR’s Combined Ratio Net 2016 100.00% 100.00% 90.00% 90.00% 80.00% 80.00% 70.00% 70.00% 60.00% 50.00% 60.00% 2014 2015 2016 2014 2015 2016 General 16.153 IPR 1 IPR 2 IPR 3 IPR 4 IPR 5 Average

GENERAL REINSURANCE PREMIUM 2015 - 2016 General Insurance & Reinsurance Premium General Domestic & Offshore Reinsurance Premium 60,000 57,454 55,183 50,000 40,000 49% 55% 30,000 20,000 43% 38% 50% 49% 49.4% 50.5% 10,000 51% 45% - 2015 General Insurance Premium 2016 General Reinsurance Premium 2015 2016 Domestic Reinsurance Premium Offshore Reinsurance Premium In billion rupiah 20

REINSURANCE PREMIUM DISTRIBUTION GENERAL 2013 - 2016 55% 49% KE LN KE P/A DN KE IPR DN 60% 4% 65% 12% 9% 11% 47% 33% 31% 24% 2013 2014 2015 2016 In Trillion Rupiah Source : OJK & IPR 21

LIFE REINSURANCE PREMIUM 2015 - 2016 Life Insurance & Reinsurance Premium Life Domestic & Offshore Reinsurance Premium 137,785,583 126,860,417 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 3.23% - 2015 39% 49% 61% 51% 3.33% 2016 2015 2016 Life Insurance Premium Life Reinsurance Premium Domestic Reinsurance Premium Offshore Reinsurance Premium In million rupiah 22

REINSURANCE PREMIUM 2015 - 2016 In million rupiah Insurance & Reinsurance Premium Domestic & Offshore Reinsurance Premium 195,239,583 182,043,417 200,000,000 150,000,000 46% 52% 100,000,000 50,000,000 54% 48% 18% - 2015 17% 2016 2015 2016 Insurance Premium Reinsurance Premium Domestic Reinsurance Premium Offshore Reinsurance Premium In million rupiah 23

BALANCE OF PAYMENT INSURANCE AND PENSION FUND 2013 - 2016 -9.6 2016 0.7 -12.2 2015 0.7 -12.5 2014 0.3 -13.7 2013 0.3 -15.0 -10.0 -5.0 0.0 5.0 Impor Ekspor Source : Bank Indonesia In Trillion Rupiah 24

BALANCE OF DEFICIT - OVERVIEW 2.00 1.00 0.00 -1.00 -2.00 -3.00 -4.00 -5.00 -6.00 -7.00 -8.00 -9.00 0.00% 0.55 0.65 0.73 0.55 0.52 -0.50% -1.00% 2011 2012 2013 2014 2015 -1.50% -2.00% -2.44% -2.71% -2.69% -2.50% -3.00% (5.31) -3.77% -3.50% (7.05) (7.31) -4.00% (7.80) -4.24% (7.93) -4.50% RI dr LN RI ke LN Rasio Defisit thd Premi Bruto In Trillion Rupiah Source : OJK 25

TOWARDS STRONG CAPITALIZED REINSURANCE OPERATION Human Capital Readiness Structure of Equity Risk Management Operational Excellence Sustainable Financial Performance 26

THANK YOU 28