Axco THE IMPORTANCE OF COMPLIANCE ABROAD JANUARY 29TH, 2014 ERV, STOCKHOLM

© Axco Insurance Information Services 2014 ABOUT AXCO About Axco With over 40 year’s experience in researching and delivering industry intelligence, Axco provides business-critical compliance and market data on non-life, life & benefits and employee benefits markets across the globe. Axco information is relied upon by a diverse range of organisations and our client base includes the world’s foremost insurers, reinsurers, brokers, and employee benefits professionals. Our unique business model and methods of research have enabled us to develop an extensive suite of products comprising in-depth reports, profiles, Q&A databases and information platforms. © Axco Insurance Information Services 2014

THE AXCO BUSINESS MODEL 02 THE AXCO BUSINESS MODEL The Axco business model Axco operates under a mutualised outsourcing model We look to build long term partnerships with both our clients and information and data sources We undertake to understand our client’s individual requirements We prioritise frequent interaction with our clients We are committed to developing new and innovative methods of information delivery. © Axco Insurance Information Services 2014

HOW IS AXCO INFORMATION RESEARCHED Other Brokers & Insurers 03 HOW IS AXCO INFORMATION RESEARCHED Local Offices Interviews, Correspondence Copy of Axco report Partners Other Brokers & Insurers Specialist Compliance Research Team Axco Database Central Global Industry Repository Interviews, Correspondence Regulators Copy of Axco report Correspondence Interviews, Copy of Axco report In-house research Associations Global Users Feedback © Axco Insurance Information Services 2014

INTERNATIONAL INSURANCE REQUIREMENTS The challenges of international insurance International companies, international operations = International risks 196 countries in the world = Hundreds of jurisdictions, cultures, insurance practices Spectrum of insurance market development: Emerging/low expertise to Developed/well-funded Aims of regulations: laws designed to protect consumers of insurance and financial systems not international companies Accepting grey answers: Complexity (of the world), Ambiguity/Uncertainty (of insurance regulations) How many countries are there? © Axco Insurance Information Services 2014

COMPLIANCE ABROAD CHECKLIST 05 COMPLIANCE ABROAD CHECKLIST ‘Compliance Abroad’ checklist Market environment Insurance regulations and supervisory authority Is non admitted permitted? Local coverage requirements Compulsory insurances Taxes and charges Local underwriting expertise and capacity © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 Market Environment Market environment Ghana: 25.31 Million 51.9% Urban Resources Exports Brazil: Natural Resources 198.66 Million 84% Urban Events © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 07 Market Environment Market environment GDP goes up to 2012. Ghana projected GDP growth %: 2013 7.40 2014 7.60% Brazil projected GDP growth %: 2013 2.00% 2014 2.60% © Axco Insurance Information Services 2014

Market Environment Insurance Law 1989 Specific insurance regulations and supervisory authority Ghana Proposed legislation can take years to reach Parliament Brazil Four resolutions to just set out the basis of premium and loss reserves Rapidly developing insurance and reinsurance market Supervisors and Regulators want to protect local companies Insurance Law 1989 Supplemented by Insurance Regulations 1990 Insurance Act 2006 CNSP Resolution no. 162 – 26 December 2006 CNSP Resolution no. 181 – 17 December 2007 CNSP Resolution no. 195 – 16 December 2008 CNSP Resolution no. 204 – 28 May 2009 Ghana: National Insurance Commission has been designing a risk-based solvency model for the Ghanaian insurance industry in line with international insurance sector best practices. New Insurance Act implementation was expected in late 2013. © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 Insurance Options On what basis can I write Insurance? Four main ways to write international business Admitted – Policy is issued locally from a locally registered and based company Cross Border Agreements – e.g. Freedom of Services Fronting – Local office used and reinsured out Non Admitted – Unauthorised Insurer © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 What is Non Admitted? What is meant by non admitted? Definition. Non-admitted insurance refers to the placing of insurance outside the regulatory system of the country in which the risk is located. A non-admitted insurance policy is one that may be issued abroad or the risk(s) may be included in a global master policy by an insurer unauthorised in that country. An authorised insurer is one which is permitted to do business in a country (or region) by the local supervisory authority. © Axco Insurance Information Services 2014

International Insurance Programme © Axco Insurance Information Services 2014

International Insurance Programme Admitted Locally Licensed and Regulated Sweden Supervision Section? Abiding by the Local Insurance regulations Very few surprises Good relationship / regular dialogue expected between local supervisor and local insurance companies Note: certain compulsory insurances have to be placed with insurers who have received authorisation from the supervisor Sweden has a sophisticated local market with many major international insurers having a presence > meaning little reason to seek insurance protection elsewhere. © Axco Insurance Information Services 2014

International Insurance Programme FOS International Agreements As if Locally Licensed Taxes and Charges Points about FOS: Legislative drive to create a single market in insurance services An insurer with a head office in an EEA member state is automatically entitled to provide services in another EEA member state (provided that the insurer has informed the supervisor in its home state) Facilitates writing of business the EEA (EU plus Norway, Iceland and Leichtenstein) French Dependencies where FOS applies: French Guiana Mayotte Guadeloupe (these locations are regions/departments of France and apply French law in its entirety) What are the downsides of FOS Ireland: supervisory levy > applies to FOS insurers writing business in Ireland (even if not through a local branch or HQ in Ireland) (Axco has a copy of the relevant law on file) Kvaerner: defined the location of liability for premium tax > this is to be paid to the authorities in the member state in which the risk is situated. © Axco Insurance Information Services 2014

International Insurance Programme Locally Licensed Office High Level of compliance confidence Local Broker Policy Wording Policy Issue Premium Payment and Terms Local Capacity EGYPT Setting up an office abroad. PROS - local expertise, local policy wording (and con DIC/DIL?), physical local document, same payments and claims as Swedish parent company. Payment of claims assured CONS - Supervision section, cost implications (leasing, getting licensed), overheads. © Axco Insurance Information Services 2014

International Insurance Programme Non Admitted is Permitted Australia Permitted if at the insured’s initiative NB exceptions: WC, compulsory third party and builders warranty (restricted to domestic insurers which have specific approval from state governments) Premium Taxes Australia has an extraordinarily complex system of premium taxes Amongst the highest in the world With the general exception of goods and services tax (GST), non-admitted policies are subject to the same array of taxes and charges as admitted policies. Taxes payable on non-admitted policies comprise deemed profits tax equivalent to 3% of the gross premium, fire service levies applicable in New South Wales and Tasmania, as well as stamp duties applicable to different policies at different rates in all states and territories. Claims management: difficulties in administering from abroad (time zones). What else to consider? Complex taxes – is the best way of ensuring compliance with the tax regime to take out a local policy or user a fronting partner? Insured’s Initiative Exempt lines of business Compulsory Insurances Taxes and Charges Claims management Non Admitted is Permitted © Axco Insurance Information Services 2014

International Insurance Programme Non Admitted NOT permitted Abide by all local regulations Long term partnership Local knowledge Not ideal for one time placements Exposed to Reinsurance taxes Expensive Brazil -non-admitted is not permitted > law says that insurance must be purchased from locally authorised insurers. Note exceptions: coverage not available / lack of interest in providing cover. Where there are less than 10 companies operating in the relevant class of business, insureds/brokers must consult all companies that do write it …. Let’s use fronting instead: - Due diligence > cost > up to date financials readily available? Use reinsurance examples, look into complexity of laws surrounding reinsurance Life insurance written on Non Admitted fined 30 times premium – DB to provide example - Complex reinsurance arrangements Non Admitted NOT permitted Fronting Partner © Axco Insurance Information Services 2014

International Insurance Programme Central Cover DIC/DIL, Financial Interest Clause, Master Policy Non Admitted NOT permitted Ghana Fines and penalties – up to 2,500 penalty points (penalty points are a value amended from time to time) and/or up to 5 years’ imprisonment. e.g. South Korea: maximum penalty 5 years’ imprisonment or a fine up to USD 26,270. Who wants to go to jail for broking an insurance policy???? Look at Nike (referred to as a global brand in sportswear…) in India – good example of getting into trouble over claims payments – DB to provide Non admitted taxes are payable, but would you pay them? Would you want to alert the authorities to business being written on a non-admitted basis? Perils of the untested in the courts FINC, DIC/DIL (Not covered in local legislation – is effectively non admitted), DB and CAY see if any other notes… Somebody will eventually be made an example of…. Claims payments if the policy is written on a non-admitted basis when it is NOT permitted AND the insurer is not in that country then often there are problems in paying claims to the insured. Getting money into the country as a claims payment is likely to arouse suspicion. In non-admitted situations, claim payments are considered as income for the insured and are therefore taxed accordingly. Penalties Prison Reputational Damage Claims payments © Axco Insurance Information Services 2014

International Insurance Programme Overview of this simple, highly multinational and not uncommon insurance policy. Recap a couple of the major points Supervisors Taxes Claims Reputation THE INSURED!!! © Axco Insurance Information Services 2014

International Insurance Programme Admitted FOS Locally Licensed Office Central Cover DIC/DIL, Financial Interest Clause, Master Policy Non Admitted NOT permitted Fronting Partner Non Admitted is Permitted © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 How can Axco help? HOW CAN AXCO HELP? Critical to have knowledge in order to continue writing compliant programmes Axco’s remit is to provide information On the ground research: Axco visits 170 + countries Avoiding information overload: ‘Less is More’ product development = right information for the right person at the right time Integration of information sources and product design: portals, annotations, click-throughs Combine that information with your expertise KNOWLEDGE Who to talk to What questions should you be asking What pitfalls should you be looking out for Never a straight forward black and white area © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 Axco Products Insurance Market Reports Comprehensive country by country insurance market information Non-Life (Property & Casualty) and Life & Benefits. Employee Benefits Reports Comprehensive coverage of worldwide employee benefits markets. Regulatory Alerts Monthly e-mail alerts reporting on key developments in regulation, legislation and premium taxation. Global Statistics Current and historical statistics covering non-life and life & benefits markets in over 180 territories worldwide. Clinical Trials Clinical trials insurance information for over 170 territories, including market and compliance data. Compliance Point A single “go to place” combining regulatory and tax compliance information. Insight Using Q&A structure, Axco Insight provides a customisable overview of global insurance markets. CIMS Market Profiles Focused information on key aspects of the market and compliance requirements in over 170 territories. Country Benefits Profiles Concise information on state and compulsory benefits and typical employer practice in 69 countries. © Axco Insurance Information Services 2014

Non-Life INSURANCE MARKET REPORTS (IMR) 22 Non-Life INSURANCE MARKET REPORTS (IMR) Non-Life Insurance Market Reports Non-life insurance market information for over 170 countries Essential legislative, insurance regulatory and tax compliance information Insurance market overview, distribution channels, market size, structure and key players All major lines of non-life business Comprehensive appendices containing market statistics, company statistics, and directory of key market contacts Create customised reports to facilitate client presentations and business tendering © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 23 Insight Compliance Insight Compliance Delivering global non-life (P&C) insurance regulations and taxes at a glance Single point of reference for non-life insurance regulatory and tax compliance requirements Question & Answer structure, with topics compiled from clients' most frequently asked compliance questions Line of business-specific regulation for over 170 territories Customise and filter data according to territory, line of business and regulatory topic © Axco Insurance Information Services 2014

© Axco Insurance Information Services 2014 Axco Compliance Point Compliance Point Interactive compliance tool guiding users through multinational insurance programmes calculating all taxes and charges that are applicable. A single “go to place” combining regulatory and tax compliance information. Market solution tailored to user group needs Intelligent questioning prompts users for the exact information needed as they progress through the system. Up to date, transparent and unbiased information from multiple sources. Auditable trail of decisions and results © Axco Insurance Information Services 2014

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