Siniša Lovrinčević, M.Sc. Advisor to the Management Board Reinsurance Company Sava Limited The Reinsurance Market in the Global Village of Changes A Slovenian Perspective Tashkent, April 2010

AGENDA 1.The position of Reinsurance Market in the Global Village of Changes 2.Slovenia – Macroeconomic Facts 3.Development of the Slovenian (Re)insurance Market 4.The future Challenges from our Slovenian Perspective

2008 World GDP expanded by 2,3% in real terms 2008 Worldwide Insurance Premium: USD bn 2008 Worldwide Insurance Premium: USD bn Life Premium: USD bn Life Premium: USD bn Non - Life Premium: USD bn Non - Life Premium: USD bn For the first time since 1980, premium declined in real terms, slower demand For the first time since 1980, premium declined in real terms, slower demand for cover, softening premium rates for cover, softening premium rates The Insurance “industry’s” sharehold capital shrank by 15-20% in non life The Insurance “industry’s” sharehold capital shrank by 15-20% in non life and 30-40% in life and 30-40% in life Very high losses from NAT CAT (frequency, severity?) CAT Scenarios: Wind, Flood, EQ, Hail Very high losses from NAT CAT (frequency, severity?) CAT Scenarios: Wind, Flood, EQ, Hail Underwriting results in 2008 for non-life insurance remain positive Underwriting results in 2008 for non-life insurance remain positive We must recognised the changes and be proactive 1.The position of Reinsurance Market in the Global Village of Changes Source: Sigma No 3 /2009

Reinsurance Market Premium (est.10-12% of insurance premium) Globale Financial Crisis? Crisis of Confidence? (Lehman Brothers, AIG) Investment ? Loss of liquidity ? Cash is still the King! Cycle Management: hard, soft, hard…, precision, prudence, UWR discipline Underwriting Discipline (causes, drivers, consequences, monitoring), adequate technical price and reserves, tailor made solution for the client Capital Allocation (risk culture is changing, cost of capital) Profitability (profit oriented underwriting, Short and Long Tail Business) Get back to basis (RISK)… risks carriers are under the pressure 1.The position of Reinsurance Market in the Global Village of Changes Source: Sigma No 3 /2009

- Overall losses: USD 258 bn - Insured losses: USD 44,7 bn (17%) Swiss Re, Sigma No 2/2009 NAT CAT - YEAR 2008 IN FIGURES / WORLDWIDE 1.The position of Reinsurance Market in the Global Village of Changes

NAT CAT - YEAR 2008 IN FIGURES / WORLDWIDE THE 10 LARGEST NAT CAT IN 2008 Ranking by overall losses Swiss Re, Sigma No 2/2009 DateCountry/RegionEventVictims Insured loss in USD m UA, CaribbeanHurricane Ike US, CaribbeanHurricane Gustav USTornadoes, storms EuropeWinter storm Emma ChinaSnow storms USThunderstorms/ EuropeStorm Hilal USTornadoes, storms USStorms, hail/ USWinter storm The position of Reinsurance Market in the Global Village of Changes

2. Slovenia – Macroeconomic Facts MACROECONOMIC FACTS Estimate GDP GDP, real growth rate-4,0%3,5% GDP per capita (EUR) UNEMPLOYMENT Unemployment rate (standardized by ILO defin., average) 6,0%4,4% INTERNATIONAL TRADE Exports of goods and services, real growth rate-8,6%3,3% Imports of goods and services, real growth rate-10,3%3,5% INFLATION Consumer prices annual average growth rate0,4%5,7%  Member of the EU since 2004  Eurozone Currency since 2007  Sovereign Credit Rating AA Source: Statistical Insurance Bulletin, UMAR, Ekonomsko ogledalo, May 2009

3. Development of the Slovenian (Re)insurance Market Number of companies18 Number of reinsurance companies22 Number of insurance companies16 Gross insurance premium (000 EUR) Non-life insurance premium (000 EUR) Life insurance premium (000 EUR) Gross reinsurance premium (000 EUR)

Slovenian Reinsurance Market (000 EUR)PremiumsClaimsLoss ratios TotalLifeNon-lifeTotalLifeNon-lifeTotalLifeNon-life ,1%69,6%51,0% ,1%56,6%52,1% ,9%25,4%55,1% ,8%22,0%48,9% ,3%39,3%56,4% ,9%42,9%55,9% ,9%22,4%83,1% Market SharesSava ReTriglav Re ,63%41,37% ,65%44,35% ,82%40,18% ,07%42,93% ,53%42,47% ,50%42,50% ,74%44,26% 000 EUR Source: Statistical Insurance Bulletin 3. Development of the Slovenian (Re)insurance Market

Solvency II Appropriate Governance Structure Measure the Performance and Financial Security Balance Liabilities with Assets Emerging Risks – evaluation E.R.M. – Enterprise Risk Management is learning process… Mission – Vision – Goals – Strategy – Operation in Practice Mission – Vision – Goals – Strategy – Operation in Practice KEY words: transparency, clear communication, discipline, control KEY words: transparency, clear communication, discipline, control 4. The future challenges from our Slovenian Perspective Rating Agencies Dynamic Financial Analysis Internal models Diversification Global Warming and Climate Change

WHY? WHO? WHERE? WHAT? HOW? WHY? WHO? WHERE? WHAT? HOW? - To be RISK Aware we must question the ANSWERS - Understanding and managing RISKS on the Global and Local Level 4. The future challenges from our Slovenian Perspective Theory Theory Practice Practice

Knowledge and Experience INSURANCE RISKS MARKET RISKS Risk Management Culture? OPERATIONAL RISKS 4. The future challenges from our Slovenian Perspective CREDIT RISKS

“WIND, HAIL, FLOOD” EVENTS IN SLOVENIA IN 2008 Frequency + Severity + Lines of Business = COMBINATION? Dates of first event: July 2008 Insured market loss: EUR 48m (motor casco: EUR 15m, property : EUR 24m, crops: EUR 9m) Dates of second event: August 2008 Insured market loss: EUR 18m (motor casco: EUR 13m, property: EUR 5m) Dates of third event: August 2008 Insured market loss: EUR 86m (motor casco: EUR 14m, property: EUR 67m, crops: EUR 5m) Total insured market loss (est.): EUR 152m (motor casco: EUR 42m, property : EUR 96m, crops EUR 14m) 16. Dnevi Slovenskega zavarovalništva, 4. in 5 junij, 2008, Portorož 4. The future challenges from our Slovenian Perspective

HAIL, AGAIN? WHEN AND HOW STRONG?

KEY WORDS: BE CLOSE TO RISKS Risk The combination of the likelihood and impact of an event, which has an influence on achieving organization's objectives Assessment Determining the likelihood and potential severity of identified risks. Determining the validity of established controls Regulation Binding or non-binding restrictions enforced by governments or other regulatory bodies E.R.M. Integrated framework for managing organization- wide risks in order to maximize organization’s value Compliance Systems to ensure that organizations are aware and comply with relevant laws and regulations Controls Specific set of policies, procedures and activities designed to monitor and mitigate risks Audit An independent, objective assurance and consulting activity designed to help organizations accomplish objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

4. The future challenges from our Slovenian Perspective “WHAT IF” SCENARIOS – be ready to pay the future claims “REALITY IS ALWAYS WIDER THAN ANY DOCTRINE” Source:Bakouinine

Tashkent, April 2010 THANK YOU FOR YOUR TIME!