Presented by Paul D. Smith Partner – JLT Re The Hurdles and Challenges of Placing Reinsurance for Russian Aviation Insurers Presented by Paul D. Smith Partner – JLT Re RAASI XV Aviation and Space Insurance Conference

JLT Re - Aviation Reinsurance Team Mark Thurgood Global Aviation Reinsurance Practice Leader Paul Smith Broking Client Support Client Services Chris Peddy Bill Morritt Andy Poulton Consultancy Services Nigel Baker Paul Dixon Technical Support Gary Morton Stephanie Grace Trevor Knights Claims Support Grant Sanders Chris Eaton Mark Pitts Mike Grout Barry Keegan Francesca Hearfield Ian Cutting Steve Watts Financial Support Alan Jelley Michele Smith Dominic Riley Jonathan Harris Colin Dipple JLT Reinsurance Brokers Limited One America Square London EC3N 2JL Telephone 020 7466 1300 Facsimile 020 7466 1469 Website www.jltre.com

A Selection of JLT Re Clients

Agenda Previous Hurdles and Challenges Current Hurdles and Challenges The Russian Market Reinsurance Sanctioned Business Summary

Previous Hurdles and Challenges Millennium Clauses in 1999 / 2000 Man power resource / intellectual capital 11th September 2001 War policies cancelled XS AV52 write backs removed from Excess of Loss Losses Occurring During cover only available Massive increase in pricing Markets bankrupt or withdraw Industry changing event Hurricane Katrina US$ 80bn + event Affected aviation pricing

Current Hurdles and Challenges The Russian Market Reinsurance Sanctioned Business

The Russian Market A reducing client base, due to:- The Global Financial Crisis European legislation Leasing companies European minimum limits Russian Air Code Retrocessional arrangements with domestic markets

Reinsurance Proportional Treaty Excess of Loss Risk Excess

Proportional Treaty Hull Quota Share Treaties Poor hull loss record in Russian Market Reinsurers reluctant to provide capacity for old Russian hulls Quality of hull fleet improving Leasing companies will not accept due to part order Quota Share means paying away lots of income in an improving hull environment

Excess of Loss Reinsurance Cheaper than proportional – retained income Reinsurers prefer Excess of Loss as they miss attritional losses Hull capacity available Cost of capital

The Cost of Capital Defined as:- “Minimum return that investors expect for providing capital to the Company” OR ‘The rate of return that capital could be expected to earn in an alternative investment of equivalent risk’

Risk Excess Hull Risk Excess – capacity Liability Risk Excess – capacity

Sanctioned Business Not a new subject Recent USA and EU Iranian Sanctions Reinsurance market reaction

Summary There are always new challenges Massive opportunity for all Profitable business Consolidation of Airlines and Insurers Improved airport infrastructure General Aviation opportunities Inflation Competition