Title Slide JUN 8 – 10, 2015 June 9, Thinking of Rating Your Captive?

Speakers: Percy J. Núñez, CFO –ASSA Compañía de Seguros, S. A. –Lion Reinsurance Company Limited, Bermuda Andrew Hulme, ACII Chartered Insurer, Vice President, Underwriting & Claims –JLT Insurance Management (Bermuda) Ltd Moderator: Alan Kandel, Business Development Manager –A.M. Best

A.M. Best Company and the Interactive Rating Process Alan Kandel, Business Development Manager

Introduction to A.M. Best About A.M. Best Ratings Rating methodology and key components The rating process Outline

Introduction to A.M. Best

Established in 1899 in the US, pioneered the concept of insurer financial strength ratings in 1906 Provider of ratings, financial data and news relating to insurance industry Coverage of approximately 4,000 companies in >80 countries –Rated first captives 1970s-1980s –Began rating new company formations 2001 –Published separate captive methodology 2002 –Published protected-cell methodology 2008 Awarded Best Global Rating Agency at the Reactions Global Awards six years running Only rating agency focused on the insurance industry: –Methodologies are specific to the insurance industry –Analysts are insurance specialists and only analyze insurance companies –Ability to provide specific indications as to the main drivers of a rating grounded in industry knowledge A.M. Best Overview

Nationally Recognized Statistical Rating Organization (NRSRO) designation by the U.S. Securities & Exchange Commission (ECAI comparable) Registered with international regulatory agencies in the following regions: Australia/New Zealand, European Union Licensed corporation in Hong Kong and Singapore Licensed representative office in Dubai Authorized Credit Rating Agency in Brazil and Mexico Accredited Rating Agency

About A.M. Best Ratings

Captives Rated Globally by A.M. Best 73% 17%

Breakdown by Captive Type

Breakdown by Captive Industry

Validation of insurance operations Enhanced state, federal and country regulation Greater transparency Increasing involvement of brokers and regional expansion Benchmarking Facilitates capital raising Reinsurance negotiations Drive to improve corporate governance practices Drivers of Ratings

Rating Methodology and Key Components

Rating Methodology – Key Components

Standard for evaluating capitalization Model evolves over time Dynamic factor-based model Minimum capital level guidelines Trends are key Critical, but only one component Starting point Best’s Capital Model (BCAR)

The Rating Process

Interactive, ongoing review of company fundamentals Review includes wide variety of both quantitative and qualitative information Primary Analyst – primary relationship manager Rating Committee (RC) –Members include team leaders and rating division management –RC reviews all rating actions –RC employs analytical guidelines, policy and procedures established by Credit Rating Policy Committee (CRPC) Best’s Rating Process

The Interactive Rating Process Initial RatingYear Two and onwards Perform on-going surveillance & monitoring Disseminate Best’s rating to the public Determine Best’s rating (via committee) Perform comprehensive analysis Hold management meeting Compile detailed information RSA Signed and returned with fee Provide Data to determine fee quote Exploratory Discussions Perform on-going surveillance & monitoring Disseminate Best’s rating to the public Determine Best’s rating (via committee) Perform comprehensive analysis Hold management meeting Compile detailed information (on-going)

Annual Reports- latest five years Audited Financial Statements for Parent and Subsidiary Full Actuarial Reports Corporate Structure / Organizational Chart and History Management Structure Biographical Information on Principal Officers Current Insurance Structure Operating Plan / Five-Year Projections Capital Management Strategies Risk Management Program Investment Guidelines / Strategies Reinsurance Program / Reinsurance Contracts Fronting Information Other Information Requested by A.M. Best: –Estimated impact (Net/Gross) from Catastrophe or other unusual event –Details of changes in ownership, management, products or operations –Revised projection of year-end results –Plans to mitigate losses and/or correct and identified problem What Kind of Information Will Be Required?

CEO Strategic Overview Corporate Governance Organizational Structure Capital Structure Underwriting Claims & Loss Reserving Reinsurance Programs Investments Financial Review & Planning Enterprise Risk Management Marketing & Business Production The Management Meeting Agenda

Rating Process - Timing STEP 1: Rating Engagement & Contract (Weeks 1-2) STEP 2: Pre-Rating Preparation (Weeks 3-6) STEP 3: Rating Meeting (Weeks 6-10) STEP 4: A.M. Best’s Analysis (Weeks 8-12) STEP 5: Rating Decision & Dissemination (Weeks 11-14)

Cost and Contracts Approved pricing model based on: Size (GWP) Complexity Cost Rating Services Agreement Contracts

Rating Options BD is available to address boards of directors Pre-engagement Options Accept the Rating Decline the Rating Appeal the Rating Initial Rating Options Withdraw from the process Annual Rating Options

Thank You! Alan Kandel Business Development Manager Tel: x5036 Mobile:

Grupo ASSA Percy J. Núñez, CFO

Who Are We? –Panamanian Economic Group –Over 2,000 employees –45 years of operations –Stock publicly traded in the Panamanian Stock Market –One of the most important insurance groups in Central America Financial Highlights Grupo ASSA Net Profit (USD Mio) Business Segments Investments 29% Insurance Operations 43% Banking 28%

Geographic Distribution Total Premiums Insurance Operations- ASSA Holding

What is Lion Re? Lion Reinsurance Company, Ltd. Incorporated under the Laws of Bermuda and registered as a 3A Insurer under the Insurance Act 1978 of Bermuda Wholly owned subsidiary of ASSA Holding Company in Panama. Started operations on November 25, 2011 Assumes reinsurance risks from its affiliates for both P&C and Personal Accidents and Health Buys retrocession cover as part of ASSA Holding Company and subsidiaries’ purchase of reinsurance Management is delegated to Willis Management (Bermuda) Limited, with KPMG as independent auditor A.M. Best Financial Strength Rating of A- (Excellent) and Issuer Credit Rating of “a”

Financial Information (in USD Thousand) Lion Reinsurance Company, Ltd. Dic. 2013Dic Gross Premiums6,2137,133 Net Premiums5,6306,890 Investment Income79302 Net Income4052,342 Total Assets10,56512,503 Total Liabilities5,6335,291 Shareholder’s Equity4,9327,212

Lion Reinsurance Company, Ltd. Central focus to senior management for reinsurance risk management and control. A central collection point for exposure and loss data that will help in risk management decisions. Budget certainty for the reinsurance costs of the Parent Company. Capital from accumulated profit to allow the expansion of corporate retentions for Grupo ASSA. Transparent evidence of consideration and management on insurable risks in line with international best practices and good corporate governance. A way to capture profit from insurance premiums that might otherwise go to the conventional reinsurance market. Business Objective

Lion Reinsurance Company, Ltd. Lines of Business FireCasualty Marine Hull Auto Marine & Inland Cargo Home Owners Group Life

Lion Reinsurance Company, Ltd. Expected Benefits File as reinsurers in Panama, Nicaragua and El Salvador. Maintain an international guideline for risk management on reinsurance operations. Reduce capital burden via reinsurance in Costa Rica.

Lion Reinsurance Company, Ltd. Rating Experience Initial Rating Initial rating issued in Corporate Guarantee from Grupo ASSA for up to US$5 million. ASSA Panama has 12 straight years being rated as A (Excellent), so process was known. Ongoing Experience Three subsidiaries are rated, so the process is integrated into one presentation and one meeting. Efficient exchange of information (they know what to look for). Same contact person for all three companies. Future Expectations Keep learning how to continuously improve our risk management practices. Consider rating of other subsidiaries, in line with our geographic expansion.

Grupo ASSA Thank you!!

JLT Insurance Management (Bermuda) Ltd Andrew Hulme, ACII Chartered Insurer Vice President, Underwriting and Claims

Captive Insurance is generally defined as: So, why would a captive require a rating when it only covers the parent’s exposure? Thinking of rating your captive? “An insurance company that is wholly owned and controlled by its insureds and whose primary purpose is to insure the risks of its owners”

Thinking of rating your captive? Captive Parental Divisions (E.g. Tax) RegulatorsPeersCedants

Thinking of rating your captive? Why do captives need cedants / fronting insurers? Increased legislation More local paper Higher local limits An investment grade rating can help a cedant reduce its capital implications, thus reducing cost.

Thinking of rating your captive? Why use your captive manager? Help assess the need/benefit Experienced and have report Manage the process

Thinking of rating your captive? Thank you!