1. Baku, June 20, 2013 Europa Re Value Proposition A brief outline 1 Riccardo Ciccozzi Accreditation & Representation Specialist

2. Agenda Context –SEE Exposure to Natural Disasters –Natural Disasters’ impact in SEE –Catastrophe Insurance Markets Project –Vision and Market Value preposition –Key services –Main Steps Challenges ahead 2

3. Major Natural Disasters in South East Europe 3 Source : Mitigating the Adverse Financial Effects of Natural Hazards on the Economies of South Eastern Europe A Study of Disaster Risk Financing Options South Eastern Europe Disaster Risk Mitigation and Adaptation Programme - Eugene N. Gurenko Wael Zakout The World Bank, Sustainable Development Department Europe and Central Asia Region and UN/ISDR secretariat Europe February 2008

4. SEE High Exposure to Natural Disasters South East Europe (SEE) is highly vulnerable to natural disasters. –In the past thirty years, economic losses in excess of $70 billion were reported. –A major earthquake in Turkey in 1999 caused more than 17,000 deaths and economic damages estimated at 5% of GDP. –Floods in Central and South East Europe alone in 2002 and 2005 caused economic losses of $15 billion and $2.5 billion, respectively, leaving over 25,000 people homeless. –In ten of the twenty-eight countries in the region, up to 4 million people are exposed to severe natural catastrophic perils, while up to 32 million (or 7% of the region’s population) can be affected by natural disasters. Climate Change is expected to worsen the region’s exposure –Due to the growing volatility of climate, smaller but more frequent events are also becoming a major reason for concern. 4

5. Disaster Risk Reduction & Disaster Risk Financing Disaster Risk Financing reduces the opportunity cost of disasters (cost of securing funds to sustain a natural disaster) 5 Disaster Risk Reduction reduces the expected disaster losses

6. Catastrophe Insurance Markets – Development Prospects The growth potential of Cat Property Markets in SEE is therefore very high. For example: Turkey Market –Turkish Catastrophe Insurance Pool (TCIP) established in 1999 –Turkey cat insurance penetration at 25% of insurable stock Romania Market –Romania Natural Disaster Insurance Pool (PAID) established in 2008 –Romania cat insurance penetration at 60% of insurable stock Success can be achieved through combined efforts of the public and private sectors: –Support by adequate government policy –Regulatory reform –Consumers’ education –Reliable claims performance –Commercial connection between flood / quake coverage and mortgage loans This was achieved in Central Europe: –Poland – Cat Insurance Penetration at 55% –Slovakia - Cat Insurance Penetration at 58% –Czech Republic - Cat Insurance Penetration at over 60% –Hungary - Cat Insurance Penetration at over 70% 6

7. Catastrophe Property Risk Insurance Pools – Examples Regional (sovereign) catastrophe risk insurance pools –Caribbean Catastrophe Risk Insurance Facility –Pacific Disaster Risk Insurance Program (under development) National property catastrophe risk insurance pools –Turkish Catastrophe Insurance Pool –California Earthquake Authority –Taiwan Residential Earthquake Insurance Pool –Algeria Catastrophe Risk Insurance Pool –Romanian Natural Disaster Insurance Pool (PAID) –Consorcio de Compensación de Seguros (Spain) –CCR (France) Etc. 7 A variety of tools and approaches are possible Issue Cat Bonds? Mandatory Insurance? Regional Spread or National Focus?

8. Nat Cat Risk Regional Exposure Nat Cat Damage Impact Private Insurance? Europa Re Solution 8  South East Europe (SEE) is highly vulnerable to natural disasters  Climate Change is expected to worsen the region’s exposure  Adverse impacts on governments’ budgets  Socio-economic implications on households  Adverse economic effects on business  Very Low Cat Insurance Penetration  Lack of Risk Awareness  Market Growth Potential FloodHeat WavesDroughtQuake

9. Europa Re - Business Model – Vision & Mission 9 A Swiss-based company owned by countries of Southeast Europe (SEE) Supported by the World Bank, EU, UNISDR, SECO and GEF Providing innovative technology-driven solutions to SEE insurers writing catastrophe and weather risk insurance products A Swiss-based company owned by countries of Southeast Europe (SEE) Supported by the World Bank, EU, UNISDR, SECO and GEF Providing innovative technology-driven solutions to SEE insurers writing catastrophe and weather risk insurance products Vision - Increase the level of catastrophe insurance penetration amongst households, small and medium enterprises (SMEs) and farmers in the SEE region Educating consumers Improving and standardize credit quality of insurance products Enabling insurers to sell weather and catastrophe risk insurance Helping governments and insurance regulators Vision - Increase the level of catastrophe insurance penetration amongst households, small and medium enterprises (SMEs) and farmers in the SEE region Educating consumers Improving and standardize credit quality of insurance products Enabling insurers to sell weather and catastrophe risk insurance Helping governments and insurance regulators Mission Europa Re Project

10. Key Services - Risk Management Market Issue: lack of high-resolution and reliable catastrophe (cat) models for SEE cat exposures ERe Solution: provide local insurers with state-of-the-art probabilistic cat modelling tools based on the latest technology offered by Market Leaders Main Benefits: High-resolution Models available at a much lower cost ERe’s Cat Models’ technology is underpinned by: –AIR’s global research in catastrophe risk modelling –Country specific risk data –Unique business applications ERe’s Risk management systems allow insurers to accurately evaluate: –Potential losses resulting from catastrophe insured risks at any point in time; –Net retention capacity relative to available solvency. 10

11. 11 Real-time monitoring of disaster events and option to receive notifications Reports on disaster risk assessment of their properties/businesses Identification of major structural vulnerabilities of their properties Advice on possible risk reduction techniques Referrals to insurance companies accredited under Europa Re program Community catastrophe risk assessment and management service Key Services - CATMonitor

12. Key Services - What will Europa Re do for Consumers Government As result: -Consumers’ profit and assets are better protected -Higher incentive to produce Outcome -Increased production -Increased income -Higher contribution to economy Insurance companies Direct subsidies Insurance premium subsidies Basic Insurance protection Specialized Insurance protection Europa Re Expertise on improving the subsidy scheme New user friendly and affordable products Know how Awareness Education Development of distribution channels New Parametric Insurance Products Improved market mechanism Consumers 12

13. Key Services - What can be expected from ERe products Products Simple Affordable Easily accessible Reliable Covering consumers’ production needs Innovative 13 Earthquake and Flood insurance for homeowners and SME’s Weather insurance products for agriculture Other as explored to fit market needs fast and simplified loss settlements Remote Sensing & Cat Modelling Technologies

14. Europa Re Parametric products 1. Precipitation 2. Temperature Main principle of parametric weather insurance: Coverage in case of unusual behavior of weather excessive precipitation drought (minimal rainfall) high heat low heat freeze 14

15. Example: Drought insurance What triggers an insurance event? when total amount of precipitation for the period is below the minimum threshold What types of thresholds? 1. minimum threshold for period 2. maximum threshold for period (based on long term average for period) What precipitation values are accepted? daily values of precipitation measured officially by Authorized National Weather Service 15

16. Pre-eventPost-Event Event timeline Geocoding at the time of underwriting Pre-event Imagery Exposure data Protocols Claims submission Assignment Evaluation in-house or send adjustors to review Phase 3 Claims settled Phase1 48-72 hrs Imagery data collection Remote Damage Assessment Phase1 Claims settled Phase 2 1-2 weeks Effectively target adjustors and claims resources In-field damage assessment Phase 2 Claims settled Phase 3 within weeks Claims Adjusting and Management Financial Management Before/After image comparison Work Management Documents I Correspondence I I Contacts I Work Management Documents I Correspondence I I Contacts I Litigation Subrogation Salvage Litigation Subrogation Salvage A new perspective for claims Event Event Monitoring & immediate notification

17. Main Sequencing Steps 17 Platform TestingCompatibility and proper functioning of the systemsEuropa Re Accreditation Sales Certificates Europa Re Accreditation Claims Reporting Certificates Europa Re New Products Launch Education and Promotion

18. Challenges ahead Government Involvement: –To educate, regulate and incentivize Consumers’ resistance: –Lack of risk awareness / low trust in private insurance Insurance Industry Resistance: –What’s in it for me? But, Engage & Innovate Lessons from the Macedonian farmers 18 New Legislation and regulations shall be issued in SEE to foster private cat insurance Promotional activities shall target directly consumers in the region Local Insurers to enter into formal cooperation with ERe New Legislation and regulations shall be issued in SEE to foster private cat insurance Promotional activities shall target directly consumers in the region Local Insurers to enter into formal cooperation with ERe

19. Thank you for your attention! Contact details: info@europa-re.com www.europa-re.com 19