1. Shaping a Constructive Regulatory Environment Greg Carter 9 th June 2010

2. Agenda How does Regulation impact ratings? 5 Key areas of analysis Conclusion

3. Agenda How does Regulation impact ratings? 5 Key areas of analysis Conclusion

4. 33 Analytical Methodology Financial ReviewIndustry ReviewOperational Review Organisational Review Management Review ProfitabilityCompetitive landscape Underwriting expertise Parent financial strength Strategic vision Investments and liquidity Pricing trendsDistribution capabilities Dividend requirements Management quality Loss reserve adequacy Competitive advantage Business mixFinancial flexibilityDepth & breadth of experience Reinsurance utilisation Barriers to entryMarket shareStrength of affiliates Risk appetite Catastrophe riskBargaining powerOperational scaleStrength of subsidiaries Successful plan execution Capital adequacyTail of lossesExpense efficiencies Group synergiesOrganisational structure Financial flexibilityRegulatory environment Brand recognitionExplicit support agreements Corporate Governance Peer analysisAccounting framework IT capabilitiesHistory of supportFinancial projections Source: Fitch

5. 44 Methodology – Where does Regulation sit? Financial ReviewIndustry ReviewOperational Review Organisational Review Management Review ProfitabilityCompetitive landscape Underwriting expertise Parent financial strength Strategic vision Investments and liquidity Pricing trendsDistribution capabilities Dividend requirements Management quality Loss reserve adequacy Competitive advantage Business mixFinancial flexibilityDepth & breadth of experience Reinsurance utilisation Barriers to entryMarket shareStrength of affiliates Risk appetite Catastrophe riskBargaining powerOperational scaleStrength of subsidiaries Successful plan execution Capital adequacyTail of lossesExpense efficiencies Group synergiesOrganisational structure Financial flexibilityRegulatory environment Brand recognitionExplicit support agreements Corporate Governance Peer analysisAccounting framework IT capabilitiesHistory of supportFinancial projections Source: Fitch

6. 55 Methodology – What does Regulation influence? Financial ReviewIndustry ReviewOperational Review Organisational Review Management Review ProfitabilityCompetitive landscape Underwriting expertise Parent financial strength Strategic vision Investments and liquidity Pricing trendsDistribution capabilities Dividend requirements Management quality Loss reserve adequacy Competitive advantage Business mixFinancial flexibilityDepth & breadth of experience Reinsurance utilisation Barriers to entryMarket shareStrength of affiliates Risk appetite Catastrophe riskBargaining powerOperational scaleStrength of subsidiaries Successful plan execution Capital adequacyTail of lossesExpense efficiencies Group synergiesOrganisational structure Financial flexibilityRegulatory environment Brand recognitionExplicit support agreements Corporate Governance Peer analysisAccounting framework IT capabilitiesHistory of supportFinancial projections Source: Fitch

7. Agenda How does Regulation impact ratings? 5 Key areas of analysis Conclusion

8. 7 Median solvency ratio (%)Solvency 1QIS4 Captive331167 Reinsurance366221 Non-life277193 Composite267230 Life200230 1) Expected Regulatory Solvency Position Source: CEIOPS QIS4final report Solvency Ratios From QIS4 Compared With Solvency I

9. 8 Number of firms that would not meet Firms participating who would not meet (%) MCRSCRMCRSCR France01406 Germany0804 Italy117119 Netherlands0220 Spain011010 UK526420 2) Sources of Additional Capital Source: CEIOPS QIS4final report Capital Shortfalls in QIS4, Selected Countries

10. 9 (%)Non-lifeLifeComposites Market risk417269 Counterparty risk743 Life risk14419 Health u/w risk20115 Non-life u/w risk (premium, reserve, nat cat risk) 55020 Total124121126 Less diversification-24-21-26 3) Options for Reducing Capital Requirements Source: CEIOPS QIS4final report QIS4 Solvency Capital Requirement (SCR) Composition

11. 10 3) Options for Reducing Capital Requirements (cont) Source: CEIOPS QIS4final report -60 -40 -20 0 20 40 60 80 100 120 140 160 Non-lifeLifeComposites (%) Interest rate riskEquity riskProperty risk Spread riskConcentration riskCurrency risk Less diversification QIS4 Composition of Required Capital for Market Risk

12. 11 4) Own Funds composition & Allowance for Hybrids >Tier 1 or Tier 2? >Grandfathering? >Longer term impact on Financial Flexibility

13. 12 5) Internal Model Use >“Solvency II compliance” >The Use Test >Partial model >Comparability and Transparency

14. Agenda How does Regulation impact ratings? 5 Key areas of analysis Conclusion

15. 14 Conclusion >QIS 5 brings some clarity, but the picture is still not clear >QIS 5 results will bring the capital landscape into focus >Regulatory capital is one part of our Capital Adequacy analysis >Capital Adequacy is one part of our Credit Rating

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