1. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA Middle East Insurance Forum 2006 Paul Jewell Regional VP, Property & Energy Middle East, Mediterranean & South Asia 21 st March 2006 The Impact of Natural Disasters on Regional Trends in Insurance

2. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 2 Topics  Global Warning  Hurricanes  Typhoons  Earthquake/Tsunamis  Impact on Insurance and Reinsurance  How does all this relate to the Middle East?

3. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 3 Global Warming  Mean annual surface air temperature risen by 0.5ºC (0.9ºF) since 1960.  Rise in Intensity of Events  World-wide impact : US Gulf Coast, Japan, Australia, Europe, Pakistan, India, Sri Lanka and Thailand..etc  Predictions of increasing water levels due to the melting of the polar ice caps

4. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 4 Hurricanes  Long term average 9.6 per season with 2 or 3 becoming intense hurricanes.  20 to 30 year cycles  Latest started in 1995. Another 10+ years of instability  Increased flooding, mudslides and storm surges

5. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 5 Hurricanes  Hurricane Katrina – 3 rd strongest storm to make landfall in the US  Estimated Insurance costs $40bn to $55bn  Economic loss from US windstorms in 2005 estimated at $174bn  7.5% of US non-life premium volume  Add the impact of 2004, estimated insured losses range from $20bn to $40bn (Charley, Frances, Ivan and Jeanne)

6. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 6 Typhoons  Japan affected by approx 2.6 Typhoons a year over past 30 years  2004 was considered a 1 in 140 year event  Hong Kong has been hit by a strong Typhoon on average every 5.7 years. Is 2006 the next?

7. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 7 Earthquakes  Annual Average is 134 per annum (6.0 to 6.9 on the Richter scale)  Major earthquakes (7.0 to 7.9) 17 per annum  1 per annum exceeding 8.0  Generally 7.5 magnitude is required to generate a Tsunami  Average is 6 Tsunamis per 100 years in the Pacific Ocean.  Atlantic Ocean considered a 1 in 10,000 year event

8. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 8 Earthquakes  In the last decade destructive Tsunamis seen in Nicaragua(1992), Indonesia (1992,1994,1996), Japan (1993), Philipines (1994), Mexico (1995) Peru (1996, 2001), Papua-New Guinea (1998),Turkey (1999) and the most recent in Indonesia (2004)  In 2005 earthquakes were seen close to the region. Pakistan, Iran, Turkey, Greece and Indonesia  Some tremors felt in Dubai!  No or little warning prior to an event  Larger potential for devastation of property and human life

9. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 9 Impact on Insurance & Reinsurance  2005 total economic losses estimated at $230bn from catastrophes alone  United Nations project that weather related losses will impact the industry to the tune of $150bn over the next decade  Weather patterns are changing with extreme events seen across the globe  A number of insurers ‘blew’ through their catastrophe protections (India and Sri Lanka particularly)  Increased insurance penetration in developing countries could raise the potential insured losses

10. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 10 Impact on Insurance & Reinsurance  Global Insurers and Reinsurers have been impacted  Fresh capital has been required to sustain some operations  PXRE is the highest profile casualty  Retrocession market has become limited  Price increases seen in US markets  Oil and Petrochemical industry in the US Gulf seeing 4 fold increase in premiums  Insurers reviewing their catastrophe modeling

11. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 11 Impact on Insurance & Reinsurance  Awareness has prompted increase catastrophe purchase  Reinsurers are requesting a premium for catastrophe prone areas.  Insurers taking higher retentions  Improvement in terms seen in the US and some regions  Cash flow underwriting and rate reductions noted in other markets (India, Sri Lanka and Pakistan)  Mergers and acquisitions are now being reported. Swiss Re takes over Gen Re is the highest profile.

12. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 12 How does all of this relate to the Middle East?  What is around the corner?  Will increasing sea levels have an impact on the reclaimed land developed areas?  Is a Tsunami a threat?  Are there exposures that haven’t been modeled yet?  Snow in the UAE last year was a first?  Will new capital in Bermuda reach the Middle East?

13. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 13 How does all of this relate to the Middle East?  Is there sufficient ROI for reinsurers in low risk areas?  Some Lloyds syndicates have increased their premium threshold. Focus on US and well rated business  Reinsurers focus is on the US but will turn to other areas. Expect pressure for rate movement at the end of 2006/7  If 2006 is a bad catastrophe year their will be an impact on the industry as a whole.  Impact will be felt in 2007.

14. AMERICAN INTERNATIONAL UNDERWRITERS MEDITERRANEAN, MIDDLE EAST & SOUTH ASIA 14 Thank You Questions?