1. SOLVENCY II and Reinsurance General Overview The 2nd International Istanbul Insurance Conference 30 th of September 2010

2. Solvency II - Key Factors Risk based approach Fair value basis –Reinsurance assets will be valued on BE basis allowing for an expected loss and accounting for reinsurer rating Mitigating effect of reinsurance

3. Solvency II - Comments The industry is still very much in favour of Solvency II With each wave of papers published by CEIOPS, the consultation peiod has become shorter, and insurers and regulators have limited numbers of qualified senior personnel available to respond appropriately. But capital requirements under Solvency II have yet to be finalised, and larger insurers are growing concerned with the current proposed calibration The industry is currently focusing on the cost of getting ready for Solvency II The function of reinsurance as a source of medium – and long term capital is clearly coming to the forefront of many reinsurance buying strategies. S&P sees reinsurers as being one of the principle beneficiaries under Solvency II, at least in the first few years of the new regime We are supportive of the principles, but the devil is in the detail.

4. Solvency II

5. Best Estimate –It must be calculated Gross and the BE ceded Proporcional -> Full Benefit XL : Adjustment net to gross –Direct and proporcional reinsurance »Only XL per risk and per Segment New possibilities for proporcional reinsurance

6. Solvency II Cat Risks –Natural catastrophe Perils –Man Made (NEW)

7. Natural Perils –Standardised scenarios Based on Perils per country and Cresta zones (EQ, Storm, Hail…) EEUU scenarios It must be calculaded Gross and then calculate the reinsurance Possibility of buying reinsurance for these scenarios

8. Man Made Cat Standardised ScenariosConclusions  Fire (explosion of a refinery) – Highly complex  Motor (Mont Blanc tunel) – High volume of information  Marine  Aircraft  Health – Possibility to be reinsured for these specific scenarios (NEW)

9. Catastrophes Factor based Method

10. Fixed Factors EventsLine of business affectedGross Factor StormFire and property; Motor, other classes175% FloodFire and property; Motor, other classes113% EarthquakeFire and property; Motor, other classes120% HailMotor, other classes30% Major fires, explosionFire and porperty175% Major MAT disasterMAT100% Major motor vehicle liability disastersMotor vehicle liability40% Major third party liability disasterThird party liability85% Credit 139% Miscellaneous 40% NPL Property 250% NPL MAT 250% NPL Casualty 250%

11. Next Steps Preparing the figures

12. Details Do we have the information? Where can we get the information from? In which format do we have it? Are the details reliable? Can we exploit that information? Do we have the information detailed by reinsurers and its ratings? …..

13. Details YES -> Determine correctly our SCR NO -> We will have many difficulties and we might be penalized by a major requirement of the capital

14. Examples of needed details Best Estimate (BEL) –Triangles with the major number of years for segment Solvency II Premiums Paid claims Incurred claims Expenses Life – Accident –Variation of the net value of the least passive assets for several risks (mortality, longevity …)

15. Examples of needed details Reinsurance Estructure –Proporcional – very easy (Gross to Net) –Xl for risk only for segment Average cost for claim Number of claims Priority / Limit –Balance and BE calculation for reinsurance and rating

16. What can reinsurers do? Proporcional reinsurance XL per risk per segment Cat Risks: Programs based on SII scenarios Reinsuracne Rating (Long Tail) Risk transfer Optimization of the use of reinsurance

17. Thank you very much Teþekkür Ederim