Baku, June 20, 2013

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

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

3. Major Natural Disasters in South East Europe 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 WaelZakout 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.

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) • 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%

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. • A variety of tools and approaches are possible Issue Cat Bonds? Mandatory Insurance? Regional Spread or National Focus?

8. Flood Heat Waves Drought Quake • 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 Market Infrastructures to develop Catastrophe and Weather Risk Insurance for Households, SMEs and Farmers

9. Europa Re - Business Model – Vision & Mission 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 Europa Re Project Mission

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’sRisk 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.

11. Key Services - CATMonitor • 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

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

13. Key Services - What can be expected from ERe products 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

15. Example: Drought insurance

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

17. Main Sequencing Steps

18. Challenges ahead 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 • 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

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