1 Reinsurance Market Outlook

Contents

Executive Summary: Orderly Renewals Despite New Market Dynamics 2

Global Reinsurer Capital 3

Traditional sector drives rebound 3

Traditional capital 3

Diverging performance 5

Alternative capital 6

Collateralized reinsurance 7

Sidecars 7

Catastrophe bonds 7

Capacity outlook 8

Demand Increased Slightly as New Portfolio Dynamics Evolve 9

Property 9

Casualty 11

Primary Rate Change 13

2019 Natural Peril Losses Lower than 2017/18; Manageable for Re/insurers 14

Contact Information 16

2 Reinsurance Market Outlook

Executive Summary: Orderly Renewals Despite New Market Dynamics

January 2020 programs renewed in an orderly fashion in most regions against a backdrop of further client differentiation in reinsurer underwriting approaches, concerns over retro leading into the renewal season, and evolving loss dynamics from several business segments. Although reinsurer participations were rebalanced on some placements, overall capacity was more than adequate for most lines and geographies to secure the desired protection at renewal. Developing discussions in property renewals related to ‘secondary’ peril loss experience, climate change, and regulatory and legislative impacts as well as social inflation, reserve levels, and evolving exposures in casualty (among others) spurred new questions during renewal. These broader market challenges coupled with individual portfolio dynamics and reinsurance results, led to reinsurers taking higher stake positions (both in decreasing and increasing lines) on many placements.

Reinsurer capital increased by 7 percent through the first nine months of 2019 from USD585 billion to USD625 billion and has offset the 3 percent decline in 2018. Traditional reinsurance capital increased 9 percent, or USD44 billion to USD532 billion, over the same nine month period. Generally strong operating performance, lower global catastrophe loss activity, and slightly better investment performance contributed to increases throughout the year. Alternative capital decreased USD 4billion over the same period, falling from USD97 billion to USD93 billion. The reduction in alternative capital was largely driven by a reduction in collateralized reinsurance as catastrophe bonds, sidecars, and ILWs remained largely in line with 2018.

Catastrophe loss activity in 2019 was significantly reduced compared to the experience in 2017 and 2018 both in the primary and reinsurance markets. An estimated total catastrophe loss of USD62 billion is also well below the recent 10-year average of USD81 billion. On a nominal basis, the U.S. continues to represent the highest share of loss activity with USD32 billion in 2019 whereas APAC was the only region to end higher than their prior 10-year average at USD19 billion (compared to USD18 billion). While global wildfire loss numbers will likely evolve, U.S. losses in 2019 were down significantly compared to the prior two years. Tropical cyclone losses, often driven by Atlantic activity, saw much more significant contributions from Japan despite overall loss levels from this peril almost matching the 10-year average of USD21 billion globally.

Aon 3

Global Reinsurer Capital Traditional sector drives rebound Aon estimates that global reinsurer capital rose by 7 percent to USD625 billion over the nine months to September 30, 2019. This calculation is a broad measure of the capital available for insurers to trade risk.

Exhibit 1: Global Reinsurer Capital

Sources: Company financial statements, Aon Business Intelligence, and Aon Securities Inc. Traditional equity capital rose by 9 percent, or USD44 billion, to USD532 billion, driven principally by a recovery in the capital markets since the low at the end of 2018. It is worth noting that this total is only up by 4 percent since the end of 2014. While the sector remains well-capitalized, analysis published by earlier in 2019 by Standard & Poor’s suggested that the aggregated risk-based capital adequacy of their top 20 rated reinsurers has steadily declined since 2014. With the increase in the last 12 months, it remains to be seen whether required capital models will reverse this trend.

Headline assets under management in the alternative capital sector are estimated to have fallen by 4 percent, or USD4 billion, to USD93 billion, driven by the payment of losses and investor redemptions. It is estimated that around USD15 billion of collateral remains trapped in the wake of recent major natural catastrophe events. The reduced amount of capacity available for deployment is impacting the retrocessional market.

Traditional capital Reinsurer operating performance was generally strong in the first nine months of 2019, driven by premium growth, a manageable level of natural catastrophe losses, and unusually favorable conditions for investing.

17 22 19 2 24 28 44 50 64 72 81 89 97 93

368 388321

378447 428

461 490511 493 514 516 488 5326% -17% 18%

18%-3% 11%

7%6% -2% 5%

2% -3% 7%

385410

340

400

470 455505

540575 565

595 605 585625

0

100

200

300

400

500

600

700

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M2019

US

D (b

illion

s)

Traditional capital Alternative capital Global reinsurer capital

4 Reinsurance Market Outlook

Aon’s Reinsurance Aggregate (‘the ARA’) posted a net combined ratio of 96.8 percent, including a contribution from natural catastrophe losses of 4.4 percentage points (pp). These were primarily related to Hurricane Dorian and Typhoon Faxai. Prior year reserve development remained favorable overall, but was well down on prior years, mainly reflecting adverse development of recent major losses (notably Typhoon Jebi). Deteriorating loss cost trends in U.S. casualty business were also a factor.

The ordinary investment yield rose to 2.9 percent, aided by past interest rate rises in the U.S. and UK markets. The total yield of 4.1 percent matched the best return since the financial crisis, as stock markets recovered, and declining interest rates generated unrealized gains on bond portfolios. This boosted the annualized return on average common shareholders’ equity to 11.3 percent, a welcome result after two years of sub-par earnings.

Exhibit 2: Traditional Sector Performance*

Sources: Company financial statements, Aon Business Intelligence * Based on Aon’s Reinsurance Aggregate

Developments in the fourth quarter are likely to result in slight dilution of the ARA’s results at the full-year stage. Natural catastrophe activity was dominated by Typhoon Hagibis, which is currently expected to generate net insured losses of around USD10 billion. Total investment returns will be eroded to some extent, due to the unwinding of some of the previously reported unrealized gains on bond portfolios.

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Valuation - Price to Book

0%

1%

2%

3%

4%

5%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M2019

Ordinary Investment Return

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M2019

Return on Equity

70%

75%

80%

85%

90%

95%

100%

105%

110%

115%

120%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M2019

Combined Ratio

Aon 5

Diverging performance Around USD250 billion of insured catastrophe losses in 2017 and 2018 provided a reasonable stress test for the reinsurance market. Generally, resilience has been demonstrated and the sector remains well-capitalized and strongly-rated. Valuations are now approaching the levels seen prior to the financial crisis, reflecting recent improvement in the underlying underwriting environment.

Analysis of individual company results over the 2015-2019 period shows a significant divergence of performance, with some reinsurers showing strong profitability, while others have failed to cover their cost of capital.

Exhibit 3: Five Year Average ROE by ARA Constituent*

Source: Company financial statements

* Calculated as net income attributable to common shareholders divided by average common shareholders’ equity; 2019 based on annualization of nine month results. Earnings pressure is now beginning to result in withdrawals of treaty capacity. Notable examples include the run-off of Asia Capital Re, the non-renewal of parts of the Tokio Millennium Re portfolio and the withdrawal of Hiscox from casualty lines. In addition, four Lloyd’s syndicates have ceased underwriting and several others are pulling back from various areas of treaty business.

0%

2%

4%

6%

8%

10%

12%

14%

6 Reinsurance Market Outlook

Alternative capital Contrary to the prior decade, the 2017-2019 period has featured a frequency of peak peril losses, related mainly to Atlantic hurricane and Japanese typhoon. Some of these events, especially Hurricane Irma and Typhoon Jebi, have shown significant adverse development relative to initial projections. In addition, ‘secondary’, often unmodeled, perils such as flood and wildfire have been a notable driver of insured losses.

This confluence of events has had a significant impact on areas of the market supported by alternative capital, principally collateralized reinsurance transactions in Florida, aggregate covers in the reinsurance and retrocession markets and collateralized quota shares and low-attaching pillared structures in the retrocession market. As a result, many investors have experienced losses over this period and some have ceased their involvement.

New inflows of alternative capital were substantial at the end of 2017, more modest at the end of 2018 and pretty much confined to the catastrophe bond sector at the end of 2019, with this area of the market showing signs of rebounding. The principal reasons for the change in investor appetite are:

1. Growing belief that climate change is driving steadily rising expected catastrophe losses.

2. Concern that the impact is not fully reflected in the historical data supporting catastrophe models.

3. Undermined confidence in the industry’s ability to assess losses on a timely basis.

4. Recognition of the dilutive impact of trapped collateral on expected returns.

Fundamentally, investors are now seeking higher returns for the risks they are running. They also expect managers to deliver greater transparency around underwriting strategies, modelling capabilities, loss reporting and corporate governance. For these reasons, any new commitments have tended to favor larger firms, with strong long-term track records of successful capital deployment.

Exhibit 4: Alternative Capital Deployment

Source: Aon Securities Inc.

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 9M2019

Lim

it (U

SD

billi

on)

Cat Bonds Sidecars ILWs Collateralized Re

Aon 7

Collateralized reinsurance Recent uncertainty in loss development is resulting in cedants retaining more collateral over longer periods of time than in the past. This trapped collateral creates a drag on investor returns and ultimately raises the cost of the alternative capital being provided.

Collateralized reinsurers are heavily engaged in trying to find ways of addressing this issue. Negotiations over the terms of loss buffer tables are becoming a key feature of renewals and pricing differentiation can be expected based on historical loss experience, the accuracy of prior loss estimates and long-term performance.

Using a rated fronting company helps to mitigate the impact of trapped collateral, as reserving conversations can then be held between the fund manager and the front, rather than with multiple cedants. This approach also improves access to business, as it enables reinstatements to be offered and widens the pool of potential buyers.

Larger fund managers that can afford to deploy significant amounts of permanent capital are starting to establish their own rated balance sheets. Benefits include the elimination of fronting costs, reduced dependency on a highly concentrated fronting market and flexibility to offer investors a greater variety of investment options.

Sidecars Losses and trapped collateral have resulted in the sidecar market being one of the more capacity-constrained segments. The capital base has also been dominated by a couple of major US mutual fund managers, supported by independent advisers and high net worth investors, making it more reactive to recent events.

The demand for sidecar capacity certainly exists, driven by reinsurers’ underlying portfolio growth and tightening conditions elsewhere. However, returns have not been sufficient to attract more opportunistic investor inflows and sponsors face pressure for more attractive collateral management structures going forward.

Catastrophe bonds Recent events have had a relatively modest impact on this area of the market, given that the issue has been one of frequency rather than severity. Nevertheless, ultimate losses are expected to be well in excess of USD1 billion, derived mainly from Florida-specific deals and aggregate covers.

Investors continue to favor the transparency and liquidity of Rule 144A bonds, but new issuance still fell by 44 percent to USD5.4 billion during 2019, principally due to lower maturities of existing bonds. Total limit outstanding fell by 6 percent to USD28.9 billion at the year-end. Including other areas such as private transactions, life securitizations and insurance-linked note issuance in the mortgage sector, the total limit exceeds USD40 billion.

8 Reinsurance Market Outlook

Exhibit 5: Rule 144A Property Catastrophe Bond Issuance

Source: Aon Securities Inc. A modest tightening was evident ahead of the mid-year renewals, resulting in several deals being pared-back and a shift away from indemnity aggregate triggers. Demand for aggregate retrocessional capacity based on industry loss triggers increased, driven by capacity constraints elsewhere. These structures were well-received, with most deals completing at terms that encouraged upsizing and brought other sponsors into the market.

Capacity outlook Available reinsurance capacity remains more than sufficient to meet cedant needs. However, modest tightening is expected as 2020 progresses, with demand continuing to increase and reinsurers looking to address the earnings impact of higher retrocession costs, lower interest rates and greater reserving uncertainty.

In the alternative market, the loss of investor confidence is likely to continue squeezing collateralized reinsurance and the proportional market. However, significant levels of activity are expected in the property catastrophe bond sector, given that around USD7 billion of coverage is due to mature in the first half of 2020.

The strategy of investing in insurance risk for its non-correlating benefits remains valid. Enhancements in model clarity, improvements in transparency and refinements in contract language are ultimately expected to result in the resumption of growth in alternative capital.

28.9

0

5

10

15

20

25

30

35

02468

101214161820

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

USD billions Annual issuance Total limit outstanding

Aon 9

Demand Increased Slightly as New Portfolio Dynamics Evolve Over the past couple of years, both property and casualty markets saw new dynamics evolve that have impacted both primary and reinsurance risk. A number of these impacted coverage and price for insurers at renewal, while others have remained more qualitative and will require further research and analysis throughout the coming year. Overall, demand was stable or showed slight increases across most lines and geographies.

Property The clear majority of placements were completed in an orderly fashion during January 1, 2020 renewals. As always, there were topics of discussion and key changes present in how both insurers and reinsurers approached the market. A few of the notable items were as follows:

Topic Commentary Reinsurance Underwriting / Insurer Partnership Selection

• A theme throughout many renewals was client differentiation on the part of reinsurers impacting both price and capacity. Early analysis of placements suggests that certain programs were targeted for growth/new lines by reinsurers more than others. On a positive note for insurers, where some reinsurers declined or reduced on some programs, many other reinsurers were willing to fill the gap with new and/or larger lines. Ultimately, renewals ended with a bit of rebalancing of participations signalling there remains more than adequate capacity in the market.

• On the other hand, many insurers also took a closer look when selecting

reinsurance partners during 2020 renewals. Factors that further influenced final lines compared to prior years included retro reliance, post-loss behavior, and the desire for broader reinsurer syndication.

Retro (as it relates to reinsurance buying impacts)

• Retro capacity has been a hot topic for 2020 renewals. That said, capacity (especially for occurrence protection) was adequate to meet the demand of insurers in all regions.

Aggregate Placements

• Recent frequency of smaller events has increased client interest in aggregate coverage. That said, it was harder to come by in 2020 than in the past. In many cases, these placements (customized to fit each company’s risk appetite) had difficult loss experience. Recent losses put more scrutiny on them during this renewal.

Regulatory / Legislative Changes

• Recent changes in California and Texas have likely resulted in increases in loss and future exposure to the industry. In California, legislative action has constrained the ability to non-renew homeowner policies in areas recently impacted by wildfire events or adjacent thereto. The chief regulator has also requested the industry to voluntarily halt non-renewal activities. The maximum dwelling coverage offered by an expanding FAIR Plan, which was constant for 50+ years, has doubled from USD1.5 million to USD3.0 million. Sacramento legislation also lengthened the required living expense coverage as relates to wildfire events from 24 to 36 months (i.e., does not directly impact policies offering only a stated amount). However, the launching of the Wildfire Liability Fund in California serves to create arguments for a reduction in model exposure for events ignited by any participating utility (i.e., now just Consolidated Edison

10 Reinsurance Market Outlook

& Sempra). The potential model credit will increase by nearly twofold if PG&E is able to shift out of bankruptcy by mid-year 2020.and the claims paying capacity for the Fund remains strong. Carriers still need to seek subrogation through the electric utilities, which are supported by the Fund for events involving negligence (i.e., establishing negligence can involve a prolonged investigative process). In Texas, TWIA changed the calculation of replacement cost from following an event to when the policy is issued.

Catastrophe Risk Evaluation Changes

• Leading into renewals, a number of insurers revisited their approach to evaluation of catastrophe protection needs. This included incorporating a more exposure accumulation-based approach for many smaller insurers, especially given the lessons learned from recent wildfire losses as well as a re-evaluation of tail (risk of ruin) events and in some cases, purchases of additional vertical protection at this renewal.

Chilean Riots • Given the insured loss impact of the recent Chilean riots (USD2 to 2.5 billion),

many insurers and reinsurers re-evaluated the capacity and pricing associated with providing strikes, riot and civil commotion coverage in property contracts. While in Chile, this resulted in new aggregate caps and restrictions in coverage provided in local property catastrophe placements, macro market implications (including global contracts that covered these territories) where limited.

Loss Adjustment Expense

• While earlier this year, we saw the FHCF increase LAE coverage from 5 to 10 percent to be more in line with actual experience, many insurers also adjusted assumptions around LAE in their risk management analysis as a result of the higher percentages of losses seen in recent events and are taking a more refined approach on a peril / geography basis.

Climate Change • Climate change impacts have been a topic of discussion amongst catastrophe

risk managers in the past, but the increase in focus from regulators and investors is causing the issue to receive significant additional attention. “Mini-cats” or the increase in frequency of smaller events has been part of recent discussions and some insurers continue to review whether additional protection is warranted. That said, the increase in regulatory authorities pushing for thought in the area and questions from investors (both from an environmental impact of doing business as well as an evaluation of risk for insurance) has called for additional research and better risk evaluation insights.

Perils with Renewed Focus

• In the US, both wildfire and Tornado / Hail have seen a renewed focus from insurers in the past few years given increased loss activity. While prior years renewals focused on loss experience, 2020 saw an updated and more formulaic approach for these perils by reinsurers. At the same time, Aon has worked with insurers to evaluate models to determine the best fit / necessary adjustments for their specific portfolio dynamics.

Rate Changes • Positive rate changes in property lines for US carriers have helped to maintain terms and conditions during this renewal and offset results of the prior few years, particularly for pro rata placements.

London Market Changes

• While recent closures in the market have led to changes in available capacity, they have also resulted in shifts in underwriting talent which may be contributing to some of the changes in reinsurers approach to renewals as well.

Aon 11

Casualty The Casualty reinsurance market in 2020 does not lend itself to a single characterization. Reinsurance outcomes vary widely depending on cedent experience and exposures. Cedents are adjusting to prevailing headwinds in unique and thoughtful ways and we are seeing significant improvement in insurance pricing conditions. Demand for reinsurance remains strong as risks emerge and evolve, yielding new uncertainties. Reinsurance capacity remains abundant and diverse in most segments of the Casualty business. Differentiation and strong analytics advocacy are critical to successful reinsurance outcomes. Below are common discussion themes impacting reinsurance into 2020.

Topic Notes Social Inflation • While the exposure to these influences may be difficult to predict, the trends are

not expected to abate (especially for high-profile and/or large insureds). To date, some insurers have adjusted pricing models to account for observed industry frequency and severity.

• Creating additional volatility for insurers, especially given the large verdicts, demand for reinsurance remains strong. Pro rata reinsurance purchases today and in the past help protect insurers against outsized outcomes.

Opioids • Casualty policies are typically bodily injury and property damage triggered; the opioid issues are heavily economic damages loss. Uncertainty remain regarding whether policies will hold up as intended.

• Key issues are the exposure of multiple years of coverage, large class size for dead and injured, large class of children/families of dead/injured parties. Medical malpractice exposure is meaningful for doctors and hospital professional liability. Awareness of overfilling of orders has been an issue in the professional liability space and drug manufacturers and distributors are also targets.

Cannabis • Many insurers and reinsurers continue to approach cautiously given federal rules around Cannabis; however, state specific legalization is promoting rapid industry growth. To date, the reinsurance market has been underpenetrated given state/federal legal differences and will need further development to address cedant needs.

• Concerns remain around casualty coverages include the lack of regulation for products and vaping injuries (with new science linking to cannabis-based products) as well as the physical safety challenges with a heavily cash business. In addition, risk continues regarding professional liability from theft exposure and directors and officers related to potential IPOs.

Other Severity Loss Trends

• The market continues to see an elevated number of Security Class Action suits for D&O. The 2018 Supreme Court (Cyan) decision allowing for certain Security Class Action claims to be brought in state courts could allow for future rise in loss trends.

12 Reinsurance Market Outlook

Cyber Ransomware

• Loss activity is seeing an acceleration of frequency and severity. SME insureds more exposed given lack of IT proficiency and business interruption exposure. The ability of “bad actors” to “monetize” faster than breach events where stolen intellectual property takes longer to turn around and sell on black market.

State of the LPT/ADC Market

• Demand is increasing from cedants looking to use ADC’s for capital relief and to reduce volatility in calendar year results. Moderate capacity exists as reinsurers are aware of social inflation concerns among cedants and they will accept these liabilities for the right price, and/or structuring mechanisms.

• Demand is stable and capacity is high for runoff transactions that come with claims handling control as runoff reinsurers value claim control in hopes they can achieve additional profit through their expert claim management

Reserving / Old Year Issues

• Commercial liability reserve position is likely deficient overall (varies widely by carrier and class). As industry reserves become thinner, companies are pushing pricing harder, especially on longer tail, volatile lines of business.

Sexual Abuse / Molestation Legislation Changes

• In general, reinsurance has remained available despite the broadening of the reporting window in several large states and more changes expected to come in 2020. Attention to the potential for multiple years / multiple claimants losses, variation amongst industry coverages, and the fact exposure goes beyond educational institutions and churches will be key to demonstrating proper risk management and maintaining future reinsurance capacity.

Wildfire Liability • California exposed industries are under significant pricing and coverage pressure and wildfire exposure in other venues are also seeing capacity reductions. Bespoke wildfire solutions are available in the reinsurance market and have been effective at helping to manage risk for cedants.

Yield Curve Issues

• Uncertainty around long-term interest rates is making nominal underwriting profit even more central to discussions on reinsurance and likely further fuels original rate increases for most long-tail lines.

Coal • Several (re)insurance companies have stated positions to reduce coal-related exposures in their portfolios resulting in significant tightening of capacity for this exposure.

Clash / Contingent / Systemic

• Clash and contingency covers have been effective supporting cedents through large ECO / XPL losses, especially in auto liability. Earnings protection is critical element, typically. A variety of structure and coverage options remain available in the global reinsurance market as cedent needs vary widely.

Insurance Rate Increases

• In the U.S., original rate increases – 20 percent or more in large public company D&O and large account Umbrella – and rate adequacy are helping to improve reinsurance terms, especially on pro rata and this momentum is expected to continue into 2020.

Aon 13

Primary Rate Change

In the US rates trended positively again for most major lines of business. Umbrella rates showed the sharpest increase in Q3, up 11.9 percent on a weighted average basis compared to mid-single digits for renewals in Q1 and Q2. Commercial auto and commercial property showed a further uptick from earlier quarters to 10.8 percent and 10.4 percent respectively. General liability increased by 5.4 percent in Q3 and showing a marked increase from relatively flat renewals in 2018 and very low single digits earlier in 2019. On the other hand, rates declined again in workers compensation, down 3.4 percent.

Exhibit 6: U.S. Rate Change By Line of Business

Source: Council of Insurance Agents and Brokers

50.0%

70.0%

90.0%

110.0%

130.0%

150.0%

170.0%

190.0%

210.0%

230.0%

250.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Commercial Auto Commercial Property General Liability

Umbrella Workers' Comp

14 Reinsurance Market Outlook

2019 Natural Peril Losses Lower than 2017/18; Manageable for Re/insurers Global catastrophe losses from natural disasters in 2019 were much reduced from the record costs incurred in 2017, and the elevated payouts in 2018. However, payouts by the private insurance industry and government-sponsored programs marked the fourth consecutive year in which they topped USD60 billion; the first time this has occurred for the industry. The recent decade cited 7 of 10 years in which insured losses topped the USD60 billion threshold. The 2019 insured losses were driven by an active year for tropical cyclone landfalls in the Atlantic and Pacific Ocean basins, severe convective storms, and inland flooding. Given the uncertainty surrounding some of 2019’s biggest events, including typhoons Hagibis and Faxai in Japan, loss totals are to be considered preliminary and subject to change.

Exhibit 7: Insured Losses by Year by Type

Source: Aon’s Reinsurance Solutions

Global insured losses in 2019 were tentatively listed at USD62 billion (subject to change), which is 23 percent lower than the most recent 10-year average of USD81 billion. Of note, this is the first time that the rolling 10-year average of insured losses have exceeded USD80 billion. When analyzing the annual loss in relation to the 10-year median, the 2019 value was 23 percent higher (USD51 billion). Median analysis provides a different and more accurate depiction of disaster losses and helps to minimize any skew from outlier data or extreme volatility on a year-to-year basis.

As has been the case in every year since 2011, the United States was the predominant driver of industry losses. It accounted for 50 percent of global industry payouts. APAC was second at 31 percent, EMEA third at 13 percent, and the rest of the Americas at 6 percent.

0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

USD

Bn

(201

9)

Other Drought Winter Weather Wildfire EU Windstorm

Earthquake Flooding Severe Weather Tropical Cyclone

Aon 15

The two costliest perils of 2019 were severe convective storm and tropical cyclone; which resulted in more than a combined USD44 billion in payouts. The most expensive event of the year was Typhoon Hagibis (~USD9 billion). The October storm brought extensive flooding and wind damage across a wide swath of the country, including in the Tokyo metro region. Hagibis occurred just weeks after Typhoon Faxai struck many of the same areas and resulted in an estimated USD6 billion in payouts. The combined costs are expected to mark the second year in a row of at least USD15 billion in typhoon-related losses in Japan. Similarly to the 2018 events (Jebi and Trami), the re/insurance market is expecting a prolonged period of loss development that will extend into 2020; likely after the end of Japan’s reinsurance renewal season on April 1.

The re/insurance market in the United States was again marked by elevated payouts associated with severe convective storms (largely driven by hail and tornadoes), record rainfall/flooding, wildfires, and tropical cyclones (Imelda and Dorian). For public entities, notably the USDA’s Risk Management Agency crop insurance program, paid out more than USD6 billion in flood or excess-moisture related claims following exceptional spring and summer flooding across the Plains and Midwest. The California wildfire season, while again active, resulted in less than USD1 billion in payouts. This is a substantial reduction from the total USD32 billion incurred in 2017/18.

Additional notable global disasters for the re/insurance industry included Hurricane Dorian’s impacts in the Bahamas, Windstorm Eberhard in Europe, and a major flood event in Queensland, Australia.

Exhibit 8: Insured Losses by Region

To find the most up-to-date global catastrophe loss data for 2019, and other historical loss information, please visit Aon’s Catastrophe Insight website: http://catastropheinsight.aon.com.

Impact Forecasting’s Weather, Climate and Catastrophe Insight: 2019 Annual Report will be released in mid-to late-January 2020 and include a comprehensive overview of the year’s events.

4

19

8

32

8

18

11

44

4

10 10

30

0

5

10

15

20

25

30

35

40

45

50

Americas APAC EMEA United States

USD

Bn

(201

9)

2019 10 Year Avg. 10 Year Median

16 Reinsurance Market Outlook

Contact Information Tracy Hatlestad Global Chief Operating Officer of Analytics Reinsurance Solutions +1 952 886 8069 tracy.hatlestad@aon.com Greg Heerde Head of Analytics & Inpoint, Americas Reinsurance Solutions +1 312 381 5364 greg.heerde@aon.com Gero Michel Head of Analytics, UK & EMEA Reinsurance Solutions +44 0(20)7086 1726 gero.michel@aon.com

Peter Cheesman Head of Analytics, APAC Reinsurance Solutions +61 2 9650 0462 peter.cheesman@aon.com Mike Van Slooten Head of Business Intelligence, International Reinsurance Solutions +44 0(20) 7522 8106 mike.vanslooten@aon.com Marie Teissier Business Intelligence, International Reinsurance Solutions +44 0(20) 7522 3951 marie.teissier@aon.com

© Aon Securities Inc. 2019 | All Rights Reserved Aon Securities Inc. is providing this document and all of its contents (collectively, the “Document”) for general informational and discussion purposes only, and this Document does not create any obligations on the part of Aon Securities Inc., Aon Securities Limited or their affiliated companies (collectively, “Aon”). This Document is intended only for the designated recipient to whom it was originally delivered and any other recipient to whose delivery Aon consents (each, a “Recipient”). This Document is not intended and should not be construed as advice, opinions or statements with respect to any specific facts, situations or circumstances, and Recipients should not take any actions or refrain from taking any actions, make any decisions (including any business or investment decisions), or place any reliance on this Document (including without limitation on any forward-looking statements). This Document is provided for the purpose of providing general information and is not intended, nor shall it be construed as (1) an offer to sell or a solicitation of an offer to buy reinsurance, (2) an offer, solicitation, confirmation or any other basis to engage or effect in any transaction or contract (in respect of reinsurance, a security, financial product or otherwise), or (3) a statement of fact, advice or opinion by Aon or its directors, officers, employees, and representatives (collectively, the “Representatives”). Any projections or forward-looking statements contained or referred to in this Document are subject to various assumptions, conditions, risks and uncertainties (which may be known or unknown and which are inherently unpredictable) and any change to such items may have a material impact on the information set forth in this Document. Actual results may differ substantially from those indicated or assumed in this Document. No representation, warranty or guarantee is made that any transaction can be effected at the values provided or assumed in this Document (or any values similar thereto) or that any transaction would result in the structures or outcomes provided or assumed in this Document (or any structures or outcomes similar thereto). Aon makes no representation or warranty, whether express or implied, that the products or services described in this Document are suitable or appropriate for any cedent, sponsor, issuer, investor, counterparty or participant, or in any location or jurisdiction. The information in this document is based on or compiled from sources that are believed to be reliable, but Aon has made no attempts to verify or investigate any such information or sources. Aon undertakes no obligation to review, update or revise this Document based on changes, new developments or otherwise, nor any obligation to correct any errors or inaccuracies in this Document. This Document is made available on an “as is” basis, and Aon makes no representation or warranty of any kind (whether express or implied), including without limitation in respect of the accuracy, completeness, timeliness, or sufficiency of the Document.

Aon 17

Aon does not provide and this Document does not constitute any form of legal, accounting, taxation, regulatory, or actuarial advice. Recipients should consult their own professional advisors to undertake an independent review of any legal, accounting, taxation, regulatory, or actuarial implications of acribed in or related to this Document. Aon and its Representatives may have independent business relationships with, and may have been or in the future will be compensated for services provided to, companies mentioned in this Document.