International Economic Outlook & the Middle East Region’s Role in

the World EconomyInsurance & Reinsurance Market Implications

Multaqa Qatar 2012

Doha, Qatar

13 March 2012

Download at www.iii.org/presentationsRobert P. Hartwig, Ph.D., CPCU, President & Economist

Insurance Information Institute 110 William Street New York, NY 10038

Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org

2

Presentation Outline

Global Economic Overview & Outlook

International Overview

Emerging vs. Developing Markets

Middle East Focus

(Re) Insurance Implications

Implications of the Persistent Low Yield Environment for (Re)Insurers

Oil and Energy Market Overview

Price Trends

Long-Term Supply, Demand and Infrastructure Considerations

Insurance Implications

The Unfortunate Nexus of Opportunity, Risk and Uncertainty

The Fusion of Economic and (Geo)Political Risk

Top 10 Risks for the Global Economy

Global Catastrophe Loss Trends and Threats

Was 2011 an Aberration or a Foreshadowing of the Future

Global Economic Outlook: Regional and Major Economy

Perspectives

3

Strength of Economies Varies Greatly as

Does Pace of Recovery from the

Challenges of 2011

Important Consequences for Insurer and

Reinsurer Growth Opportunities3

4

Real GDP Growth Forecasts: Major Economies: 2011 – 2013F

Sources: Blue Chip Economic Indicators (2/2012 issue); Insurance Information Institute.

1.7

%

0.9

%

1.6

%

3.0

%

2.2

%

0.4

%

0.4

%

8.2

%

1.8

%2.6

%

1.8

%

1.0

%

1.5

%

8.5

%

1.8

%

9.2%

-0.8%-0.4%

-2%

0%

2%

4%

6%

8%

10%

US UK Euro Area Germany China Japan

2011 2012F 2013F

Growth Prospects Vary Widely by Region: Brightening in the US, Mild Recession in the Eurozone, A ―Soft Landing‖ in China, Strength in

India, Reconstruction Stimulus in Japan and Modest Growth in America’s Largest Trading Partners—Canada and Mexico.

The Eurozoneand UK are in

recession. Both should

end in Q3:2012

China growth has slowed, but remains strong in an expected ―soft landing‖

scenario

US recovery

continues

Rebuilding acts as a

stimulus to Japanese economy

5

Real GDP Growth Forecasts: Emerging Market Regions: 2010 – 2013F

*Excludes Libya in 2011. **Indonesia, Malaysia, Thailand, Philippines and Vietnam

Sources: IMF World Economic Outlook (Jan. 24, 2012 update); Insurance Information Institute.

5.2

%

9.9

%

4.3

%

4.5

%

4.0

%

6.9

%

5.3

%

3.8

%

7.0

%

3.1

%

5.1

%

4.9

%

3.3

%

7.1

%

1.1

%

3.3

%

5.2

%

5.5

%

3.9

%

8.0

%

3.6

%

2.4

% 3.5

%

5.6

%

5.3

%

4.1

%

4.8

%

3.2

%0%

2%

4%

6%

8%

10%

12%

World

Output

India Middle

East &

North

Africa*

Central &

Eastern

Europe

Russia ASEAN-5** Sub-

Saharan

Africa

2010 2011 2012F 2013F

Growth Prospects Vary Widely by Region: All Regions Slowed in 2011 As Economic Recovery Encountered Many Challenges. IMF Outlook for 2012 Is Mixed With Broader, More Robust Growth in 2013 Predicted.

Actual Growth in 2012 Could Surprise to the Upside.

Middle East Region has seen growth slow with

political upheaval in several nations

(4.0)

(2.0)

0.0

2.0

4.0

6.0

8.0

10.0

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

F1

3F

Advanced economies Emerging and developing economies World

Source: International Monetary Fund, World Economic Outlook Update, Jan. 2012; Ins. Info. Institute.

Emerging economies (led by China) are expected to grow by 5.4% in 2012 and

5.9% in 2013.

GDP Growth: Advanced & Emerging Economies vs. World, 1970-2013F

Advanced economies are expected to grow at a sluggish pace of 1.2% in

2012 and 1.9% in 2013.

World output is forecast to grow by 3.3% in 2012 and 3.9% in 2013. The world economy shrank by 0.6% in

2009 amid the global financial crisis

GDP Growth (%)

7

Relative Shares of Global Output,Advanced vs. Developing Economies, 2009

Developing

Economies

47.1%

Advanced

Economies

52.9%

Source: EDC Economics, “The Moment of Truth: Global Export Forecast Fall 2010, at http://www.edc.ca/english/docs/gef_e.pdf

The gap is closing quickly. China became the world’s second largest

economy in 2010 and before long the developing world’s share of GDP will exceed that of advanced economies.

8

Current Real GDP Growth vs. Pre-Crisis Average (2000-2007 vs. 2011F-2012F*)

*Percentage point difference between compound annual rates of change 2000-2007 vs. forecasts for 2011-2012.

Source: IMF, World Economic Outlook, September 2011; Insurance Information Institute.

Latin and South American markets are

in general growing more strongly than prior to the crisis

The US, Europe and Eurasia have seen

significant slowdowns

Parts of the Middle East and South Asia

have done well

9

Current Real GDP Growth vs. Pre-Crisis Average (2000-2007 vs. 2011F-2012F*)

*Percentage point difference between compound annual rates of change 2000-2007 vs. forecasts for 2011-2012.

Source: IMF, World Economic Outlook, September 2011; Insurance Information Institute.

Growth in much of Europe today is about 2 pts.

Lower than pre-crisis

INVESTMENTS: THE NEW REALITY

10

How Much of a Threat Are Persistently Low Interest Rates for (Re)Insurers?

10

Reinsurer Investments: Bonds Are Safe but Vulnerable to Low Yield Environment

Source: Guy Carpenter; Insurance Information Institute.

Asset Allocation of Reinsurer Investment Portfolio

(As of September 30, 2011)

Reinsurer (and primary insurer) portfolios are

overwhelming weighted toward fixed income

securities

12

Treasury Yield Curves: Pre-Crisis (July 2007) vs. Feb. 2012

0.06% 0.09% 0.12% 0.16% 0.28%

1.37%

1.97%

4.82%4.96% 5.04% 4.96%

4.82% 4.82% 4.88% 5.00% 4.93% 5.00%5.19%

0.83%

0.38%

3.11%

2.75%

0%

1%

2%

3%

4%

5%

6%

1M 3M 6M 1Y 2Y 3Y 5Y 7Y 10Y 20Y 30Y

February 2012 Yield Curve

Pre-Crisis (July 2007)

Treasury yield curve remains near its most depressed level

in at least 45 years. Investment income will fall as

a result. Fed is unlikely to hike rates until well into 2014.

The Fed Is Actively Signaling that it Is Determined to Keep Rates Low Through Late 2014

Source: Federal Reserve Board of Governors; Insurance Information Institute.

3-Month Interest Rates forMajor Global Economies, 2008-2012F

0.7

%

0.3

% 0.7

%

2.0

%

2.5

%

1.4

%1.8

%

0.6

%

2.1

%

1.3

%

1.0

%

0.2

%

0.9

%

0.2

% 0.7

%

2.9

%

0.9

%

0.2

%

1.1

%

0.2

%

0.8

%

4.9

%

1.1

%

0.1

%

0.9

%

0.2

%

0.9

%

5.5

%

0.9

%

0.1

%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Euro Area Japan UK China Netherlands US

20082009201020112012F

Source: Blue Chip Economic Indicators, Feb. 2012 edition.

Interest rates remain generally low in much of the

world, depressing insurer investment earnings.

Central banks in many countries, including the US,

are intentionally holding rates low.

14

-1.8

%

-1.8

%

-2.0

%

-3.6

%

-3.3

%

-3.3

%

-3.7

%

-4.3

%

-5.2

%

-5.7

%

-7.3%

-1.9

%

-2.1

%

-3.1

%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Per

sona

l Lin

es

Pvt P

ass A

uto

Per

s Pro

p

Com

mer

cial

Com

ml A

uto

Cre

dit

Com

m P

rop

Com

m C

as

Fidelit

y/Sure

ty

Warra

nty

Sur

plus

Line

s

Med

Mal

WC

Rei

nsur

ance**

Lower Investment Earnings Place a Greater Burden on Underwriting and Pricing Discipline

*Based on 2008 Invested Assets and Earned Premiums

**US domestic reinsurance only

Source: A.M. Best; Insurance Information Institute.

Reduction in Combined Ratio Necessary to Offset 1% Decline in Investment Yield to Maintain Constant ROE, by Line*

14

Suggests that reinsurers need to reduce their combined ratio by more

than 7 points to offset a 1% decline in yield to maintain the same ROE

15

Focus on Middle East Economies

Economic Experiences of Middle East Countries Varies Widely

16

Real GDP Growth: World vs. Middle East, Region, 1980-2016F

Source: IMF; Insurance Information Institute.

GDP growth in the Middle East has

generally outperformed the world as a whole for the past 20 years

First Gulf War—Record oil prices

caused Middle East GDP to surge

IMF expects Middle East growth to normalize 2012-2016

17

Real GDP Growth: Key Middle Eastern States, Including Qatar, 1980-2016F

Source: IMF; Insurance Information Institute.

IMF expects Iraq to be the regions growth leader through 2016

(effect of starting from a small base GDP)

Qatar GDP growth has generally outperformed the Middle East region over the past 15 years

(since 1996)

Kuwait during first Gulf War

18

Real GDP Growth Forecasts: Emerging Market Regions: 2010 – 2013F

Sources: IMF World Economic Outlook (Jan. 24, 2012 update); Insurance Information Institute.

12.6%

6.0%

3.8% 3.6% 3.6% 3.4%

1.4%

9.8%

4.9% 4.9%4.2% 4.2% 3.8%

4.6% 5.0%4.0%

0%

2%

4%

6%

8%

10%

12%

14%

Iraq Qatar World UAE Bahrain Oman Iran Syria

2012F 2016F

Growth Prospects Vary Widely Throughout the Middle East.

Qatar is the true growth leader in 2012 as Iraq starts from a

very low base

19

Oil Demand Will Rise, Oil Prices Will Rise Still Faster

Long-Run Demand and Price Dynamics Remain Strong for Oil and

Associated Insurance Markets

20

Commodity Price Changes Including Oil, Jan. 2010- Jan. 2012*

50

100

150

200

250

300

1-J

an-1

015-J

an-1

0

29-J

an-1

012-F

eb-1

026-F

eb-1

0

12-M

ar-

10

26-M

ar-

10

9-A

pr-

10

23-A

pr-

10

7-M

ay-1

021-M

ay-1

0

4-J

un-1

018-J

un-1

0

2-J

ul-10

16-J

ul-10

30-J

ul-10

13-A

ug-1

0

27-A

ug-1

010-S

ep-1

0

24-S

ep-1

08-O

ct-

10

22-O

ct-

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5-N

ov-1

019-N

ov-1

0

3-D

ec-1

017-D

ec-1

0

31-D

ec-1

014-J

an-1

1

28-J

an-1

111-F

eb-1

1

25-F

eb-1

111-M

ar-

11

25-M

ar-

11

8-A

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22-A

pr-

11

6-M

ay-1

1

20-M

ay-1

13-J

un-1

1

17-J

un-1

11-J

ul-11

15-J

ul-11

29-J

ul-11

12-A

ug-1

1

26-A

ug-1

19-S

ep-1

1

23-S

ep-1

17-O

ct-

11

21-O

ct-

11

4-N

ov-1

1

18-N

ov-1

12-D

ec-1

1

16-D

ec-1

130-D

ec-1

1

13-J

an-1

2

Metals Food Raw Materials Crude Oil (APSP) Gold

*Data are through January13, 2012Source: International Monetary Fund World Economic Outlook January 2012 update at http://www.imf.org/external/pubs/ft/weo/2012/update/01/index.htm ; Insurance Information Institute.

Index (Jan 3, 2006 = 100)

Raw materials prices more than doubled over the course of

2010-2011.

Crude peaked in Q2:2011, fell

significantly in late 2011 but has since

risen again

21

Crude Oil Price Changes,Jan. 2010- 6 Mar. 2012*

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

4-J

an-1

018-J

an-1

01-F

eb-1

015-F

eb-1

01-M

ar-

10

15-M

ar-

10

29-M

ar-

10

12-A

pr-

10

26-A

pr-

10

10-M

ay-1

024-M

ay-1

07-J

un-1

021-J

un-1

05-J

ul-10

19-J

ul-10

2-A

ug-1

016-A

ug-1

030-A

ug-1

013-S

ep-1

027-S

ep-1

011-O

ct-

10

25-O

ct-

10

8-N

ov-1

022-N

ov-1

06-D

ec-1

020-D

ec-1

03-J

an-1

117-J

an-1

131-J

an-1

114-F

eb-1

128-F

eb-1

114-M

ar-

11

28-M

ar-

11

11-A

pr-

11

25-A

pr-

11

9-M

ay-1

123-M

ay-1

16-J

un-1

120-J

un-1

14-J

ul-11

18-J

ul-11

1-A

ug-1

115-A

ug-1

129-A

ug-1

112-S

ep-1

126-S

ep-1

110-O

ct-

11

24-O

ct-

11

7-N

ov-1

121-N

ov-1

15-D

ec-1

119-D

ec-1

12-J

an-1

216-J

an-1

230-J

an-1

213-F

eb-1

227-F

eb-1

2

A sustained $10 rise in the price of oil reduces global GDP by approximately 0.2% in Year 1

and 0.5% in Year 2.

*Europe Brent Spot FOB price.Source: US Energy Information Administration update at http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm ; Insurance Information Inst.

2012 Peak = $126.68 on

5 March

$ Price per Barrel

2011 Peak = $126.46 on

11 April

Global Oil Consumption and Price, 2008 – 2035F

Millions of Barrels per Day Nominal Price/BBL

*Source: US Energy Information Administration; Insurance Information Institute

85

.5

83

.7 86

.0 87

.4 88

.9 90

.3

90

.4

91

.1 92

.5

92

.9

93

.5

94

.3

95

.1

96

.1

97

.1

98

.2

99

.3

10

0.5

10

1.8

10

3.2

10

4.5

10

6.1

10

7.6

10

9.1

11

0.8

92

.0

91

.5

89

.6

$108.1

0

$112.3

6

$114.2

1

$115.9

6

$117.5

4

$118.9

9

$120.2

5

$121.3

4

$122.3

0

$123.0

9

$123.7

1

$124.2

0

$124.5

3

$124.6

8

$124.9

4

$110.3

0

$105.7

1

$103.1

5

$100.5

0

$97.6

2

$94.5

8

$91.3

8

$83.2

1

$61.6

6

$100.5

1

$85.7

3

$88.0

3

$78.0

3

80

85

90

95

100

105

110

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

0

20

40

60

80

100

120

140

   Total Consumption Nominal Price (Light, Low Sulfur Crude)

Oil Will Become Relatively More Expensive Over Time, With Price Increases Outstripping Income Growth in Many Parts of the World

The nominal price of oil is expected to rise by 2.8% per year

on average through 2035

Global oil consumption is expected to rise by 1.1% per

year on average through 2035

23

Much Uncertainty Exists in the World, But Energy Demand Grows Under All Scenarios

Energy is One of the Few Major Markets/Industries With Clear

Growth Long-Term Trends

347.7

472.4508.3

551.5595.7

637.3678.3

462.1

0

100

200

300

400

500

600

700

800

1990 2005 2006 2010P 2015P 2020P 2025P 2030P

World Primary Energy Consumption, 1990-2030P

Source: Energy Information Administration, 2009 International Energy Outlook, Insurance Information Institute.

Between 2006 and 2030, energy consumption in projected to increase

annually by 1.5% worldwide but only 0.5% in the US

Quadrillion BTUs

Global energy consumption is

expected to increase by 33.4% between 2010 and 2030 but by only 12% in

the US

Avg. Annual Change in Total Energy Consumption by Country/Region:2006-2030P

Average Annual Change in Consumption (Quadrillion BTUs)

3.2%

2.6% 2.5%

1.5%

0.9%

0.5% 0.5%

1.1%1.2%1.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

Ch

ina

Bra

zil

Ind

ia

Can

ad

a

S.

Ko

rea

Mexic

o

Au

st/

NZ

Ru

ssia

US

Eu

rop

e

(OE

CD

)

Source: Energy Information Administration, 2009 International Energy Outlook, Ins. Info. Institute

US/Europe have the slowest growth rates for energy

consumption through 2030, growing at less than 1/6 the rate

in China and 1/5 that of India

25

26

Global Oil Demand and Production,by Region

Source: IMF, World Economic Outlook, Sept. 2011; Insurance Information Institute.

Oil Demand in Advanced Economies is Weak but Production Gains Continue to Satisfy Demand in Emerging Countries

Percentage Change (%)-3

.5%

2.9

%

3.3

%

-0.3

%

-4.0

%

2.2

%

-5.8

%

1.9

%

1.5

%

5.1

%

2.2

%

2.0

%

-0.6

%

3.5

%

4.8

%

0.8

%

-0.2

%

4.4

%

-0.4

%

0.7

%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Advanced

Economies

Emerging

Economies

OPEC Non-OPEC

2007 2008 2009 2010 2011P

OIL DEMAND OIL PRODUCTION

27

US Natural Gas Production and Non-Hydro Renewable Electricity Generation, 1990-2035P

Source: US Energy Information Administration, Annual Energy Outlook 2011; Insurance Information Institute.

Shale gas production is expected to grow rapidly in the US

Wind is expected to account for the majority of renewable

electricity generation

Tight gas production involves controversial

hydraulic fracturing (fracking) techniques

11.3

14.6

18.0

20.6

23.2

26.0

28.9

31.8

12.6

0

5

10

15

20

25

30

35

1990 1995 2000 2006 2010 2015 2020 2025 2030

World Net Effective Electric Power Generation, 1990-2030P

Source: Energy Information Administration, 2009 International Energy Outlook, Insurance Information

Institute.

Global electric power generation was dampened about 3% by the

global financial crisis, but will still grow at 2.9% per year through 2030 compared to 1.9% for total energy

consumption

Trillions of Kilowatt

Hours

29

Massive Investments in Global Energy

Infrastructure Are Needed

Upgrading the World’s Antiquated Energy Infrastructure is Also

Critical for Future Energy Security

Biofuels,

$0.3 , 1%

Oil, $10.1 ,

27%

Natural

Gas, $9.5 ,

25%

Power,

$16.9 , 44%

Coal, $1.1 ,

3%

Projected energy infrastructure investment

through 2035 total $38 trillion; Implies substantial

incurrence of risk.

Cumulative Projected Investment in Global Energy Infrastructure, 2011-2035 ($ Trill.)

Source: International Energy Agency, World Energy Outlook 2011.

31

The Unfortunate Nexus: Opportunity, Risk & Instability

Most of the Global Economy’s Future Gains Will be Fraught with Much

Greater Risk and Uncertainty than in the Past

32

Global Real (Inflation Adjusted) NonlifePremium Growth: 1980-2010

Source: Swiss Re, sigma, No. 2/2010.

-10%

-5%

0%

5%

10%

15%

20%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Real growth rates

Total Industrialised countries Emerging markets

Nonlife premium growth in emerging markets has

exceeded that of industrialized countries in

27 of the past 31 years, including the entirety of the

global financial crisis..

Real nonlife premium growth is very erratic in part to inflation volatility in emerging markets as

well as a lack of consistent cyclicality

Average: 1980-2010

Industrialized Countries: 3.8%

Emerging Markets: 9.2%

Overall Total: 4.2%

33

Nonlife Real Premium Growth in 2010

Source: Swiss Re, sigma, No. 2/2011.

Latin and South American markets performed

relatively well during and after the global financial crisis in terms of growth

There was also growth in the Middle East, East and South Asia as well as Australia and New

Zealand

34

Nonlife Real Premium Growth Ratesby Region: 2000-2009 and 2010

Source: Swiss Re, sigma, No. 2/2011.

-4% 0% 4% 8% 12% 16% 20% 24%

World

Industrialised countries

North America

Western Europe

Continental Europe

Japan and newly industrialised Asian economies

Oceania

Emerging markets

South and East Asia

Latin America and the Caribbean

Central and Eastern Europe

Africa

Middle East and Central Asia

Growth rate 2010 Annual average growth rate 2000-2009

-12% -8% -4% 0% 4% 8% 12% 16%

World

Industrialised countries

North America

Western Europe

Continental Europe

Japan and newly industrialised Asian economies

Oceania

Emerging markets

South and East Asia

Latin America and the Caribbean

Central and Eastern Europe

Africa

Middle East and Central Asia

Real Premium Growth Rates

Growth rate 2009

Annual average growth rate 1999-2008

Every emerging

market region except Central

and Eastern Europe

experienced growth during the financial

crisis and into 2010

The Middle East and many emerging market economies continued to grow during the global financial crisis and

continued to benefit from foreign direct investment

35

Distribution of Nonlife Premium: Industrialized vs. Emerging Markets, 2009

Sources: Swiss Re; Insurance Information Institute research.

Although premium growth throughout the industrialized world was negative in 2009, its share of global nonlife premiums remained very high at nearly 86%--accounting for nearly $1.5 trillion in premiums.

The financial crisis and sluggish recovery in the major insurance markets will accelerate the expansion of the emerging market sector

Premium Growth Facts

14.3%85.7%

Industrialized Economies

$1, 485.8

Emerging Markets$248.8

2009, $Billions

Developing markets now account for 47% of global

GDP but just 14% of nonlife premiums

36

Political Risk in 2011/12: Greatest Business Opportunities Are Often in Risky Nations

Source: Maplecroft

The fastest growing markets are generally

also among the politically riskiest, including East

and South Asia

Heightened risk has economic and insurance implications

Much of the middle East and North Africa have

experienced and continue to experience

political turmoil

37

The ―Arab Spring‖ Has Increased Uncertainty in an Already Volatile Part of the World

Source: Wikipedia as of Nov. 7, 2011; Insurance Information Institute research.

Some energy-rich nations have been among the most

unstable in 2011/12

Longer-run, significant

investment and insurance

opportunities exist throughout

the region

Government overthrown Sustained civil disorder and governmental changes

Protests and governmental changes Major protests Minor protests

Protests outside the Arab world

Arab Springالربيع العربي

38

Summary of 10 Greatest Potential Threats to Global Economy as of March 2012

1. Armed Conflict in the Middle East, Disrupting Oil Markets A conflict between Iran and Israel viewed by some as imminent

$200/bbl oil is possible; Severe supply disruptions

Resultserious damage to the global economy, killing fragile recovery

2. Rising Oil Prices Even in the absence of armed conflict, oil prices slowing growth

Sustained $10/bbl increase -0.2% on global GDP

3. Sovereign Debt Concerns in Europe (was #1 threat in 2011) Contagion spreads beyond GreeceItaly, Spain, Portugal, etc.

Greek/EU political/economic solution fails resulting in disorderly default

4. ―Hard Landing‖ of Chinese Economy A sharp decline in China’s GDP would damage global economies

5. Mega-Catastrophe Trends Continue at Record Pace Catastrophes trimmed 0.5% off global GDP in 2011

Massive disruptions to fragile global supply chains

6. Sudden Weakening of US Economy

7. Intensification of Geopolitical Instability (esp. in Middle East)

8. Disintegration of Eurozone (Political Failure)

9. Commodity Price Inflation (apart from oil)

10. Large-Scale Cyber Attack/Terrorism Attack (including cyberterror)

Global Catastrophe Loss Developments and Trends

39

2011 Rewrote Catastrophe Loss and Insurance History

But Will Losses Turn the Market?

39

40

Global Catastrophe Loss Summary: 2011

2011 Was the Highest Loss Year on Record for Economic Losses Globally

Extraordinary accumulation of severe natural catastrophe: Earthquakes, tsunami, floods

and tornadoes are the primary causes of loss

$380 Billion in Economic Losses Globally (New Record)

New record, exceeding the previous record of $270B in 2005

$105 Billion in Insured Losses Globally

2011 losses were 2.5 times 2010 insured losses of $42B

Second only to 2005 on an inflation adjusted basis (new record on a unadjusted basis)

Over 5 times the 30-year average of $19B

$72.8 Billion in Economic Losses in the US

Represents a 129% increase over the $11.8 billion amount through the first half of 2010

$35.9 Billion in Insured Losses in the US Arising from 171 CAT Events

Fifth highest year on record

Represents 51% increase over the $23.8 billion total in 2010

Source: Munich Re; Insurance Information Institute.

Geophysical events

(earthquake, tsunami, volcanic activity)

Meteorological events

(storm)

Hydrological events

(flood, mass movement)

Selection of significant

loss events (see table)

Natural catastrophes

Earthquake, tsunami

Japan, 11 March

Earthquake

New Zealand, 22 Feb.

Cyclone Yasi

Australia, 2–7 Feb.

Landslides, flash floods

Brazil, 12/16 Jan.

Floods, flash floods

Australia,

Dec. 2010–Jan. 2011

Severe storms, tornadoes

USA, 22–28 April

Severe storms, tornadoes

USA, 20–27 May

Wildfires

USA, April/Sept.

Earthquake

New Zealand, 13 June

Floods

USA, April–May

Climatological events

(extreme temperature, drought, wildfire)

Number of Events: 820

Drought

USA, Oct. 2010–

ongoing

Hurricane Irene

USA, Caribbean

22 Aug.–2 Sept.

Wildfires

Canada, 14–22 May

Drought

Somalia

Oct. 2010–Sept. 2011

Floods

Pakistan

Aug.–Sept.

Floods

Thailand

Aug.–Nov.

Earthquake

Turkey

23 Oct.

Flash floods, floods

Italy, France, Spain

4–9 Nov.

Floods, landslides

Guatemala, El Salvador

11–19 Oct.

Tropical Storm Washi

Philippines, 16–18 Dec.

Winter Storm Joachim

France, Switzerland,

Germany, 15–17 Dec.

41Source: MR NatCatSERVICE

Natural Loss Events, 2011

World Map

Natural Catastrophes Worldwide 2011Insured losses US$ 105bn - Percentage distribution per continent

Continent Insured lossesUS$ m

America (North and South

America)40,000

Europe 2,000

Africa Minor damages

Asia 45,000

Australia/Oceania 18,000

37%

2%

44%

17%

<1%

42Source: MR NatCatSERVICE

In 2011, 61% of insured natural catastrophe losses

were in the Asia/Pacific region, nearly 3.5 times the

average of 13% over the prior 30 years (1981-2010)

In 2011, just 37% of insured natural

catastrophe losses were in the

Americas, barely half the average of 66%

over the prior 30 years (1981-2010)

42

Natural Catastrophes Worldwide 1980 – 2011 Insured losses US$ 870bn - Percentage distribution per continent

Continent Insured lossesUS$ m

America (North and South

America)566,000

Europe 146,000

Africa 2,000

Asia 115,000

Australia/Oceania 41,000

66%

16%

<1%

13%

5%

43Source: MR NatCatSERVICE

In 2011, 61% of natural catastrophe losses were in the Asia/Pacific region,

nearly 3.5 times the average of 13% over the

prior 30 years (1981-2010)

43

Worldwide Natural Disasters 1980–2011,Overall and Insured Losses

44

Overall losses (in 2011 values) Insured losses (in 2011 values)

Source: MR NatCatSERVICE © 2011 Munich Re

50

100

150

200

250

300

350

400

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

2011

Overall Losses: $380 Bill

Insured Losses: $105 Bill

(Insured Losses, 2011 Dollars, $ Billions)

45

Top 16 Most Costly World Insurance Losses, 1970-2011**

(Insured Losses, 2011 Dollars, $ Billions)

*Average of range estimates of $35B - $40B as of 1/4/12; Privately insured losses only.

**Figures do not include federally insured flood losses.

Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.

$11.9$13.0 $13.0$13.1

$19.1$21.3

$24.0$25.0

$37.5

$47.6

$7.7 $8.1 $8.3 $8.5 $9.3 $9.7

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Hugo

(1989)

Winter

Storm

Daria

(1991)

Chile

Quake

(2010)

Ivan

(2004)

Typhoon

Mirielle

(1991)

Charley

(2004)

Wilma

(2005)

Thailand

Floods

(2011)

New

Zealand

Quake

(2011)

Ike

(2008)

Northridge

(1994)

Spring

Tornadoes/

Storms

(2011)

WTC

Terror

Attack

(2001)

Andrew

(1992)

Japan

Quake,

Tsunami

(2011)*

Katrina

(2005)

Large catastrophes in Asia/Pacific and South

America Have dominated mega-losses since 2010

5 of the top 14 most expensive

catastrophes in world history have occurred within the past 2 years

Worldwide Natural Disasters,1980 – 2011

Number of Events

Source: MR NatCatSERVICE 46

Meteorological events

(Storm)

Hydrological events

(Flood, mass

movement)

Climatological events

(Extreme temperature,

drought, forest fire)

Geophysical events

(Earthquake, tsunami,

volcanic eruption)

200

400

600

800

1 000

1 200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

There were 820 events in 2011

20

40

60

80

100

120

140

160

180

200

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Natural Catastrophes in Asia 1980 – 2011Overall and insured losses in 2011 Dollars

Overall losses (in 2011 values) Insured losses (in 2011 values)

© 2011 Munich Re 47Source: MR NatCatSERVICE

($ Billions) 2011 set a record for both overall economic losses

in Asia ($266B) and insured losses ($45B).

The rapid economic development of Asia and

increased insurance penetration guarantee that losses will trend higher in the future.

47

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