1. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 0 State of the Market François Dagneau Senior Vice President Aon Benfield Canada

2. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 1 Agenda Section 16 Key Trends that Impact Reinsurance in Canada Section 2State of the Market Section 3Conclusion

3. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 2 Section 1: Six Key Trends that Impact Reinsurance in Canada

4. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 3 Trend 1 – Domestication of Insurers Not too long ago, aside from the mutuals, P&C insurance in Canada was essentially owned by foreign interests Since then: –ING Canada, Axa Canada forming Intact –TD Meloche purchased Liberty –Co-op buying Cumis Impact on reinsurance? Local purchase

5. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 4 Trend 2 – De-domestication of Reinsurers Since 2000, the following local reinsurers have disappeared –CNA –Gerling Re –Hartford Re –Rhine Re – Alea –Sorema –ERC –Terra Nova A reversing trend? –Arch Re opened a local office in 2011 –Catlin (2011) Impact on reinsurance? Dramatic reduction in supply of reinsurance for local reinsurance coverages –Surplus treaty –Low XOL treaties –Other special needs

6. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 5 Trend 3 – Shift Towards Non-Proportional Reinsurance This is a trend similar to what has been experienced all over the world –Canada lagging behing the USA, but ahead of rest of the world Aon Benfield Market Study of Proportional Treaties –2003: 26 treaties worth $428m in premium –2006: 19 treaties worth $426m in premium (on the decline) –2007: 17 treaties worth $329m in premium (on the decline) –2012: 12 treaties worth $150m in premium ?? Why? –Consolidation - Capitalization –Reinsurers pricing now reflects Cat risk and per risk exposure embedded in proportional cover Proportional Treaties are still indicated in some situations: –Large Cat exposure –Large per risk capacity required –Capital relief Impact on reinsurance? Dramatic reduction in premium volumes

7. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 6 Trend 4 – Unlocking of US and International Reinsurance Markets Peak capital user vs non-peak Capital users –After 1998-1999: prices barely moved in Canada if you did not have a loss –After WTC: pricing went up 50% in Canada –After Katrina: +5 to +10% in Canada vs +50% in US+Retro The marginal required capital theory –After 2011: pricing outside US under pressure The minimum required capital adjustment Impact on reinsurance? Top layers moving from 1.75% ROL to 2.00 ROL –No differentiation between clients, layers –Very little by peril

8. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 7 Canadian Catastrophe Rate Changes Aon Benfield Canada Proprietary & Confidential Sources: Canadian - RRC; US – RAA; Global - Aon Benfield Estimate 1991 Calgary Hailstorm 1998 Ice storm 2001 WTC 2005 KRW 1992 Andrew 2005 Ontario August Rain Storms

9. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 8 Trend 5 – Consolidation of Reinsurance Brokers Over the past few years: –Late 90s: First round of consolidation –Past 5 years: Benfield, Gallager, HSBC and Collins Driven by consolidation in the insurance market and growth in analytics requirements (trend #6):

10. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 9 Trend 6 – Explosion in the use of Analytics –Around 1990: First Cat model developed after Hugo –In 1994: there was one P&C actuary in reinsurance in Canada –In 2001: Aon Re had 4 people in analytics –In 2008: 12 –In 2011: 16 –In 2012: Aon Benfield Canada has an staff in analytics of 20 people

11. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 10 Trend 6.1 – Actuarial –Key tasks Benchmark Pricing Reinsurance Optimization But also assist in: Economic Capital Modeling Capital Allocation Entreprise Risk Management Provide insurers with a full understanding of the metrics of the transaction Impact on regulatory capital Impact on rating agencies Impact on economic capital and internal models Cost of the reinsurance Tailor-made reinsurance that meets optimally the needs of the clients

12. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 11 Aon Benfield Analytics | AMA – 29 February 2012

13. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 12 Trend 6.1 – Actuarial: All this from 35,000 feet Asset Risk Non-Cat Catastrophe Market Credit Underwriting Risk Net U-W Results Reinsurance Reinsurance Optimization Economic Capital Modeling Enterprise Risk Management Operational + Strategic Risks Reserves Capital Allocation

14. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 13 Return, Volatility and Valuation – US Listed Company Experience Aon Benfield Hit/No Hit Price to Book Regression Study No earnings hits >150% of average quarterly operating income: 1 point increase in prospective ROE increases P:B by 5.7 points 1 or more earnings hits: 1 point increase in prospective ROE increases P:B by only 2.9 points Valuation differential has persisted through time

15. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 14 Trend 6.2 – Catastrophe Modeling –Primary tasks Scrub data, know your data (do you know your cat modeler?) Model PMLs (RMS, ReCat, AIR, EQE) Prepare files for submission to reinsurers Benchmark relative to peers –Helping pricing Cat risk Cat Cost Allocation - Various levels of sophistication – this is evolving very very fast Allocated based on property premium Allocation to BC then based on BC property premium Based on expected loss (AAL) loaded for cost of reinsurance Next Step

16. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 15 Trend 6.3 – Capital Management Technical Finance Regulatory Capital Management & Analysis Regulatory Guideline Advisory Financial Analysis and Modeling Peer Review Study Mergers & Acquisitions Reinsurance Market Analysis & Security Licensed/Unlicensed Markets Reinsurer Credit Rating Management Market Securities Research & Development Regulatory Changes & Updates Accounting and Reporting Developments Rating Agency Advisory Practice Full Rating Agency Advisory Services Rating Agency Capital Model

17. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 16 Trend 6.3 – Capital Management: Key Federal Regulatory Changes – 2010 to 2014 Proprietary & Confidential January 18, 2011 Guideline E18 - Stress Test, December 2009 Guideline E4A - Role of Canadian Chief Agent & Record Keeping Requirements, Dec 2009 MCT/BAAT Capital Framework, 2010 – 2014 Amendments to Part XIII, effective 1st January 2010 OSFIs Regulatory and Supervisory Reform for Reinsurance, March 2010 Guideline A4 - Internal Target Capital Ratio for Insurance Companies, May 2010 Guideline B3 - Reinsurance Security Agreement, effective 1st July 2011 (new agreements); effective 1st January 2012 (existing agreements) IFRS Guidelines – Phase 1, 2011 Internal Capital Modeling, 2012 – 2013 Corporate Governance – Sound Business and Financial Practices, August, 2012

18. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 17 Section 2: State of the Market

19. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 18 2011 Catastrophe Losses DatePerilLocation USD Loss (Economic) USD Loss (Insured) 11 MarchEarthquakeJapan210.00bn35.50 22 FebruaryEarthquakeNew Zealand30.00bn (*)13.50 June-NovemberFloodThailand45.00bn10.78 22-28 AprilSevere WeatherUSA10.20bn7.30 21-27 MaySevere WeatherUSA9.10bn6.50 22-30 AugustHurricane IreneUSA8.55bn4.30 21 DecemberFloodAustralia30.00bn (*)2.20 2 – 5 MarchSevere WeatherUSA2.80bn2.00 1 JuneEarthquakeNew Zealand30.00bn (*)1.80 14 – 16 AprilSevere WeatherUSA2.50bn1.70 Other Losses85.16bn19.84 Total433.31bn106.12bn (*) The New Zealand Government has only released a combined USD30bn economic loss for the Sept 2010, Feb 2011 and June 2011 earthquake events. 18

20. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 19 Non-US Catastrophe Insured Market Losses (2010/11) YearEventRegionInsured Loss 2010Maule QuakeChile$8,500m 2010XynthiaFrance$4,000m 2010Darfield QuakeNew Zealand$6,000m 2010Queensland FloodsAustralia$5,500m 2011Littleton QuakeNew Zealand$11,000m 2011Tohuku QuakeJapan$35,500m 2011Denmark CloudburstDenmark$1,000m 2011Thailand FloodsThailand$10,780m 2010 - $24,000m 2011- $58,280m 19

21. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 20 Top Canadian Catastrophe Losses in 2011 - 2012 Canada did not avoid Catastrophe activity More than $1.6bn of insured losses Slave Lake is the 2 nd largest catastrophe loss in Canadian history 20 TimeType of EventLocationInsured Loss Estimate April, 2011WindstormOntario$210M May, 2011Wild FireSlave Lake$700M Spring, 2011FloodingManitoba and SaskatchewanMinimal (>$800M economic loss) July, 2011HailAlberta$185M August, 2011TornadoGoderich$200M August, 2011Hurricane IreneEastern Canada$150M November, 2011WindstormAlberta$200M May, 2012Flood, Hail, WindThunder Bay – Montreal$200M August, 2012Flood, Hail, WindCalgary$500M

22. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 21 Insured Catastrophe Losses Source: Aon Benfield Analytics 2012 loss activity is on pace to be well below the loss activity experienced in 2010 and 2011, especially if the US hurricane season produces low insured losses Catastrophe loss activity to date is approximately half of the recent years average activity for the same period 21

23. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 22 Exhibit 1: Global Reinsurer Capital 22 Aon Benfield Analytics | Market Analysis Proprietary & Confidential

24. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 23 Exhibit 11: ABA Combined Ratio 23 Aon Benfield Analytics | Market Analysis Proprietary & Confidential

25. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 24 Reinsurers Combined Ratio Comparison Sources: Canadian - RRC; US – RAA; Global - Aon Benfield Aggregate for Mid Year 2012 Canadian from MSA 24

26. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 25 Year to Date Share Price Development (1/1/2012 vs 29/8/2012) Aon Benfield Analytics | Market Analysis Proprietary & Confidential 25

27. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 26 Year to Date Price to Book Development (1/1/2012 vs 29/8/2012) Aon Benfield Analytics | Market Analysis Proprietary & Confidential 26

28. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 27 Invested Assets Portfolio 27 Aon Benfield Analytics | Market Analysis Proprietary & Confidential

29. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 28 Peripheral EU Sovereign Debt Exposures Aon Benfield Analytics | Market Analysis Proprietary & Confidential 28 Company Reporting Currency (millions)GreeceIrelandItalyPortugalSpainTotal As % of Shareholders Funds AmlinGBP1020018392.6% ArchUSD0060060.1% BerkshireUSDnd Fairfax*USD2440000 2.9% Hannover ReEUR02717 851472.4% Munich Re^EUR01,0002,40001,2004,60018.1% PlatinumUSD0500050.3% Swiss Re^USD000310 0.1% XLUSD001700 0.2% ^ Potential (disclosed or inferred) participation by life insurance companies * Sovereign debt exposure as of December 31, 2011 Source: Company reports, Aon Benfield Market Analysis nd = not disclosed

30. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 29 Ratings Distribution Aon Benfield Analytics | Market Analysis Proprietary & Confidential 29 A.M. BestStandard & Poors

31. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 30 Building Damage Following February 22, 2011 Event Source: Tonkin and Taylor

32. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 31

33. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 32

34. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 33 Factors Impacting Reinsurance Supply and Demand Source: Aon Benfield Analytics Global Factors Influencing Reinsurance Supply +Record reinsurer capital + Low ceded catastrophe loss activity + Growing investor interest in catastrophe bonds or similar collateralized facilities -Continued low market valuations of reinsurers shares =High reinsurance market supply Global Factors Influencing Reinsurance Demand - Strong insurer capital - Sluggish insurance demand growth for insurance in difficult economic environment -Continued decline in loss frequency in casualty lines -Very competitive insurance landscape in nearly all markets -Low investment returns + Low insurer market valuations and associated accretive share repurchase math + Sovereign debt related issues =Stable to weak growth in reinsurance demand 33

35. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 34 Section 3: Conclusion

36. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 35 Conclusion – Closing Comments There is more to reinsurance than what meets the eye Largest budget item Greatest risk to capital Reinsurance capital is excellent –Very affordable –It has shown its resilience Reinsurance broking is not a commodity –Analytical tools are growing in importance –We have a simple portfolio –Be proud to be Canadian

37. Questions

38. Presentation to the Seminar of the Appointed Actuary State of the Reinsurance Market | Sept 21st, 2012 37 Contact Information François Dagneau Senior Vice President Aon Benfield Analytics francois.dagneau@aonbenfield.com francois.dagneau@aonbenfield.com Or your favorite Aon Benfield broker….