1. CCRIF – A Captive for all Seasons Cayman Captive Forum 2013 William Dalziel, Partner London & Capital Asset Management Ltd 5 th December 2013

2. London & Capital were appointed in 2007. We are currently responsible for the management of the largest part of the Insurer’s funds, in a wholly Fixed Income mandate. CCRIF’s Investment Policy Statement is reviewed no less than annually to ensure it continues to meet the Insurer’s evolving requirements. The IPS includes a range of risk control criteria, including minimum ratings, concentration and geographical limits, and strategic asset allocation with bounded limits for each sub asset class. In addition, it also recognises the need to avoid adding to enterprise risk (exposure to Insurers/Reinsurers, issuers in the same geographical zone as its Policyholders), the need to maintain liquidity in line with the Insurer’s claims paying commitment, and limiting portfolio volatility. 2 Background

3. London & Capital’s Delegated Responsibilities Examine, understand and assist the Board to articulate its investment objectives and risk appetite Understand CCRIF’s investment constraints whether imposed by risk appetite, regulation, liability profile, policyholders or owners Specifically, be aware of CIMA’s Supervisory framework –Insurance Law 2010 and implementing Regulations (Dec 12) –Risk Management Rule (Dec 2010) Translate all of the above into a best estimate prospective return and volatility expectation based on the Macro Economic environment Minimise portfolio exposure to unrewarded and operational risks Provide the Board with information and analysis of sufficient granularity to enable them to assess and control the portfolio risk and our own effectiveness Work closely with other service providers to facilitate a high standard of service, and Decide how to invest the assets, trade and manage the portfolio. 3

4. Strategic AA is a Risk Management Function, Tactical AA is an Investment Team function Separation of powers – risk exploitation and risk control are overseen independently Single point of reference, coordination and accountability to client. PartnerCIO Tactical Asset Allocation Portfolio Construction Investment Strategist Compliance / Risk Modelling 4 Accountability

5. Stages of the Economic Cycle RecessionRecoveryBoomSlow-down Asset Cash Govt bonds Asset IG Corp bonds HY Corp bonds Equities Asset Equities HY corp bonds Commodities Asset Cash Govt bonds Above trend Below trend 5 Active management and the Business Cycle Different investments perform differently at different points in the business cycle Portfolio management needs to adjust accordingly – tactical asset allocation and duration changes Source: London & Capital

6. Strategic Objective Be able to meet claims within 14 days of loss event Liquidity – Able to strike NAV on any trading day, and liquidate assets at T+2 Liquidity – Limit acceptable assets to issuers with average daily liquidity at least xxx Asset Selection – Exclude assets that could be negatively impacted by Hurricane or Volcanic Eruptions in the Caribbean Basin Asset Selection – Exclude Insurers/Reinsurers (correlated to CCRIF’s own business cycle) Asset Selection – Exclude the use of Funds to avoid illiquidity traps 6 How CCRIF’s Objectives impact the Portfolio

7. Strategic Objective Preserve Policyholder Capital and Reserves Portfolio Construction – Manage the portfolio to a target volatility of 3.5% and maximum volatility of 5% with a 70% confidence interval Tactical AA – The Portfolio can revert to high levels of cash to protect the nominal value of the assets in periods of extreme stress IPS - Set an absolute return, rather than relative return portfolio objective (Cash plus) 7 How CCRIF’s Objectives impact the Portfolio

8. Strategic Objective Understand Portfolio RiskStrategic AA – Model alternative SAA’s and aim to optimise on medium term objectives Risk Management – Attribution and Factor Analysis to flesh out sources of past performance and understand portfolio sensitivity to future changes in these factors Risk Management – Conduct regular Macro Economic top-down analysis of the investment environment to identify build up of tail risks and to estimate 1-year return and volatility parameters for FI sub-asset classes Monitor portfolio compliance with IPS Client Meetings – Board reports to include confirmation of compliance, and portfolio analytics on key risk metrics Controls - Data on portfolio composition, compliance and performance independently sourced by the Board from the Custodian 8 How CCRIF’s Objectives impact the Portfolio

9. Risk Areas Operational Financial Aggregation / Diversification Underwriting Market Credit Frictional Liquidity 9 One way to think about Risk Categories

10. Strategic Asset Allocation: Agreed mid-term combination of asset classes designed to deliver target returns through the cycle, within volatility limits Tactical Asset Allocation: Optimise portfolio within SAA limits to select asset classes that have the most attractive risk/reward characteristics Portfolio Construction: Eliminate Idiosyncratic risk, credit analysis, appropriate security weighting, relative value analysis. 10 How we control Portfolio Risk

11. 11 Risk & Portfolio Reporting L&C reports Risk to the Board by reference to a range of factors that each contribute to a balanced understanding of the whole: Portfolio Compliance with IPS Macro Economic Analysis – How the (prospective) outlook for assets is being affected by market, business and ratings cycles, thematic and other forces Scenario Analysis – Sources of return, impact of a one Standard Deviation move in each factor Portfolio Correlation Value at Risk (VaR) Ratings Portfolio Concentration Sharpe Ratio Performance is reported across two dimensions: The change in the value of the portfolio over a given time as a result of Income generated, plus/minus Change in market value, and The risk accepted in achieving this

12. Source: Bloomberg 12 Example Scenario Analysis