1. www.actuarialpartners.com building value together Hybrid Insurance Structures “Helping each other” 12 November 2012 Zainal Abidin Mohd Kassim, FIA Istanbul 2012

2. 1 Actuarial Partners Structure of Stock Insurance Companies  Leverages on the concept that 1) There is a ‘price’ for taking on risk. 2) For the right price there is capital willing to undertake the risk. 3) Risk can usually be mathematically modeled with some degree of certainty. 4) There is a secondary market to “off load” excessive insurance risk (the reinsurance market).  Total capital invested in insurance companies and reinsurers globally is estimated to be USD3.4trillion* and USD480 billion* respectively. * Aon Benfield research 2012

3. 2 Actuarial Partners Proprietary Insurers and Mutuals  While stock insurers seeks to maximize its profits, Mutuals seek to benefit its members rather than maximize its profits.  Insurance is a service. It is intangible and difficult to assess. Can buyers of insurance be really sure what he is buying is what he needs?  Difficulty for the public to compare premium rates. This asymmetry in information puts the insurer at an advantage as compared to the policyholder.

4. 3 Actuarial Partners Hybrid Insurance Structures Ownership Owned by Shareholders Owned by Policyholders Modern Takaful Mutuals Risk Sharing Stock Insurers Risk Transfer ???

5. 4 Actuarial Partners Guarantees & Surplus Sharing Guarantees No guarantees Modern Takaful Discretionary Mutuals Policyholders share in surplus Stock Companies Policyholders do not share in surplus

6. 5 Actuarial Partners How risks are distributed Stakeholders Operational Risk Underwriting Risk Investment Risk Expense Risk Stock insurer Mutuals Modern Takaful Discretionary Mutuals Reciprocals Shareholders/management company Policyholders/participants

7. 6 Actuarial Partners Conclusion Trust Beliefs Price Convenience Choice is driven by

8. www.actuarialpartners.com Actuarial Partners Consulting Sdn Bhd Suite 17.02 Kenanga International Jalan Sultan Ismail 50250 Kuala Lumpur Tel +60 3 21610433 Fax +60 3 21613595 www.actuarialpartners.com zainal.kassim@actuarialpartners.com