International Insurance Solutions Allianz Global Corporate & Specialty International Insurance Solutions Angelo Colombo November, 2014

Increasing demand for international services Increasing globalisation is fundamentally changing the business landscape – and with change comes new challenges for international risk management.  New exposures from vertical and horizontal integration and accelerated supply chains  Global interdependencies between suppliers and customers, as well as with business partners  Increased regulation creates additional need for transparency and corporate governance  Mergers, acquisitions and joint ventures – often with diverse cultures  Multinational legal and fiscal environments Never before has there been a greater need for integrated risk management – globally coordinated and managed, but locally delivered…..  Increased international trade in emerging markets – increasing exposures and the potential for international litigation  Pressure to improve efficiency and effectiveness of risk management, especially on a globally coordinated basis  New risks emerging from mergers, acquisitions and joint ventures © Copyright Allianz Global Corporate & Speciality 17-Apr-17

Indirect and direct Supplier Business is global and so are the risks Insured location 5 Insured location 4 Indirect Supplier Insured location2 Insured location 1 (HQ) Indirect and direct Supplier Insured location 3 Direct customer Indirect customer Power Supplier How should your risk management respond in case an event arises? © Copyright Allianz Global Corporate & Speciality 17-Apr-17 3 3

Which solutions can risk managers chose from ? Building blocks International Insurance Solutions (IIS) is the broader meaning of different structures and services that can be offered in response to specific global insurance needs of different clients and their set up. Stand-alone local policies Program structure Property example Master Policy provides Difference in Condition (DIC) and Difference in Limits (DIL) cover, over and above locally admitted policies. Singapore DIC/DIL Germany Italy Austria Australia Thailand US FOS (optional) DIC/DIL above local policies Policy scope (limits and conditions) 1: Parent company (e.g. in Singapore) 2: Thailand 3: Australia 4: FOS Countries Single European policy (FOS) 5: US Geographical territories Centrally controlled master program Local policies issued dependent on risk and maturity of market Master cover provides global umbrella Harmonized coverage across the program for corporate protection Premium is allocated in relation to local risk and exposure Local policies are re-insured by the master policy insurer to the level legally permitted © Copyright Allianz Global Corporate & Speciality 17-Apr-17

Violations can result in : However, regulatory pitfalls have to be avoided Over 200 local insurance laws & taxes vary country by country (sometimes, even state by state)… Violations can result in : Unanticipated tax charges Fines and penalties Trade disruption Sanctions & Embargoes Reputation risk Prison Countries to watch out E.g., Brazil, China, India, Russia © Copyright Allianz Global Corporate & Speciality 17-Apr-17

How to deliver a comprehensive, consistent & compliant, insurance program that covers all the main risks at a cost-effective price? Control Cost Coverage Compliance Overall risk managers need to balance the 4C’s when choosing the optimal solution for their company © Copyright Allianz Global Corporate & Speciality 17-Apr-17 6 6

It’s all about flexibility … We offer truly customized international insurance solutions for clients with international risk exposures aligning local and global coverage Singapore DIC/DIL Germany Italy Austria Australia Thailand US FOS (optional) Local policies follow best market standards  Administration of local taxes Taking local supervisory aspects into consideration, e.g. minimum local retention Including mandatory local coverage Adequately reflecting and covering client local risk Risk based premium allocation Property Example Policy scope (limits and conditions) Geographical territories Singapore DIC/DIL Germany Italy Austria Australia Thailand US 1 US 2 US 3 Umbrella Liability Example Pooling of local policies via reinsurance *)  Policy scope (limits and conditions) Harmonizing overall coverage by including local companies under the Master in DIC / DIL  Geographical territories FOS not recommended Captive fronting based on client needs  Potential sharing of risks with a panel of coinsurers / reinsurers  *) to the degree legally permitted © Copyright Allianz Global Corporate & Speciality 17-Apr-17 7

Regulations and Compliance The Question of „Admitted“ versus “Non-Admitted“ Local insurance law (more than 200 different laws) mandates that a policy is issued or coverage provided with an insurer licensed in the country where the risk is located. Admitted: An admitted policy is a policy issued or coverage provided by an insurer to a policyholder domiciled in a territory where that insurer is licensed. Non-Admitted: A Non Admitted policy is a policy issued or coverage provided by an insurer to a policyholder domiciled in a territory where that insurer is not licensed. TALKING POINTS Increased regulation creates additional need for corporate governance / SOX / Solvency II Taxes There are more than 195 countries in the world – BUT more than 250 insurance regulatory statutes or supervisory laws! Exceptions: Self procurement, prior approval by host state regulator, broker licensed etc. © Copyright Allianz Global Corporate & Speciality 17-Apr-17

2. Expertise Your questions on legal aspects of international insurance program answered I/II What does admitted and non-admitted insurance mean? Many countries have regulations in place requiring that insurance be taken out with insurance companies that are licensed (admitted) to write direct insurance business in the country. In those countries the provision of cross-border insurance on a direct basis (non-admitted) is prohibited or subject to conditions. How do IIP respond to this? As part of an international insurance program, local policies are issued related to the risk and exposure as well as capacity and cover available in the market, which are respecting local regulatory aspects. Our extensive global network allows us to issue admitted local policies in countries where your risks are located. Why does Difference in Conditions / Limits (DIC/DIL) matter? Depending on the capacity and coverage of markets and the agreed structure of the international insurance program, it can be more efficient to provide additional coverage and/or limits through the master policy complementing the local policies. DIC/DIL is subject to cross border insurance provisions described above. How can AGCS help you? Where permitted the foreign subsidiaries of the parent company can be included as additional insureds in the master policy. The DIC/DIL provision describes the additional coverage provided above local policies. The parent company is the policyholder of the master policy and receives the loss payment. © Copyright Allianz Global Corporate & Speciality 17-Apr-17

2. Expertise Your questions on legal aspects of international insurance program answered II/II Why does Insurance Premium Taxes (IPT) matter? In countries where IPT exists, the tax laws regulate the amount and calculation base for insurance premium taxes, levies and fees (parafiscal charges to IPT) that are charged in relation to the insurance premium. How can AGCS help you? Our extensive global network allows us to issue admitted local policies that take care of the local IPT requirements and the handling of the IPT and its parafiscal charges (to collect and transfer to the tax office). Within our international insurance program’s premium allocation is related to local risk and exposure. Why does transfer pricing matter? Transfer pricing regulations should be considered if the parent company centrally purchases insurance coverage on behalf of its subsidiaries but pays premiums centrally. The customer should ensure that the group internal allocation of premiums and claims payments complies with the arm’s length standard to avoid double taxation. How can AGCS help you? The parent company must consult with its accounting, tax and finance specialists and analyse its needs and obligations. Once the client has performed the analysis, we consider those aspects in structuring the international insurance program. © Copyright Allianz Global Corporate & Speciality 17-Apr-17

2. Expertise A client example A Singapore based company with subsidiaries all over the world purchases international insurance programs in various lines of business Germany Austria Italy US Thailand Singapore HQ Australia © Copyright Allianz Global Corporate & Speciality 17-Apr-17

Property claims example: The case of natural catastrophe 2. Expertise Property claims example: The case of natural catastrophe Scenario description 3 months of flooding caused huge damages to a Thailand factory with a coverage of Total Sum Insured: Property Damage (PD) EUR 300mn Business Interruption (BI) EUR 200mn Total EUR 500mn Cat Limits agreed Master Flood Limit EUR 40mn Local Flood limit EUR 30mn Example of Settlement (Illustrative & simplified) EUR 40mn DIC/DIL FOS (optional) Policy scope (limits and conditions) US UK Thailand Austria Italy Germany Germany Singapore Australia Loss due to physical damage on machinery, building, etc. (PD) Loss due to business interruption (BI) Geographical territories Local Compensation EUR 30mn EUR 15mn EUR 25mn DIC / DIL Compensation EUR 10mn Total loss EUR 40mn Total Compensation EUR 40mn © Copyright Allianz Global Corporate & Speciality 17-Apr-17

Liability claims example: The case of production interruption 2. Expertise Liability claims example: The case of production interruption Scenario description One of the Client’s component of a production line was defective due to a design error and caused property damage to 25 customer in 5 different countries. The components have to be exchanged. Property damage EUR 1 mn and costs for dismantling and reinstallation EUR 5 mn. Affected are 5 local policies with a limit of EUR 1mn each for the property damage Master Policy for the exchange costs (DIC) with an overall limit of EUR 50mn Total loss EUR 6 mn Example of Settlement (Illustrative & simplified) Singapore DIC/DIL Germany Italy Austria Australia Thailand US 1 US 2 US 3 Umbrella EUR 6mn loss Policy scope (limits and conditions) Geographical territories © Copyright Allianz Global Corporate & Speciality 17-Apr-17