U.S. REINSURANCE UNDER 40S GROUP

2016 Miami and Cayman Islands Educational Tour Report

Monday, April 11

to Friday,

April 15 2016

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Contents

Background of the U.S. Reinsurance Under 40s Group and the Educational Tour ................................................................ 3

2016 Education Tour Participants .................................... 4

Educational Tour Agenda .......................................................... 5

Educational Tour Reports ........................................................ 7

Biographies of Attendees ......................................................... 56

Closing Thoughts and the Road Ahead .................................. 59

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Background of the U.S. Reinsurance Under 40s

Group and the Educational Tour

The U.S. Reinsurance Under 40s Group, Inc. (RU40) was founded in January 2008 by a group of young professionals in the reinsurance industry. We are a non-for-profit

organization, with the primary aim to provide educational, social, charitable and networking opportunities for members of the (re)insurance industry within the U.S. The day-to-day

affairs of Re Under 40s are managed by the Re Under 40s board and committee members representing a wide array of industry organizations. While the board and committee

positions are held by professionals under the age of 40 (hence the name), all members of the (re)insurance industry are welcome to attend our events.

Ever since the U.S. Reinsurance Under 40s Group was founded, one of our goals has been to arrange a yearly trip for our members to learn about other insurance markets, similar to the tours currently offered by the Lloyd’s Non-Marine Under 30s Group, the (London)

Under 35s Reinsurance Group, and the Bermuda Re/Insurance Under 40s Group.

Specific to the RU40’s tour, since 2012, we have organized an annual tour in cities that are considered (re)insurance hubs. Our first tour was in London (2012), followed by

Munich/Zurich (2013), Bermuda (2014), and, we returned to London (2015).

We are happy to announce that our 2016 Educational Tour to Miami and the Cayman Islands was a resounding success. As outlined in this Report, we attended meetings with (re)insurers, captive managers, brokers, lawyers, accounting firms, regulators, and other

financial services agencies and organizations. We developed a greater understanding of the (re)insurance Latin America (LATAM), the

Caribbean, and Captive Markets.

Visit our website to learn more about the U.S. Reinsurance Under 40s Organization www.reunder40s.org

Disclaimer: We have endeavored to provide a full and comprehensive report of the various events and meetings that occurred during the 2016 Educational Tour. While we have aimed for accuracy throughout this Report, please note

that the views and comments expressed herein are the attendee’s own, and not attributable to their companies, sponsors, participants or hosts.

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2016 Education Tour Participants

Name Company Role

Anna Card Trans Re Participant

Rob DiUbaldo Carlton Fields Participant

Hartland Moede AON Participant

Marlín Ramlal AXIS Reinsurance Tour Leader

Sean Ramlal QBE Re Participant

Nicholas Secara Baker McKenzie Participant

Gabriel Silvasi AXIS Reinsurance Participant

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Educational Tour Agenda

Monday, April, 10th Breakfast with Odyssey Re Odyssey Re Overview of Surety Market in LATAM and the Caribbean MS AMLIN Reinsurer Overview of Insurance and Reinsurance in LATAM and the Caribbean University of Miami Tracking Natural Hazards and Catastrophes Lunch with the University of Miami Validus Re Underwriting and Actuarial Pricing of LATAM and Caribbean business Baker & McKenzie, LLP LATAM Financial and Infrastructure Projects, including Insurance Industry-Related Schemes Cocktail Reception hosted by Baker McKenzie Educational Tour Group Dinner and Networking Tuesday, April 11th Breakfast with Beazley Beazley Lloyd’s in LATAM and the Caribbean Willis Re Broker Overview of the Insurance and Reinsurance market in LATAM and the Caribbean Lunch with Carlton Fields Carlton Fields Litigation Environment in LATAM and the Caribbean Aspen Re Reinsurance Market in Miami, new entrants, and future of Reinsurance in Miami Reinsurance Under 40s Miami Social and Networking Event

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Wednesday, April 13th Travel Day to Cayman Islands Maples & Calder “HedgeFund” Re and CAT bonds: Formation and market in the Cayman Islands Educational Tour Group Dinner and Networking Thursday, April 14th AON (Cayman) Captives market and types, including United Insurance and Nexus Re Cayman Finance Discussion with the Head of Cayman Finance Ernst & Young Discussion with E&Y Partner, including governance in the Cayman Islands Lunch with MARSH MARSH (Cayman) Overview of Captive Market and introduction to Small Captives Cayman Islands Monetary Authority (CIMA) Discussion with Monetary Authority in the Cayman Islands, including Class D Reinsurers Greenlight Re Greenlight Overview and Hedgefund Re Strategy and Model Educational Tour Group Dinner and Networking Friday, April 15th Insurance Managers Association of Cayman (IMAC) Discussion with Cayman Education Committee Appleby The beginning of the Cayman Islands as a finance service hub and the legal environment PricewaterhouseCoopers (PwC) The job market and importance of accounting firms in the Cayman Islands KPMG Overview of insurance accounting regulatory changes and trends End of Educational Tour

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Educational Tour Reports

Odyssey Re Hugo Cardona, Chief Underwriting Officer

Andrew Dickson, SVP, Head of Surety-Americas

Alejandra Galeana, Underwriting, Caribbean

Alvaro del Valle, Underwriting, Caribbean

Our tour kicked off on an early sunny Monday morning at the office of OdysseyRe, with a breakfast kindly hosted by the Latin America Surety team of Mr. Hugo Cardona, Ms. Alejandra Galeana, Mr. Andrew Dickson, and Mr. Alvaro del Valle. OdysseyRe has a rich history of serving clients in Latin America, and as such our dialogue focused not only on the credit and surety markets in Latin America generally, but also on unique aspects of Latin America that make underwriting there different from that in other parts of the world. In addition to it being a catastrophe prone area, there are cultural considerations that make business less transactional-focused and more relationship-driven. Yes, there are clearly numbers-based analytics and attention to combined ratios to ensure a profitable business, but history, management, and other soft factors also come in to play. And of course, every country in Latin America is different from every other, and cross-national business negotiations must be ever-sensitive to these cultural differences. What is a surety bond, and how are they different in Latin America? As some background: Surety bonds have three parties. The owner (“obligee”) is typically the government which is sponsoring a construction project. The obligee requires the contractor doing the construction work (“principal”) to take out insurance in the form of a surety bond, in which a guarantor (“surety”) pays the obligee in the event that the project does not complete. In the United States, government projects over $100,000 are required to be bonded per the Miller Act. However, in Latin America, legal environments differ, and are evolving. Issues with corruption in Latin America, especially by government entities, did not go unmentioned. A related issue is the fact that the legal system in Latin America is very slow, causing insurers to avoid certain “first demand bonds” that could possibly put the insurer in a “pay me now”

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situation followed by the need to go through the legal system. Finally, whereas in the United States performance bonds are usually equal to 100% of the contract price, in Latin America they are typically 20%-30% (depending on the country), making them in effect “low penalty” obligations. What is your general underwriting process? The underwriting process begins first and foremost with (1) “underwriting the underwriters” (a theme that made several appearances throughout the Miami leg of our tour). This is followed by (2) pricing the treaties and negotiating terms and conditions, (3) approve or decline special acceptances, (4) perform underwriting audits (which evidently are not particularly popular in Latin America), (5) liaise with the accounting, claims, and actuarial divisions, and (6) monitor aggregations of risk on individual entities (principals, debtors, etc.) across programs and across territories. The primary documents referenced are (1) the narrative, (2) premium and loss triangles, (3) treaty experience, (4) EPI, and (5) risk profiles. The form of the premium and loss triangles differs depending on country, though best practices are making their way down. Two of the main overarching indicators of quality looked at are (1) the experience and track record of the surety team, and (2) the results of the current book of business, combined with the number of years in the surety business. What specific qualitative and quantitative factors are considered in pricing? Other qualitative factors considered in underwriting include looking at the claim staff, performing a credit analysis, and looking at the quality of the analytical tools and overall efficiency. Quantitative analyses for quota-share and excess-of-loss treaties include experience and exposure models with a blending between the two (as it is generally a severity-driven line). Commission rates need to be considered, and are analyzed against the market. Ground-up loss ratios tend to be low (the teens), with the exception of Colombia (40s). In addition to EPI and risk profile analyses, accumulation analyses and clash coverage considerations need to be performed, particularly with regards to RDSs (realistic disaster scenarios), which in turn requires the need to monitor current events in each country and examine carefully the credit risk of top principals. Often information and data is terse. Trying to group all Latin America industry data together for purposes of analyses generally does not work due to heterogeneity between countries. At times US models need to supersede. What are the rate trends nowadays? Rates are decreasing, especially in Colombia. It is a very competitive market presently, and with a lot of writing below tech prices, this is basically amounting to cash flow underwriting. That being said, higher rates are not necessarily a good sign, either. Argentina, in particular, has seen a lot of severity trend stemming from inflation. It is interesting to note that the US financial crisis did very little to negatively impact the surety market; on the contrary, surety results were very good, with the losses being primarily underwriting-related.

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What types of structures and terms are typical? Proportional treaties are generally RAD (risks attaching during). Commissions can be 35-45%, with around 20% loss ratios. A retention analysis ensures there is skin in the game. Treaty limits are on a per-principal basis for all years combined. Losses for one principal can affect multiple treaty periods. There is the traditional matching of “premium against losses” philosophy. Excess of loss treaties typically protect the retention of proportional treaties, and are also on a per principal (per contractor) basis. Treaty language is typical. In terms of exclusions: Typically excluded are riskier classes of surety, bonds without indemnity agreements, environmental guarantees, and nuclear risks and the like. Special Acceptances can be used for risks outside of the treaty parameters. (Facultative reinsurance is often too time-consuming to implement, and may result in too much exposure.) Over-line or special acceptances follow the treaty conditions and are paid with the treaty. Information that reinsurers would require include (1) recommendation and proposed terms and conditions, (2) financial information about the principal, (3) information about the risk being bonded, (4) current exposure, and (5) bonding plan for the principal. What are the territories in Latin America with the largest surety market share? Mexico accounts for 22% and Brazil 22%, with Colombia, Argentina, and Venezuela rounding the top five countries. Local insurers concentrate on 50% of the market, global insurers 35%, and regional insurers 15%. Global insurers are the savviest in pushing reinsurance. What are future projections for the market? The surety product is expected to grow in Latin America. Work is picking up, and there are many infrastructure needs, but the problem is lack of money. We are seeing a “Darwin effect” with regards to stronger contractors surviving. Add to this the wave of mergers and acquisitions both in the US and internationally. One important take-away is that technology will be key going- forward.

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MS AMLIN Louis De Segonzac, Head of Latin America

Amlinis a London-headquartered global specialty insurer and reinsurer. Amlin’s global specialty insurer, with over a hundred years’ experience, writes business in the Lloyd’s, UK, Netherlands, Belgium, German, French, European and Asian markets. Amlin’s global specialty reinsurer, with over fifty years’ experience in the reinsurance markets, writes business in the Lloyd’s, Bermudan, European, Latin American and Asian markets. Amlin announced the completion of the acquisition by Mitsui Sumitomo Insurance Company “MSI”, a wholly-owned subsidiary of MS&AD Insurance Group Holding, on February 2016.

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2014 GWP figures: Combined GWP £3B (Amlin £2.6B, MSILM £351M, and MSFRE £172M) Amlin launched its Miami office in October 2014. The office is located in the heart of Miami's Brickell Financial District. Amlin offers insurance clients across Latin America strong multi-line underwriting expertise in a range of specialty lines treaties including property, catastrophe, liability, motor, engineering, surety, political risk and marine & aviation. Mr. De Segonzac advised that Miami is a very important reinsurance hub for the Latin America market and an office there allows them to build on Amlin's reinsurance presence. Amlin has done business in Latin America for many years out of our London and Bermuda offices, but a local team, in Miami, is essential for growth. Amlin Miami offers LATAM Reinsurance products in Excess of Loss, Quota Share, and Facultative. Reinsurance is a critical element for economic growth in Latin America. Reinsurance provides coverage for the world's commercial insurance coverage. Why Miami as a Reinsurance Hub to Latin America and the Caribbean?

• Miami is used as a reinsurance hub because the city serves as a stable marketplace to access countries with political instability or less developed regulatory environments.

• In addition to being an attractive place to work, it also offers an increasingly attractive talent pool for professionals in the reinsurance industry.

• Miami serves as an attractive point for business travel to all of Latin America and the Caribbean, making it highly accessible to visit clients multiple times a year, including direct flights to all of South America. Reinsurance is a very relationship oriented market.

Louis de Segonzac, is the Head of Reinsurance at Amlin in Miami. He advised treaty placements are trending away from London, unless they are too big to be placed in the local market or are distressed. Facultative deals are frequently handled from London, while treaty deals are handled in Miami.

• Average line can range from $100,000 to $200,000. The majority of the book is made up of multiple small deals.

• A majority of the accounts are property driven, and are quota share deals. • Reinsurance programs are placed both directly and through the broker channel. • Insurance carriers feel comfortable with reinsurance underwriters that can speak

Spanish, which is similar to the Asia market. • Reinsurance Underwriters are multiple line underwriters

Latin America's overall growth rates are substantial, but account for a very small number of the world's total insurance premiums (less than 5%). Annual premiums over GDP is very

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low compared with developed countries. As an example the penetration in the US is closer to 10%, while in Latin American the number is approximately 3%. Annual premiums per capita is very low in Latin America than in developed countries. As of 2012, Chile is the most penetrated with 4-5% penetration, while in most countries it is from 1%-3.5%. Chile has a higher penetration, due it’s to its recent frequency and severity of earthquakes in the country, but also pension and annuities growth. Latin American insurance markets are far from saturated, holding immense growth opportunities for insurance companies. Compulsory insurance policies, such as automobile insurance, are driving non-life growth. Two lines of business that have a short-tail are Worker’s Compensation and Professional Liability, unlike in the US. Reinsurance pricing is Property Catastrophe driven. It is normal to have non-concurrent terms in Latin American and Caribbean deals. Insurance hubs include Rio De Janeiro, Panama, and Santiago. Insurance market potential differs among Latin American countries, distinguished by regulation, mandatory insurance requirements, literacy and insurance awareness. All strongly affect performance and growth capacity.

In recent year, there has been an improvement is the economic environment, business-friendly environment, and higher income in the Latin American countries.

There is a large market in Brazil with population of 200,000,000 and $2.5B GDP, but suffering from challenging business and regulatory environment. Regulatory barriers also make Argentina less attractive. Mexico's market size and significant growth possibilities make it extremely appealing for new entrants. Colombia offers similar growth potential as well as market stability.

There is abundant capacity and market for Latin America business, making it attractive to new entrants.

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University of Miami Dr. Igor Kamenkovich

Dr Igor Kamenkovick believes that there is a growing demand in the workforce for employees skilled in the analysis of risks associated with natural disasters, as catastrophes increase worldwide. In response to this need, The University of Miami now offers a Masters of Professional Science degree (MPS), which prepares students for science careers in the industry. *Accelerated Graduate Degree program (2 semesters & internship) *Program has been successful with placing student is Reinsurance jobs Sample Curriculum

The curriculum is structured to allow students to obtain the training and real-world experience necessary to prepare them for careers in today’s professional science job market. For more information on the program and prerequisites required, please visit their website: http://mps.rsmas.miami.edu/

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Validus Re Jorge Beltran, Head of Treaty, Latin America

Jason Morgan- Actuary

Julian Banchon, Assistant Underwriter, Latin America

Sarah Bitter, Catastrophe Modeling Analyst

Maria Hernandez- Underwriting Technician

Validus Reinsurance is a global reinsurer formed in 2005. They are headquartered in Bermuda and provide coverage for many lines including property catastrophe, property pro rata, and property per risk. Their Miami office serves as their base for Latin America and is underwritten on their behalf by Validus Reaseguros, Inc., Validus Reaseguros provides coverage for Property Catastrophe, Property per risk, Property proportional, Property retro, Marine and offshore energy, Marine retro, Aviation and space, Workers’ compensation catastrophe/life catastrophe, and Terrorism.

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Jorge provided us with an overview of Validus, reinsurance in Miami, and the history of the office. The main presentation was by Jason and focused on pricing Latin American business and the impact of geocoding resolution. In the United States, data is very granular however that luxury doesn’t exist with Latin America. The overall approach for LatAm is similar to pricing US business in that experience and exposure methods are both used. This is complemented with vendor models, such as RMS, as well as internally developed models and research scientists in the US and Canada who analyze those models. The level of data for LatAm business is sometimes a struggle as the information may come in on a high-level aggregated basis. One way to drive advances in data is from the top down, i.e. reinsurers demand more specific data. Depending on the data, the model uses two different methodologies:

• Spectral Acceleration – This considers a buildings response to ground shaking given the frequency content of the ground motions, local site conditions, and structure characteristics.

• Peak Ground Acceleration (PGA) – The maximum acceleration recorded during an earthquake. It is used in the vulnerability model using Modified Mercalli Intensity (measure of severity using intensity which refers to the effects actually experienced at location of an earthquake).

When using RMS to model earthquakes in Central America, there are two main components that are considered:

• Ground Motion Attenuation – This is the decay of ground shaking as seismic waves travel from the earthquakes source. Essentially this is the loss of an earthquakes’ intensity as it moves.

• Geotechnical Hazard Data – In reference to Soil Liquefaction (saturated soil loses strength due to an earthquake and causes the soil to have liquid-like behavior) and Soil Amplification (Softness of soil may amplify earthquake ground motions)

Soil type is an important characteristic for estimating earthquake ground motions. Soil type can vary greatly over short distance and can range from soft soil to rock. Soft soil amplifies ground motion, which makes it important to know the exact location of risks. There are 5 geocoding levels used: Coordinates (longitude and latitude), Postal Codes, City, Department, and CRESTA. The most used for LatAm is CRESTA. CRESTA stands for Catastrophe Risk Evaluating and Standardizing Target Accumulations. CRESTA was established in 1977 by the (re)insurance industry as an independent body for the technical management of natural hazard coverage. CRESTA's main goal is to establish a uniform and

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global system to electronically aggregate exposure data for accumulation risk control and modeling. In general, modeled loss estimates for CRESTA level are conservative compared to detailed stress or coordinate information. Jason’s presentation walked us through various CRESTA zones, including Panama, Guatemala, and Mexico as well as geotechnical heat maps for soil and liquefaction types.

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Baker & McKenzie, LLP Daniella Fonseca Puggina, Partner

In Latin America ("LATAM") with respect to the commercial and legal contexts, settlement is a major concern because the legal system generally proceeds at a very protracted pace. Chile is the exception. Columbia:

• There is a growing middle class. • Foreign insurers are permitted to operate as local insurers. • There is significant competition in the insurance market. • Columbia has a bifurcated framework, i.e., operations are separated between life

insurers and general insurers. • As concerns the insurance market, there is generally great opportunity for

development as certain regulations limit insured-risk. Brazil:

• Brazil is the largest insurance market in LATAM. • Brazil, however, exhibits significant political instability, e.g., the president is currently

in the midst of being impeached for manipulating certain economic metrics preceding her election as well as selling political seats.

• As of late, there has been no significant investment in state infrastructure nor tax reform.

• As concerns the legal system, judges have been aggressive recently—possibly too aggressive—as they have liberally authorized wiretaps and other questionable actions that potentially violate constitutional rights.

• Although Brazil had been a fertile environment for economic development, including the insurance and reinsurance industry, it currently is not fertile. Significant sums of money that could have been used to build state infrastructure, etc., have been lost due to corruption.

• Catastrophic environmental and economic disasters have occurred in the energy sector that directly affect the insurance and reinsurance markets. For example:

o The Samarco dam disaster occurred on Nov. 5, 2015, when an iron ore tailings dam in Bento Rodrigues, a sub-district of Mariana, Brazil, suffered a catastrophic failure. The toxic flood that followed destroyed two villages, killing at least 17 people and injuring many more. Reportedly, at least 60 million cubic meters of iron waste flowed into the Doce River, which

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eventually reached the Atlantic Ocean. The total impact, including environmental consequences to the nearby river, wildlife and villages, is still unclear. This incident has been described as the worst environmental disaster in Brazil's history. Samarco operates the dam, which is a joint venture that is owned by Vale and BHP Billiton. Vale and BHP Billiton reportedly could face liability of more than $100 billion.

Argentina: • Workers compensation and motor vehicle insurance constitutes a significant portion

of the Argentine insurance and reinsurance markets. • Argentina is the only country in LATAM where casualty insurance is placed. Many

casualty claims are settled quickly, thus they have a very short tail. • Although the political environment is currently viewed as negative (e.g., high inflation

and an economy in flux), positive progress is expected going forward. • Insurance regulations model the Insolvency Type II regime.

Chile: • There has been a shift in the regulatory framework, which has made the regulatory

scheme more efficient and stable. Consequently, the economic environment is becoming ever more fertile for insurance and reinsurance business.

• Corporate taxes have increased recently. Mexico:

• Mexico is the second largest insurance market in LATAM. • The regulatory framework is evolving. As of April 2015, regulations were effected

that should align the Mexican regulatory scheme ever more closely with the Solvency Type II regime.

Peru: • The middle class is expanding. • There has been a rapid growth in investment. • The insurance market has grown by approximately 200% over the last decade. • Only a few insurance companies account for the majority of the gross premiums

received in Peru. Uruguay:

• There has been significant growth in disposable income. • The economy currently focuses on exporting commodities. • There is great competition in the insurance market. • One government-owned insurance entity controls approximately 65% of the

domestic market.

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Beazley Paul Felfle, Treaty Underwriter, Latin America

Mr. Felfle’s background was rich and diverse. He has experience working in Chicago, Bogota, Colombia, and, currently works in Miami. Felfle has worked for 20 years in underwriting and broking roles for the Miami reinsurance market, and previously worked as managing director of Aon Benfield Analytics Latin America and as vice president of Latin America and Caribbean at Everest Re. Mr. Felfle manages the Beazley office, which started operations in May 2013. Beazley's managed syndicates are backed by the Lloyd's chain of security. Beazley operates in the UK, US, Australia, France, Germany, Hong Kong, Singapore and Norway. In 2012, Beazley underwrote gross premiums of US$1.89bn. Beazley Miami focuses on the development of reinsurance business and growth from Latin America. The company aims to expand its footprint in Latin America by accessing business that has not traditionally come to London. Miami is a growing hub for Latin American business and clients are becoming increasingly sophisticated with their analysis and research. Miami presence is important to maintain long-term reinsurance relationships with clients and brokers. There are attractive growth opportunities in Latin America, but focus is profitability rather than growth. Objective include to strengthen relationships that Beazley already has in the LatAm region and to develop business that doesn't ordinarily come to Lloyd's. Beazley is a specialist insurer that operates in niches where quality underwriters are needed to help assess and price the risk. The product portfolio of Beazley is skewed towards areas that mainstream insurers have traditionally found it difficult to operate in. Reinsurance strategy in Latin America is focused on the development of a treaty portfolio focused primarily on property related lines. In the long run, it will complement the existing facultative book. Beazley will build a regional treaty portfolio that generates margins that are accretive to Beazley's bottom line. The role of the reinsurance broker has changed, considerably, specifically in the LATAM market. There is an increase awareness and investment in analytics' over the past two decades. However, how that role is perceived varies by geography and client.

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For most insurance companies in the LATAM region the primary role of the broker is still seen as a transactional one (traditional) with the added requirement that catastrophe modeling must be part of that service. It is perceived that the broker role is likely changing to a role of capital advisor. There is a combined need from clients that need to “sit-down” with the broker to explain analytics results.

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Willis Re Tony Philips, Managing Director, Treaty Re in Latin America

Cameron Roe, SVP

Tony Matta, CEO Facultative, Central & Caribbean

Maria Alexandra Gonzalez, VP FINEX

On the morning of Thursday April 12th, the Reinsurance Under 40s group met with Willis Re’s Latin American reinsurance brokers, who are based in Miami. We spoke with Anthony Phillips, Managing Director; Tony Matta, CEO – Central America & Caribbean Facultative; Cameron Roe, Senior Vice President; and Maria Alexandra Gonzalez, Vice President. The discussion was largely informal and each broker described a bit about their roles at Willis Re, the markets they work in, and generally the economic forecast in Miami, particularly related to the influx of capital into the area’s real estate market from Latin America.

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Since the merger with Tower’s Watson, Willis has reorganized into three different entities: 1) Retail Insurance, 2) Investments, Risk, & Reinsurance, 3) Health &Benefits. The office we visited was solely devoted to the Investments, Risk, & Reinsurance for Latin America. Small separate offices in other parts of Miami focused on Miami local Retail Insurance and Health & Benefits. There are plans to bring all parts of the operation under a single roof in the future. Anthony Phillips is the head of the office and also works on catastrophe treaty reinsurance business in Latin America. Tony Matta runs the facultative reinsurance arm for Latin America, and Cameron Roe heads up the treaty reinsurance for the English speaking Caribbean. All of them focus on property catastrophe insurance, which makes up the majority of risk in Latin America. In the Caribbean the main focus is on windstorm, while in Central and South America the focus is heavily on Earthquake exposures with windstorm along the coasts. Especially compared to the United States, there is limited casualty business in Latin America, due to the region’s non-litigious legal environment. The majority of people are not willing to sue and prefer to avoid lawyers. Hence, there are few brokers focused exclusively on that line of business, and it is often written as an add on to property reinsurance programs. The largest casualty market in the region is Argentina, which has a fairly large private workers’ compensation market. The rest of the conversation focused on how business is done in Latin America. They noted that it is an incredibly personal market, and it is very important to regularly see clients. This is a major part of the reason that Miami has become such a hub for Latin American and Caribbean reinsurance, as there are daily flights to all the Latin American and Caribbean capitals, along with easy access to financial markets in New York and Europe. A downside to the nature of this type business is that it often results in some levels of corruption that also exist throughout the economies of Latin America. Therefore, it is important to maintain a high level of integrity when operating in these markets while also developing strong relationships.

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Carlton Fields Robert Macaulay, Attorney at Law

Steven Brodie, Attorney at Law

On Tuesday, April 12, the Group was hosted by the Miami office of Carlton Fields, a U.S. law firm with ten offices located in New York, Miami, Tampa, Los Angeles, Washington, D.C., Hartford, West Palm Beach, Orlando, Tallahassee and Atlanta. The Group met with three partners: Rob DiUbaldo, founder of the Under 40s, and a shareholder in the New York office who represents reinsurers, insurers and other industry participants in various legal and regulatory matters; Steve Brodie, co-Managing Partner of the Miami office, and co-head of Carlton Fields’ Property & Casualty Insurance Group, who focuses on representing clients in the insurance industry; and Bob Macaulay, a shareholder in the Miami office who represents numerous domestic and international companies and investors in a variety of transactions and ongoing business matters, including, SEC practice, mergers and acquisitions, technology licensing, international transactions, inbound and outbound foreign

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investment, international taxation, real estate, domestic and offshore banking, distribution agreements, shareholder disputes, and aviation. Carlton Fields is a full-service law firm that represents businesses in key industries across the country and around the globe. Through its core practices, Carlton Fields helps its clients grow their businesses and protect their vital interests. Its insurance and reinsurance group is recognized for its outstanding capabilities both domestically and internationally, providing unmatched depth and focus in (re)insurance product development and protection, regulatory guidance, corporate matters and (re)insurance-related litigation, coverage and arbitration. With an emphasis on both the property and casualty and life, annuity and health sectors, Carlton Fields’ insurance practice has been ranked No. 1 by Chambers for eleven consecutive years and was recognized in a recent BTI Consulting Group Power Elite survey of general counsel at Fortune 1000 companies. Carlton Fields’ national and international litigation teams handle the most complex business trials, arbitrations, and appeals in the insurance, reinsurance and financial services sectors, as well as various other industries, such as healthcare, telecommunications, real estate and consumer finance. In the life insurance and financial product liability areas alone, its financial services industry attorneys have handled more than 300 class actions. Carlton Fields also advises clients on sophisticated business transactions across a range of issues and industries. With a strong presence in Atlanta, Los Angeles, New York, Washington, D.C., and Miami, it offers focused guidance on domestic and international matters and handles a wide variety of transactions for clients throughout the country and internationally. These matters include mergers and acquisitions, securities, tax planning, and ERISA, as well as state regulatory counseling to clients in the (re)insurance and financial services sectors, the energy sector, and other key industries. Carlton Fields presentation focused on some of the primary differences in the rule of law, legal system and regulation as between the United States and Latin America. While most U.S. states follow the so-called “common law” system, many Latin American countries adhere to the “civil law” system or a blend of the two. The differences between the two legal systems can be significant on matters such as the role and power of the judiciary, trial procedure, the role of the juries, freedom of contract and evidentiary issues, such as the use of documentary proof and witness testimony. Unlike the United States, the legal system in certain Latin American countries is founded more upon statutory and legislative authority, as opposed to a well-developed body of common law formed through court decisions. Where judicial decisions in the United States interpreting common law typically have a binding effect on third-parties in future matters, this is much less so in many Latin American countries that adhere to the civil law system. By contrast, writings of legal scholars generally play a far greater role in the interpretation of the law in Latin American countries that follow the civil law system, as opposed to in the United States. The presentation also focused on the growth of insurance and reinsurance in the Latin American market, and Miami’s role in serving as a gateway to that market. In addition to

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acting as counsel in insurance and reinsurance arbitrations that involve Latin American insurers and reinsurers, as well as regulatory matters for (re)insurers seeking to do business in Latin America, Carlton Fields has also acted as counsel in various capital markets transactions relevant to the region, including having represented the ceding insurer to the largest fully collateralized reinsurance catastrophe bonds ever marketed.

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Aspen Re Jorge Canardo, SVP, Head of Latin America

Santiago Deluchi, VP, Latin America

Luis Alberto Baron, VP, Property Latin America

Giovanni Fanizza, Casualty Manager, Latin America

Aspen is a global insurance and reinsurance company. Aspen teams are located in Bermuda, France, Germany, Ireland, Singapore, Switzerland, the UK and the US. Aspen specializes in property and casualty treaty reinsurance. Aspen’s dedicated underwriting teams focus on proportional and excess of loss within the Latin American market – offering facultative capacity on an excess of loss basis across property and engineering lines. Also for agriculture, credit and surety, aviation, marine and energy programs, through our London, Miami and Zurich offices.

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Aspen’s team works alongside brokers and clients throughout the LATAM region. Aspen keeps in pace with market developments and delivers quality service through strong corporate and personal relationships. Aspen relationships’ are long-lasting and provides stability to innovate when transferring risk. Aspen LATAM hub for the region is based in Miami with specialty lines support from Zurich and London. Regulations that foster private sector development differ significantly across Latin America. Chile and Mexico are perceived as the most advanced, while Argentina, Bolivia, Ecuador and Venezuela are perceived as less friendly to the private sector. The quality of Peru's regulation has improved over the past 10 years, as has Colombia's. Brazil, however, hasn't shown much improvement. There is a focus on six of the most promising Latin American economies: Argentina, Brazil, Chile, Colombia, Mexico and Peru. Currency devaluation is an issue that gives the insurance company instability, and thus the reinsurance, also. Agriculture programs (coverage provided for hail, crop, freeze, etc…) are quota share and are highly volatile in LATAM (Brazil, Mexico, Argentina & Uruguay). Overall trends in LATAM are viewed positively. There is an increase in middle-class, there is opportunity in the casualty lines of business, potential within 10-20 years, and there is a “place at the table” for Aspen for growth. Aspen has hired a Casualty Manager for Latin America in preparation of the expected growth and specialization in the Casualty realm. Giovanni Fanizza, was previously with Gen Re for 30 years.

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Reinsurance Under 40s Miami

Social and Networking Event

On our last night in Miami, we invited young industry professionals to our very first networking event in the city. There were approximately 30 people from companies including TransRe, OdysseyRe, Aon, Baker McKenzie, Swiss Re, Validus Re, Aspen Re, and more. This event was a proof of concept test to gauge the level of interest in a group like ours in the Miami area. The great turn out combined with the excitement and passion for our group has led us to expand our event offerings to Miami. Julian Banchon of Validus Re has been named the group’s ambassador for the 2016 term and will serve as the group’s “boots on the ground” and assist in the planning of Reinsurance Under 40s activities in Florida.

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Maples & Calder John Dykstra, Partner

Tim Frawley, Associate

Abraham Thoppil, Partner

Lesley Thompson, Maples FS

Maples and Calder was formed in the Cayman Islands almost 50 years ago and today is the largest law firm in the Cayman Islands. Maples and Calder is also acknowledged by clients and competitors alike as being the market leader in each of their principal practice areas, in particular funds, finance and corporate. Maples and Calder’s Cayman office also provides, through our regulated affiliate, incorporation and registered office services. In response to client demand Maples and Calder opened offices in Dubai, Hong Kong, London and Singapore. These offices give Maples and Calder’s clients the option to

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access their world-renowned Cayman Islands practice with the added convenience of local support in the clients own time zone and language. Maples and Calder’s, also, has offices in the British Virgin Islands and Dublin which offer British Virgin Islands and Irish legal advice, respectively. The Maples and Calder Cayman Islands office can also coordinate specialized management, administration and fiduciary services through our affiliate, MaplesFS. MaplesFS, through its divisions Maples Fiduciary, Maples Fund Services and Maples Private Client Services, is an independent global provider of specialized fiduciary, fund administration, entity formation and management, insurance management and trust and private client services. With offices in key locations around the world, our clients include global financial institutions, institutional investors, investment managers and international corporations. We work closely with our affiliate Maples and Calder, in addition to other leading international and domestic law firms, audit firms and other consultants and service providers. Combined with a wide range of expertise in law, accountancy, investment management, banking, regulation, risk management, management consultancy, trust and private client services and fund administration, MaplesFS is able to offer professional and comprehensive services that are tailored to client requirements. Why Captives in the Cayman Islands? A leading global insurance jurisdiction

708 captives 2nd largest captive domicile 239 Healthcare captives , including MedMal

Insurance laws specifically targeted for captive insurance companies Insurance Law

Established regulatory framework & infrastructure Financial regulator Cayman Islands Monetary Authority (CIMA) is

independent from the Government Tax Information Exchange Agreements (TIEAs) with 35 countries to date

Regulatory flexibility No “one-size-fits-all” regulatory system Access to regulator

Tax Neutrality No local corporate income, premium, capital gains tax, foreign exchange

restrictions Viewed favorably by the global reinsurance markets Cutting edge legislation

Pioneer domicile of Segregated Portfolio Companies (SPCs) and Portfolio Insurance Company (PICs) legislation

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Forefront of Anti-Money laundering legislation Political stability

Cayman is British Overseas Dependent Territory Private sector excellence

52% Pure Captive, 20% Segregated Portfolio Company, 18% Group Captive, 7% Commercial Insurer, 4% Special Purpose Vehicle, and 1% Reinsurance Companies

• Opportunity for growth in the reinsurance sector

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AON (Cayman) Steve Britton, Managing Director, Global ILS Management

Adrian Lynch, Managing Director, Aon Ins. Managers (Cayman) Ltd

Helen Stephenson, SVP and Chief Underwriting Officer

Kristian Leese, AVP

On the morning of Thursday April 14th, the Reinsurance Under 40 Group met with Aon and its Captive and Insurance Linked Securities Management teams. We received presentations from Adrian Lynch, Managing Director Aon Cayman; Helen Stephenson, Senior Vice President and Chief Underwriter for United Insurance Company; and Steve Britton, Managing Director Global ILS Management.

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Mr. Lynch provided initial introductions and a general background on Aon and captive management. Aon is a large international brokerage with offices worldwide capable of handling many risk management, insurance and reinsurance needs. The office in Grand Cayman is focused primarily on captive consulting and management, though a small local insurance broking arm is included in the operations. Aon manages 100 of the 708 captives domiciled on the island. Aligning with the nature of the industry represented in Grand Cayman, close to a majority of these 100 are related to the healthcare industry. Outside of Grand Cayman, Aon has other Captive Management offices in Bermuda, Vermont, Dublin, Guernsey, and Luxembourg that manage a total of 1,150 captives with an annual premium of $25 billion as of 2014. More generally, Mr. Lynch also discussed the reasons captives are used by risk managers and generally where they are used in an insurance program structure. According to a 2015 Global Risk Management Survey, “Strategic Risk Management Tool” was the primary reason for utilizing a captive. Against what is often the common view of captive usage, the ability to optimize taxes and establish reserves each represented only four percent. Ms. Stevenson followed up with an outline of United Insurance Company, a captive insurance company owned by 15 leading US, European and Brazilian multinationals. Aon acts as the captive manager of the company and also holds a small stake in its ownership. The company, which has an AM Best rating of A-, has the flexibility to offer an array of capacity to the property, casualty, and marine markets. Typically, the company is used to provide a buffer layer between retentions held by member corporations and standard insurance markets. It can do this either through a direct insurance placement or as a reinsurer of a standard market carrier. Via United’s Nexus subsidiary, United can also allow members to trade risk between their various individual captives to allow for diversification that should improve the predictability of underwriting results and make the captive coverage closer to true insurance. Mr. Britton followed, diving deeper into Aon’s Captive management group for insurance linked securities and other alternative capital vehicles. As discussed throughout this report, insurance linked securities are an alternative form of reinsurance that allows capital market investors direct access to insurance risks, as opposed to investing via equity of an insurance or reinsurance company. To isolate the insurance-related risk, a special purpose vehicle is set up that is fully funded with extremely safe securities, such as US treasuries. Aon’s captive management group is responsible for managing these funds that in many ways behave in a manner similar to other more traditional captives. As of the presentation, Aon’s ILS and Structured Insurance vehicles group had $8.5 billion in assets under management. In addition to Aon’s managing of assets after issuance, another group within Aon also acts as the leading issuer of catastrophe bonds and other insurance linked securities. In fact, Aon is the leading issuer of insurance linked securities, ahead of other more traditional investment banks like Goldman Sachs and Deutsche Bank and insurance industry competitors like Swiss Re and GC Securities.

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Mr. Britton also provided a summary of the various types of insurance linked securities along with a brief history of the products. The table below outlines of the major forms of insurance linked securities along with the following chart that sets up a theoretical reinsurance program using these ILS securities.

ILS Product Description When to Utilize

Catastrophe Bonds

Typically cover specifically defined risks on an Excess of Loss basis; investors provide coverage to insurers above an agreed trigger level

Enables an insurer or reinsurer to access funds if a severe disaster produces large-scale damage Market size currently c. $15bn, the majority of ILS placements are cat bonds

Sidecars

A quota share agreement: an independent “side” company is created, giving reinsurers temporary access to capital

Primarily used after major catastrophes when investors have excess capital and reinsurers are faced with a hard market

Industry Loss Warranties

Reinsurance contract or derivative instrument that cover losses from events where the industry-wide insured loss exceeds some pre-agreed threshold

Designed to protect insurers and reinsurers more comfortable with index-based risk from severe losses due to extreme industry events

Collateralized Reinsurance

Coverage identical to traditional reinsurance with limits fully collateralized; mainly single event risks

Used primarily for lower layers of coverage and for treaties without reinstatable limits, including aggregate covers and RPPs

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Cayman Finance Jude Scott, Chief Executive Officer

Ernst & Young Rohan Small, Partner, Financial Services

We had the pleasure of meeting with Mr. Rohan Small, a Partner in EY’s Financial Services division, and Mr. Jude Scott, Chief Executive Officer of Cayman Finance. Cayman Finance is a non-profit organization with the mission to protect, promote, develop, and grow the financial services of Cayman Islands, which includes both the insurance and reinsurance arenas. Cayman Finance works closely with the Ministry of Finance with regards to new legislation, as well as CIMA (Cayman Islands Monetary Authority). All three entities have relationships with service providers in the legal, public accounting, and fiduciary services sectors, which in turn encompass a variety of industry sectors, including banking, capital

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markets, trusts, insurance, and investment funds and asset management. Of these, the investment funds and asset management sector is the largest, though there is considerable overlap among the sector. Clients are at the center of financial services industry. Mr. Scott spoke of the importance of having a high quality of people. The need for experts in finance who are well versed in the specific legislative and regulatory environment of the Cayman Islands, as well as its strong court system, requires local expertise difficult to replicate in other jurisdictions. With regards to the Cayman Islands in general, the banking and fiduciary services areas tend to recruit new hires from large accounting and law firms while promoting a “balanced lifestyle.” North America, Europe and Australia are the primary recruiting grounds. Legal services firms in the Cayman Islands tend to recruit exclusively from the United Kingdom, given the kinship of UK and Cayman law. There is an emphasis on innovation as well; for example, there is now a Fintech working group. Mr. Small spoke of many of the regulatory aspects in the financial arena in the context of other regulatory regimes such as Solvency II and NAIC equivalency efforts. Currently in the Cayman Islands there are several regulatory classes: Class A for domestic insurers, Classes B1 and B2 for international captives, Class B3 for international commercial insurers, Class C for international Special Purpose Vehicles, and a relatively new Class D for reinsurers (which, at the time of this writing, consists of one, Greenlight Re). One of the challenging business-sector challenges is in the area of taxation. The OECD is focused on tax transparency and harmonization, promoting a common tax platform. However, the “captive” concept is challenging: Is it true insurance? Are captives “real-people” companies, or rather funding “vehicles” to be taxed onshore. The Beneficial Ownership regime presents its challenges as well, with central registries being a sticking point. For example, the UK had proposed a self-reporting register, but with no validation. An overriding theme in many of these challenges is that international initiatives to change normal markets could artificially reshape how capitalism works. Finally, Mr. Small and Mr. Scott spoke of a theme which entered many of the presentations throughout our leg of the Cayman Island tour: the need for the Cayman Islands to create a positive image with regards to the transparency of information and the policing of financial crimes. If it is not enough for movements such as Occupy Wall Street to create the perception in the public’s mind that the financial system is the cause of inequality and corruption, the image of the Cayman Islands has suffered unfairly from fiction stories such as a well-known one by John Grisham. Now, with news of the Panama Papers fresh in people’s minds, there is the need to remind the public of the Cayman Islands’ commitment to transparency. CIMA requires an international bank to be regulated elsewhere in order to open in Cayman Islands. Suspicious transactions are required to be reported to the FRU (Financial Reporting Unit). And the implementation of the OECD’s Common Reporting Standard (CRS) that allows a global automatic exchange of financial and tax information will exemplify cooperation in the international arena.

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Of course, there are still technical challenges here: For example, OECD’s CRS has IT demands that make it difficult and administratively costly to implement. And even if a suspicious transaction must be reported to the FRU, the response time to stop it is slowed due to how the reporting has to be “merged” with other global reporting systems, which could take several years. A key point is that one never condones the breaking of laws in any country. Yet still, even when everything is legal, some “vilification” unfairly spills over in the public’s eye. An example mentioned is the important distinction between tax evasion and tax avoidance. In tax avoidance, there is no breaking of any laws, but rather an understanding of where the loopholes are. But loopholes are legal, and moreover, well-known; thus the on-shore government could very well pass a law to close the loophole. But it doesn’t. In fact, with regards to lack of transparency and opportunities for money laundering, the United States actually fares far worse in these respects, particularly in states such as Delaware where the beneficial ownership requirements are not nearly as robust. An article in The Guardian reports that it requires less documentation to open a shell company in Delaware than to renew a library card! (See 4/6/2016 “Forget Panama: it’s easier to hide your money in the US than almost anywhere.”)

Marsh Cayman Kieran O’Mahony, SVP- Client Services Leader at Marsh Management

Services Cayman, and Vice Chairman for IMAC

Ken Kimatu, AVP, Account Executive

Marsh Cayman has nearly 50 years’ captive experience. It manages over $40 Billion in premium. There are approximately 430 captive experts manage 1,250 captive insurers globally. As the world’s largest captive manager, organizations come to Marsh for captive solutions, including advice, implementation, management, and actuarial services. Managing Services For a Captive it is important to understand appropriate domicile, as well as domiciles’ infrastructure, tax structures, and treaties. Marsh offers services, including:

• Strategic management. • Accounting. • Insurance-policy management. • Claims management. • Regulatory compliance.

Marsh’s captive advisory professionals offer counsel to captives and advise alternative applications that a captive can provide, including Feasibility studies, Strategic reviews, Domicile reviews, and Exit-strategy studies. Continually monitoring the insurance market, Marsh adjusts insurance program to changes in market conditions. Historically, Captive insurance companies have been a risk management tool for large corporations. Currently, there has been an increasingly number of small-to-medium size firms learning about the benefits of small captives to fund their insurable risks. What is a captive? A captive insurer is a legal entity formed primarily to insure the risks of one corporate parent company, or a number of affiliates, thereby reducing the parent company’s total cost of risk.

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Captives are usually domiciled in a specialized location, either onshore or offshore, and sometimes write business unrelated to their parent companies. Typical Captive Structure

What is a Small Captive? The term “small captive” refers to a captive insurance company typically created by midsize companies writing less than $1.2 Million in premium (threshold increases to $2.2 million effective January 1, 2017). Should the captive meet certain risk distribution and risk shifting elements and qualify as an insurance company for US federal tax purposes, they can then elect to be taxed only on investment income. Captives that make this election often insure risks that are characterized with historically high-severity and low-frequency losses. Small captives have led to significant growth and it is

estimated over 1,000 small captive formations by US Companies 1) Captive: Business and Insurance Advantages

• Coverage for risks not available in the commercial market. • Improved negotiating position with insurance and reinsurance markets. • Flexibility in program design. • Broader and simpler insurance contracts. • Better risk management discipline and central governance. • Efficient way to begin a new captive program — small and simple.

2) Captive: Financial Advantages

• Protected cash flow. • Matching of revenue and expense. • Performance measurements. • Underwriting profit not subject to federal income tax if captive is properly structured

(investment income is subject to federal income tax). • Efficient wealth-transfer mechanism.

A captive may be formed to fund future loss payments, but this alone does not qualify the entity for accounting and tax status as an insurance company. Such status is accomplished only through proper risk distribution and risk shifting. A captive must first demonstrate proper risk distribution, or “risk pooling,” in order to qualify as an insurance company from a US federal tax perspective. “Internal risk pooling” refers to the existence of a sufficient number of separate legal entities within a holding-company structure.

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Captive Insures a Minimum of Seven Legal Subsidiaries

“External risk pooling” occurs when the captive takes on the risk of individuals, or entities other than the sponsor, for example, extended warranties to customers, employee benefits, or risk assumed from reinsurance pools. Unaffiliated reinsurance pools, or “risk pools,” are created to spread risk from one captive insurer across many. If a captive cedes sufficient risk to the risk pool, to the extent that the unrelated risk it assumes in return is at least 30% of its total premium received for the year, then the captive may qualify as an insurance company for US federal tax purposes. Policies written by a captive must shift risk to qualify as an insurance contract. That is, there needs to be a reasonable chance of a loss to the insurer. Small captives may insure any number of coverages, but those electing to be taxed on their non-underwriting performance often choose to write high-severity/low-frequency type coverages and finance large losses through accrual of profits during favorable underwriting cycles.

• Supply chain/contingent business interruption, Intellectual property, Cyber, Environmental, Product liability, Product recall, E&O, D&O, Political risk, and Terrorism.

A Captive is both a long-term commitment and a fully functioning insurance company, and should make the following considerations: The parent company must contribute the capital required to support the captive’s business plan, as determined by the insurance regulator in the captive’s chosen domicile, generally a minimum of $250,000. While these funds remain within the parent group, they may not realize the same return as they would if invested in the parent organization’s operations.

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The captive’s capital could be eroded by adverse operating results. While underwriting gains may not be subject to federal income tax, underwriting losses may not be used to offset other gains, or carried forward. The formation and operation of a captive will incur various expenses and vary by domicile. The benefits outlined previously need to outweigh the associated costs.

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Cayman Islands Monetary Authority (CIMA) Razaak Busari & Suzanne Sadlier

Cayman Island Monetary Authority (CIMA) was formed in January 1997, by the amalgamation of the Cayman Islands Currency Board and Financial Services Supervision Department. CIMA is the primary financial services regulator in the Cayman Islands. Their obligations include acting in the best economic interest and promoting and maintaining a sound financial system in the Cayman Islands, through robust but appropriate regulation.

They strive to improve the management of the currency reserves, assist overseas regulatory authorities, advise the government on regulatory matters and monitor the compliance with money laundering regulations.

CIMA consists of 11 divisions, an onsite inspection unit and the managing director’s office. Of the 11 divisions, four are regulatory divisions (Banking, Fiduciary, Insurance and Investments & Securities); four are non-regulatory divisions (Currency, Legal, Compliance and Policy & Development); and there are three operational support divisions (HR, IT and Finance). The divisions are managed by Heads of Division and Deputy Heads.

CIMA attempts to keep all laws, rules and regulations seamless and transparent. They do this by issuing guidance notes on complex processes, issue licenses, and performs due diligence on all persons applying to act as directors, shareholders and officers. They enforce laws by investigating breaches and take action when necessary. Most importantly, they reduce the possibility for the use of financial services business for AML (money laundering) or other crimes involved with terrorism.

Cayman remains the second largest offshore captive domicile in the world and the largest for number of healthcare captives. The Insurance sector is categorized into four classes based on different requirements such as MCR (minimum capital requirements).

More detailed information about the licensing requirements can be found on their website: http://www.cimoney.com.ky/regulated_sectors/reg_sec_ra.aspx?id=94&ekmensel=e2f22c9a_14_88_btnlink#CB

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The Reinsurance presence in the Cayman Islands is big and expected to grow. Currently there are 110 reinsurance companies operating out of the island and their underlying business is predominantly US based. They offer a wide range of coverage from WC, Professional Liability, Med Mal, Marine & Aviation, and Disability etc. Part of the government’s strategy is to promote and enhance the reinsurance sector in the Cayman Islands. CIMA’s strategy includes increased focus on further developing in-house reinsurance expertise and enhancing the regulatory framework. They hope to become a NAIC qualitied jurisdiction.

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Greenlight Re Bart Hedges, Chief Executive Officer

Brandon Barry, Chief Underwriting Officer

Greenlight Re (GLRe) was established in 2004 and is the only Class D property and casualty reinsurance company based in the Cayman Islands. Greenlight Re is a hedge fund backed reinsurer in that the investible assets from operations are managed by a hedgefund. Greenlight Re’s assets are managed by the highly regarded David Einhorn hedge fund, Greenlight Capital. The Reinsurance Under 40s group met with Bart Hedges (Chief Exectuive Officer) and Brendan Barry (Chief Underwriting Officer), who walked us through Greenlight’s history and strategy. When it was founded in 2004, the company had approximately $210M in capital privately raised by Greenlight Capital and included a significant investment from David Einhorn. This gave them access to the hedgefund which was closed to other investors. In 2006, the company began writing business and later IPO’d in 2007.

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The strategy is to have very close long term relationships on target business and combine that with a long-short equity strategy. The strong relationships helps to keep the funds “sticky” for investments – they aim for a retention in the mid 90s. The investment strategy is to take long positions in perceived undervalued securities and short positions in securities believed to be overvalued and fundamentally challenged. The desire is to outperform the market on both the underwriting and the investment side. Greenlight Re’s target business includes Auto (typically non-standard), Property with controlled Cat exposure, Workers Comp, Retro Property Cat, and Professional Liability. Greenlight Re is a lean operation with about 30 people for an approximate one billion dollar portfolio. The small team aims to be transparent and responsive to their business partners and consists of highly skilled underwriters, some of which have actuarial credentials. As the only large P&C reinsurer on the island competing with hubs like the US, Bermuda, and London – they must work hard to stand out amongst the crowd. While Cayman has many advantages, being a central location for reinsurance needs isn’t one of them. GLRe gets around that by doing video wrap ups several times a year, performing offsite meetings, and client visits to the island. They aim to be the lead market on their deals and will sometimes take 100% of a placement. The team conducts quarterly analysis sharing with brokers and cedents as an added value.

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Insurance Managers Association of Cayman (IMAC)

Colin Robinson, SRS & IMAC Education Committee

Lesley Thompson, Maples Fiduciary

What is a Captive?

• At a most basic level, a captive insurance company is an insurance company that only insures all or part of the risks of its parent.

– This definition is limited and in many ways does not define how the use of a captive has evolved from its original use.

• A closely held insurance company whose insurance business originates and is controlled by its shareholders

• Shareholder-insureds have direct involvement and influence over the company’s operations

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– underwriting, claims management policy, and investments • A risk management tool designed to assist with risk financing needs • Owned Captives

– Single Parent Captive (most common structure) – Group Captive

• Cell Captive – Segregated Portfolio Company (SPCs) – Portfolio Insurance Company (PICs)

Single Parent (Direct and Fronted)

Group Captive

Role of the Captive Manager

• Almost all captive owners hire professional managers who are well-versed in the local regulatory, financial and administrative requirements of the captive’s operations.

The captive manager has significant insurance expertise and the capabilities to work with all internal and external service providers of the captive.

Provides regulatory, accounting, corporate, compliance and administrative support services for the captive and coordinate with all related parties.

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Managing the Captive’s Operation

Local Representation & Corporate

• Act as Principal Representative in Domicile • Provide local director (if required) • Preparation for Board Meetings

Financial Services • Provision of financial statements and forecasts • Preparation and support for year end audits

Treasury Services

• Financial transactions • Monitoring and processing cash and investment activities • Assisting implementing of with collateral requirements:

LOCs and trusts

Compliance & Administration

• Day to day administration • Compliance, KYC, MLRO • Regulatory filings • Coordination of service providers (Attorneys, Auditors,

Investment Managers, Actuaries)

Insurance Services

• Policy documentation • Mid-term endorsements • Certificates of Insurance

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Appleby Samuel Banks, Counsel

On the morning of Friday April 15th, the Reinsurance Under 40 Group met with Samuel Banks a Counsel and member of Appleby’s corporate practice group. He works on both the firm’s Corporate Finance and Insurance teams. Mr. Banks provided a brief overview of Appleby as a firm and then outlined the Cayman Islands’ legal history, government organization, participation in international and bilateral regulatory schemes for finance and insurance, and finally briefly reviewed the country’s insurance regulations. The Cayman Islands were first spotted by Christopher Columbus in 1503 and were transferred to United Kingdom from Spain in 1670. They have remained connected to the United Kingdom since. The Caymans were linked to Jamaica as a dependency but remained with the United Kingdom when Jamaica declared independence in 1962. Grand Cayman remains what is deemed an Overseas Territory. As an overseas territory, Cayman maintains its own local laws, but the Foreign and Commonwealth Office (FCO) appoints a governor, who is responsible for many outward facing issues, including national security, foreign

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affairs, and immigration among others. The local government is based on the Westminster system, and a 20 person Parliament makes up the legislative body. Of the 20 individuals serving in the parliament, seven serve as ministers that form the government. The legal system is based on English Common Law with the highest court ultimately being the Judicial Committee of the Privy Council based in London. The Cayman Islands are a major financial services center and are considered a tax neutral zone with no taxes levied on profits, capital gains, and income. Duties levied on the majority of imported goods are the government’s main source of income. In opposition to the view that the Cayman Islands are an offshore tax haven, the country maintains cooperation agreements with every major international regulatory authority and has reporting requirements that are far more transparent than even many US jurisdictions. For example, all names of the beneficial owners of any Cayman corporate must be registered. The country also signed the Foreign Account Compliance Act (FACTA), implementing the act’s required domestic legislation in 2014 and implemented the Common Reporting Standard effective as of January 1, 2016. Hence, the country will likely enter 100 intergovernmental agreements with other countries that have also implemented the Common Reporting Standard. The country also cooperates with other jurisdictions in legal matters, such as money laundering and drugs, and on other regulatory matters via the Cayman Islands Monetary Authority. Finally, a brief review of the Cayman Island’s local insurance regulations was provided. Historically, the country relied upon English Common Law for all insurance protections. However, in 2008 and 2010 insurance laws were passed that provided statutory protection for policyholders, particularly related to long-term insurance products like life insurance and accidental death and dismemberment policies. These regulations protected policyholders and for instance made policies solely payable to insureds, as opposed to being for the benefit of creditors unless addressed otherwise.

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PricewaterhouseCoopersDamian Pentney, Insurance Leader

Richard Wainwright, Manager

Jason Horton, Manager

Jessica Redhead, Manger

Damian, the Insurance Leader for the Cayman Islands firm of PwC walked us through a presentation on the reinsurance accounting and consulting done in the Cayman office and the reasons why the Cayman Islands is a major center for international business. PwC’s Cayman office has close to 50 years of local experience with 13 partners and 185 professional staff. With clients based in over 30 countries, the largest service they provide is asset management. While a typical PwC office has an approximate 60%/40% split between asset management and consulting, the Cayman office does about 85% of asset management. The office operates in three segments: Asset Management, Insurance, and Banking. The asset management segment’s hedge fund practice audits approximately 25% of all hedge

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funds in the Cayman Islands. The insurance segment audits approximately 20% of captives domiciled on the islands and works with a number of captives belonging to Fortune 500 companies. The banking segment has a relationship with over 50% of the retail banking institutions in the islands. For over 40 years, the Cayman Islands has been an international financial center. Is it a stable system backed by the UK with a legal framework based on UK common law. Over the years, the islands have built up a regulatory regime, reputation, and provided resources to make it an attractive domicile for businesses and professionals. Per capita, the Cayman Island has one of the highest concentrations in the world of professionals, including: lawyers, accountants, certified financial analysis, and trust and estate professionals. There are also several important tax considerations. As a tax neutral jurisdiction, there is no income tax, corporation tax, profit tax, withholding tax, capital gains tax, or capital transfer tax. A recent development in the Cayman Islands is the Cayman Enterprise City (CEC). The CEC is a special economic zone that CEC has removes the red tape and financial constraints normally associated with setting up an offshore business presence. Benefits include zero corporate tax, no sales or income tax, no import duties, no government reporting or auditing requirements, IP held offshore, and 5 year renewable work visas granted for staff in 5 days.

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KPMG David Watt, Partner

Kristy Fenner, Manager- Insurance

Ashita Shenoy, Principal

Our educational tour concluded with a visit with Mr. David Watt, Kristy Fenner, and Ms. Ashita Shenoy of KPMG to learn about insurance accounting updates and regulatory trends. As well, our “education” also consisted of learning that it’s a bit difficult to get taxis from Camana Bay to downtown during certain times of the day, as well as the non-existence of Uber in the Cayman Islands. Could there be a business opportunity here…? The dialogue centered on aspects related to CIMA’s allowance of the use of an Internal Capital Model (ICM) in determining capital requirements for insurers and reinsurers, as an alternative to a more traditional factor-based model. Although CIMA has not yet published

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the ICM statements of guidance (at least not at the time of this writing), the ICM will be particularly important for Class D entities (reinsurers), for which the capital requirements are quite high. Granted there is currently only one Class D entity in the Cayman Islands at the time of this writing (Greenlight Re) Nassau Re and Elisa Re are looking to be licensed as Class D in the near future. The ICM has particular relevance for Cayman Islands entities due to asset risk; a large actuarial focus is on the modeling of asset yields and asset volatility in contrast to insurance companies’ traditional focus of liability-side modeling. The emphasis on managing asset risk is key to banking and loan origination entities that perform dynamic hedging to manage greeks (sensitivities of options to their underlying instruments). Fair value is used to value both assets and liabilities. The Cayman Islands has historically been a hub of Catastrophe Bond work, with entities licensed as Class C by CIMA. Until about 3-4 years ago the growth in cat bond interest was fueled not only by investor interest in adding uncorrelated risks to their portfolio, but higher yields as well. However, in recent years, as the market softens, collateralized reinsurance (“cat bond lite”) has become more efficient for investors. As well, with law changes enacted in Bermuda, Bermuda has now become a better fit for collateralized reinsurance activity than Cayman Islands. Currently at the time of this writing, cat bonds are not priced significantly differently from traditional instruments. The Cayman Islands has decided not to go down the path of Solvency II, as Solvency II is a European Union initiative and not appropriate for Cayman Islands’ current book of business. In particular there is uncertainty regarding how proportionality would be applied for the captive industry. The ORSA framework of the United States’ NAIC appears to be the more fruitful path, and a pursuance of NAIC equivalency would add credibility to the Cayman Islands as a reinsurance market. Furthermore, with Bermuda recently gaining full Solvency II equivalence, it is predicted that more hedge fund reinsurers will re-domicile from Bermuda to the Cayman Islands. Discussed briefly was the upcoming plan for CIMA to split the B(iii) regulatory class into B(iii) and B(iv), with B(iv) applying where “50% or less of net written premium is related business and annual net earned premiums are greater than US $20M.” Also discussed briefly were legal changes affecting portfolio insurance companies (PICs). Previously, the PIC regime of “core + cells” was one single legal entity. Under the law amendment, the individual cells can transition to become their own insurance companies once they reach a critical mass. Cybersecurity risk has become a big focus of late, and as such CIMA plans to review licensees approach to data security going forward. The dialogue concluded on a somber tone regarding how the IASB and FASB have diverged, not converged as was expected, with regards to short-term and long-term

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insurance contract accounting. Part of the issue stems from the fact that the US GAAP accounting standards tend to be very “rules-based,” whereas the IFRS has traditionally promulgated “generalisms.” Recently the IFRS has been trying to go in a more rules-based direction, but is still diverging with FASB.

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Biographies of Attendees Tour Leader:

Marlin Ramlal

AVP, Treaty Underwriter

AXIS Re

Education Tour Leader/Chair

Marlín Ramlal is Assistant Vice President for AXIS Reinsurance. She joined AXIS in September 2012. In her role, Marlín is focused on serving the reinsurance needs of Regional P&C insurance companies through the broker channel. Marlín is an enthusiastic and dedicated underwriter with 10 years of experience in primary insurance, brokerage and reinsurance. She started her career, in 2004, as an intern and, later, as an Excess & Surplus Lines Underwriter for RPS the MGA division of Arthur J Gallagher. Marlín holds a B.S. in Actuarial Science from St. John’s University. She holds her CPCU and ARe and is pursuing her RPLU designation. Marlin, currently, serves as the President of the RU40s Group. She served on the 2015-2016 RU40 board as Education Tour Chair. Previously, she served as Social and Networking Chair, and Education Chair. She is a member of the John Street Insurance Association and Association of Professional Insurance Women.

Tour Participants:

Anna K. Card

Property Underwriter Trans Re

Anna began her career in Reinsurance as a U.S. Property Catastrophe modeler for AXIS Re in Bermuda. A few years later, she transitioned into an Assistant Underwriting role and continued to work on U.S. Property business. In 2015 she took an opportunity with Transatlantic Reinsurance in New York and now works in the Property Treaty department as an Underwriter.

Robert W. DiUbaldo

Shareholder Carlton Fields

Rob DiUbaldo is a Shareholder in the New York office of Carlton Fields and a member of its Financial Services and Insurance Litigation Department. His practice focuses on insurance and reinsurance arbitration, litigation, regulatory matters and complex claims analysis on behalf of insurers, cedents, reinsurers and other entities engaged in the (re)insurance space. Mr. DiUbaldo has litigated, arbitrated or counseled clients on matters involving a broad range of issues in the property & casualty and life & health sectors, as well as many specialty lines, such as financial and surety

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products. He also counsels (re)insurers on regulatory, contract wording, insolvency, and commutation-related issues, and represents insurance companies, banks, lenders and other financial services companies in general commercial litigation matters. Mr. DiUbaldo is a member of the ARIAS Law Committee, as well as a founder and current board member of the U.S. Reinsurance Under 40s Group.

Hartland Moede Project Manager

Aon

Hart is currently a Project Manager with Aon’s Strategic Advisors and Transaction Solutions group, providing insurance, risk management and captive due diligence and advisory services for private equity and strategic buyers. In 2010 Hart graduated magna cum laude with a bachelors in political science and economics from the College of Charleston followed by postgraduate work in accounting and finance at the London School of Economics. While in London, he was introduced to several individuals working in the Lloyds market and in 2012 took a job with the specialty Marine insurer ProSight Specialty Insurance in New York City. He worked as a Marine Underwriter until 2014, when he moved to Aon. Hart holds the Chartered Property and Casualty Underwriter (CPCU), Associate in Marine Insurance Management (AMIM), and Associate in Reinsurance (ARe) designations and is a licensed New York State Property and Casualty Insurance Broker. He has been involved with the Reinsurance Under 40 group since 2012.

Gabriel Silvasi AVP, Actuary

AXIS Re

A graduate of the University of Pennsylvania in Philadelphia, Gabriel began his career as a programmer of electronic bond trading systems at CS First Boston and DLJ (now Credit Suisse). After consulting as a web programmer and database administrator, he worked at the Wharton Risk Management and Decision Sciences research center at the University of Pennsylvania programming economic models of catastrophic risk. He then made a career move to actuarial science, and has since worked in pricing and capital modeling roles at XL Reinsurance, AEGIS Insurance Services, and presently at AXIS Re in New York. His pricing experience has been in commercial property lines, and has also worked on reserve risk models for excess liability and other casualty lines, as well as analyzing and programming insurer capital models for approval by the Bermuda Monetary Authority. He is a Fellow of the Casualty Actuarial Society, a Member of the American Academy of Actuaries, and a co-author of research published in the Journal of Judgment and Decision Making.

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Sean Ramlal

AVP - Lead Treaty Underwriter

QBE Re

Sean is currently an Assistant Vice President at QBE Re working as a lead treaty underwriter on their casualty reinsurance team. Before graduating from St. John's University's Actuarial Science program, Sean began his career as a claims intern at Platinum Re. From there, he joined CNA's actuarial rotation program in Chicago as an analyst for their Specialty Lines reserving team and their Worker's Compensation pricing team. In 2009, he returned to the reinsurance industry in New York to work for Allied World Re as an actuary pricing casualty treaties. He joined the underwriting team at QBE Re in 2014. Sean holds the Associate of the Casualty Actuarial Society (ACAS), Member of the American Academy of Actuaries (MAAA), Chartered Property Casualty Underwriter (CPCU), and Associate in Reinsurance (ARe) designations and has been named to the Intelligent Insurer's list of 40 Rising Stars Under 35. He has been involved with the Reinsurance Under 40s group since 2010 and now serves as President.

Nick Secara

Associate Baker McKenzie

Nick is an attorney in the New York office of Baker & McKenzie LLP, where he practices in the areas of insurance and reinsurance. He advises oil and nuclear industry mutuals on complex, high-value, coverage and commercial disputes in domestic and international arbitrations and judicial proceedings. Nick also counsels insurers and reinsurers on cross-border transactions, regulatory and compliance matters, and investigations by state regulators, such as the New York Department of Financial Services and State Attorneys General. He has been involved with the U.S. Reinsurance Under 40s Group, Inc. since 2012, where he currently serves as Secretary, and is also a member of the Insurance Federation of New York, Inc.

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Closing Thoughts and the Road Ahead We believe that the Tour was a fantastic opportunity for all of the participants to learn about the LATAM, the Caribbean, and Captive markets, further their professional knowledge and make life-long networking relationships. It was great experiencing first- hand the Cayman Island initiative for Class D reinsurance companies. We met with people from all walks in the industry and heard their views on the current market and predictions of what lies ahead of us. We learned about a multitude of countries and different types of covers that we had not been exposed to, yet, in our careers. We made a lot of contacts that we hope to maintain for many years to come within our professional insurance and reinsurance careers. On behalf of the U.S. Reinsurance Under 40s Group, we want to thank all of the companies, sponsors and organizations that helped make the 2016 Miami and Cayman Island Tour a great success! We look forward to our RU40 tour for 2016/2017! Respectfully, Marlín Ramlal 2015-2016 Educational Tour Leader/Chair 2016-2017 President