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Quick Tour

About Lloyd’s. Quick Tour. Lloyd’s history, market structure and core strengths. Click HERE for Tutorial. Click HERE to launch dashboard. Recent Updates: June 2010 Update of the geographic profile of insurance, growth and outlook. . > www.lloyds.com/QUICKTOUR.

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Quick Tour

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  1. About Lloyd’s Quick Tour Lloyd’s history, market structure and core strengths Click HEREfor Tutorial ClickHEREto launch dashboard • Recent Updates: June 2010 • Update of the geographic profile of insurance, growth and outlook  >www.lloyds.com/QUICKTOUR > filip.wuebbeler@lloyds.com FOR BROKERS & MANAGING AGENTS

  2. Content Market structure GeographicProfile History Global Network Core Strengths Click Box to navigate QUICK TOUR (About Lloyd's)

  3. QUICK TOURis designed to be used as a dashboard (in PowerPoint Show Mode). This enables quick navigation to areas of interest using the various dashboard tools summarised below. About Navigation Click Top Left Box to return toCONTENT ClickAny Box to navigate to area of interest ClickAny Top Box to navigate to any other section QUICK TOUR (About Lloyd's)

  4. History From Coffee House… to reconstruction QUICK TOUR (About Lloyd's)

  5. From Coffee house… to Lloyd’s members 1689 • Ships and goods insured by wealthy individuals acting on a personal basis. • Lloyd’s Coffee House; first recorded February 1689. • Importance of information. 1800 – 1850s • Development of the concept of “Lloyd’s member”. • Development of syndicates Historical Context 1712 First steam engine 1750s Beginning of the Industrial Revolution 1805 Battle of Trafalgar 1876 Telephone invented QUICK TOUR (About Lloyd's)

  6. From marine… to every type of insurance 1904 1911 1960s Historical Context 1906 San Francisco earthquake 1917-1990 Rise and fall of Communism 1914-1918 1939-1945 The world at war 1969 Man on the moon QUICK TOUR (About Lloyd's)

  7. …to a string of losses Piper Alpha Asbestosis Hurricane Hugo Exxon Valdez Hurricane Andrew European storms QUICK TOUR (About Lloyd's)

  8. From Reconstruction… to new structure 1996 • Reconstruction & Renewal • Corporate members introduced since 1994. • Equitas reinsures liabilities from 1992 and prior years. 2001 • Lloyd’s regulated by the FSA. 2002 • Governance structure amended. QUICK TOUR (About Lloyd's)

  9. Market Structure The market place and its stakeholders… QUICK TOUR (About Lloyd's)

  10. Lloyd’s is different Lloyd’s is different • Lloyd’s is a Society of Members that operates as an insurance market. • Lloyd’s is not an insurance company. • Lloyd’s has members. It does not have shareholders. Lloyd’s consists of a number of participants • The Society of Lloyd’s. • Lloyd’s Members. • Members Agents. • Lloyd’s Syndicates • Lloyd’s Managing Agents. • Lloyd’s Brokers. QUICK TOUR (About Lloyd's)

  11. Lloyd’s Market Structure Corporation of Lloyd’s Management 52 Managing Agents Brokers Coverholders Service Companies* Members Policyholders 84Syndicates • Direct • Corporate Members Agents • Reinsurance • Individual Underwriting BUSINESS FLOW CAPITAL PROVISION SEE: www.lloyds.com/directories QUICK TOUR (About Lloyd's) Source: Lloyd’s as at 31/12/09; * some risks are placed directly with managing agent-owned service companies

  12. Lloyd’s Managing Agents Corporation of Lloyd’s Corporation of Lloyd’s Management Management 48 51 Managing Managing 176 Agents Agents Members Members Policyholders Policyholders Lloyd’s BrokersService Companies 80 78 Direct Direct Corporate Corporate § § § § Members Members Syndicates Syndicates Agents Agents Reinsurance Reinsurance Individual Individual § § § § Underwriting Underwriting • The syndicates underwriting at Lloyd’s form one of the world’s largest commercial insurers, and a leading reinsurer. • The Lloyd’s market is home to 52 managing agents which currently manage 84 syndicates. BUSINESS FLOW CAPITAL PROVISION QUICK TOUR (About Lloyd's) Source: Lloyd’s as at 01/01/09

  13. Sources of Lloyd’s Capital • . Corporation of Lloyd’s Corporation of Lloyd’s Management Management 51 48 Managing Managing 176 Agents Agents Members Members Policyholders Policyholders Lloyd’s BrokersService Companies 78 80 Direct Direct Corporate Corporate § § § § Members Members Syndicates Syndicates Agents Agents Reinsurance Reinsurance Individual Individual § § § § Underwriting Underwriting BUSINESS FLOW CAPITAL PROVISION By Type 15% Individual Members UK Listed 47% International 38% • Financial security gives confidence to capital providers and peace of mind to policyholders. • It is the members of Lloyd’s who provide the capital to support the syndicates’ underwriting. • Members are drawn from some of the world’s major insurance groups and companies listed on the UK stock exchange as well as individuals and limited partnerships. QUICK TOUR (About Lloyd's) Source: Lloyd’s, Annual Report, (March 2010), www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2009_Annual_Report.htm

  14. Sources of Lloyd’s Capital UK Insurance Industry Worldwide Insurance Industry US Insurance Industry Corporation of Lloyd’s Corporation of Lloyd’s Management Management 48 51 Managing Managing 176 Agents Agents Members Members Policyholders Policyholders Lloyd’s BrokersService Companies 78 80 Direct Direct Corporate Corporate § § § § Members Members Syndicates Syndicates Agents Agents Reinsurance Reinsurance Individual Individual § § § § Underwriting Underwriting BUSINESS FLOW CAPITAL PROVISION By Geography Bermudian Insurance Industry Names (Limited Liability) Names (Unlimited Liability) QUICK TOUR (About Lloyd's) Source: Lloyd’s, Annual Report, (March 2010), www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2009_Annual_Report.htm

  15. Lloyd’s Franchise Model Corporation of Lloyd’s Corporation of Lloyd’s Management Management 51 48 Managing Managing 176 Agents Agents Members Members Policyholders Policyholders Lloyd’s BrokersService Companies 78 80 Direct Direct Corporate Corporate § § § § Members Members Syndicates Syndicates Agents Agents Reinsurance Reinsurance Individual Individual § § § § Underwriting Underwriting BUSINESS FLOW CAPITAL PROVISION Establishment of Franchise Board and model in 2002 to improve market profitability and protect Lloyd’s central assets and address divergence in syndicate performance. • Performance Management • Syndicate business planning • Underwriting standards • Monitoring / benchmarking • Claims, reinsurance and run-off management Syndicates submit plans on an annual basis and performance against plans is reviewed / benchmarked on a quarterly basis • Capital Management • Syndicate capital • Central assets Lloyd’s has set capital requirements centrally using its own risk based capital model since 1995 (Individual Capital Assessment (ICAs) • Risk Management • Realistic Disaster Scenarios • Risk management framework Undertaking disaster planning process, to identify and monitor key aggregation and catastrophe risk exposures QUICK TOUR (About Lloyd's) Source: http://www.lloyds.com/Lloyds_Market/Performance_management_framework/

  16. Lloyd’s Brokers Corporation of Lloyd’s Corporation of Lloyd’s Management Management 48 51 Managing Managing 176 Agents Agents Members Members Policyholders Policyholders Lloyd’s BrokersService Companies 80 78 Direct Direct Corporate Corporate § § § § Members Members Syndicates Syndicates Agents Agents Reinsurance Reinsurance Individual Individual § § § § Underwriting Underwriting BUSINESS FLOW CAPITAL PROVISION The interaction between brokers and underwriters is the source of the market's reputation for innovation and creativity. Non-Lloyd's brokers can now deal directly with managing agents subject to meeting the samecommercial and regulatory standards that apply to Lloyd's brokers. • Regulatory Approval …has been approved by an appropriate regulatory body; • PROFESSIONAL INDEMNITY …meets our enhanced PI requirements; • TOBA …has entered into a terms of business agreement with each managing agent with whom it intends doing business; • Arrangements to protect monies …has arrangements for protecting insurance/client monies; • London Market processes and standards …is able to handle and process the business in accordance with relevant London market standards and practices. QUICK TOUR (About Lloyd's) Source: http://www.lloyds.com/Lloyds_Market/Market_participants/Managing_Agents/Managing_Agents_dealing_with_non-Lloyds_brokers.htm

  17. Geographic Profile From Geographic split to profile… QUICK TOUR (About Lloyd's)

  18. Young population Ageing population New start-ups Large conglomerates Emergence of a middle-income class FDI capital outflow Reform of old (state-owned) companies Increasing role of services South Korea Increasing home/car ownership XOL Corporate (re)insurance Rapid industrialisation Culture / Buying Behaviour / Market Dynamics / Regulation Growth of personal lines FDI/capital inflow Captives Credit & Surety Motor/household insurance Turkey China Poland Vietnam US Brazil Singapore Increasing liability business Protection of start-ups Focus on commercial lines Protection products Wealth management Savings products Shifting Business and Insurance landscape Business Environmentincreasing income / complexity & maturity of economy Insurance Environmentsophisticated products / buyers / complexity of risks QUICK TOUR (About Lloyd's) Based on: Hess, T., “The Opening up of International Insurance Markets: Trends and Consequences”, (2006)

  19. Lloyd’s Business Split – 2009 UK20% Europe16% US & Canada45% Central Asia & Asia Pacific9% Rest of the World4% Other Americas6% QUICK TOUR (About Lloyd's) Source: Lloyd’s, Annual Report, (March 2010), www.lloyds.com/Lloyds_Market/Financial_performance/Financial_reports/2009_Annual_Report.htm

  20. Gross Domestic Product* – 2000 Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2000) (IMF ESTIMATE) Canada 888bnUS 9.9 trillion Mexico 1.0 trillion Brazil 1.2 trillionArgentina 338bn UK1.5 trillion France 1.5trillion Germany 2.1trillion Italy 1.3 trillion Turkey 512bnRussia 1.1 trillion India 1.5 trillion Saudi Arabia353bn South Africa 295bn China 3.0 trillionJapan3.2 trillion Korea775bnIndonesia500bnAustralia 528bn QUICK TOUR (About Lloyd's) Source: *Purchasing Power Parity based on: IMF, World Economic Outlook (April 2010); http://www.imf.org/external/pubs/ft/weo/2010/

  21. Gross Domestic Product* – 2010 Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2010) (IMF FORECAST) Canada 1.3 trillionUS 14.7 trillion Mexico 1.5 trillion Brazil 2.1 trillionArgentina 609bn UK2.1 trillion France 2.1 trillion Germany 2.8 trillion Italy 1.7 trillion Turkey 932bnRussia 2.2 trillion India 3.8 trillion Saudi Arabia618bn South Africa 521bn China 9.7 trillionJapan4.2 trillion Korea1.4 trillionIndonesia1.0 trillionAustralia 882bn QUICK TOUR (About Lloyd's) Source: *Purchasing Power Parity based on: IMF, World Economic Outlook (April 2010); http://www.imf.org/external/pubs/ft/weo/2010/

  22. Gross Domestic Product* – 2015 Size of bubble proportionate to level of Purchasing Power Parity in USD; benchmarked to US (2015) (IMF FORECAST) Canada 1.6 trillionUS 18.2 trillion Mexico 2.1 trillion Brazil 2.8 trillionArgentina 771bn UK2.7 trillion France 2.6 trillion Germany 3.3 trillion Italy 2.0 trillion Turkey 1.2 trillionRussia 2.9 trillion India 6.2 trillion Saudi Arabia838bn South Africa 700bn China 16.8 trillionJapan5.1 trillion Korea1.9 trillionIndonesia1.5 trillionAustralia 1.1 trillion QUICK TOUR (About Lloyd's) Source: *Purchasing Power Parity based on: IMF, World Economic Outlook (April 2010); http://www.imf.org/external/pubs/ft/weo/2010/

  23. Top Sovereign Wealth Funds* – 2010 Size of coloured bubbles represent total disclosed SWF assets; benchmarked to China (2010) (SWF INSTITUTE ESTIMATE) US 52bn Norway443bn Russia90bn Ireland 31bn France 28bn UAE 662bn Saudi Arabia432bn Kuwait203bn Libya70bn Qatar65bn China 787bnSingapore370bnHong Kong140bnAustralia 59bn Korea 27bnMalaysia 25bn QUICK TOUR (About Lloyd's) Source: *Estimate based on: Sovereign Wealth Fund Institute, (June 2010); figures are aggregated on funds, which were disclosed at www.swfinstitute.org/

  24. Direct Insurance Market* – 2008 Size of bubble proportionate to level of total direct market in USD; benchmarked to US (2008) (III ESTIMATE*) Canada 57bnUS 662bn Mexico 11bn Brazil 25bnArgentina 6bn UK107bn France 92bn Germany 132bn Italy 58bn Turkey 8bnRussia 38bn India 7bn Saudi Arabia3bn South Africa 8bn China 45bnJapan106bn Korea31bnIndonesia2bnAustralia 28bn QUICK TOUR (About Lloyd's) Source: *Estimate based on III Fact Book; www.iii.org; for detailed statistics and clear market definitions, please refer to the local regulator & Regional Watch: www.lloyds.com/REGIONALWATCH

  25. Direct Insurance Market* – 2000 – 2008 2000 - 2008 Premium Growth > 200% > 100% - 200% < 100% Size of bubble proportionate to level of total direct market in USD; benchmarked to US (2008) (ESTIMATE*) Canada 57bnUS 662bn Mexico 11bn Brazil 25bnArgentina 6bn UK 107bn France 92bn Germany 132bn Italy 58bn Turkey 8bnRussia 38bn India 7bn Saudi Arabia 3bn South Africa 8bn China 45bnJapan 106bn Korea 31bnIndonesia 2bnAustralia 28bn QUICK TOUR (About Lloyd's) Source: *Estimate based on III Fact Book; www.iii.org; for detailed statistics and clear market definitions, please refer to the local regulator & Regional Watch: www.lloyds.com/REGIONALWATCH

  26. Global Network From structures to licences and offices… QUICK TOUR (About Lloyd's)

  27. Licence Network *See:www.lloyds.com/crystalfor detailed access routes + exemptions Insurance + Reinsurance Reinsurance from outside the territory Reinsurance only 52 territories where Lloyd’s is licensed to underwrite insurance and reinsurance business.* Lloyd's is specifically registered or licensed to write reinsurance business only.* Territories where Lloyd’s is not registered or licensed but can transact cross-border reinsurance business.* USExcess & Surplus QUICK TOUR (About Lloyd's)

  28. Licence Network 1990s EU legislation allows Lloyd’s to carry on insurance in other EEA member states on an establishment & services basis 1997 Lloyd’s Japan established 2000 Lloyd’s Asia established 2002 EU establishment licence Spain 2006 Lloyd’s becomes an onshore re-insurer in China 2008 ‘Admitted reinsurer’ status in Brazil and EU establishment licences in Poland and Austria 2009 EU establishment licence in Portugal QUICK TOUR (About Lloyd's)

  29. Office Network 1 4 3 4 1 3 3 3 1 3 4 1 3 3 3 3 1 3 1 1 2 2 3 3 1 1 2 2 Type Market Development Scope Territories China Local underwriting with co-located Syndicates (or via a Lloyd’s regulated entity); Country Manager with Market Development Role 4 Japan Singapore Benelux, France, Germany, Ireland, Italy, Poland,Spain, Sweden, Switzerland Australia, Hong Kong (SAR) 3 Country Manager with Market Development Role Brazil South Africa Cyprus, Greece, Israel, Malta Country Representative for regulatory requirements 2 New Zealand Austria, Denmark, Norway, Portugal Country Representative for minimum regulatory requirements 1 Argentina, Belize, Chile Namibia, Zimbabwe Europe North America Europe www.lloyds.com/AMERICA 2 QUICK TOUR (About Lloyd's)

  30. Core strengths From Performance to ratings… QUICK TOUR (About Lloyd's)

  31. Core Strengths: Lloyd’s Outperforms • Lloyd’s outperforms the market during below average catastrophe years LLOYD’S MAJOR LOSSES USD BN INDEXED TO 2009 INDUSTRY CAT LOSSES USD BN INDEXED TO 2009 7 140 6 120 5 100 4 80 3 60 2 40 1 20 0 0 1999 2000 2001 2002 2003 2004 2005 2006 2009 1994 1995 1996 1997 1998 2007 2008 Average Industry 1994 - 2008 Lloyd's Industry 2009 QUICK TOUR (About Lloyd's) Source: Industry - Swiss Re, Sigma No 1/2010; Lloyd’s – Net ultimate claims for major losses per syndicate QMRs, Lloyd’s pro forma financial statements, 31 Dec 2009

  32. Core Strengths: Strong results 2006 2009 2005 2007 2008 £16,414m £21,973m Gross written premiums £14,982m £16,366m £17,985m 83.1% 86.1% Combined ratio 111.8% 84.0% 91.3% £1,661m £1,769m Investment return £1,436m £2,007m £957m £3,662m £3,868m Profit before tax (£103m) £3,846m £1,899m 31.4% 23.9% Return on capital (pre-tax) (0.9%) 29.3% 13.7% QUICK TOUR (About Lloyd's) Source: Lloyd’s pro forma financial statements, 2009 Interim Results

  33. 22% 8% 13% Strong Results: Currency Movements GWP GBP m Note: Attribution to foreign exchange movements and increase in local currency stated on a compound basis QUICK TOUR (About Lloyd's) Source: Lloyd’s pro forma financial statements, 31 Dec 2009

  34. Core strengths: Good performance • 2009 annual results of a profit before tax of GBP 3,868m COMBINED RATIO Lloyd’s continues to compare well against its peers QUICK TOUR (About Lloyd's) Sources: Sources i) Insurance Information Institute (estimate-2009), ii) Reinsurance Association of America, iii) Company data (8 European companies: 17 Bermudian companies)

  35. Core Strengths: Strength and Stability Syndicate Level Assets GBP 37,400m 1st Link Several Assets Members’ Funds at Lloyd’s GBP 13,159m 2nd Link Central FundGBP 983m Corporation AssetsGBP 143m Mutual Assets Callable LayerGBP 683m 3rd Link Subordinated Debt / SecuritiesGBP 958m Chain of security provides excellent security and capital efficiency QUICK TOUR (About Lloyd's) Source: Society of Lloyd’s financial statements, Annual Report, (March 2010)

  36. Core Strengths: Large Solvency surplus BALANCE SHEET GBP m GBP m Note: * Solvency surplus net of solvency deficits QUICK TOUR (About Lloyd's) Source: Lloyd’s pro forma financial statements, 31 Dec 2009

  37. Core strengths: Well Positioned 3 Our focus: • Performance Management • Solvency II • The Exchange • Claims Transformation • Access to business A A+ Fitch Ratings A+ (strong), stable outlook Standard & Poor’s A+ (strong), stable outlook A.M. Best A (excellent), stable outlook QUICK TOUR (About Lloyd's) Source: Society of Lloyd’s financial statements, (2008); based on Lloyd’s, Annual Report, (April 2009)

  38. Appendix QUICK TOUR (About Lloyd's)

  39. Data Limitations The detailed country-level Lloyd’s data used in this document is based on calendar yearsigned grosspremiums sourced from Xchanging. This differs from the Lloyd’s data published in the Annual Report. The accounting-level Lloyd’s data published in the Annual Report is based on calendar yearwritten gross premiums sourced directly from Syndicates. Differences are therefore explained by (1) the timing differences between written and signed gross premiums and (2) inconsistent use of rates of exchange between Syndicates and Xchanging. Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK Motor, which is not processed by Xchanging. Lloyd’s figures are based on gross signed premiums based on figures processed by Xchanging by processing year and country of origin. Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy expenses remitted with a premium but before the deduction of outward reinsurance premiums. Country of Origin: Denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes. Processing Year: Relates to the calendar year in which the premium, additional or return premium is processed by Xchanging, irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk). Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by “Country Of Origin”, but “French” for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007 “Underwriting Year of Account” but may not be processed by Xchanging until 2008 and so be allocated to the 2008 “processing year”. Disclaimer “This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure, expression of opinion or belief contained in this document". QUICK TOUR (About Lloyd's)

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