IUA Annual Review 2015

Constructingthe futureAnnual Review 2015

Members of the Board and OfficersMembers of the BoardMalcolm Newman, Chairman SCOR UK Company LimitedDave Matcham, Chief Executive International Underwriting AssociationPaul Bonny Transatlantic Reinsurance CompanyVinicio Cellerini Zurich Global Corporate UKMark Chapman Global Aerospace Underwriting ManagersGeoff Godwin AIG Europe LimitedMark Gregory Axis Specialty Europe PlcJon Hancock RSA UK CommercialNigel Ingrouille Swiss Re International SE, UK BranchMark Julian Tokio Millennium Re (UK) LtdBrian Kirwan Allianz Global Corporate Specialty SENick Parr International Insurance Company of Hannover SE UK BranchChris Smith Chubb Insurance Company of Europe SEWilliam Stovin Markel International Insurance Company Ltd James Weatherstone Arch Insurance Company (Europe) LtdManagement Chief Executive Programme DirectorDave Matcham Director of CommunicationsLouise Day Director of Market ServicesScott Farley Chris Jones Director of Government AffairsNick Lowe Committee ChairmenLegal and Regulatory CommitteeMichael Connor Lancashire Insurance Company (UK) LimitedProcess Efficiency Group Chubb Insurance Company of Europe SEPeter Houston Property and Casualty Technical CommitteeDave Matcham International Underwriting AssociationMarine Technical Committee Axa Corporate Solutions SAPaul Newton Aviation Technical CommitteeJette Varnals XL Catlin Insurance CompanyFinance and Audit CommitteeDavid Radford Transatlantic Re

Chairman’sStatement In recent years the London Market has been asking itself some rather existential questions about its place in the world. The condition appears to have been catching with the rest of the UK also debating its relationships within and beyond the European Union. In an intensely competitive industry, IUA companies needto be agile and responsive. When we surveyed members about their views of areferendum on UK membership of the EU, one of the most important findings wasthat firms were prepared to modify and adapt their business models to meet a rangeof different political and economic scenarios. By the time this annual review is published the result of the referendum will beknown. Whatever the outcome, one advantage of undertaking such exercises isthat a detailed examination of available evidence can create firm foundations forfuture planning. This has been the London Market’s experience since the publication of itsLondon Matters report which I described in last year’s IUA annual review. The dataand insights provided by both London Matters and the IUA’s own member researchenabled the creation of an effective action plan to enhance growth and modernisethe London Market. Over the past year the IUA has played a leading role in implementing thiscross-market strategy and already certain elements are beginning to bear fruit. Forexample, my role as IUA chairman has involved sponsoring a taskforce to establishLondon as a hub for insurance-linked securities transactions. The scheme has secured the backing of the Chancellor of the Exchequer GeorgeOsborne and HM Treasury has proposed a raft of new measures relating to theauthorisation, supervision and taxation of ILS business. This represents significant progress in the effort to create an environmentin which innovation can thrive in the London Market. It has also enabled us toestablish good working relationships with government officials that can be usedto push forward with further improvements to our industry’s tax and regulatoryframework. Promoting innovation is, however, just one of four major workstreams that theLondon Market Group is pursuing with the support of the IUA. 3

Chairman’sStatement Another important objective is building a dynamic workforce, capable ofdelivering the insurance requirements of the future. In order to better understandwhere true skills shortages currently lie and are expected to emerge, an extensivesurvey has been completed. Over 500 market participants responded to this polland in-depth interviews were conducted with senior executives. Meanwhile, efforts are also developing to raise the profile of the LondonMarket internationally. There is a clear need to provide customers, particularlythose in emerging markets, with the detail they need about why our market is acompelling choice for their insurance requirements. A coordinated public relations effort could make a significant impact here,but a number of short term initiatives are also being pursued and the IUA is alsoworking with insurance and reinsurance bodies in Singapore and Dubai. Bothof these business centres operate in a complementary fashion to London andthe connections we have established will enable a broader range of services formultinational companies. The IUA is keen to adapt its service offering to reflect theglobalised business models of its members. Last, but by no means least in terms of budget requirements, are projectsdesigned to make London an easier place to do business. This modernisation ofour processing infrastructure has now been branded the London Market TargetOperating Model (TOM) and in total comprises 15 new and existing initiatives. TheIUA, is supportive of the overall scheme objectives, but firmly focussed on areasthat can demonstrate effective cost benefit cases for its member companies. Currently, there are two major enterprises that are being advanced withdedicated financial support from the IUA: a new electronic placing platform forthe market and an update of central processing services to enable wider use ofstandardised messaging. These are described in more detail elsewhere in thisreport. The IUA Board continues to monitor these projects closely, alongside ourpractitioner representatives on various cross-market bodies. Enacting large scaletechnological change across a diverse marketplace of many different participantsis never an easy task, but the potential prize is great. London’s technology, in anumber of instances, is already well in advance of other underwriting hubs and,if we can establish successful e-trading systems under the TOM, then these couldwell be rolled out internationally to become global standards. 4

Chairman’sStatement The IUA has always worked with companies in London to enhance theirbusiness environment and it is now cooperating more effectively than ever beforewith other stakeholders to promote the market’s interests at home and abroad. Iwould like to personally thank all the IUA secretariat who this past year have beenprominent in representing the members so effectively and making the IUA voiceone that counts, not only inside our market place, but also in the wider world ofWhitehall and Westminster.Malcolm NewmanChairmanInternational Underwriting Association 5

Chief Executive’sReport As a non-profit organisation the IUA cannot necessarily look towards its ‘bottom line’ for a measurement of success. Whilst our financial report (on page 15) shows that we have healthy reserves and relatively flat subscription levels, other metrics are required to determine whether or not we are meeting our objectives. Several of the most important of these are all about engagement. Looking at all measures, the IUA has had a very successful and productive year.In particular, we have seen growing interest and involvement in our activities fromacross the company sector and wider London Market. This is important becauseincreased input from practitioners increases our collective knowledge and givesour representative voice much greater authority. In 2015 we welcomed four new member firms to the IUA, representing anincrease in membership of 10%.Maintaining such support remainsa key priority for the association,particularly in light of the merger andacquisition fever which has recentlygripped our industry. It seems that insurance’smega-mergers have generallybeen conducted in a relativelyfriendly manner with top positionsbeing shared and an absenceof the hostility that sometimesaccompanies unions in the business world. The objective seems to be to establisheconomies of scale that will enable significant cost savings and allow firms tocompete effectively in the globalised markets of the near future. This altered landscape, however, does present challenges for managingmembership levels at the IUA. With some deals finalised, others still beingconsidered and who knows what else in the pipeline, it is difficult to know how ourlist of companies will read a year or two from now. In 2015 we also noted our firstChinese membership by ownership – another sign of things to come perhaps? 6

Chief Executive’sReport New IUA members are always keen to become part of the ‘IUA community’which involves active participation in our various underwriting, claims, publicpolicy and market modernisation groups. Engagement here continues to increase as over the past year, in response tomember demand, we have launched a number of new committees discussingadditional lines of business. We now run around 70 different groups coveringeverything from property to political risk, compliance to clauses, quoting processto claims and many things in between. By the end of 2015 there were nearly 800 individuals from our membercompanies serving on at least one committee and more than 1000 occupiedcommittee positions. Meanwhile, we have also been working to raise our wider public profile andensure that the research, consultations and other documents we produce benefitas many practitioners as possible across the company market. Our monthly updateof IUA activity has been revamped and expanded whilst our communicationthrough the insurance trade press has risen exponentially. There are now more than 15,000 member records on the association’s variousdistribution lists and interest groups. Over the coming year we plan to furtherimprove our company contacts with more targeted messaging at both senior levelsand by class of business. In 2015 our international reach was extended through the establishment of anaffiliated partnership with the Singapore Reinsurers’ Association. This relationshipwill allow Singapore companies, many of whom are part of an IUA member group,to tap into ongoing London Market developments and we are exploring similararrangements with other complementary underwriting hubs. As the clear point of contact for the company market the IUA has been ableto make significant contributions over the past year to the ‘growth agenda’established by the London Market Group. Within this body we have cooperatedwith Lloyd’s and brokers to try and provide international clients with as manyreasons as possible to place business in London. Its workstreams remainprominent within our list of business priorities. Certain developments during 2015 were difficult to anticipate. Marketdynamics, governance and supplier questions were all present in frustrations tothe progress of electronic placing and central services programmes. The conceptof a London Market Target Operating Model (TOM) also emerged and this now 7

Chief Executive’sReportencapsulates all market modernisation projects. A new TOM steering board, onwhich the IUA is well represented, oversees this work. Another surprise was the bidding war which developed over ownership ofXchanging. The IUA, which holds a 25% shareholding in Xchanging Ins-sureServices on behalf of the company market, followed developments here closelyand is ready to work with new owners CSC to ensure shared central servicescontinue to develop effectively. At the end of the 2015 the IUA moved into new offices at Number 1 MinsterCourt after 16 years in the London Underwriting Centre which has now been closedfor refurbishment. The new location has been a welcome change and we have beenpleased to welcome many members and other industry contacts. In particular, theIUA Board has maintained an excellent programme of guest invites to its monthlymeetings. Representatives from the Prudential Regulation Authority, Lloyd’s CityUKand Airmic have all been among the attendees in recent months. Such occasionsoffer a very useful opportunity for our members to debate market developmentswith other stakeholders and we look forward to many more in the year ahead.Dave MatchamChief ExecutiveInternational Underwriting Association 8

Chief Executive’sReportIUA priorities and achievements in 2015 C ontinue to increase membership Four new member companies joined in 2015 Implementation of placing platform and increase in electronic endorsements Programme now in place to launch Placing Platform Ltd in 2016 following extended contract negotiations G reater promotion of London market activities through unified messages and marketing materials The London Market Group’s voice has matured and is now seen as a key contact point by UK government Increase IUA profile, promoting our work and achievements Major expansions undertaken of both member communications and press activity Increase international activities of IUA secretariat IUA has affiliated with the Singapore Reinsurers’ Association and expanded its outreach to other hubs Implementation of phase one of Central Services Refresh Programme Governance and supplier issues addressed with first release now on track for 2016IUA priorities for 2016 Continue the increase in number of Ordinary members Successfully implement placing platform C onduct full review of model wordings in light of the Insurance Act 2015 F urther increase international activities of the IUA secretariat Successfully implement phase one of Central Services Refresh Programme Conduct survey on EU referendum and respond accordingly 9

Public PolicyIn recent years the IUA has strengthened its Government Affairs team and furtherchanges to this resource are being reviewed. This move has been necessitated byan increasing weight of regulation, both prudential and conduct, imposed overthe last few years. The IUA monitors initiatives from a wide range of jurisdictions important to theLondon company market. There are also a number of transnational supervisorybodies whose activities have a direct impact on our members’ business. In particular, the International Association of Insurance Supervisors (IAIS)has now become a very important institution from which much regulatorybenchmarking is now derived. Its lead is followed by authorities around the worldkeen to use the standards it produces. Of course, it is, therefore, vital for the IUA to effectively liaise with the IAIS andunderstand its work. Unfortunately, this task was not made any easier in 2015 bythe organisation deciding to cancel ‘observer membership’ for its annual meeting,thus denying all industry groups the opportunity to attend this important event. Since then we have received indications that the IAIS may be willing to reversethis decision in 2016, or at least establish some alternative arrangements thatpromote a healthy dialogue between regulators and companies. On an international scale the voice of our member companies is greatlyenhanced by the IUA’s cooperation with coalition organisations Insurance Europeand the Global Federation of Insurance Associations. Both of these bodies greatlyenhance our ability to monitor and influence the growing international dialogue oninsurance regulation. Back home, our relationships with UK authorities are being strengthenedall the time through our work with the London Market Group which has nowappointed a public affairs agency to support conversations with senior governmentofficials. After the success of instigating changes to the regulatory frameworksurrounding insurance linked securities, we now hope to exploit London’simproved profile to lobby for further changes that will encourage more businessinto our market. Day to day, the IUA continues to monitor and respond to UK initiatives proposedby both the Prudential Regulation Authority (PRA) and the Financial ConductAuthority (FCA). For example, in 2015 we highlighted how insurers may soon struggle 10

Public Policyto recruit non-executive directors as increasingly prescriptive regulation putspressure on those performing such roles. Responding to a PRA consultation paperon board responsibilities, the IUA warned that rising responsibilities may shrink the‘talent pool’ of available non-executive candidates, drive up recruitment costs andhamper diversity ambitions. Another example of our representative work was prompted by a proposedFCA financial crime form. This would conflict with numerous other reportingrequirements, the IUA stated, drawing attention to the difficulty of having tosubmit information within 30 working days of the financial year end. Alongside this advocacy role, the IUA has also provided companies withinformation to assist with their compliance responsibilities. Updates oninternational sanctions continue to be amongst our most popular services and in2015 we provided regular news on measures relating to Iran, Russia and many othertargeted jurisdictions. At the end of the year a new international sanctions clause,designed to ensure that insurance contracts are clear and certain on the applicationof such trade restrictions, was also published by the IUA. The wording indicates toenforcement agencies that companies have taken note of their obligations and putin place safeguards against any incidental breach of rules. A series of sanctionscountry guides is now being planned and this online resource will complement thequarterly spreadsheet currently received by IUA members. Online insurance premium tax updates by country are already being madeavailable to companies on the association’s website and these have featured anumber of increases recently, not least for the UK. Indeed, tax policy generally seemsto be undergoing a sweeping global reform that will have significant implications forthe insurance industry. Responding to public concerns about tax evasion, the G20 major economieshave ordered a major shift towards greater cooperation between tax authorities.This work is being led by the Organisation for Economic Co-operation andDevelopment (OECD) and coincides with a number of individual country initiativesaimed at making corporate profits and taxes more transparent. The IUA has subsequently received numerous consultation documentscontaining proposals for reform. Tax avoidance is clearly in the spotlight and itappears that automatic exchange of information among different tax jurisdictionsis set to become normal practice. The IUA is working to ensure that any new rulesare fair and equitable. 11

Public Policy Finally, 2015 saw welcome progress on one of the IUA’s long-running projects:a reduction in the collateral burdens imposed on its members writing US business.The negotiation of a covered agreement between the EU and US has been afavoured solution to this issue since it became a legislative possibility with thepassing of the Dodd Frank Act in 2010. A negotiating mandate was last year put in place for the European Union topursue such an agreement and the US eventually followed suit. Discussionsbetween the two sides have now begun and we await their outcome with greatinterest. 12

EventsProgress towards the IUA’s objective of boosting its profile across the LondonMarket was advanced through substantial contributions to a number of wellsupported events in 2015. The association now provides significant event planning expertise to severalcomplementary organisations, including the London Business InterruptionAssociation and the International Islamic Association of London. In addition toeducation days and London seminars we assisted with a conference in Dubaiduring 2015. Continued support has also been given to annual events organisedfor marine claims and cargo underwriting communities. At the same time the IUA’s own programme of market briefing lectures remainsextremely popular with members, attracting more than 1,000 attendees to 25events during the course of the year. These occasions cover an eclectic mix oftopics as evidenced by a list of the most popular in 2015 which includes cyber risk,US sanctions, indirect taxation and underwriting in Latin America. Further events have beenorganised by the IUA with the aimof promoting insurance careersand encouraging a diverse anddynamic workforce for the LondonMarket. The association organiseda ‘Women in the Workforce’seminar with the BrokerageCitylink, a charity that helps youngLondoners pursue employmentopportunities in the financial industries. It featured presentations from severalsuccessful women currently working in the Lloyd’s and company markets. In 2015the IUA also supported ‘Dive In’ – a four-day celebration of the bottom line benefits ofdiversity and inclusion for the insurance industry. 13

MarketModernisationA number of important strategic decisions have been taken about the LondonMarket’s process modernisation projects over the last year and these are likely tohave a significant influence for some time to come.During 2015 the concept of a London Market Target Operating Model (TOM)was born and this now encapsulates all central projects designed to make Londona more accessible and cost effective place with which to do business.The programme is comprehensive and ambitious. Lloyd’s has chosen to levyits managing agents in order to fund the various workstreams. This option is notavailable to the IUA and we are therefore seeking to harness an open willingnessto contribute, based on a clear understanding of costs and benefits for eachmember company. A TOM Steering Board has been established Much effort hason which the IUA is represented alongside other gone into improvingsenior figures from across the wider London governance and cost-Market. This body has elected to focus on threekey initiatives during 2016 that correspond benefit analyses forclosely with the priorities of IUA members: market projectselectronic placing, standardised processing forpremium and claims accounting and DelegatedAuthorities.The first of these is centred around the development of Placing PlatformLimited (PPL) – a single market system utilised by everyone to capture placinginformation electronically, earlier and with greater accuracy.The IUA has joined brokers and Lloyd’s in backing this service with our boardunanimously approving the concept and 11 board members signing a publicstatement of support. This commitment included agreement to endorse a contractwith the technology firm Ebix to develop the placing platform and fund a one thirdof share of the costs of this work in 2016.Extensive consultation has taken place across the market with IUArepresentatives providing useful feedback to assist implementation of thetechnology. Roll-out of the new system is planned to continue throughout 2016after commencing with a pilot of terrorism business.A Central Services Refresh Programme (CSRP) is the second major focus of theTOM. This will allow brokers to interact with the London Market’s central bureau 14

MarketModernisationservice using the same data and process standards that have been successfullyimplemented outside the bureau by the Ruschlikon initiative. The first phase of CSRP is Post-bind submissions, concentrating on premiumsfor excess of loss business. Future releases will support further broker adoptionwith technology to support global standard messages for claims submissions andfor additional types of premium. An online portal is also planned for brokers andservice companies that choose not to invest in an integrated messaging solution. On Delegated Authority business the TOM aims to centralise and streamlineprocesses to eliminate inefficiencies. In particular, this initiative will addressissues surrounding poor integration of data between systems and an improvedcoverholder approval process. It will also seek to reduce duplication of audits andinterruptions to coverholders and replace manual data preparation with moreautomated processes. In many ways 2015 has been a strategic year for market modernisation. Mucheffort has gone into improving governance and trying to demonstrate clear cost-benefit analyses for market projects that must obtain widespread support if theyare to attract necessary funding and prove successful. At the beginning of 2015 a new IUA Programme Director, Louise Day, assumedresponsibility for overseeing the association’s market modernisation work.We continue to play a full part in the strategic development, management andimplementation of all projects impacting companies undertaken by the LondonMarket Group. In order to ensure our members interests are fully served in this areawe expanded our available resources through the appointment of a consultanton a six-month contract and have subsequently recruited one additional full-timemember of staff. 15

Underwritingand ClaimsThe range of issues and business classes covered by the IUA’s underwritingand claims committees has continued to expand over the past year. In responseto member demand we have added two new underwriting groups examiningdirectors and officers (D&O) risks and delegated authority business. In addition,our Cyber Underwriting Group has set up a legal and claims sub committee tomonitor the handling of losses in this increasingly important area. With hundreds of practitioners from across our member companies meetingregularly to debate market developments our agendas are extensive and diverse.Occasionally, however, a single topic crops up that has implications across the fullrange of business classes. One such issue has been the introduction of the Insurance Act 2015 whichcomes into full effect on 12 August 2016 after an 18 month transition period.This piece of legislation introduces an entirely new legislative framework for theconduct of insurance business in the UK and was the subject of intensive scrutinyby the IUA and other industry groups during its passage through Parliament. Together with the Lloyd’s Market Association the IUA hosted a series ofseminars to help prepare companies for the new regime. Guidance bookletswere also published, providing a comprehensive explanation of the changes, thepractical differences they might make and potential challenges insurers may face. As a result of the Act it has been necessary to launch a review of all modelwordings and clauses published by the IUA to ensure that they satisfy the newprovisions. This work is continuing throughout 2016. Away from the Insurance Act the IUA’s general policy clause drafting functionhas been active in the past 12 months. A new international sanctions clause,for example, was issued reflecting significant recent legislative and regulatorychanges in this area. Claims series, index and capitalisation clauses have all alsobeen published. Elsewhere, our underwriting and claims groups have continued to undertakeimportant research projects, publishing a number of useful papers for the benefitof all IUA members and the wider London Market. Two of the most notable titlesissued over the past year focussed on cyber risks and asbestos claims. A report on the former showed how coverage by conventional classes of insurancecan be patchy with common exclusions, not necessarily aimed at cyber perils,ensuring that cover is not always provided in situations where it might be expected. 16

Underwritingand Claims The role of asbestos in causing lung cancer was identified as a crucial questionin the future development of long-tail liability claims, by the IUA’s LiabilityUnderwriters’ Group. In a guide to recent legal developments surrounding thetopic, the committee discussed several landmark cases that have affectedasbestos risk in recent years and looked ahead to future decisions which couldhave significant implications for both primary liability and insurance cover. Members of the IUA’s Professional Indemnity Forum, meanwhile, havedeveloped a new entry-level qualification for practitioners, enabling candidates togain a grounding in the subject which is not felt to be covered in adequate detailby existing industry education syllabuses. Course materials were drawn up toprovide the first group of candidates with a syllabus and examination covering themarket structure, key risks and basic cover analysis. Rapidly expanding interest in the use of aviation drones was a hot topic forboth aviation and liability sectors during 2015. IUA groups covering both linesof business discussed challenges in providing insurance cover and liaised withvarious supervisory bodies developing new rules governing drone operators.The association’s view is that a coordinated international regulatory approach isessential for the developing technology to thrive. More widely on aviation, ourAviation Technical Committee, together with the Lloyd’s Market Association, hasalso launched a new website to host a database of aviation certificates. Further development of the IUA’s services for property underwriters tookplace during 2015. A joint Property Underwriting Group was established throughthe combination of separate committees for facultative and treaty business. Themerger has proved successful, encouraging greater participation and discussionof market issues in a class of business which continues to be the largest written byIUA members in London, accounting for more than a quarter of total premiums. These are just some of the highlights from a few of our underwriting andclaims committees which now cover the vast majority of business lines writtenin the London company market. Around 800 practitioners from across the IUAmembership actively participate in these groups. A more extensive summary ofactivities can be found on pages 12 and 13. 17

ResearchThe IUA’s online document library continues to grow with new research andreports produced to assist companies with their day to day underwriting, claimsand compliance activities. All such resources are available for members to download from our website, eitherfrom a central Document Library or from pages relating to the activities of specific IUAcommittees. A selection of publications currently available is listed below.• Asbestos Diseases and Insurance• Company Market Premiums and Claims Statistics• Compliance Papers: –Bribery Act Guidance –Anti Money Laundering Guidelines –International Corporate Governance and Matrix Management Guidelines –Business Ethics and Conflicts of Interest Guidelines• Corporate Manslaughter and Corporate Homicide Act 2007: its impact upon general liability policies• Cyber Risks and Insurance• Environmental Liability: loss scenarios and coverage analysis• Financial Loss: what is it and when is it covered?• The Insurance Act 2015• International Sanctions Updates• Marine Underwriting Risk Lists• Premium Payment Reports: measuring broker performance against settlement due dates• Professional Lines Underwriting Information Questionnaire• Rehabilitation Code• Summary of European Insurance Premium Tax Rates• Terms of Business Agreements• UK Bodily Injury Awards Study• UK Motor Excess of Loss Questionnaire 18

Statistics Australasia Africa Asia2015 marked the fifth edition of the IUA’s annual LondoLnatinC/Sooutmh Ampearicany MarketStatistics Report. This publication has now gathered enUoSAu/Cganhadadata to include anumber of timeline graphs, plotting changes in premiumEuroipne (cExocl UmK/Ierelasndince 2010. AustralasiaData submissions are received from around 60 firmsUaK/Inreldandbusinesses anAdfriciasanalysed by placement type, class and geographical origin. Each company iAssi,a ofcourse, unique with its own experience of trading in the London Market, but weEurope (Excl UK/Irelandare now able to detect some longer term evidence for trends that have been keenlyLatin/South Americadebated. USA/CanadaIt is clear that a certain level of business is now being written independently UK/Irelandin local markets. Direct and facultative placements are becoming more dominantcompared to treaty contracts while changes in levels of premium income are farfrom uniform across all classes of business.The results published last year showedthat the overall premium total for the Londoncompany market in 2014 was £22.943bn. Grosspremium written in London totalled £15.855bnwhile a further £7.079bn was identified aswritten in other locations but overseen byLondon operations. Combining the IUA’s totalfigure for the company market with Lloyd’sof London’s gross written premium figureof £25.283bn gives an overall total for theLondon Market of £48.217bn. STLAOTNIDSOTNICCOSMPRANEYPMOARRKETT The 2015 statistics report was the first OCTOBER 2015edition published since the London MarketGroup issued its London Matters survey. Wehope that in years to come our research willassist in monitoring the impact of the growthagenda comprising various projects designed toattract more business to our market. 19

CommunicationsAfter the development of a major new IUAcommunications strategy, reported in last year’sannual review, 2015 witnessed a full implementationof the plan and some welcome results. Our aims, to improve the association’sprofile across the London Market and expandengagement with the staff of member companies,are not always easy to quantify. However, ananalysis of our activity has demonstrated that greatercommunication with insurance journalists resulted in a 400%increase in press articles focussing on IUA work. The number of media releases issued by the IUA rose by 150% whilst ourregular member newsletter expanded by 80% in both frequency and content. A newIUA blog was also launched. The new communications strategy also involved experimenting with variousdifferent email styles and features in order to make our messages to members asattractive and easy to read as possible. For example, both our information circularsand pages on the IUA website have been redesigned with responsive templateswhich enable them to display differently according to the device upon whichmembers are viewing them. This capability is particularly important as more andmore practitioners use smartphones and tablets to read content. Improvements made here can be monitored by email marketing metrics suchas the number of mailings opened and forwarded and website visitors. All these measurements have shown steady improvement throughout 2015. We are now working on an important project to upgrade the contact information held in our membership database. An increase in the number of distribution lists maintained by class of business and job title will allow better targeting of more relevant communications to the most appropriate recipients. An increased level of IUA communications activity is now being maintained to become ‘business as usual’. This effort should positively reinforce the association’s market profile through a virtuous circle of raised awareness and interest in our work. 20

Committee By the end of 2015 Reports there were nearly 800 individuals Chairman: from our member Peter Houston, companies serving Head of Operations, on at least one UK & Ireland, committee Chubb Europe Process Efficiency Group• Participated in the development of a London Market Target Operating Model• Represented company market interests in the negotiation of contract to provide a new electronic placing platform• Provided feedback on development of Placing Platform Ltd• Reviewed first phase of Central Services Refresh Programme focussing on post-bind submissions• Informed members of plans to centralise and streamline delegated authority business processes• Provided IUA representatives to many cross-market modernisation groups• Updated members on plans to re-platform the Insurers’ Market Repository• Reviewed Market Reform Contract, a standard form for placing submissions 21

CommitteeReportsInterim Chairman:Dave Matcham,Chief Executive,International UnderwritingAssociationProperty and Casualty Technical Committee Banks Underwriting Group • Issued guidance on introduction of the Business Interruption Insurance Act 2015 Casualty Treaty Group Clauses Sub Committee • Published updated version of motor Contingency Working Party excess of loss questionnaire Contingency Claims Committee Cyber Underwriting Group • Researched developments in asbestos Cyber Interests Group risk Delegated Authority Underwriting • Supported annual conferences for Group liability and contingency underwriting Directors and Officers Underwriting communities Group • Issued new version of the Liability Underwriting Group Rehabilitation Code Non-Marine Claims Group Non-Marine Environmental Committee • Published index and capitalisation Political Risks Committee clauses and claims series clause Professional Indemnity Forum Professional Lines Underwriting Group • Developed new qualification for Property Underwriting Group professional indemnity underwriters Rehabilitation Working Party • Researched cross class liabilities for cyber risks • Established group to monitor global cyber claims • Developed new international sanctions clause 22

CommitteeReportsChairman:Paul Newton,Head of London Marine HullUnderwriting,Axa Corporate Solutions SA Marine Technical Committee • Supported London Market participation at the annual Energy Claims Committee International Union of Marine Joint Cargo Committee Insurance (IUMI) conference in Berlin Joint Claims Committee Joint Excess of Loss Committee • Researched marine insurance premium Joint Hull Committee income for UK insurers and contributed Joint Liability Committee to IUMI global statistics survey Joint Rig and Association Business • Supported International Marine Claims Committee Conference in Dublin Joint Specie Committee Joint War Committee • Sponsored final year of training International Union of Marine for maritime cadet and agreed to subsequently fund another new cadet Insurance (IUMI) Fact and Figures Committee • Hosted market briefing events on International Union of Marine general average, offshore energy Insurance (IUMI) claims and marine insurance case law Political Forum International Union of Marine • Participated in meeting of market Insurance (IUMI) interests on the application of Iranian Legal and Liability Committee sanctions• Responded to proposed government actions following last year’s Maritime Growth Study by the Department of Transport• Issued papers on cyber risks affecting the marine industry 23

CommitteeReportsChairman:Jette Varnals,Technical and WordingsManager, Aerospace,XL Catlin Insurance Company Aviation Technical Committee • Issued premium payment policy and slip clauses Aviation Claims Committee Aviation Insurance Clauses Group • Maintained discussions with brokers Aviation Liaison Forum and Lloyd’s market representatives on development of an Aviation General• Launched new online aviation insurer Underwriters Agreement certificates database • Monitored use of electronic• Discussed development of aviation endorsements drones and responded to consultation exercises by the European Union and • Worked with brokers on increasing the Federal Aviation Administration in the volume of endorsements agreed and US processed electronically• Supported London company market participation at the annual International Union of Aviation Insurers (IUAI) meeting in India• Responded to UK government consultation on civil sanctions for the Civil Aviation Authority 24

CommitteeReportsChairman:Michael Connor,General Counsel,Lancashire InsuranceCompany (UK) LtdLegal and Regulatory Committee Accounts, Taxation and Solvency • R esponded to Enterprise Bill plan Committee to introduce legal damages for late payment of claims – Direct Taxation Working Group – Indirect Taxation Working Group • H osted market briefing seminars on – Solvency Working Group indirect taxation, Solvency II and US Americas Committee sanctions Compliance Committee • Provided competition law training• Alerted members to sweeping tax sessions reforms designed to clamp down on tax evasion and responded to various • Issued regular international sanctions international consultation exercises updates• Responded to FCA proposals on • Highlighted new Chinese reinsurance transparency in the renewal process market access rules for general insurance policies • A nswered FCA consultation on• Highlighted rules for transition to new proposed new financial crime UK rate of insurance premium tax reporting form• Commented on the development • Responded to Bank of England of new Senior Insurance Managers consultation on regulation of audit Regime committee• Warned various supervisory • Commented to Law Commission on authorities of growing regulatory the draft Insurance Contracts Bill burden on non-executive directors • R esponded to FCA consultation on its approach to small and medium- sized enterprises as users of financial services 25

Market Committeeswith IUA RepresentationLondon Market Group Public PolicyCentral Services Refresh (CSR) Steering British Insurers’ European PanelGroup Global Federation of InsuranceThe Message Exchange Limited (TMEL) AssociationsBoard Liberalisation of Trade in Services– Operations Sub Committee Committee– Finance and Compliance Sub Insurance Europe International and Reinsurance Committee Committee Insurance Europe Single Market– Technical Sub Committee CommitteePlacing Platform Limited BoardRuschlikon UK Implementation Group Training and EducationTarget Operating Model (TOM) SteeringGroup Lloyd’s Education Committee– Target Operating Model (TOM) London Market Education Group (Chartered Insurance Institute) Working Group Marine Insurance Education CouncilBranding Strategy Steering Group Insurance Institute of London JournalILS Task Force CommitteeAssociations Administration Institute of LondonCommittee Underwriters BoardAccounting and Settlement User Group Ins-sure Services Review PanelElectronic Claims File Steering GroupElectronic Claims File User Group Ins-sure ShareholderFinance Sub Group CommitteePerformance Sub GroupPost-bind Submission Management Ins-sure Services BoardGroup 26

Financial ReportThe IUA’s financial position benefited greatly in 2015 through the recruitment ofseveral new member companies. This enabled operating expenditure to be, onceagain, broadly matched by core subscription income. Consequently, the dividendproceeds received from Ins-sure Holdings have continued to be treated as a bonusrevenue stream which can be reinvested by the IUA, on behalf of members, intomarket growth and modernisation projects. Our growing membership base has helped keep subscription levels downand helps provide a high degree of certainty when planning the association’sbudget. We are also now able to offer a tiered subscription model with membercontributions reflecting a company’s relative size, measured by premium income.Since 1 January 2015 we have been pleased to welcome four new ordinarymember firms: Fidelis Underwriting Ltd, International General Insurance Company(UK) Ltd, HSB Engineering Insurance Ltd and HDI Global SE – UK. Coming on top of five new members in 2014 this result represents enthusiasticsupport for our work across the London company market. Joining the IUA enablescompanies to immediately access a wide range of services and actively engagewith market projects to improve business efficiency, opportunity and theregulatory environment. Discussions about membership are continuing with thesmall number of firms that are not yet members of the association. The IUA’s annual income (excluding dividend) in 2015 was similar to theprevious year at close to £3m. Member subscriptions make up the vast majority ofthis sum, though important contributions were also made by another successfulevents and seminar programme. We were fortunate to receive over £5m individend receipts from Ins-sure Holdings. This income was used to fund thecompany market’s contribution towards various London Market modernisationinitiatives; specifically, the Central Services Refresh Programme and the discoveryphase for the new Target Operating Model (TOM). 27

Financial Report 2015 also saw modernisation and change for the IUA itself as in December werelocated to new premises on the 8th floor of Number 1 Minster Court. The newoffices are a welcome change and have received a positive response from manyvisiting members. Finally, I would like to thank all members of IUA Finance and Audit Committeeand, in particular, David Radford, Chief Financial Officer at Transatlantic Re, whohas taken on the chairmanship of this group. Thanks also to our auditors GrantThornton for their advice and guidance. A full set of the association’s financialstatements has been sent to members.Dave MatchamChief Executive 28

Members of the IUAAs at 23rd March 2016Ordinary MembersAce European Group Limited HSB Engineering Insurance LimitedAIG Europe Limited International General InsuranceAllianz Global Corporate Specialty SE Company (UK) LtdAllied World Assurance Company International Insurance Company of(Europe) Ltd Hannover SEArch Insurance Company (Europe) Ltd Lancashire Insurance Company (UK)Aspen Insurance UK Limited Limited- Aspen Re UK Liberty Mutual Insurance EuropeAssicurazioni Generali S.p.A. (UK LimitedBranch) Markel International InsuranceAviva Insurance Limited Company LimitedAXA Corporate Solutions SA Munich Reinsurance CompanyAxis Specialty Europe Plc New India Assurance Company LimitedCatlin Insurance Company QBE Insurance (Europe) LtdChubb Insurance Company of Europe SE - QBE Re- Federal Insurance Company Royal & Sun Alliance Insurance plcCNA Insurance Company Limited - Marine Insurance CompanyEndurance Worldwide Insurance SCOR UK Company LimitedLimited Sirius International InsuranceErgo Versicherung AG Corporation (publ)Everest Reinsurance (Bermuda) Ltd Starstone Insurance LimitedFidelis Underwriting Limited Swiss Re Europe S.A, UK BranchGeneral Reinsurance Company Swiss Re International SEGlobal Aerospace Underwriting Tokio Marine Kiln Insurance LimitedManagers (GAUM) Tokio Millennium Re (UK) Limited- Berkshire Hathaway Transatlantic Re- Mitsui Sumitomo Trans Re LondonGreat Lakes Reinsurance (UK) Plc Travelers Insurance CompanyHannover Rueck SE W R Berkley Insurance Europe LtdHDI Global SE - UK XL Re EuropeHouston Casualty Company London Zurich Insurance PlcItalicised companies are underwriting entities of member companies to which theIUA is providing services. 29

Members of the IUAAs at 23rd March 2016Associate Members Affiliate MembersEurasia Insurance Company JSC Bimeh Iran UKGeneral Insurance Corporation of India Catalina London LimitedIsle of Man Assurance Limited DMV Group LimitedMapfre Spain Pro Insurance SolutionsMillî Reasürans TAS Randall & QuilterMitsui Sumitomo Insurance Co. Ltd Scyllogis ConsultingPool Reinsurance Company Limited Underwriter Insurance CompanyRenaissance Reinsurance of Europe LimitedSamsung Fire & Marine Insurance Wurttembergische Versicherung AGCompany of Europe LtdSunderland Marine Mutual InsuranceCompany LimitedTaiping Reinsurance Co Ltd 30

Parent Company Locationsof IUA Ordinary MembersUnited states 9 united kingdom 4 germany 8 sweden 1 switzerland 4 france 2 japan 2 italy 1bermuda 12 dubai 1 india 1 australia 1The International International Underwriting Association LtdUnderwriting Association London Underwriting Centreof London (IUA) exists to 1 Minster Court, Mincing Lanepromote and enhance the London EC3R 7AAbusiness environment forinternational insurance tel +44 (0)20 7617 4444and reinsurance companies email [email protected] in or web www.iua.co.ukthrough London.