Country Risk Tier

CRT-1
Economic Risk
Political Risk
Financial System Risk
United Kingdom
The Country Risk Tier (CRT) reflects A.M. Bests assessment of
three categories of risk: Economic, Political and Financial System
Risk.
The United Kingdom (UK) is a CRT-1 country with very low
levels of risk across all three categories. Despite its strong risk
profile, the UK was hit particularly hard by the global finan-
cial turmoil, partially due to its sizeable financial sector. The
economy has continued to recover slowly with growth between
0-2% and an expected 0.7% in 2013. Forecasted growth should
be between 1-2% going forward driven by marginally higher
employment, lower inflation, improved demand and easing con-
cerns over the eurozone.
A.M. Best considers the majority of countries pictured below
to be categorized as CRT-1 and CRT-2. Notable exceptions are
the Eastern European countries of Bosnia and Herzegovina,
Belarus and the Ukraine.
Very Low
Low
Moderate
High
Very High
Very Low
Low
Moderate
High
Very High
Very Low
Low
Moderate
High
Very High
For information on companies followed
Market Outlooks
1
September 24, 2013
AMB CocN1nv R:s Rvvon1
Our Insight, Your Advantage.
CRT 1 2 3 4 5
Copyright 2013 by A.M. Best Company, Inc.
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Curacao
Cayman Islands
Anguilla
British
Virgin
Islands
St. Maarten
Zimbabwe
Zambia
Yemen Vietnam
Somoa
Venezuela
Vanuatu
Uzbekistan
Uruguay
United States
United
Kingdom
U.A.E.
Ukraine
Uganda
Turkmenistan
Turkey
Tunisia
Trinidad & Tobago
Tonga
Togo
Thailand
Tanzania
Tajikistan
Syria
Switzerland
Sweden
Swaziland
Suriname
Sudan
Sri Lanka
Spain
South Africa
Somalia
Solomon Islands
Slovenia
Slovakia
Singapore
Sierra
Leone
Serbia
Senegal
Saudi Arabia
Sao Tome & Principe
San Marino
St Vincent & the Grenadines
St Lucia
St Kitts & Nevis
Rwanda
Russia
Romania
Qatar
Puerto
Rico
Portugal
Poland
Philippines
Peru
Paraguay
Papua
New Guinea
Panama
Palau
Pakistan
Oman
Norway
Nigeria
Niger
Nicaragua
New Zealand
Netherlands
Nepal
Namibia
Mozambique
Morocco
Mongolia
Republic of
Moldova
Mexico
Mauritius
Mauritania
Malta
Mali
Malaysia
Malawi
Madagascar
Macedonia
Luxembourg
Lithuania
Liechtenstein
Libya
Liberia
Lesotho
Lebanon
Latvia
Laos
Kyrgyzstan
Kuwait
South
Korea
North Korea
Kenya
Kazakhstan
Jordan
Japan
Jamaica
Italy
Israel
Ireland
Iraq
Iran
India
Iceland
Hungary
Honduras
Haiti
Guyana
Guinea-Bissau
Guinea
Guatemala
Grenada
Greenland
Greece
Ghana
Germany
Georgia
Gambia
Gabon
French
Guiana
France
Finland
Fiji
Falkland Islands
Canary
Islands
Azores
Reunion
Sumatra
Borneo
Taiwan
Sakhalin
K
u
r
il
I
s
la
n
d
s
New Guinea
Tierra Del Fuego
South Georgia
Ethiopia
Estonia
Eritrea
Equatorial Guinea
El Salvador
Egypt
Ecuador
East Timor
Dominican
Republic
Dominica
Dijbouti
Denmark
Czech
Republic
Cyprus
Cuba
Croatia
Cote d'Ivoire
Costa Rica
Congo
Dem. Republic
of Congo
Comoros
Colombia
China
Chile
Chad
Central Africa Republic
Cape Verde
Canada
Cameroon
Cambodia
Burundi
Myanmar
Burkina Faso
Bulgaria
Brunei
Brazil
Botswana
Bosnia &
Herzegovina
Bolivia
Bhutan
Benin
Belize
Belgium
Belarus
Barbados
Bangladesh
Bahrain
Bahamas
Azerbaijan
Austria
Australia
Armenia
Argentina
Antigua & Barbuda
Angola
Andorra
Algeria
Albania
Afghanistan
Western Sahara
(Occupied by Morocco)
Montenegro
Isle of Man
Jersey
Guernsey
Monaco
Gibraltar
Seychelles
Russia
Hong Kong
Macau
Russia
Guam
Northern Mariana Islands
Wake Island
Marshall Islands
Federated States
of Micronesia
Nauru
Tuvalu
Coral Sea
Islands
New Caledonia
Norfolk Island
French Polynesia
Pitcairn Islands
Kiribati
Tokelau
American
Samoa
Cook
Islands
Niue
AMB Country Risk Report United Kingdom
Regional Summary: Western Europe
Western Europe is a highly developed
and affluent region. The European Union
(EU) is an economic and political union
of 28 countries that account for 28% of
the worlds GDP. The EU is facilitating a
single European market with standardized
regulatory systems and free movement of
people, goods, services and capital.
Western Europe has been experiencing
a prolonged economic slowdown with
growth in the EU contracting by 0.2%
in 2012 and projected to be flat in 2013
with a small improvement to 1.4% in
2014. High unemployment, tighter credit
conditions, weak demand and govern-
ment austerity programs have stymied a
return to sustainable growth.
While the European Central Bank has
continued to ease monetary policy, as
well as out-right bond purchases for trou-
bled members, the situation remains fluid.
Economic Risk: Very Low
The UKs service industries, including
fnancial services and real estate activities,
represent three quarters of economic pro-
duction.
With infation contained and growth
sluggish, the Bank of England is expected
to maintain low interest rates until mid-
to-late 2014.
While growth is positive it will be con-
strained near-term by tighter fscal policy,
restrained consumers, soft global growth
and tight credit conditions.
A new lending scheme by the Bank
of England, aimed at encouraging loans
to smaller business, is hoped to spur
improved credit conditions and growth.
2
Source: IMF, Axco, Swiss Re and A.M. Best
Source: IMF World Economic Outlook and A.M. Best
Nominal GDP USD bn 2440.51
Population mil 63.2
GDP Per Capita USD 38,589
Real GDP Growth % 0.2
Inflation Rate % 2.8
Premiums Written (Life) USD mil 205,918
Premiums Written (Non-Life) USD mil 105,500
Premiums Growth (11-12) % -0.5
Country Risk Tier
United Kingdom CRT-1
France CRT-1
Germany CRT-1
Ireland CRT-2
Italy CRT-2
Spain CRT-2
Regional Comparison
Vital Statistics 2012
-5
-4
-3
-2
-1
0
1
2
3
4
5
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP CPI Inflation
%
Economic Growth
AMB Country Risk Report United Kingdom
Political Risk: Very Low
The United Kingdom is a member of the
European Union. The United Kingdom,
along with Denmark, obtained special
opt-outs from the Maastricht Treaty which
allow them to not adopt the euro unless
they wish. The pound remains the cur-
rency.
The UK government implemented sev-
eral stimulus packages during the down-
turn. However, in order to rein in gov-
ernment spending, strong fscal austerity
measures will continue near-term.
New banking regulation has increased
the power of the Bank of England to
oversee fnancial stability, phasing out the
FSA. Targeted changes include a banking
tax, limiting bonus, and curbing high risk
behavior.
Financial System Risk: Very Low
In 2010 The Bank of England took over
control of the regulation of the UK fnan-
cial services industry, including insurance
from the Financial Services Authority.
The UK is widely seen as a major center
for international insurance and reinsur-
ance and is home to the London Market, a
wholesale market that writes risk around
the world. Lloyds of London accounts for
over half of the business on the London
Market.
The fnancial sector has stabilized, fol-
lowing government intervention and
increased supervision in the wake of the
fnancial crisis. Banks have agreed to
increase lending to businesses. Challenges
to the sector remain, including raising
capital and liquidity and the heightened
uncertainties regarding growth in the
eurozone and sovereign debt.
Source: IMF and A.M. Best
3
0
10
20
30
40
50
60
70
80
90
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
United Kingdom France Germany Ireland Italy Spain
GDP Per Capita Population
U
S
D
M
i
l
l
i
o
n
s
Source: A.M. Best
0
1
2
3
4
5
International Transactions
Policy
Monetary Policy
Fiscal Policy
Business Environment
Labor Flexibility Government Stability
Social Stability
Regional Stability
Legal System
United Kingdom World Average
Political Risk Summary
Score 1 (best) to 5 (worst)
GDP Per Capita and Population
for Selected Countries
4

GUIDE TO BESTS COUNTRY RISK TIERS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims paying ability of an insurer. Country risk is
evaluated and factored into all Bests Credit Ratings. Countries are placed into one of five tiers, ranging from CRT-1 (Country Risk Tier 1),
denoting a stable environment with the least amount of risk, to CRT-5 (Country Risk Tier 5) for countries that pose the most risk and, therefore,
the greatest challenge to an insurers financial stability, strength and performance.
A.M. Bests Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country Risk Tiers
Country Risk Tier Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country Risk Reports
A.M. Best Country Risk Reports are designed to provide a brief, high level, explanation of some of the key factors that determine a countrys
Country Risk Tier assignment. It is not intended to summarize A.M. Bests opinion on any particular insurance market, or the prospects for that
market.
Categories of Risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are: (1) Very Low; (2) Low; (3) Moderate; (4)
High and (5) Very High.
Category of Risk Definition

Economic Risk
The likelihood that fundamental weaknesses in a countrys economy will cause adverse developments for an
insurer. A.M. Bests assessment of economic risk evaluates the state of the domestic economy, government
finances and international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of
the legal system and of the business infrastructure, the efficiency of the government bureaucracy and the
appropriateness and effectiveness of the governments economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that
financial volatility may erupt due to inadequate reporting standards, weak banking system or asset markets
and/or poor regulatory structure. Along with the risk that the insurance industrys level of development and
public awareness, transparent and effective regulation and reporting standards and sophisticated regulatory
body will contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political Risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of 1-5 with 1 being the least amount of
risk and 5 being the highest amount of risk.
Category Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy Measures the ability of a country to effectively implement fiscal policy.
Business Environment Measures the overall quality of the business environment, and ease of doing business.
Labor Flexibility Measures the flexibility of the labor market, including the companys ability to hire and fire employees.
Government Stability Measures the degree of stability in a government.
Social Stability Measures the degree of social stability including human development and political rights.
Regional Stability Measures the degree of stability in the region
Legal System Measures the transparency and level of corruption in the legal system.
Country Risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Bests credit rating methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor do they address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Financial Strength Ratings are distributed via press release and/or the A.M. Best Web site at www.ambest.com and are published in the Rating
Actions section of BestWeek. Financial Strength Ratings are proprietary and may not be reproduced without permission.
Copyright 2013 by A.M. Best Company, Inc. Version 070208
AMB Country Risk Report United Kingdom
Copyright 2013 by A.M. Best Company, Inc.
All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise.