EVOLUTION OF REINSURANCE & RETAKAFUL INDUSTRY

18th April 2011

BIRTH OF THE FIRST LOCAL REINSURER

BIRTH OF THE FIRST LOCAL REINSURER

Government concern over the increasing premium paid to overseas reinsurance companies (1965). First reinsurer in Malaysia was established. Malaysian National Reinsurance Berhad was established in 1971.

BIRTH OF THE FIRST LOCAL REINSURER

Feasibility study conducted in 1971 for the formation of National Reinsurer. Malaysian Re commenced operation on July 1, 1973.

OBJECTIVE OF MALAYSIAN RE

Reduce overseas drain of reinsurance premium Strengthen local Malaysian companies shareholding in Malaysian Re, retrocessions received Increase local retention capacity

OBJECTIVE OF MALAYSIAN RE

Participate in international reinsurance business Provide employment and training opportunities in reinsurance, particularly for Bumiputras.

MALAYSIAN RE NEXT PHASE

Initially, Malaysian Re received compulsory business in the form of quota share reinsurance from insurance companies. Company expanded to underwrite all classes of general insurance and other forms of reinsurance from domestic and international markets.

MALAYSIAN RE NEXT PHASE

Auto Facultative Cessions Local Facultative business Overseas Facultative business Local Treaty business Overseas Treaty business

MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY CENTRAL ADMINISTRATION BUREAU (CAB)

A bureau (managed by Malaysian Re) that centrally administers and settles facultative reinsurance transactions among the insurers and reinsurers operating in Malaysia. Mission To eliminate administrative and reconciliation problems and ensure efficient settlement of balances and claims recovery.
Central to its operations is a computerized system linking members via

internet. The cost of development and operations of the system is funded jointly by its members. The bureau commenced online operation on 1 July, 1998.
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY INSPECTION

Malaysian Re was given the mandate by General Insurance Association of Malaysia (PIAM) to form an Inspection Task Force to conduct inspections or carry out investigations on the conduct and activities of its members in accordance with the terms and provisions of the various Inter-Company Agreements. With effect from 1 April 1992, the various Inter-Company Agreements had now been amalgamated into a single agreement called "Inter-Company Agreement On General Insurance Business" (ICAGIB).
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY MALAYSIAN MOTOR INSURANCE POOL (MMIP)
Established in July 1992 Provide motor insurance to vehicle owners who cannot find insurance protection for their vehicles All insurance companies are pool members each having equal share.

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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY MALAYSIAN ENERGY RISKS CONSORTIUM (MERIC)

Established in 1995 Objectives - Optimize national retention - Promote wider interests in the underwriting of specialized classes of business, thereby developing underwriting skills Comprises 12 local insurers and 3 reinsurers Malaysian Re secretariat Capacity Upstream risks RM50m Risks underwritten by a committee Primary portfolio Malaysian risks & Malaysian interests abroad Others risks within Asia, Pacific region and Middle East countries.
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY MALAYSIAN AVIATION POOL

Established in 1986 In 1996, Malaysian Re assumed the Secretariat role Objectives are similar to MERIC Comprises 9 insurers & 3 reinsurers Capacity RM393M for general aviation risks and RM6.7M for other risks Underwritten by a committee Primarily Malaysian risks & Malaysian interests abroad

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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY MARKET TRAINING

Over the years, Malaysian Re has and will always continue to conduct various courses/seminars on insurance and reinsurance subjects for staff of insurance companies to instill a higher degree of professionalism in the industry.

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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY SCHEME FOR INSURANCE SPECIALISED RISKS OF LARGE &

The main objective of the Scheme, which was implemented on 1 January 1994, is to develop technical expertise to enable insurers to become active underwriters of large and specialized risks. In turn, it will enable insurance companies to have a better understanding of such risks and optimize national retention capacity, thus reducing the unnecessary outflow of premiums abroad. Malaysian Re was appointed by BNM to manage the Scheme.
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY SIHAT MALAYSIA

Sihat Malaysia Scheme, which was officially launched on 18 February 2000, was developed by the National Insurance Association of Malaysia (NIAM). Members of NIAM subscribing to this Scheme provide a uniform health insurance program covering health care including cashless admission to hospitals, medical treatments, surgery as well as emergency assistance to policy holders. Managed Care Organization has been appointed under the Scheme to provide specialized services to both the policy holders and NIAM members. Malaysian Re was appointed as Account Manager of the Scheme.
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY SPECIAL RATING

Malaysian Re was appointed by PIAM to form a Rating Committee specifically for the purpose of determining special rates for Fire and Industrial All Risks (IAR) Insurances, for risks which qualify for special rating under the Fire Tariff. This Committee comprises not less than 6 qualified or experienced fire insurance underwriters or risk surveyors from among PIAM members of whom not more than 3 shall be from Malaysian Re. The Chairman of the Rating Committee shall be a representative from Malaysian Re. By virtue of this appointment, Malaysian Re also acts as the Secretariat to this Committee as well as handles the day-to-day operations of all matters pertaining to special rating applications.
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MALAYSIAN RES CONTRIBUTION TO THE INDUSTRY SURVEYING & ADVISORY SERVICE ON RISK MANAGEMENT Fire Risk Inspection Special Rating Risks assessments PML estimation Risk Management services

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Reinsurance
Policy Holders
(Insured) Direct Intermediary Primary Risk Sharing

Insurer or Co-Insurer
(Cedant) Reinsurance Intermediary

ABC Sdn. Bhd.

Secondary Risk Sharing

XYZ Sdn. Bhd.

Reinsurers

Glad Reinsurance

Smile Reinsurance

Happy Reinsurance

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Reinsurance Chain
Insured
Liability

Direct Insurer
PREMIUMS Liability LOSSES

Reinsurer
Liability

Retrocessionaire

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ROLES OF REINSURANCE / RETAKAFUL

Increase underwriting capacity Reinsurers/ Retakaful Operators contributed towards the increase in underwriting capacity of insurance companies over the last few decades.

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ROLES OF REINSURANCE / RETAKAFUL

Stabilization of Profits Reduction in Unearned Premium Reserve Protection against catastrophe loss Technical Assistance from the Reinsurer Surplus relief Reduce net outflow of premium Retention ratio : 77.2% (1990) 92.1% (2009)

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TYPES OF REINSURANCE / RETAKAFUL

Two main types of Reinsurance/ Retakaful in Malaysia:

Facultative Treaty

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TYPES OF REINSURANCE / RETAKAFUL

Facultative

simplest and oldest method similar to co-insurance optional free choice to decide single risk method full disclosure of all facts follows all original policy conditions

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TYPES OF REINSURANCE / RETAKAFUL

Treaty Two forms of treaty arrangements:

Proportional Non proportional

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REINSURANCE COMPANIES REGISTERED UNDER INSURANCE ACT 1996

Reinsurance Companies registered under the Insurance Act 1996:
1. Malaysian Reinsurance Berhad 2. Asia Capital Reinsurance Malaysia Sdn Bhd. 3. Hannover Rueckversicherung AG 4. Munich Reinsurance Company Malaysia Branch 5. Swiss Reinsurance Company 6. Toa Reinsurance Company Limited Kuala Lumpur Branch 7. Malaysian Life Reinsurance Group Berhad

Reinsurance Companies licensed under the Offshore Insurance Act 1990:

More than 25 and growing rapidly.

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KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

Direct Insurers Life General Life & General

2007 8 25 8 41

2008 9 26 7 42

2009 9 23 7 39

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KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

Premium Income Life General

2007 RM 18.8 B RM 10.0 B

2008

2009

RM 18.7 B RM 19.8 B RM 10.3 B RM 11.5 B RM 29.0 B RM 31.3 B

TOTAL RM 28.8 B

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KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

2007 General Premium Net Premium Retention ratio RM 10.0 B RM 8.2 B 90.3% 2008 RM 10.3 B RM 8.5 B 92.3% 2009 RM 11.5 B RM 9.3 B 92.1 %

Retention ratio measures amount of premium retained within Malaysia.

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KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

Professional Reinsurers Life General Life & General

2007 1 5 1 7

2008 1 5 1 7

2009 1 5 1 7

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KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

General Reinsurance Premium & Market Share
2005 REINSURANCE PREMIUM (RM) MARKET SHARE MALAYSIAN RE ACR EMPLOYERS RE HANNOVER RE MUNICH RE SWISS RE TOA RE % 58.6 5.8 7.0 11.2 14.6 2.8 2006 % 57.3 5.5 6.3 11.2 16.2 3.5 2007 % 61.9 7.3 12.7 14.2 3.9 2008 % 60.1 3.2 6.6 12.1 14.2 3.8 2009 % 61.2 6.0 5.9 13.4 9.6 3.8
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999.6M 994.2 M 969.7 M 1,056.5M 1,149.1M

KEY INDICATORS OF INDUSTRY - CONVENTIONAL INSURANCE

Retention ratio 77.2% in 1990, increased to 92.1% in 2009.

Reinsurance

&

Retakaful

companies

have

contributed towards higher retention ratio.

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EVOLUTION OF TAKAFUL INDUSTRY

Religious Product Fashion Product Differentiation Alternative

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PROMOTERS OF MALAYSIAN TAKAFUL OPERATORS

STAGE 1 Islamic Bank Sykt Takaful Malaysia 1985

STAGE 2 Indigenous Organizations

Sykt Takaful Nasional Maybank Takaful Takaful Ikhlas

1993 2001 2003

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PROMOTERS OF MALAYSIAN TAKAFUL OPERATORS

STAGE 3 Financial Conglomerates CIMB Aviva Takaful Prudential BSN HSBC Amanah MAA Takaful 2006 2007 2007 2007

STAGE 4 International Life Cos

Great Eastern Takaful AIG Takaful Am Takaful ING Takaful

2011 2011 2011 2011

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TAKAFUL DIRECT PREMIUM CONTRIBUTION

Takaful (Family and General)
2006 NO. OF TAKAFUL OPERATORS INCOME CONTRIBUTION MARKET SHARE 8 RM 1.72 B 6.7% 2007 9 RM 2.56 B 9.0% 2008 8 RM 3.03 B 10.4% 2009 8 RM 3.75 B 11.0%

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RETAKAFUL OPERATORS IN MALAYSIA

MNRB Retakaful

- 2007

Munich Retakaful - 2007 ACR Retakaful Swiss Retakaful - 2008 - 2008

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OTHER RETAKAFUL OPERATORS

Best Retakaful ASEAN Retakaful Takaful Re Hannover Re Retakaful Division of Conventional Reinsurers

- 1985 - 1997 - 2005 - 2006 - Various

- Tunisia (Labuan since 2010) - Labuan - Dubai - Bahrain

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RECENT EXAMPLES OF CATASTROPHE LOSSES QUEENSLAND FLOOD

Queensland Flood - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES QUEENSLAND FLOOD

Queensland Flood - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES QUEENSLAND FLOOD

Queensland Flood - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES QUEENSLAND FLOOD

Queensland Flood - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES QUEENSLAND FLOOD

Queensland Flood - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Panorama of Christchurch taken shortly after the earthquake

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Panorama of Christchurch taken shortly after the earthquake

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Cathedral, before and after Earthquake Christchurch Cathedral, an Iconic building in NZ after Earthquake
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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES CHRISTCHURCH EARTHQUAKE

Christchurch Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Japan BEFORE the Earthquake - Space Photo

Japan AFTER the Earthquake - Space Photo

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Japan Tohoku Earthquake - Aftermath

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Tsunami triggered by of the Tohoku Earthquake

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Tsunami wave washing inland

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Japan after the Tsunami

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Japan after the Tsunami

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Japan after the Tsunami

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Explosion at Fukushima Daiichi Plant

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Damaged Reactor at Fukushima Daiichi Plant

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Satellite Photo - Damage at Fukushima Daiichi Plant

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RECENT EXAMPLES OF CATASTROPHE LOSSES JAPAN TOHOKU EARTHQUAKE

Satellite Photo - Damage at Fukushima Daiichi Plant

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