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					A DECADE’S JOURNEY
THROUGH THE INSURANCE INDUSTRY
(AND WHAT THE NEXT DECADE HOLDS…)




Joe Plumeri
Chairman and CEO, Willis Group Holdings plc
IISA/SAIA/FIA Conference
Sun City, South Africa – June 11, 2012
THE LESSONS OF HISTORY
…IN BUSINESS
  From this…   …to this!




    2000         2012
                           1
HOW DID WE GET THERE?
 From memories…   …to dreams




     1912            2009
                               2
IT WASN’T EASY IN A
DECADE OF UPHEAVAL…
Man-Made Disasters:              Natural Catastrophes:           Regulatory Upheaval:
2001: 9/11 - Largest single     2011: Costliest year ever      2004-2005: Age of Spitzer
property, aviation & WC loss.    for nat cat losses -- $105 bn   brings $3 bn in fines.
                                 insured losses.
2008: Global financial crisis                                   Today: Solvency II
– 389 banks failed; how many     2005: 2nd costliest year       implementation cost
insurers?                        with insured losses of          €2-3 bn over 5 years.
                                 $101 bn.




    Lessons Learned:                 Lessons Learned:                 Lessons Learned:
   Contract Certainty &              The importance of                The importance of
   stick to your knitting          resiliency & analytics           transparency & ERM

                                                                                         3
…ALL IN THE DECADE OF
THE BLACK SWAN
8 of the top 10 costliest insurance losses in the past 30
years occurred in the last decade!
Event                         Year   Total Insured Losses
1. Hurricane Katrina          2005   $74.7 billion
2. Tōhoku quake and tsunami   2011   $35 billion
3. Hurricane Andrew           1992   $25.6 billion
4. September 11 Attacks       2001   $23.8 billion
5. Northridge Earthquake      1994   $21.2 billion
6. Hurricane Ike              2005   $21.5 billion
7. Hurricane Ivan             2004   $15.3 billion
8. Hurricane Wilma            2005   $14.5 billion
9. Thailand Flooding          2011   $12 billion      2010 Eyjafjallajökull
                                                      Volcano: Cost airlines
10. Christchurch Earthquake   2011   $12 billion
                                                      €150m a day for 6 days
Source: Swiss Re

                                                                           4
   PLUMERI’S TOP 10 RISKS:


 10           9          8            7               6
Reputation   Piracy     Cyber                     Cost and
                       Security   Globalization Availability of
                                                   Credit


   5          4          3             2              1
Regulation   Market   Pandemics    Terrorism        Climate
   and        Cap                                   Change
Compliance    Risk

                                                         5
NEW TYPES OF RISK
PROLIFERATE
                                     Lloyds Risk Index 2011 –
“The top 5 risks on the               Top 5 Risks
minds of business leaders
                                        1.   Loss of customers
today aren’t easily solved
by purchasing insurance.                2.   Talent and skills shortages

Traditional risks… wind,                3.   Reputational risk
earthquake, flood –                     4.   Currency fluctuation
aren’t even in the top 30               5.   Changing legislation
anymore.”
                                     All difficult or impossible to insure
         -- Hank Watkins, Lloyd’s
              December 19, 2011      Demanding resiliency



                                                                           6
TODAY’S GLOBAL
INSURANCE INDUSTRY
Today our industry is facing a      Top 10 Risks Facing Global
perfect storm of:                   Insurance Industry (2011):
 Heavy regulatory demands on       1. Regulation
  capital and solvency vs need to   2. Capital
  run a profitable business         3. Macro-economic trends
 Continuing global macro           4. Investment performance
  economic uncertainty              5. Natural catastrophes
 Low interest rates impacting      6. Talent
  investment performance            7. Long tail liabilities
 A continued soft market –         8. Corporate governance
  excess capacity and stiff         9. Distribution channels
  competition; surge in mega
                                    10. Interest rates
  catastrophe claims
                                    Source: PwC/CSFI

                                                                 7
THE INSURANCE INDUSTRY:
WE OWN RESILIENCE
 Insurance industry proven its own
  resilience throughout the decades.
 Focus on extreme 1:200 year events –
  made us more resilient to catastrophe
  and shocks from mother nature and
  markets.
 Transforming the scale, depth and
  quality of insight about the risks facing
  our clients and how to manage and
  transfer them.
 Our market is fully operational –
  testament to the strength and resilience
  of this capital market.

                                              8
FOR OUR INDUSTRY: A ONCE
IN A LIFETIME OPPORTUNITY
 Our responsibility as an industry:
  – To “own” resilience…
  – To lead using our expertise and
    resources to address long term risks…
  – To be an industry building sustainable
    and predictable growth in the face of new
    risks…
  – To bring knowledge, expertise, products
    and services as risk and uncertainty
    grows…
  – To establish resilience as an aspirational
    purchase
 Insurance is the vehicle for delivering resilience rather than a
  transaction; to bring risk management and analytical services to
  our clients.

                                                                     9
THE EMERGING GLOBAL
MIDDLE CLASS
   The big story of the 21st Century is     Relentless rise
    the rise of a new global middle          Middle class population as % of world total
    class, most of it in Asia.
                                                                                                      60
   Two billion more people will join the
                                                                                                      50
    middle class by 2030.
                                                                                                      40
   They will accumulate property and
    income, and rival the U.S. consumer                                                               30
    in spending. A business opportunity
    this large is unprecedented.                                                                      20

   They will want to protect their lives,                                                            10
    property and income, too – the
                                                                                                      0
    insurance opportunities are huge.        1820 90 1913 38 50            60   80    90 2000 06
                                             Source: Surjit Bhalla, “The Middle Class Kingdoms
   Greatest need will be in cities.         of India and China”


                                                                                                 10
THE NEXT DECADE:
AFRICA’S ERA?
Over the past decade, the number of middle-                  Offshore expansion strategies
class consumers in Africa has grown 60%                       South African insurers are
to 313 million                                                     focusing on: e.g.
                                                                 Mozambique & Angola
 34% of Africans are firmly entrenched in
  the new middle class, spending between        Rest of Africa
  $2 and $20 a day.
 By 2060, African middle class will be 1.1 bn
                                                         Asia
  strong
 On par with Chinese and Indian middle classes.
 2nd fastest-growing economy in the world.    South America
 Huge potential for global investors.
 Africa now has more mobile-phone
                                                        China
  subscribers than entire U.S. population
Source: WSJ, The Economist
                                                   Europe and USA
The emerging African Middle Class
                                                                    0   5      10   15    20   25   30
will contribute to an emerging
Golden Age for Insurance!                                               Number of companies
                                                                            Source: PwC

                                                                                               11
SOUTH AFRICA: GATEWAY TO
THE CONTINENT
Global brands using South Africa as a
“foothold for continental expansion”:
   Wal-Mart paid $2.4 billion to buy 51% of South
    Africa's Massmart Holdings Ltd
   U.S. Yum Brands Inc. to invest $74 million in 100
    new KFC outlets in Africa in 2012, and will double
    the number of stores to 1,200 by 2014
   Ford Motor invested $500 million in its SA
    operations in 2011
   British Vodafone now owns 65% of Vodacom,
    SA's largest mobile phone operator
                                                         "Yes, there are risks to doing
Source: WSJ
                                                         business in Africa. However,
South African insurance market will lead the             here in Africa, right now the
way as the dominant market in Africa,                    rewards could be as vast as
accounting for 90% of regional life premium              the continent itself."
volume and half of the regional non-life
premium volume.                                                           Donald H. Gips
                                                              U.S. Ambassador to South Africa


                                                                                      12
ANYTHING IS POSSIBLE…




                        13
A DECADE’S JOURNEY
THROUGH THE INSURANCE INDUSTRY
(AND WHAT THE NEXT DECADE HOLDS…)




Joe Plumeri
Chairman and CEO, Willis Group Holdings plc
IISA/SAIA/FIA Conference
Sun City, South Africa – June 11, 2012

				
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