Protector Forsikring

Call Transcript • Nov 17, 2017

Conference call questions and answers regarding the Reinsurance disagreements related to the Grenfell Tower Property loss

Date of conference call: 17.11.2017 Time of conference call: 11:30-12:00 Oslo time The questions are numbered and in bold.

• 1. Are there any other risk linked to this problem and are they fully covered by your present reinsurance structure?
• Yes, there are 4 in total and they are fully covered, based on our contractual view until the end of the year. 3 in the UK, 1 in Norway. No disputes relative to these 4 clients is expected if any new claims arrives.
• 2. Will this incident influence on the market activity in the UK?
• No, not at all. Activities in the UK or the Nordic Market will not be influenced.
• 3. Will there be more negative news arriving out of the Grenfell tower situation?
• We have absolutely no information now indicating any new challenging situations. Of course, we cannot guarantee how the Grenfell Tower claim develops, but we do not have any information indicating that such a situation should occur.
• 4. Will your present property reinsurance contract which is not up for renewal before 1st of January 2019 be cancelled and/or replaced
• No, the contract will run as usual until the end of the agreed period which is at the end of 2018 (31.12.2018)
• 5. Will your present guiding for the future be changes due to this situation?
• No.
• 6. Why will you not book any losses in Q4 (2017)?
• According to Norwegian accounting rules (NRS 13), you should not book any losses if you consider the probability to loose such a dialogue/arbitration to be less than 50 %. This is also discussed and confirmed by our external auditor.
• 7. How many similar property contracts do you have with the same reinsurance company? The question is probably related to the four risks, which is covered in the same way as in the Grenfell Tower situation. See question 1.
• 8. Is the reinsurance company financially sound and 100% able to live up to its obligations?
• Yes, probably the biggest in the world, with a AA rating.

9. Does this dispute make it likely, that Protector has to renegotiate other contracts?

• Yes, we may renegotiate our facultative reinsurance program from 1st of January. This is considered as a minor issue.

10. What are the specific questions raised by the Reinsurer regarding the different interpretation of the contract?

• The dispute is related to proportional vs. non-proportional facultative placement and market practice.
• 11. If your understanding of the contract is so clear, why is the reinsurer's interpretation differing?
• Difficult to respond to, as we understand the dialogue with the reinsurer, they are starting from a market practice point of view, but there are many different market practices. We are of the opinion that the contract supports our position.

12. What is the estimated maximum potential loss of NOK 100 m based on?

• It is possible to calculate the exactly figure based on a proportional vs. a non-proportional view. In addition, we have added a figure for some insecurity and legal expenses.
• 13. Will there be any challenges with your property reinsurance structure from January 2019?
• No, we do not expect any challenges if our present property reinsurance contract potentially disappears in January 2019.
• We have a substantial, well diversified and historical to date profitable property business, even after the Grenfell Tower accident. We consider ourselves a very attractive opportunity for the reinsurance market.

14. What exactly is the claim for (NOK100m)? Property or casualty etc.?

• Property only.
• 15. If you have to pay the extra claim, have you then underestimated the risk you have taken on other volume? (I.e. higher liability in the reinsurance contracts than you thought.)
• No, Grenfell tower is a very special incident and even if it is a big claim, it does not really influence in a significant way in the large loss element of the UK property market. We would not consider the risk differently.
• 16. What is the risk that other reinsurers will levy claims against you if you have to pay the NOK 100m?
• No other reinsurer implications coming out of this situation
• 17. How has this confrontation with your reinsurer affected your relationship with said reinsurer?
• A comment on this have already been given in the notification to the stock exchange. Considered to be professional and good now.

18. In general, more information on how this claim arised would be appreciated.

• See question 10 and 11.

19. Is this the last we will hear about Grenfell Tower in terms of negative surprises?

• No guarantees can be given. We have no information now, that indicates that additional surprises will arrive.

20. What is the current total claim on all parties regarding the Grenfell Tower?

• After Q3 17, we updated on the gross reserve to £75m in total. The gross reserves are unchanged in this dispute.
• 21. Is there any unsettled understanding surround any other reinsurance agreements regarding the Grenfell Tower accident?
• No. Obviously it's a complex claim situation and there will be a dialogue with the reinsurer's the next years, we have not seen other issues regarding other reinsurance agreements

22. What would the potential impact from a new facultative reinsurance from Jan 2018 be?

• The financial impact is very limited and included in the NOK 100m maximum. If we enter into an arbitration, we will pass these kind of bills (limited amount of MNOK – single digit) towards the arbitration.

23. Is this just the reinsurer testing a weak case as is fairly normal with large claims?

• We do not have experience to answer the question. We know from 9/11 (twin tower) that it is not unusual to see these kind of disputes after significant claims.
• 24. Is it fair to assume that other reinsurance contracts have the same wording, i.e. if the reinsurer is right on this one, could it apply to other contracts in 1. This particular case, 2. Other insurance objects?
• See answer to question 1 and 13
• 25. Also, could this affect your pricing in the future – if the reinsurer is right, you might have to increase prices accordingly and if you are right, reinsurers might increase prices?
• No, the large loss element post Grenfell Tower is understood, yes we may see market prices go up slightly, but it doesn't influence our pricing towards the market in any significant way.

26. Is the reinsurance placed through a broker

• Yes.

27. Is it one reinsurer or a consortium?

• One.

28. Under which jurisdiction is the policy placed Norwegian or English

• Norwegian. A potential arbitration will take place in Norway.

29. What is the way forward in regards to resolving the dispute?

• We will not go into detail on the matter. We had a phone call with the reinsurer late last night regarding the further process. Realistically, we believe it will take several months before this situation is concluded – either by sorting it out with the reinsurer or in an arbitration.

30. Why should we not expect similar disputes related to casualty?

• We have not been challenged at all by the casualty panels, in any way. We would be surprised if we are.