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Market
Presentation
Israel
Sigal Schlimoff
Lloyd’s Representative in Israel
October 2013
> www.lloyds.com/marketpresentations
> www.lloyds.com/countryprofiles
The Market 1
Insurance Market Trends
Reinsurance Market Trends
Content
Regulatory Environment
Lloyd’s 2
Business Profile
Coverholders & Service Companies
Opportunities 3
Whom to target
What to target
Conclusions © Lloyd’s
1
The Market
Macro Themes
Insurance Themes
Market Size
Top Insurers
Distribution
A Market In Motion
Changes in Regulation
Outlook
© Lloyd’s
The Market >Macro Themes 1
Chart: GDP (Years & Indicator)
BUSINESS ENVIRONMENT in US$ (Billions)
HEADLINES
2013 ECONOMIC GROWTH: +3.4% 400 6%
(Q1+Q2 2013)
5.0% 5%
4.6% 4.5%
RANKED #4: most 4.4% 4.4%
4%
dynamic 3.4%
3.2%
OECD 200
2.8%
3%
growth
2%
UNEMPLOYMENT RATE: 6.1% 1.1% 1%
0 0%
2009 2010 2011 2012 2013 2014 2015 2016 2017
PRICE STABILITY: 2.2% Inflation
STRONG CURRENCY
1 Continued Resilience of economy
Large Natural Gas Extraction
SOLID BANKING SECTOR: NPL at 0.4% 2 expected to add 1%age point to
growth
Over the last 5 years Israel is one of the fastest-growing economies in the world and
is growing faster than its OECD peers
January 2013 – first election driven by social issues © Lloyd’s
Source: Market Intelligence calculation based on: Central Bureau of Statistics, Bank of Israel, www.bankisrael.gov.il; Global Insight (September 2013)
The Market >From “Start Up” to “Exit” Nation 1
Start
Start UpUp Buyer
Buyer Price
Price
US$ 966m
US$ 800m
US$ 800m
US$ 480m
US$ 475m
2012 - 50 exits in Israel, amounting to- US$ 5.5bn
This trend is set to continue throughout 2013
© Lloyd’s
Source: Soft Market Intelligence – Globes Magazine, The Marker Magazine, Calcalist Magazine
The Market >Israel’s Sovereign Ratings 1
Sovereign Ratings over time
HEADLINES
Moody’s – A1(stable)
S&P – A+ (Stable)
Fitch – A (stable)
Israel is amongst the few OECD countries which have recently been upgraded
Since the 2008 crisis, all agencies upgraded ratings
Steady rating improvement over the years
© Lloyd’s
Source: The Government Debt Management Unit http://ozar.mof.gov.il/debt/gen/mainpage.asp; S&P Israel: http://www.maalot.co.il/publications/CP20130807113430.pdf; MOF
The Market >Insurance Themes 1
INSURANCE ENVIRONMENT Chart: 2000-2012 Market HEADLINES
premiums
(non-life, in million NIS)
PREMIUM GROWTH: steady 30,000
25,000
Premium growth from 2011 to 2012
20,000
(non-life): +6.6% (in local currency)
15,000
Still a soft market 10,000
All insurance companies are composite 5,000
insurers – which contributes to their 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
stability
(non-life, in million US$)
Regulator takes active steps to encourage
8,000
competition 7,000
6,000
Tight regulation in private lines – recent 5,000
regulation in life and health insurance 4,000
3,000
More lenient regulatory environment in 2,000
respect of commercial insurances 1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Favourable regulatory regime
Increasingly open to foreign investors / insurers
Advanced implementation of Solvency II regulation © Lloyd’s
Source: Market Intelligence calculation based on: Commissioner of Capital Markets, Insurance & Savings, http://ozar.mof.gov.il; soft intelligence based on Lloyd’s Representative, 2013
The Market >Market Size 1
Chart: 2000 – 2012 Non-Life Market Premiums by Class
in million NIS LEGEND
30,000
25,000
Miscellaneous
20,000
MAT
15,000 PA & Health
Liability
10,000
Property
5,000 Motor
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Most significant class of business growth in: Third Party Liability, Credit Insurance, Product
Liability, Employers’ Liability
Market is still driven by Motor insurance (c. 40%) and life.
2013 - 1st year of profit in Motor & Property insurance following many years of losses
© Lloyd’s
Source: Market Intelligence calculation based on: Commissioner of Capital Markets, Insurance & Savings, http://ozar.mof.gov.il; soft intelligence based on Lloyd’s Representative, 2012
The Market >Market Size 1
Chart: 2000 – 2012 Non-Life Market Premiums by Class
in million US$ LEGEND
8,000
7,000
6,000 Miscellaneous
5,000 MAT
4,000 PA & Health
3,000 Liability
2,000 Property
1,000 Motor
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Most significant class of business growth in: Third Party Liability, Credit Insurance, Product
Liability, Employers’ Liability
Market is still driven by Motor insurance (c. 40%) and life.
2013 - 1st year of profit in Motor & Property insurance following many years of losses
© Lloyd’s
Source: Market Intelligence calculation based on: Commissioner of Capital Markets, Insurance & Savings, http://ozar.mof.gov.il; soft intelligence based on Lloyd’s Representative, 2012
The Market >Top Insurers 1
Chart: 2012 Gross Written Premiums by top Market players
in million US$; non-life only
0 500 1000 1500 HEADLINES
Harel
The Phoenix
19 insurance companies
Clal
Menora Mivtachim Very High level of concentration
Migdal
Ayalon
- Top 6: 78%
IDI
ILD
Eliahu - Others: 22%
AIG
Other
Chart: 2012 Gross Written Premiums by top Market players
in million US$; including life insurance Local market depends on
0 500 1000 1500 2000 2500
international Reinsurance
capacity; no local Reinsurance
Migdal
capacity
Harel
Clal
Market entry of new players
The Phoenix
Menorah Movtachim
Ayalon
Premium income increase for most insurance companies (16 out of the 19) between
2011-2012
© Lloyd’s
Source: Market Intelligence calculation based on: Commissioner of Capital Markets, Insurance & Savings, http://ozar.mof.gov.il; soft intelligence based on Lloyd’s Representative, 2012The Market >Distribution 1
HIGHLIGHTS
No legal difference in Israel
Main distribution channel -
between broker & agent
insurance agents
Unique stakeholders -
Circa 12,000 insurance agents
insurance consultants in
operate within 1,150 insurance
commercial insurances
agencies- significant parts in
pension insurance
Increased trend in sale of direct
insurance – (IDI & AIG and also
other insurance companies). IDI Significant potential change -
celebrated a successful IPO. “Tied Agencies” – Commissioner
considers prohibiting insurance
agencies controlled by insurance
New advanced technological
companies from selling insurance
distribution solutions in pipeline products of other insurers,
(tablets, smartphones, online) specifically in private lines - many
large insurance agencies will be
sold or become “tied agencies”
© Lloyd’s
Source: Market Intelligence calculation based on: soft intelligence by Lloyd’s Legal RepresentativeThe Market >A Market In Motion 1
1 MIGDAL & CLAL
Migdal: Generali sold the controlling shares to Shlomo Eliyahu
(local player)
Clal: Sale of control to Chinese Group – JT Capital
2 PEOPLE CHANGES
New CEOs appointed in the major insurance companies – introducing
different business approach
3 REGULATION
New Commissioner of Insurance was appointed as a result of recent
elections. Most of the senior staff were replaced
Investment Houses are now allowed to sell life insurance - new players
© Lloyd’sThe Market > Changes in Regulation 1
1
Opening of the Israeli market to foreign insurers – under review by
Commissioner
2
Major regulation change in Executive Insurances, Life Insurance
and Pension Insurance
3
Implementation of new strict claims handling process in personal lines
Imposition of wording restrictions on policy wordings
© Lloyd’sThe Market >Outlook 1
1 FINANCIAL STABILITY AND GROWTH
Strong and diversified economy, proven resilience during financial crisis,
growing consistently faster than OECD peers
2 EVOLVING INSURANCE MARKET REMAINS VERY STABLE
Well regulated insurance market with enhanced capital requirements
Strong financial results
3 A VERY CONCENTRATED YET SOPHISTICATED MARKET
In 2012, the insurance market became more concentrated with fewer
insurance companies
The insurance market is very sophisticated with high levels of penetration
& insurance awareness
© Lloyd’s2
Lloyd’s
Background
Business Profile
Coverholders & OMCs
Reinsurance
Key Actions & Office Support
Events
Summary
15 © Lloyd’sLloyd’s >Background 2
WESTERN ASIA LLOYD’S PROFILE
Other
18% UAE
20%
Cyprus
2012
Israel is consistently a
6%
Western Asia major source of
Qatar Lloyd’s Premiums
7%
US$ 939m Israel
premiums for Lloyd’s
19%
Saudi Arabia
8%
in the region
Bahrain
9% Turkey
13%
SOURCE: Market Intelligence based on *Gross Signed premiums; Xchanging (2013); unaudited figures based on country of origin and processing by calendar year; see Appendix for details
DIRECT BUSINESS
Lloyd’s underwriters are allowed to transact business on a direct basis (no deposit requirement)
IN ISRAEL: Business is conducted through Lloyd’s Coverholders
or Open Market Correspondents (OMCs)
(who must obtain a licence from the Commissioner of Insurance)
IN LONDON: Business is conducted through Lloyd’s brokers
REINSURANCE BUSINESS
Lloyd’s underwriters are approved by all local insurance companies to reinsure all lines of business,
© Lloyd’s
facultative and treatyLloyd’s >Business Profile 2
2008 – 2012 Premiums by type (in million US$)
2012 GROSS SIGNED PREMIUMS*
200
Total US$ 180m
150
Reinsurance US$ 72.m
Direct US$ 106.9m
100
50 *COUNTRY OF ORIGIN PREMIUMS
Policyholders based or
headquartered in this territory;
0 Premiums may be written outside
this territory;
2008 2009 2010 2011 2012
X Not where risks are located.
Direct Reinsurance
SOURCE: Market Intelligence based on *Gross Signed premiums; Xchanging (2013); unaudited figures based on country of origin and processing by calendar year;
see Appendix for details
SUCCESS STORIES 2012 Premiums by Class* (in million US$)
1 COVERHOLDERS & OMCs UK Motor
23 Coverholders & OMCs Property Treaty
Property (D&F)
EXPANDED BUSINESS Overseas Motor
2 24 new applications for Marine
OMC/Coverholder status or Energy
expanded classes Casualty Treaty
Casualty
LEADER IN INNOVATIVE
3 PRODUCTS
Aviation
Accident & Health
Lloyd’s perceived as leader in
0 10 20 30 40 50 60
sophisticated & niche lines © Lloyd’sLloyd’s >Coverholders & OMCs 2
COVERHOLDERS & OMCs Coverholders & OMCs
6 Coverholders
17 Open Market Correspondents
11
9
Claims
5 Coverholders have claims handling
authority
1 Coverholder has delegated claims
handling authority to a Third Party
Administrator domiciled in Israel
Number of active binders by region > SEE: www.lloyds.com/directories
0 11
for further details
1 Be local
Lloyd’s Coverholders & OMCs operating from Tel Aviv and vicinity across the country
2 Coverholders / OMCs are active in complementary solutions which are not provided by the local
market
Source: Market Intelligence calculation based on Country Manager & Lloyd’s Delegated Authorities (October 2013)Lloyd’s >Reinsurance 2
2010 TOP REINSURERS Lloyd’s main reinsurance involvement ‐
OTHERS
31.5%
in facultative reinsurance
4%
4%
19%
Need for greater capacity in CAT risks
4.5%
5%
5%
12% Main potential for Lloyd’s in Israel ‐ in
7%
8% Reinsurance ‐ high growth potential
2012 Top Reinsurers of 5 biggest Insurers
Non-life, reinsurers exceeding 10% of premium in one or more insurer
Swiss Re
Munich Re
Generali
National Indemnity
Zurich
Lloyd’s
Source: Market Intelligence calculation based on The Israeli Insurance Market – main figures Dec. 2010, MOF - capital market insurance and savings divisions, Individual Financial Statements of 5 biggest Insurance
CompaniesLloyd’s >Key Actions and Office Support 2
2014 COUNTRY DEVELOPMENT PLAN OFFICE SUPPORT
1
1 2 3 4 5
KEY KEY BUSINESS INSURANCE LLOYD’S
FACTS STATISTICS ENVIRONMENT ENVIRONMENT BUSINESS
Create a facility to enable London
Lloyd’s Vision 2012
Positioning Lloyd’s as an unquestionable leader on non-life speciality insurance and reinsurance market in Poland. Lloyd’s is well understood by the top local intermediaries
contacting Market and bringing business there on a daily basis. The coverholder’s network is well established across the country and the local coverholders deliver the
substantial part of Lloyd’s country production.
Lloyd’s key Initiatives 2012
Build a network of at least 15 coverholders at the end of 2012.
The Lloyd’s Country Development Plan
Targeting 20 top insurers in the country and supporting them in developing business with Lloyd’s.
contains key Market Development
Promoting use of Lloyd’s Polska office in Warsaw.
Improving the visibility and understanding of Lloyd’s among the local stakeholders.
Promoting Lloyd’s in the country.
Events & Market Intelligence
INDUSTRY EVENTS
Annual Brokers Congress, May 2012.
LLOYD’S EVENTS
Polish Risk Managers Visit to London, 12 March 2012.
Reinsurance Rendezvous, Warsaw, 5 June 2012.
Regional event in Hungary, Budapest, 26 June 2012.
Meet the Market Event, Warsaw, 11 September 2012.
MARKET INTELLIGENCE
Country Profile
Market Presentation
Country Roundup
Activities and a clear Vision U/Ws & Brokers to meet local
stakeholders
© Lloyd’s
> www.lloyds.com/events > www.lloyds.com/marketintelligence
2 Contacts with Regulators
1. EXPLORE OPPORTUNITIES IN
CHANGING MARKET
New opportunities and challenges for Lloyd's 3 Support local insurance companies
in view of the significant changes in the market & brokers interested in working with
Lloyd’s
2. HIGHLIGHT REINSURANCE AND
SPECIALIST APPETITE
Lloyd's unique position as a leading insurer
FUTURE EVENTS
and reinsurer in special lines, should be
fortified
1 J Gross Memorial scholarship
3. PROMOTING LLOYD’S
Lloyd’s predominance as an international
London-based market should be introduced
2 Lloyd’s Market and COB event
and promoted
3 Coverholders' Dinner
© Lloyd’s
Source: Country Manager (October 2013)Lloyd’s >Summary 2
1 Main Role of Lloyd’s in Local Market - Specialty & Innovative Products
Lloyd’s is perceived as a leader mainly in specialist lines and an
important source when high capacity is required
2 Steady Growth of Lloyd’s Premium Income in Israel
From 2011 to 2012 – increase of 6.5% in total premium
From 2010 to 2011 – increase of 25% in total premium
3 Israel is a Major Market for Lloyd’s in the Region
A strong cooperation with local insurance companies and a solid network
of Coverholders & OMCs puts Israel among the top market for Lloyd’s in
the region
© Lloyd’s3 Opportunities Targets Summary 22 © Lloyd’s
Opportunities >Specialty Lines 3
1 CYBER INSURANCE
Israel Faces 100,000 cyber attacks each day, yet the damages are not
very high in view of tight secured systems.
There is a very high awareness of the risk but very few products in the
market
2 TERROR INSURANCE
Businesses seek cover from terror risks. In view of the existence of a
State’s Statutory Fund which compensate against property damage
caused by war and terrorism, the risk for insurers is only residual – for
whatever is not covered by the fund
(indirect damages, reinstatement value)
3 ENERGY INSURANCE
Significant natural gas discoveries have led to increased need for
insurance capacity
© Lloyd’s
Soft market intelligence : http://www.israelnationalnews.com; http://www.maglangroup.comOpportunities >Specialty Lines 3
1 HIGH TECH
Constantly evolving high tech market requires various types of cover,
from PI, PL, Cyber, Multimedia, VC Liability
2 MEDICAL TOURISM
Israel is quickly becoming an international attraction in the field of health
tourism.
Insurance opportunities include: Travel, Health and Med-mal insurances
3 REINSURANCE
Participation in treaties, fronting facilities & facultative in special lines:
e.g. Financial Institutions, Diamonds, Med-mal, Terror, D&O
© Lloyd’s
Soft market intelligence : http://www.israelnationalnews.com; http://www.maglangroup.comOpportunities >Targets- Who to target? 3
Increase appetite for reinsurance
Offer reinsurance in innovative products
Local Carriers Increase participation in treaty reinsurance
Utilise market need for fronting facilities
Work in cooperation with local and international
Local & Intl. Lloyd’s brokers
Support brokers who are or wish to become
Brokers coverholders /OMCs in areas where there is a need
for the market
Large companies
and specialty Who seeks direct or reinsurance at the Lloyd’s market
industries
© Lloyd’sOpportunities >Targets – What to Target? 3
1 OPPORTUNITIES FROM SECTORS WHERE LOCAL CARRIERS
LACK KNOW-HOW
2 OPTIONS FOR GROWTH IN NEW SEGMENTS AND SOPHISTICATED
CLASSES (AS PER OPPORTUNITIES)
3 POTENTIAL OPPORTUNITIES IN ISRAELI-ARAB SECTOR
© Lloyd’sOpportunities >Summary 3
1 CHANGE MAY CREATE OPPORTUNITIES
Changes in the Israeli insurance market create new opportunities for
Lloyd’s both in Direct and Reinsurance business
2 STEADY PREMIUM GROWTH FOR LLOYD’S
Lloyd’s gross premiums have exhibited steady growth in recent years
3 LLOYD’S FINANCIAL STRENGTH IS A MAJOR ADVANTAGE
Lloyd’s high rating is a major advantage in the reinsurance sector,
in view of tightening regulatory requirements
© Lloyd’sA Appendix About Market Intelligence 28 © Lloyd’s
> www.lloyds.com/marketintelligence
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© Lloyd’sAppendix > Data Limitations & Disclaimer
Lloyd’s Data Limitations
Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete
for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK
Motor, which is not processed by Xchanging.
Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy
expenses remitted with a premium but before the deduction of outward reinsurance premiums.
Lloyd’s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country
of origin.
Country of Origin: denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or
policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.
Processing Year: relates to the calendar year in which the premium, additional or return premium is processed by Xchanging,
irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).
Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but
French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007
underwriting year of account but may not be processed by Xchanging until 2008 and so be allocated to the 2008 processing
year
Disclaimer
This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the
information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or
liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure,
31 © Lloyd’s
expression of opinion or belief obtained in this document.32 © Lloyd’s
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