Guy Carpenter Mid-Year Report Highlights Catalysts for Growth in (Re)Insurance Industry

New York, NY (Sept. 9, 2013) – Guy Carpenter & Company, LLC, the leading global risk and
reinsurance specialist and member of Marsh & McLennan Companies, has released
its mid-year market report, highlighting a time of dynamic capital growth in the reinsurance industry.
As investors supply capacity through a convergence of alternative and traditional vehicles, the report
details the ways in which this new supply of capital and excess capacity has changed the nature of
the sector’s capital structure.

“The changing dynamics of the specialty insurance and global reinsurance markets, coupled with a
market characterized by excess capital, a growing investor base, low investment returns and
diminishing reserve releases, presents a unique set of challenges and opportunities for our industry,”
said David Flandro, Global Head of Business Intelligence for Guy Carpenter. “Guy Carpenter
remains committed to helping our clients navigate the challenges of this ‘new normal’ to achieve
sustainable and profitable growth.”

Convergence Capital and Excess Capacity

Over the past 18 months alone, an estimated USD10 billion of new capital has entered the market in
the form of catastrophe bonds, structured industry loss warranties (ILWs) and collateralized
reinsurance. This surge in capital has been driven primarily by increased supply from institutional
investors seeking access to a comparably high-yielding, non-correlating asset as part of an
alternative asset management strategy. This growing segment of the reinsurance market now
accounts for an estimated USD45 billion of capacity, which is approximately 14 percent of the global
property catastrophe limit purchased.

The most tangible evidence of the impact of convergence capital can be seen in the U.S. property
catastrophe reinsurance market, where double-digit rate reductions occurred during the 2013 midyear
renewals. The influx of convergence capital has also resulted in ILS catastrophe risk pricing
decoupling from price expectations in the traditional reinsurance market. For the first time, some ILS
products are now offering more competitive pricing terms than seen in the traditional market. Despite
a significant decrease in ILS pricing over the last 12 months, investor demand continues to be
robust. Projections by GC Securities* indicate that the catastrophe bond market could reach USD23
billion by the end of 2016.

Capital Stewardship

Faced with soft pricing and excess capital, reinsurers are confronted with the challenge of
deciding how to strategically deploy capital to generate returns that will satisfy the expectations of investors
and/or shareholders. The balance of options includes: maintaining the status quo, returning capital to shareholders,
pursuing organic growth or identifying M&A opportunities.

  • Maintaining the Status Quo: One option for carriers is to hold excess capital as a buffer against
    future losses. By maintaining an excess level of capital, carriers can quickly deploy funds
    following a catastrophe, which is often considerably less time-consuming, less expensive and
    more certain than raising capital in the aftermath of an event. Nevertheless, holding on to excess
    capital for too long will dilute returns on equity and consequently to market valuation.
  • Return to Shareholders: As a principle, excess capital should be returned to shareholders in
    periods of low-return opportunity. During the last eight years, reinsurers have been relatively
    disciplined in returning capital when the pricing environment has softened. GC Securities expects
    the level of capital returned to shareholders to accelerate in 2013.
  • Organic Growth: Organic growth is often perceived as being a low-risk strategy, but is difficult to
    achieve in the current economic climate. The excess capital available in the reinsurance market
    today, coupled with increased competition from convergence players, means that 2013 will likely
    see more risks assumed for the same, if not less, return than in 2012.
  • Mergers and Acquisitions: The focus for growth and competiveness in an evolving reinsurance
    market is moving towards more M&A activity, particularly strategic bolt-on transactions. The need
    to adapt business models to respond to these new market dynamics provides the ingredients for
    an increase in M&A activity.

“Although the best capital stewards will employ a strategy that encompasses all four of these
approaches, the market is increasingly turning to strategic M&A opportunities to achieve scale, global
reach and a more diversified product suite in order to remain competitive,” said Des Potter, Head of
GC Securities, EMEA. “Evaluating the merits of each option and the interplay between them is
paramount to realizing your growth objectives, and is where a trusted and informed advisor can help
to identify the best route to success.”

The full report, Capital Stewardship: Charting the Course to Profitable Growth, is available for
download at

About Guy Carpenter

Guy Carpenter & Company, LLC is a global leader in providing risk and reinsurance intermediary services. With
over 50 offices worldwide, Guy Carpenter creates and executes reinsurance solutions and delivers capital
market solutions* for clients across the globe. The firm’s full breadth of services includes line-of-business
expertise in agriculture; aviation; casualty clash; construction and engineering; excess and umbrella; life,
accident and health; marine and energy; medical professional liability; political risk and trade credit;
professional liability; property; retrocessional reinsurance; surety; terrorism and workers compensation. GC
Fac® is Guy Carpenter’s dedicated global facultative reinsurance unit that provides placement strategies,
timely market access and centralized management of facultative reinsurance solutions. In addition, GC
Analytics®** utilizes industry-leading quantitative skills and modeling tools that optimize the reinsurance
decision-making process and help make the firm’s clients more successful. For more information, visit

Reactions magazine named Guy Carpenter Best Global Reinsurance Broking Company Overall and Best
Reinsurance Broking CEO of the year in 2012. At the Reactions London Market Awards, Guy Carpenter was
also named Reinsurance Broker of the Year and took home Reinsurance Broking Team of the Year honors
for both Property and Aviation. In the past year, Guy Carpenter has also won: Global Best ILS Advisor (GC
Securities*), US Best ILS Advisor (GC Securities*) and US Best Broker for Casualty Reinsurance from
Intelligent Insurer, Insurance Day‘s 2012 ILS Transaction of the Year (GC Securities*), and Reinsurance
Broker of the Year for the Asia-Pacific region at the 16th Annual Asia Insurance Industry Awards.

Guy Carpenter is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of
professional services companies offering clients advice and solutions in the areas of risk, strategy and human
capital. With 53,000 employees worldwide and annual revenue exceeding $11 billion, Marsh & McLennan
Companies is also the parent company of Marsh, a global leader in insurance broking and risk management;
Mercer, a global leader in talent, health, retirement, and investment consulting; and Oliver Wyman, a global
leader in management consulting.

*Securities or investments, as applicable, are offered in the United States through GC Securities, a division of MMC Securities Corp., a US
registered broker-dealer and member FINRA/SIPC. Main Office: 1166 Avenue of the Americas, New York, NY 10036. Phone: (212) 345-5000.
Securities or investments, as applicable, are offered in the European Union by GC Securities, a division of MMC Securities (Europe)
Ltd., which is authorized and regulated by the Financial Services Authority. Reinsurance products are placed through qualified affiliates of
Guy Carpenter & Company, LLC. MMC Securities Corp., MMC Securities (Europe) Ltd. and Guy Carpenter & Company, LLC are affiliates
owned by Marsh & McLennan Companies. This communication is not intended as an offer to sell or a solicitation of any offer to buy any
security, financial instrument, reinsurance or insurance product. **GC Analytics is a registered mark with the U.S. Patent and Trademark