Transfer of the long-term reinsurance business of Swiss Reinsurance Company Ltd Hong Kong branch ("SRZHK branch") to Swiss Re Asia Pte. Ltd., Hong Kong branch ("SRALHK Branch")

Dear [client's name],

Thank you for your trust in Swiss Re over the years.

In April 2017, Swiss Re Group announced an initiative to establish a dedicated entity in

Singapore, Swiss Re Asia Pte. Ltd. ("SRAL"), to serve as the regional headquarters for our

reinsurance operations in Asia. All operations in Asia will be subsequently transferred to

become branches or subsidiaries of SRAL over the next few years.

We wish to inform you that SRAL has obtained authorisation from the Insurance Authority

("IA") to conduct reinsurance business in Hong Kong through SRALHK branch and subject to

permission of the IA, expects to commence its business from 1 January 2020.

SRZHK branch intends to transfer all of the reinsurance contracts relating to its long-term

business to SRALHK branch ("Proposed Transfer"). The Proposed Transfer will be carried out

by way of a scheme of transfer ("Scheme") pursuant to section 24 of the Insurance

Ordinance. The Proposed Transfer is planned to be effective 1 January 2020, subject to the

approval of the Court of First Instance ("Hong Kong Court"). With the Proposed Transfer,

SRALHK branch will replace SRZHK branch as the reinsurer on record for your reinsurance

contract(s) on 1 January 2020 or such other date as the Hong Kong Court shall approve

(“Transfer Date”). All correspondence and documents sent to you in relation to your

reinsurance contract(s) will bear the name of SRALHK branch after the Transfer Date. The

terms and conditions of your reinsurance contract(s) will remain unchanged. The Proposed

Transfer will not affect the contractual obligations and benefits to which you are entitled

and all your rights and benefits against SRZ shall, on and from the Transfer Date, become

against SRAL.

Client's name, title and address. Swiss Reinsurance Company Ltd Hong Kong Branch 61st Floor, Central Plaza 18 Harbour Road Wanchai, Hong Kong Phone +852 2 827 4345 Fax +852 2 827 6033 swissre.com

26 July 2019

An independent actuary, Mr. Paul Sinnott, Fellow of the Institute and Faculty of Actuaries

(United Kingdom) ("Independent Actuary"), has been appointed by SRZHK branch to

examine the likely effects of the Scheme on the long-term policyholders of Swiss

Reinsurance Company Ltd ("SRZ") and SRAL, and to prepare a report for the Hong Kong

Court. A summary of the Scheme and the Independent Actuary's report are included in

Schedules 1 and 2 of this letter.

If you wish to obtain further information, you may:

• inspect copies of: i) this letter; ii) the petition to the Hong Kong Court; iii) the

Scheme; and, iv) the report of the Independent Actuary at the following address:

61st Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong, from 9 a.m. to 5

p.m. (local time), on normal business days (Monday to Friday (except public holidays))

from 26 July 2019 to 16 August 2019; or

• review the electronic version of any of the above documents by visiting our webpage

at www.swissre.com/about-us/our-global-presence/hongkong-scheme.html, until

the final petition hearing in the Hong Kong Court or making a request by writing to

the offices of SRZ or SRAL at 61st Floor, Central Plaza, 18 Harbour Road, Wanchai,

Hong Kong on or prior to the date of the final hearing.

After the Proposed Transfer, SRZ will apply to the IA for withdrawal of its reinsurance

authorisation and will cease to be an authorised reinsurer in Hong Kong.

Any person who alleges that he or she would be adversely affected by the carrying out of

the Scheme has the right to be heard in the Petition by the Hong Kong Court. If you intend to

do so, please refer to the section entitled "Final Hearing" in Schedule 1 - Part 2 attached to

this letter for details. Please find attached a set of Frequently Asked Questions to help you

better understand the Proposed Transfer. If you have any questions, please do not hesitate

to contact your Swiss Re Client Manager or Key Account Manager.

With our enhanced presence in Asia, we are committed to delivering industry-leading

services and innovative solutions catering to your needs. We look forward to continuing our

partnership in driving the next stage of growth together.

Swiss Reinsurance Company Ltd, acting

through its Hong Kong branch

_____________________________

Victor Kuk Ho Ming

Chief Executive

Swiss Re Asia Pte. Ltd., acting through its

Hong Kong branch

______________________________

Victor Kuk Ho Ming

Chief Executive

Frequently Asked Questions

1. Why is Swiss Re making this transfer of reinsurance business from Swiss Reinsurance Company Ltd, Hong Kong Branch ("SRZHK branch") to Swiss Re Asia Pte. Ltd., Hong Kong Branch ("SRALHK branch")?

The transfer of the reinsurance business of SRZHK branch to SRALHK branch ("

Proposed Transfer") is part of an initiative by the Swiss Re Group announced in April

2017, to establish an entity in Singapore which will serve as the regional headquarters

for our reinsurance operations in Asia. Once this structure is fully implemented, Swiss

Re Asia Pte. Ltd. ("SRAL") will have presence across the region, mirroring the

operational footprint we currently have in Australia, China, Hong Kong, India, Japan,

Korea, Malaysia and Singapore. As a client of Swiss Re, you will continue to enjoy

industry-leading services and innovative solutions from us. Moving forward, we will

have more capabilities to do this with a stronger local presence in Asia.

It is intended for SRZHK branch to discontinue operations after the Proposed Transfer,

and that all of the responsibilities of SRZHK branch will be taken up by SRALHK

branch.

2. What is the background of SRAL? Who owns SRAL? How will it be capitalised?

SRAL is a wholly owned Swiss Re Group subsidiary incorporated on 13 September

1919 in Switzerland. It transferred its registration from Switzerland to Singapore on

31 December 2017 and is licensed by the Monetary Authority of Singapore (MAS) to

carry on life and general reinsurance business in Singapore since then.

SRAL is strongly capitalised in line with regulatory requirements. As a wholly owned

subsidiary of Swiss Re Group, it shares the same financial strength rating as major

Swiss Re Group operating entities. As of 30 June 2019, SRAL's current ratings of AA-

from S&P, Aa3 from Moody’s and A+ from A.M. Best reflect rating agencies' forward-

looking view on the financial strength of SRAL.

3. How will the Proposed Transfer take place?

SRAL has applied to the Insurance Authority for authorisation to carry on reinsurance

business in or from Hong Kong, and an authorisation has been obtained on 26 June

2019.

Under the Scheme of Transfer ("Scheme") your long-term reinsurance contract(s)

effected with SRZHK branch prior to the Transfer Date (defined below) will be

transferred to SRALHK branch, according to section 24 of the Insurance Ordinance,

Cap. 41 of the Laws of Hong Kong (" Ordinance"), and is subject to the approval of the

Hong Kong Court.

The Proposed Transfer is expected to take effect on 1 January 2020 or such other date

as the Hong Kong Court shall approve ("Transfer Date"), on the conditions that (i) the

Insurance Authority has removed the requirements currently imposed on SRAL which

restrict it from commencing any long term business in or from Hong Kong without the

Insurance Authority's written permission, and (ii) the Insurance Authority has granted

its approval for the transfer of SRZ’s general business in or from Hong Kong to SRAL

pursuant to sections 25D and 25E of the Ordinance (such condition (ii) may be waived

by SRZ and SRAL at their discretion).

From the Transfer Date, SRAL will be responsible for providing the reinsurance

coverage and services under your reinsurance contract(s) including processing of

claims.

We have placed a notice of the Proposed Transfer in the Gazette as well as the South

China Morning Post and Sing Tao Daily in Hong Kong.

Information relating to this Proposed Transfer is also posted on our webpage

www.swissre.com/about-us/our-global-presence/hongkong-scheme.html. We will

notify you in writing after the Scheme has been sanctioned by the Hong Kong Court

and has taken effect.

For information on the final hearing by the Hong Kong Court of the Scheme, please

refer to the section entitled "Final Hearing" in Schedule 1 - Part 2 attached to this letter.

4. What are the details of the Scheme?

We have prepared the Scheme pursuant to section 24 of the Ordinance, a summary of

which is attached to this letter. You can also review the Scheme document on or before

16 August 2019 by visiting our office at 61st Floor, Central Plaza, 18 Harbour Road,

Wanchai, Hong Kong between 9:00 a.m. and 5:00 p.m. (Hong Kong time), Monday to

Friday (except public holidays).

5. Will there be any change to the terms of our reinsurance contracts or each party's

rights and obligations under the reinsurance contract?

No. The Proposed Transfer will not affect your rights and obligations under your

reinsurance contract(s). On and from the Transfer Date, you will have the same rights

available to you under your reinsurance contract(s) with SRALHK branch as you had with

SRZHK branch.

6. Will new reinsurance contracts be issued for our existing reinsurance contracts?

Your existing reinsurance contracts remain valid and will be automatically transferred to

SRALHK branch from the Transfer Date. As such, we will not be issuing new reinsurance

contract(s).

7. How does the Proposed Transfer affect the payment of premiums?

All premiums payable under your reinsurance contract(s) with SRZHK branch after the

Transfer Date are to be made payable to SRALHK branch. We will furnish payment

instructions and bank account details directly to your Finance department in due course.

8. What if we make a claim before the Transfer Date and the claim has not yet been settled by the Transfer Date?

If you have made a claim before the Transfer Date, your existing contract terms and

conditions will continue to govern the assessment of the claim and SRALHK branch will

take over the processing of the claim from SRZHK branch and be responsible for any

subsequent payment to you. You do not need to submit a new claim form as the

information will be transferred from SRZHK branch to SRALHK branch.

9. How can we keep up to date with the progress of the Proposed Transfer?

We will notify you in writing after the Scheme has been sanctioned by the Hong Kong

Court and has taken effect.

Schedule 1

Part 1 - SUMMARY OF THE SCHEME

Background and Purpose of the Proposed

Transfer

Swiss Reinsurance Company Ltd ("SRZ") was incorporated in Switzerland on 19 December 1863. It is a wholly-owned subsidiary of the Swiss Re Group's ultimate parent, Swiss Re Ltd, a public listed company based in Switzerland. SRZ is a reinsurance carrier licensed and supervised by the Swiss Financial Market Supervisory Authority (FINMA).

SRZ is registered in Hong Kong as a non-Hong Kong company under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong). SRZ is an authorised insurer under the Insurance Ordinance (being a professional reinsurer) with authorisation to carry on reinsurance of long-term business of classes A, C, D and I and all classes of general business (as set out in Part 2 and Part 3, respectively, of the Schedule 1 of the Insurance Ordinance (Cap. 41 of the Laws of Hong Kong) ("Insurance Ordinance")) in or from Hong Kong. The principal place of business of SRZ in Hong Kong is 61st Floor, Central Plaza, 18 Harbour Road, Wanchai, Hong Kong.

Swiss Re Asia Pte. Ltd. ("SRAL") was registered as a company in Singapore on 31 December 2017 pursuant to Section 359(1) of the Companies Act (Cap. 50) of Singapore. SRAL is licensed by the Monetary Authority of Singapore as a reinsurer to carry on life and general business in Singapore under the Insurance Act (Cap. 142) of Singapore.

SRAL is registered in Hong Kong as a non-Hong Kong company under the Companies Ordinance (Cap. 622 of the Laws of Hong Kong).

As part of a strategic initiative of the Swiss Re Group, it is proposed that the Business (as

defined below) and general business carried on by the Hong Kong branch of SRZ ("SRZHK branch"), and all other business undertakings, in respect thereof, shall be transferred to and assumed by Swiss Re Asia Pte. Ltd., Hong Kong Branch ("SRALHK branch") ("Proposed Transfer"). For this purpose, a Transfer Agreement will be entered into between SRZ and SRAL for the Proposed Transfer.

In order to take over the Business (as defined below) and general business carried on by SRZHK branch, an application was made by SRAL to the Insurance Authority on 30 April 2019 for the authorisation to carry out reinsurance of all classes of general business and classes A and D of long-term business. The authorisation was obtained on 26 June 2019.

The purpose of this Scheme is to transfer the Business from SRZ to SRAL, pursuant to sections 24 and 25(1) of the Insurance Ordinance under Hong Kong law (all terms as defined in the Scheme).

The Proposed Transfer

It is proposed that, pursuant to section 24 of the Insurance Ordinance, the long-term business carried on in or from Hong Kong by SRZHK branch ("Business") shall be transferred to SRALHK branch in accordance with the terms of the Scheme and subject to the order of the Hong Kong Court ("Hong Kong Order") made pursuant to sections 24 and 25(1) of the Insurance Ordinance. Such Business shall comprise the Transferring Policies, the Transferring Assets and Transferring Liabilities, as defined below (in this regard, "Transferring Policies" means (i) "all reinsurance policies underwritten by SRZ (or in which SRZ is the reinsurer) under and in respect of its Business under which any liability remains outstanding as at the Transfer Date (as defined below),

whether such reinsurance policies have expired, lapsed, terminated or otherwise, including all proposals or applications for reinsurance policies, certificates, supplemental coverages, endorsements, riders and ancillary agreements in connection therewith); and (ii) all

proposals or applications received by SRZ but the

processing of which has not been completed by SRZ

prior to the Transfer Date (which shall be processed

by SRAL after the Transfer Date).

Transfer Date

On the conditions that (i) the Insurance Authority has removed the requirements currently imposed on SRAL which restrict it from commencing any long term business in or from Hong Kong without the Insurance Authority's written permission, and (ii) the Insurance Authority has granted its approval for the transfer of SRZ’s general business in or from Hong Kong to SRAL pursuant to sections 25D and 25E of the Ordinance (such condition (ii) may be waived by SRZ and SRAL at their discretion), this Scheme shall become effective at 00:01 a.m. hours (Hong Kong time) on such date as SRZ and SRAL may decide which date shall be within 90 days after the date on which the Hong Kong Order is granted sanctioning this Scheme. Subject to the grants of the Hong Kong Order and the satisfaction of the above-mentioned conditions, it is expected that the Scheme will take effect on 1 January 2020, but it may be subject to change as mutually agreed between the parties.

Unless this Scheme shall become effective on or before 90 days after the date on which the Hong Kong Order is granted, or such later date and/or time, if any, as the parties may decide and the Hong Kong Court may allow, it shall lapse.

Transfer of Assets and Liabilities

On and with effect from the Transfer Date, the "Transferring Assets" shall, by virtue of the Hong Kong Order and without any further act or instrument but subject to paragraph “Further or Other Acts or Assurance” below, be transferred by SRZ to, and vested in, SRAL, subject to any Encumbrances in respect thereof. SRAL shall accept without investigation or requisition such title as SRZ shall have at the Transfer Date to each

Transferring Asset then transferred. SRZ and SRAL shall as and when appropriate execute all such documents, including assignments, and do all such other acts and things as may be requisite to effect or perfect the transfer to, and vesting in, SRAL of any Transferring Asset.

In this regard, "Transferring Assets" means the property, assets or investment of SRZ (including any right, discretion, authority, power or benefit of SRZ under or by virtue of any Transferring Policies) as is attributable to the Business wherever situated; and the rights, benefits and powers of SRZ under and by virtue of:

(a) the contracts between SRZ and its insurance intermediaries in relation to the Business;

(b) any Retrocessions; (c) any lease, outsourcing agreements or

arrangements, IT and related contracts in respect of the Business;

(d) any other contracts, agreements, arrangements or undertakings in respect of or concerning the Business; and

(e) all tax assets attributable to SRZHK branch.

“Encumbrances” means any mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third party right or interest, any other encumbrance or security interest of any kind, and any other type of preferential arrangement having a similar effect.

On and with effect from the Transfer Date, each Transferring Liability shall, by virtue of the Hong Kong Order and without any further act or instrument and without investigation or requisition but subject to paragraph “Further or Other Acts or Assurance” below, be transferred by SRZ to, and become a liability of, SRAL, with the effect that SRZ shall be entirely released from and SRAL shall assume any liability in respect of such Transferring Liability. SRZ and SRAL shall as and when appropriate execute all such documents, including assignments, and do all such other acts and things as may be requisite to effect or perfect the transfer to, and assumption by, SRAL of any Transferring Liability. In this regard, "Transferring Liabilities"

means all liabilities of SRZ as at the Transfer Date attributable to the Business including, without limitation, the liabilities and obligations (whether present, future or contingent) under or in relation to the Transferring Policies and Business, mis-selling liabilities, and tax liabilities and tax obligations attributable to SRZHK branch.

Transfer of Transferring Policies

On and with effect from the Transfer Date, SRAL shall become entitled to all of the rights, benefits, advantages and powers conferred on or vested in SRZ under, or by virtue of, the Transferring Policies. The Transferring Policies shall on and with effect from the Transfer Date form part of SRAL’s long-term business carried on in or from Hong Kong.

On and with effect from the Transfer Date, all rights, benefits, advantages and powers against SRZ conferred on or vested in the Transferring Policyholder or other third parties under or in relation to every Transferring Policy shall cease and shall be substituted by the same rights, benefits, advantages and powers against SRAL. "Transferring Policyholder" means holder of a Transferring Policy.

Transfer of Records

On the Transfer Date, all Statutory Records and other information relating to the Transferring Policyholders, insureds, beneficiaries and assignees of, or any other persons relating to, the Transferring Policies, including, without limitation, the personal data (as defined under section 2 of the Personal Data (Privacy) Ordinance (Cap. 486 of the Laws of Hong Kong)) of such Transferring Policyholder , insureds, beneficiaries, assignees and other persons, which is held by SRZ shall be transferred to SRAL, and SRAL shall have the same rights, benefits, advantages and powers in holding and using (and transferring) such information as those of SRZ prior to the Transfer Date. In this regard, "Statutory Records" means all books, files, registers, documents, correspondence, papers and other records that are required, by the applicable legal or regulatory requirement or corporate governance requirement (whether or not having the force of law), to be kept by SRZ and

retained in its possession in respect of the Business.

In respect of the Transferring Policies under which premiums continue to be payable, the Transferring Policyholders of the Transferring Policies shall account to SRAL for any further premiums as and when they become due. SRAL shall be entitled to any and all defences, claims, counterclaims and the right of set-off against or under the Transferring Policies which would have been available to SRZ prior to the Transfer Date.

SRAL shall be bound by, observe and perform all terms, conditions and covenants of the Transferring Policies, assume all liabilities and satisfy all claims and demands arising out of or in respect of the Transferring Policies in every way as if SRAL and not SRZ had issued the Transferring Policies.

All terms and conditions of the Transferring Policies (including proposal, quotations, slips, or application forms, illustrative documents, principal brochures, riders, schedules and declarations) shall remain unchanged save that, on and with effect from the Transfer Date, all references in the Transferring Policies to "SRZ" or "SRZHK branch", its Board of Directors, Appointed Actuary, offices, auditors and any other officers and employees or agents shall be read as reference to "SRAL" or "SRALHK branch", its Board of Directors, Appointed Actuary, offices, auditors and any other officers and employees or agents (as the case may be); and any reference to "SRZ" or "SRZHK branch" in the names of the Transferring Policies will be read as a reference to "SRAL" or "SRALHK branch" (as the case may be). In particular, but without limitation, all rights and duties exercisable or expressed to be exercisable or responsibilities to be performed by "SRZ" or "SRZHK branch", its Board of Directors, Appointed Actuary, offices, auditors and any other officers and employees or agents in relation to the Transferring Policies shall, on and with effect from the Transfer Date, be exercisable or required to be performed by "SRAL" or "SRALHK branch", its Board of Directors, Appointed Actuary, offices, auditors and any other officers and employees or agents (as the case may be).

Further or Other Acts or Assurance

Without prejudice to the effect of this Scheme, to the extent that the Scheme and the Hong Kong Order are not effective in transferring and vesting any of the Transferring Assets, Transferring Liabilities or Transferring Policies under this Scheme to and in SRAL without further or other acts or assurance (including without limitation the need of obtaining further consent or approval):

(i) SRZ and SRAL shall do and execute and deliver or procure to be done and executed and delivered all such further acts, deeds, documents, instruments of conveyance, assignment, novation and transfer and all things as may be necessary to give effect to the Scheme, to transfer the Business and all Transferring Assets, Transferring Liabilities and Transferring Policies to SRAL and as SRAL may request, in order to effectively convey, assign, transfer, vest and/or record title to each of the Transferring Assets, Transferring Liabilities and Transferring Policies and the Business in SRAL as from the Transfer Date;

(ii) pending doing of such acts, deeds, documents and things, SRZ shall as from the Transfer Date:

(a) hold the beneficial interest in each of the affected Transferring Assets in trust for SRAL, to the extent that it shall not have been transferred to SRAL, and shall pay to SRAL promptly upon its receipt of any sums by it under any such affected Transferring Assets; and

(b) hold or assume any liabilities in each of the affected Transferring Liabilities for and on behalf of and for the account of SRAL;

(iii) SRAL shall from the Transfer Date (at its own costs) assist SRZ to perform the obligations of SRZ or discharge such liability of SRZ under such affected Transferring Assets, Transferring Liabilities and Transferring Policies and failing that, indemnify SRZ against all liability and any reasonable costs or expense incurred by SRZ that is directly attributable to such affected Transferring Assets, Transferring Liabilities and Transferring Policies; and

(iv) SRZ shall in any event as from the Transfer Date be subject to SRAL's directions in respect of any affected Transferring Assets, Transferring Liabilities and Transferring Policies referred to in paragraphs (i) and (ii) above until the affected Transferring Assets, Transferring Liabilities and Transferring Policies are transferred to SRAL, and SRAL shall have authority to act as attorney of SRZ in respect of such affected Transferring Assets, Transferring Liabilities and Transferring Policies for all such purposes.

Continuation of Proceedings

By virtue of the Hong Kong Order, on and with effect from the Transfer Date, any judicial, quasi-judicial, disciplinary, administrative, arbitration or legal proceedings or complaints (whether current, pending, threatened or in contemplation) by or against SRZ in relation to the Transferring Policies, Transferring Assets and Transferring Liabilities shall be continued by or against SRAL, in substitution for SRZ and SRAL shall be entitled to the same defences, claims, counterclaims and rights of set-off as SRZ in respect thereof.

New SRAL Insurance Funds

With effect from the Transfer Date, SRAL shall

establish a SRAL Class A Fund which shall be

maintained as a separate account for its Class

A long term business and a SRAL Class D Fund

which shall be maintained as a separate

account for its Class D long term business (as

defined in the Scheme) and (i) all Transferring

Policies which belong to the Class A long-term

business of SRZ shall be allocated to and

become part of the SRAL Class A Fund and all

Transferring Policies which belong to the Class

D long-term business of SRZ shall be allocated

to and become part of the SRAL Class D Fund;

(ii) all Transferring Assets which are maintained

by SRZ in the SRZ Class A Fund shall be

allocated to and become part of the SRAL Class

A Fund and all Transferring Assets which are

maintained by SRZ in the SRZ Class D Fund

shall be allocated to and become part of the

SRAL Class D Fund; and (iii) all Transferring

Liabilities of SRZ which are attributable to the

SRZ Class A Fund shall be allocated to and

become part of the SRAL Class A Fund and all

Transferring Liabilities of SRZ which are

attributable to the SRZ Class D Fund shall be

allocated to and become part of the SRAL Class

D Fund.

All beneficial interest in any property, assets or

investments held on trust by SRZ for SRAL

pursuant to paragraph “Further or Other Acts or

Assurance” above shall be allocated to the

relevant SRAL Long Term Fund (as applicable)

to which such property, assets or investments

would have been allocated.

Premiums, Mandates and Other Instructions

All premiums, loan repayments (if any, and interest thereon) and other amounts received or receivable by SRZ in respect of any of the Transferring Policies on or after the Transfer Date shall be payable to SRAL after the Transfer Date.

SRAL shall be irrevocably authorized to endorse for payment any cheques, drafts, orders, postal orders or other instruments payable to, or to the order of, SRZ and received by SRAL in respect of premiums paid or loan repayments (if any) under the Transferring Policies on or after the Transfer Date.

SRAL shall have the sole responsibility for billing and collecting premiums and paying all applicable taxes in respect of premiums accrued under the Transferring Policies on or after the Transfer Date.

Any mandate, autopay authority, standing order or other instruction in force on the Transfer Date and providing for the payment by a bank or other intermediary of premiums payable to SRZ in respect of any of the Transferring Policies shall, from and after the Transfer Date, take effect as if the same had been provided for and authorized in favour of SRAL.

Costs of the Scheme

SRZ and SRAL shall, out of their own funds, pay

in all costs in relation to the preparation of this

Scheme and of its presentation to the Hong

Kong Court for sanction and all other

professional fees related thereto. None of such

costs shall be borne by the funds maintained

by SRZ or SRAL pursuant to the Insurance

Ordinance in respect of their respective long-

term business, general business or other

policies of SRZ or SRAL, or the policy holders

thereof.

Modification

Subject to the last paragraph of this section, SRZ and SRAL may apply to the Hong Kong Court for consent to modify, vary or amend the terms of this Scheme, subject to any conditions which the Insurance Authority or the Hong Kong Court may impose.

Subject to the last paragraph of this section, the terms of this Scheme shall be modified, varied or amended in accordance with such consent or conditions as may be given by the Hong Kong Court under the paragraph above.

The consent of the Hong Kong Court shall not be required in relation to modification(s), variation(s) or amendment(s) to correct manifest error(s) of this Scheme provided that the Insurance Authority has been notified of the same and has indicated that it does not object thereto.

Governing Law

This Scheme shall be governed by the laws of Hong Kong.

Part 2 - FURTHER INFORMATION ON THE HEARING

Final Hearing

The Petition for sanction of the Scheme will be heard at the Hong Kong Court. The final hearing, at which the Hong Kong Court will consider whether or not to sanction the Scheme, is scheduled to take place at 10 a.m. on 21 November 2019.

The Ordinance stipulates that any person who

alleges that he or she would be adversely

affected by the carrying out of the Scheme is

entitled to be heard in the Petition by the Hong

Kong Court.

If you do intend to appear at the hearing of the

Hong Kong Court, we request you to give

preferably not less than seven days’ prior

written notice of such intention, and the

reasons therefor, to the solicitors of SRZ and

SRAL at the following address:-

Baker & McKenzie

14th Floor

One Taikoo Place

979 King's Road

Quarry Bay

Hong Kong

(All letters should be marked in English “SRZ

and SRAL- Insurance Portfolio Transfer” for the

attention of Mr. Martin Tam or in Chinese "「SRZ 與 SRAL – 保險組合轉讓」 " for the

attention of譚志偉律師)

If you intend to object to the Scheme but do not wish to appear at the hearing of the Hong Kong Court, we request you to give not less than seven days’ prior written notice of such intention, and the reasons therefor, to the solicitors of SRZ and SRAL at the address above.

12

Schedule 2

Part 1: Key Assessment of the Independent Actuary

The Independent Actuary has opined, in particular,

(i) The Scheme will not have a materially adverse effect on the reasonable

expectations of the policy holders of SRZ and SRAL respectively, and in

particular, the Transferring Policyholders with regard to benefits and levels

of service.

(ii) The Scheme will not have a materially adverse effect on the financial security

of the policy holders of SRZ and SRAL respectively, and in particular, the

Transferring Policyholders.

(iii) He is satisfied that the proposed Scheme provides sufficient safeguards to

ensure that the Scheme operates as presented.

13

Part 2: Summary of the Independent Actuary's Report

Summary of the Independent Actuary’s Report

Introduction

1.1. I, Paul Sinnott, have been appointed as the Independent Actuary pursuant to Section 24 of

the Hong Kong Insurance Ordinance Chapter 41 (the “Ordinance” or “HKIO”), to provide an

independent opinion on the terms and likely effects of the proposed scheme (the

“Scheme”) for the transfer of the long term reinsurance business (also hereinafter referred

as “Transferring Business”) of the Hong Kong Branch (the “SRZHK branch”) of Swiss

Reinsurance Company Ltd (“SRZ”) to the Hong Kong Branch (the “SRALHK branch”) of

Swiss Re Asia Pte. Ltd. (“SRAL”). SRZ and SRAL are collectively referred to as the

“Parties”. The Transferring Business involved consists of Class A (Life and annuity) and

Class D (Permanent health) only, underwritten by the SRZHK branch before 1 January

2020, which is the date the Scheme is expected to become effective (the “Transfer Date”).

The reinsurance cedants transferring to the SRALHK branch in respect of the SRZHK

branch’s Transferring Business are referred to as the “Transferring Policyholders”, who

hold “Transferring Policies”; the reinsurance cedants remaining in SRZ after the Scheme

are referred to as the “Non-Transferring SRZ Policyholders”, who hold “Non-Transferring

SRZ Policies”; and the existing reinsurance cedants of SRAL before the Scheme are

referred to as the “Existing SRAL Policyholders”, who hold “Existing SRAL Policies”.

1.2. The general reinsurance business (also hereinafter referred as “property and casualty

business”) of the SRZHK branch will also be transferred to the SRALHK branch through

another statutory mechanism sanctioned under Section 25D of the Ordinance, and

through the use of novation clauses included under some of these general reinsurance

contracts.

1.3. I am Principal and Consulting Actuary of Milliman Limited (“Milliman”), residing of 3901-2,

AIA Tower, 183 Electric Road, North Point, Hong Kong. I am a Fellow Member of the

Actuarial Society of Hong Kong (“ASHK”) and a Fellow of the Institute and Faculty of

Actuaries (United Kingdom).

1.4. I have also considered input from my colleague, Cathy Hwang, when forming my opinion

with regard to the impact on the Transferring Business from the different general

reinsurance portfolios within SRZ and SRAL. Cathy Hwang is Principal and Consulting

Actuary of Milliman, and a Fellow Member of the ASHK and a Fellow of the Casualty

Actuarial Society.

1.5. In preparing my Independent Actuary report on the Scheme, I consulted the Hong Kong

Insurance Authority (“IA”) on the required contents and incorporated suggestions from the

IA as appropriate. The report is prepared in accordance with the approach and

expectations in section 2 paragraphs 27 to 40 of the Prudential Regulation Authority, as

set out in “The Prudential Regulation Authority’s approach to insurance business

transfers” dated April 2015. I have also had regard to Chapter 18 of the Supervision

Manual contained in the Financial Conduct Authority (“FCA”) Handbook as well as Section

6 of the further guidance released by the FCA, as set out in “The FCA’s approach to the

review of Part VII insurance business transfer” dated May 2018.

1.6. The scope of my review and opinions are confined to the effects of the Scheme on the

long term reinsurance policyholders of SRZ and SRAL, in particular the Transferring

14

Policyholders. It does not include an assessment of the impact of the Scheme on the

shareholders of SRZ and SRAL. I have considered the Scheme as presented to me and

have not considered any other alternative schemes of transfer.

1.7. I have been provided free access to the information that I requested as necessary to

conduct my work. In addition, I have also been given unrestricted access to and held

discussions with various representatives of the Parties.

1.8. This is a summary of my Independent Actuary report dated 24 June 2019. Details of the

scope of my work, considerations and conclusions, reliances, limitations and the terms of

reference are provided in the full version of my report. Copies of the full report are

available to the Transferring Policyholders and other interested parties in the office of

SRZHK branch. An electronic version of the same report is also available on Swiss Re’s

webpage at www.swissre.com/about-us/our-global-presence/hongkong-scheme.html

until the final petition hearing in the Hong Kong Court.

Background of the transfer and summary of my opinion

1.9. The Scheme has been initiated as part of the regional restructuring of SRZ and its

subsidiaries. As the Swiss Re Group has respective regional headquarters in other parts

of the world but not in Asia, it is intended that SRAL, a subsidiary of SRZ incorporated in

Singapore, will serve as the regional headquarters of its reinsurance operations in Asia.

The Parties are making progress in establishing new SRAL branches or subsidiaries to

replace SRZ’s existing branches in Australia (property and casualty), China, Hong Kong,

India, Japan and Malaysia; while the business under the SRZ Korea branch was

transferred to the SRAL Korea branch on 1 January 2019. The Scheme involves the

transfer of the Transferring Business and all other business undertakings from the SRZHK

branch to the SRALHK branch. The employment contracts will be moved via a business

transfer agreement and other non-reinsurance contracts will be transferred under an

ancillary order to be granted by the Hong Kong Court.

1.10. In my opinion,

▪ The Scheme will not have a materially adverse effect on the reasonable expectations

of the policyholders of SRZ and SRAL respectively and, in particular, the Transferring

Policyholders with regard to benefits and levels of service.

▪ The Scheme will not have a materially adverse effect on the financial security of the

policyholders of SRZ and SRAL respectively and, in particular, the Transferring

Policyholders.

▪ I am satisfied that the proposed Scheme provides sufficient safeguards to ensure

that the Scheme operates as presented.

1.11. In arriving at my opinion, I have considered various aspects below. More detailed analyses

and conclusions are provided in the full version of my report.

Effect of the Scheme on the benefit expectations of Transferring Policyholders

Contractual benefits provisions

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2.1. According to the Scheme, the SRALHK branch shall be bound by, observe and perform all

terms, conditions and covenants of the Transferring Policies, assume all liabilities and

satisfy all claims and demands arising out of or in respect of the Transferring Policies in

every way as if the SRALHK branch has issued the policies. Settlement of claims, payment

of profit commissions, as well as the fulfilment of other contractual benefits will be

assumed by the SRALHK branch. I have been informed by the Parties that the guaranteed

elements of reinsurance contracts will not be altered after the Scheme is implemented

and that the rights of the Transferring Policyholders, as defined under their existing policy

documents, will be the same before and after the transfer.

2.2. A reinsurance treaty review exercise, covering major reinsurance treaties and some

selected minor treaties, has also been carried out to confirm there is no unique treaty

features where the rights and contractual benefits of the Transferring Policyholders may

be adversely impacted by the Scheme.

2.3. The Parties have confirmed that the asset management responsibility for the long term

business fund assets will shift from SRZ to SRAL after the Scheme is implemented. Assets

of the Hong Kong branch will continue to be segregated from other assets of the wider

SRAL entity. I have been informed that the SRALHK branch will follow the same

investment guidelines as the SRZHK branch. Therefore, I have no reason to believe there

will be a materially adverse impact from asset management related changes.

Other policies subject to company discretion

2.4. For some of the reinsurance arrangements, the SRZHK branch has broad rights to adjust

reinsurance premium rates either at each renewal date, or after the period where

reinsurance premium rates are guaranteed, as set out in the reinsurance treaties.

According to the Scheme, the SRALHK branch will retain the same rights with respect to

the Transferring Policies. However, these rights exist whether or not the Scheme

proceeds and I have no reason to believe the Scheme will lead to a materially adverse

exercise of discretion in relation to the Transferring Policyholders.

2.5. I understand from the Key Person of the Actuarial Function of the SRZHK branch that the

decision to revise future reinsurance premium rates depends on a number of factors set

out under Swiss Re Group’s proprietary Economic Value Management framework,

including expense level of the branch, technical cash flows from the reinsurance treaties,

risk capital cost, debt funding cost, and tax. These factors are not expected to be affected

by the Scheme, and hence, I do not expect the Scheme will affect the future reinsurance

premium rates in this regard.

Costs and expenses in relation to the Scheme

2.6. The SRZHK branch has confirmed that the costs and expenses incurred in relation to the

Scheme are not expected to lead to an increase in the reinsurance premiums charged to

the Transferring Policyholders as there is a dedicated project budget to fund the Scheme.

Therefore, I have no reason to believe there will be a materially adverse impact on the

Transferring Policyholders of the SRZHK branch in this regard.

Tax implications

2.7. The SRALHK branch will elect the same taxation basis as the SRZHK branch, under which

the branch calculates profit tax based on total assessable profits and the elected tax rate.

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The Parties have also advised that all the tax balances, except the tax asset (i.e. deferred

tax asset, if any) arising from any unutilised tax loss carry forward as at the Transfer Date,

of the SRZHK branch will be transferred to the SRALHK branch. Given the tax regime of

the Transferring Business will remain unchanged after the implementation of the Scheme,

I have no reason to believe there will be a materially adverse impact on the Transferring

Policyholders due to tax related reasons.

Policy terms and conditions

2.8. I have been informed that there will be no change to the policy terms and conditions of in-

force reinsurance policies as a result of the Scheme.

2.9. The Parties have reviewed the policy terms and conditions, other than those related to the

policyholders’ benefits, of selected reinsurance treaties which are more inclined to have

non-standard terms and conditions, for example, legacy treaties and treaties involving

those reinsurance cedants who may have higher tendency to request non-standard terms

and conditions historically. The Parties have confirmed that there are no terms and

conditions identified by the review which will cause a materially adverse impact following

the change in jurisdiction of the parent company of the branches after the implementation

of the Scheme. Therefore, I have no reason to believe there will be a materially adverse

impact on the policy terms and conditions of Transferring Policyholders caused by the

Scheme.

Effect of the Scheme on the financial security of Transferring Policyholders

Capitalisation policies

3.1. The financial security of the Transferring Policyholders depends heavily on how the

immediate parents are capitalised and to what extent capital could be transferred within

the Swiss Re Group should any extreme adverse events happen that might jeopardise the

financial position of any of its subsidiaries or branches. I have reviewed the key

capitalisation policies within the Swiss Re Group that set out the criteria on the

capitalisation of SRZ, SRAL and the SRZHK branch. In essence, SRZ and its legal entities

(including SRAL and the SRZHK branch) are required to hold a respective target capital

amount which is always above the local required regulatory capital, with allowance to

absorb the volatility of required regulatory capital to cover a substantial loss event without

requiring a replenishment of capital.

3.2. According to one of the key policies, as a business holding company, SRZ is capitalised

such that it ensures the operation as a whole covers statutory requirements, SST ratio,

Standard & Poor rating capital and dividend capability targets. SRZ therefore holds

greater amount of target capital than its subsidiary legal entities to readily deploy as

needed within the Swiss Re Group. Should SRZ run a deficit against its target capital, the

capitalisation policies would require the Swiss Re Group management to carry out

appropriate capital measures to restore its capital position.

3.3. Similarly, in the event when the available capital of SRAL or the SRZHK branch falls below

its target capital by more than 10%, in accordance with the respective capitalisation

guidelines, there would be remedial actions to improve the capital position but under most

circumstances SRZ will provide additional capital to SRAL or the SRZHK branch. Actual

capital held by SRAL or the SRZHK branch in excess of their respective target capital by

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more than 10% is expected to be repatriated back to SRZ, subject to the approval of

relevant Swiss Re internal bodies.

3.4. I have been informed that the SRALHK branch will be subject to the same capitalisation

guideline as the SRZHK branch and continue to obtain financial support from SRAL when

needed. Together with the fact that the Scheme will not change any of the capitalisation

policies, and I have no reason to believe the abovementioned capitalisation mechanism

would be materially adversely affected by the Scheme.

Retrocession and intra-group retrocession (“IGR”)

3.5. The financial security of the Transferring Policyholders is dependent on the risks retained

by the reinsurance business of the Hong Kong branch, as well as those retained by the

parent company of the branch. The level of risks retained is reduced by retrocession

arrangements put in place with other entities within the Swiss Re Group or external

retrocessionaires at both branch level and parent company level.

3.6. At a branch level, SRAL intends to implement the roll-over of the existing surplus share

retrocession arrangement between the SRZHK branch and SRZ in respect of the

Transferring Business in order to protect the same lines of business of the SRALHK branch

from any adverse developments, pending for approval by relevant Swiss Re internal bodies

as part of their annual IGR review process, which is expected to happen by Q3 2019. The

terms and conditions of the retrocession, hence the level of IGR protection, will remain

unaltered by the Scheme. I will continue to monitor the situation and, if relevant, will

provide an updated comment in the Supplementary Report in the event that the roll-over of

the retrocession agreement fails to be implemented following the finalisation of this report

and prior to the submission of final documents to the Hong Kong Court.

3.7. At a parent company level, SRAL entered into IGR arrangements with SRZ (both

proportional and non-proportional) at the same time as its redomicilation to Singapore on

31 December 2017. The primary objective of the IGR program is to protect SRAL from

legacy exposures and from large and frequent losses in excess of local risk tolerance

levels.

3.8. I also understand that once SRAL establishes its Asian branch network (as the

restructuring proceeds), these SRAL branches will enter into IGR agreements with SRZ on

equivalent terms to their current respective IGR programs that have been covered by SRAL

before their respective transfers, including the existing surplus share arrangement of the

SRZHK branch covering the Transferring Business.

3.9. With SRZ being required to reimburse SRAL in the event of certain adverse insurance

events, I do not expect the risks originating from the businesses of different SRAL

branches to materially adversely affect the financial security of the Transferring

Policyholders.

3.10. As a result of the above, I have no reason to believe that the important protection provided

by the retrocession arrangements will be materially adversely affected after the Scheme is

implemented.

Long term reinsurance portfolio risk profile

3.11. The proposed Scheme will expose the Transferring Business to different risks to different

degrees as a result of the change in the immediate holding parent company from SRZ to

SRAL. In comparison to SRZ, SRAL has a smaller number of in-force reinsurance treaties

that mainly cover mortality and health business. Therefore, if the proposed Scheme

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proceeds, it could be possible that the Transferring Business is exposed to fewer different

types of risk compared to SRZ, while the diversification effect also needs to be considered.

3.12. Given the Korean, Malaysian and Japanese long term reinsurance portfolios have been /

will be transferred from the respective SRZ branches to the respective SRAL branches

before or in conjunction with the Scheme, I have considered their risk profiles in assessing

the risk profile of SRAL and have not identified any areas where additional long term

reinsurance risk exposure resulting from these transfers are likely to have a materially

adverse effect on the financial security of the Transferring Policyholders. In addition,

these branches are able to receive additional capital from the Swiss Re Group in the event

of inadequate capital or liquidity as they are also governed by the capitalisation policies.

General reinsurance portfolio risk profile

3.13. In light of the significance of general reinsurance business to both SRZ and SRAL, Cathy

Hwang and I have considered the general reinsurance portfolio risk profiles of SRZ

(including the SRZHK branch) and SRAL as well as the risk profiles of the Korean,

Malaysian, Japanese and Australian portfolios, which have been / will be transferred

before or in conjunction with the Scheme. Given SRAL and the abovementioned branches

are dominated by typically relatively short-tail proportional risks, such as property and

motor risks, and the majority of the risks will ultimately be retroceded back to SRZ, Cathy

Hwang and I have not identified any potential areas of concern caused by the different

general reinsurance portfolios of SRZ and SRAL that may have a materially adverse impact

on the financial security of the Transferring Policyholders.

Reserving practices

3.14. I have been informed that both SRZ and SRAL have in place technical reserving policies

respectively that govern how the actuarial reserves are determined to support the in-force

reinsurance agreements. Cathy Hwang and I have reviewed the methodology under both

policies and found that they are largely consistent.

3.15. In the statutory valuation reporting process, the current procedure is that each year, the

Key Person of the Actuarial Function of the SRZHK branch proposes the valuation methods

and a set of valuation assumptions which are then used for statutory valuation purposes.

After the transfer, Cathy Hwang and I understand that the reinsurance reserving approach

and methodology as well as the statutory valuation reporting procedures to be adopted by

the SRALHK branch will remain the same as the SRZHK branch for both long term and

general reinsurance business provided that the accounting concession and valuation

relaxations are granted to SRAL by the IA, and the reserving of liabilities will be the

responsibility of the same Key Person of the Actuarial Function as the SRZHK branch.

Hence, in my view, there will be no materially adverse impact on the financial security of

the Transferring Policyholders with respect to reserving practices.

Solvency positions under the HKIO basis

3.16. I have compared the solvency of the Parties under both HKIO and SST bases. In general,

having a higher solvency ratio and more capital in excess of required capital is beneficial

to financial security, but it should be noted that the excess capital could potentially be

removed in the future according to the capitalisation policies. In the case where the

Transferring Policies have moved to an entity with a lower solvency ratio but the ratio is

still well above the Swiss Re Group requirements, and the new immediate parent has a

similar capitalisation policy in place versus the parent before Scheme, I would not

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necessarily consider this will bring materially adverse impact to the Transferring

Policyholders.

3.17. The pre-Scheme solvency ratios of SRZ and SRAL and the post-Scheme solvency ratio of

SRAL under the HKIO basis were estimated by converting their balance sheets from Swiss

or Singapore statutory basis to HKIO basis. The conversion was performed by the Parties

and reviewed by both the Accountable Actuary and CFO of SRZ and both the Certifying

Actuary and CFO of SRAL:

TABLE 1: ESTIMATED SOLVENCY POSITION OF THE PARTIES UNDER HKIO BASIS AS AT 31

DECEMBER 2018

Pre-Scheme Post-Scheme1

USD million SRZ SRAL SRAL

Surplus (Net Asset) 7,886 742 3,112

Solvency Margin 5,067 296 988

Solvency Ratio 156% 250% 315%

Note 1: The post-scheme position includes also the SRZ branches transferred before or in conjunction with the Scheme,

i.e. Korea, Hong Kong, Malaysia, Japan and Australia (property and casualty only), in order to reflect the realistic position of

SRAL immediately after the implementation of the Scheme.

3.18. As observed from Table 1, the estimated solvency position of SRAL post-Scheme is higher

than that of SRZ pre-Scheme under HKIO basis, which does not signify a situation where

the financial security of the Transferring Policyholders is adversely impacted.

3.19. In the event that the transfers of the other branches planned to occur in conjunction with

the Scheme are all cancelled or postponed, and the Scheme is implemented as at the

Effective Date, the Parties have informed me that the estimated SRAL solvency ratio post-

Scheme is close to its pre-Scheme solvency ratio. My opinion stated in the previous

paragraph will not change in this scenario.

3.20. I have also been provided with the Dynamic Solvency Testing (“DST”) calculations for the

SRZHK branch calculated as at 31 December 2017, which show that the SRZHK branch

remains financially strong under both the base and all the prescribed and plausible

adverse scenarios throughout the three-year projection period. Although the DST results

as at 31 December 2018 are not yet available as at the date of this summary, I have been

informed by the Key Person of the Actuarial Function of the SRZHK branch that the risk

profile of the branch as at the end of 2018 has not changed significantly compared to

2017. Therefore when the same DST exercise is conducted for the SRALHK branch, the

conclusion should be broadly similar to the one conducted for the SRZHK branch.

Solvency positions under the Swiss Solvency Test (“SST”) basis

3.21. As an entity regulated by the Swiss Financial Market Supervisory Authority, SRZ is

required to report and manage its business under the SST regime. Based on the

requirements of the Monetary Authority of Singapore (“MAS”), SRAL needs to report and

20

manage its business under both the local regulatory basis as well as an economic basis.

SST is currently used as the economic basis for SRAL as set out in the Swiss Re Asia Pte.

Ltd. Risk Appetite Framework (“SRAL Risk Appetite Framework”). The solvency positions

of SRZ and SRAL as at 1 January 2019 under the SST basis are summarised under Table

2.

TABLE 2: ESTIMATED SOLVENCY POSITION OF THE PARTIES UNDER SST BASIS AS AT 1

JANUARY 2019

Pre-Scheme Post-Scheme1

USD million SRZ SRAL SRAL

Risk bearing capital after market value margin 26,414 1,164 2,473

Target capital after market value margin 12,091 887 1,567

SST ratio 218% 131% 158%

Note 1: Similar to Table 1, the post-scheme position includes also the SRZ branches transferred before or in conjunction

with the Scheme, i.e. Korea, Hong Kong, Malaysia, Japan and Australia (property and casualty only).

3.22. Despite SRAL having a lower SST solvency ratio than SRZ, an estimated solvency ratio of

158% still suggests that the financial strength of SRAL is more than sufficient to comply

with its internal capital requirement and withstand the 1 in 100 year extreme scenarios

set out under the SST regime. Together with the capitalisation policies and IGR

arrangements in place which ensure capital and protection through IGR can be obtained

by SRAL from SRZ, I have no reason to believe there will be a materially adverse impact to

the financial security of the Transferring Policyholders following the implementation of the

Scheme.

3.23. Although the post-Scheme SRAL SST results, in the event that the transfers of the other

branches planned to occur in conjunction with the Scheme are all cancelled or postponed,

are not available, the Parties have informed me that the SRAL risk appetite framework

requires the maintenance of an SST ratio above SRAL’s risk tolerance level. If the SST

ratio drops below SRAL’s risk tolerance level, the framework requires management to

consider what actions, if any, are required to maintain the SST ratio at a level acceptable

to the Board. As a result of this risk appetite framework, together with the SRAL

capitalisation policies and IGR arrangements in place, even if the SST ratio, in the scenario

of a Hong Kong branch only transfer, is below the 158% level, my opinion that there will

not be a materially adverse impact to the financial security of the Transferring

Policyholders following the implementation of the Scheme remains the same.

Credit rating

3.24. SRZ and SRAL have the same financial strength rating as the Swiss Re Group according to

Standard & Poor (AA-), Moody’s (Aa3) and A.M. Best (A+).

Governance / management arrangements

21

3.25. The governance of the SRALHK branch is expected to be different from the SRZHK branch

given one of the key objectives of the regional restructuring is to establish and situate the

governance locally in Asia. However, I do not expect this to have materially adverse

impact on the financial security of the Transferring Policyholders because:

▪ SRALHK branch will inherit the staff from the SRZHK branch and the branch

governance structure of the SRALHK branch is planned to be the same as that of the

SRZHK branch to ensure business continuity.

▪ Branch governance structure, Branch Management Committee Charter, Branch

Management Committee members and personnel of the SRZHK branch will remain

unaltered by the Scheme.

▪ Risk policies, standards and guidelines established at the Swiss Re Group and the

SRZ level will continue to form the basis for risk management framework of SRAL,

and SRAL is also subject to the Swiss Re Group group-wide risk control framework.

Risk policy and risk control framework

3.26. The financial security of the Transferring Policyholders is also contingent on the risks

faced by the SRZHK branch and the SRALHK branch, as well as the risks associated with

their parent companies. I have reviewed the key risk policies which govern how risks are

managed within the Swiss Re Group, and I have been informed that the SRALHK branch

will be subject to the same set of risk policies. Therefore, I believe there will be no

materially adverse impact on the Transferring Policyholders from the risk management

perspective post-Scheme.

Regulatory overlay

3.27. The financial security of the Transferring Policyholders needs to be further considered

from a legal perspective, especially when the Scheme involves moving from a Swiss

parent to a Singaporean one. I have considered the regulatory overlay from two

perspectives, including:

▪ Regulatory framework and solvency practice: both the Singaporean and Swiss

regulatory frameworks and solvency practice were held in high regard by the

International Monetary Fund, according to their reports named “Detailed

Assessment of Observance – Insurance Core Principles” on both frameworks. In

addition, in terms of day to day regulatory supervision, the IA maintains regulatory

and supervisory authority of both the SRZHK branch and the SRALHK branch; and

▪ Policyholder protection: currently Switzerland, Singapore and Hong Kong do not

have regulatory policyholder protection scheme in place to protect the reinsurance

cedants should an insolvency happen and thus the Scheme does not place the

Transferring Policyholders in a more adverse situation in this regard. As the Hong

Kong branch is part of the parent company (unlike subsidiary), the wind-up of the

parent company (i.e. SRZ before the Scheme and SRAL after the Scheme) would

automatically trigger the wind-up of the branch itself. Therefore, similar to the

treatment under the event of the insolvency of the Hong Kong branch, the creditor

ranking of reinsurance cedants would be governed by Hong Kong law and follow the

pre-determined ranking set out by statute which will not be affected by the Scheme.

Financial security conclusion

22

3.28. In summary, I recognise that the Transferring Policyholders will continue to be protected

by the financial strength of SRZ after the Scheme is implemented through support from

both the capitalisation policies and the IGR arrangements in the extreme event where

SRAL faces financial difficulties. This view is also supported by exactly the same credit

rating being applied to SRZ and SRAL by the three main global rating agencies. As a

result, I conclude that, in my opinion, the Scheme will have no materially adverse effect on

the financial security of the Transferring Policyholders.

Effect of the Scheme on the benefit expectations of the Non-Transferring SRZ Policyholders and the

Existing SRAL Policyholders

4.1. In assessing the effects of the Scheme on the benefit expectations of the Non-Transferring

SRZ Policyholders and the Existing SRAL Policyholders, I have relied upon the professional

opinion of the Accountable Actuary of SRZ and Certifying Actuary of SRAL respectively.

Contractual benefits provisions

4.2. I agree with the opinion of the Accountable Actuary of SRZ that SRZ’s ability to pay valid

claims and to act appropriately in other contractual matters should be unaffected by the

Scheme given the relative immateriality of the Transferring Business when compared to

SRZ’s entire business.

4.3. I have been informed by the Certifying Actuary of SRAL that the contractual benefits

provided to the Existing SRAL Policyholders will not be changed by the Scheme, and that

valid claims will continue to be paid when due in the same manner as before the Scheme.

Other policies subject to company discretion

4.4. Similar to the features found in the reinsurance treaties of the SRZHK branch, for some of

the reinsurance arrangements, both SRZ and SRAL have broad rights to adjust reinsurance

premium rates either at each renewal date, or after the period where reinsurance premium

rates are guaranteed. These rights exist whether or not the Scheme proceeds.

4.5. The decision to revise future reinsurance premium rates depends largely on the same

factors as mentioned under paragraph 2.5. Given the costs and expenses in relation to

the Scheme are covered by a dedicated project fund, this is not expected to have a

material impact on the expense level of SRZ and its legal entities (including SRAL and its

branches). Furthermore, as the legal jurisdictions, as well as the regulatory requirements,

of SRZ and its legal entities (including SRAL and its branches) will not be changed by the

Scheme, there is expected to be little impact on the technical cash flows from the

reinsurance treaties, risk capital cost, debt funding cost and tax.

4.6. Therefore, in conclusion, I have no reason to believe the Scheme will lead to a materially

adverse exercise of discretion and future reinsurance premium charged to both the Non-

Transferring SRZ Policyholders and the Existing Policyholders of the SRAL.

Policy terms and conditions

4.7. Both the Accountable Actuary of SRZ and the Certifying Actuary of SRAL have confirmed

that the policy terms and conditions of in-force Non-Transferring SRZ Policies and the

Existing SRAL Policies will not be changed by the Scheme.

23

Effect of the Scheme on the financial security of the Non-Transferring SRZ Policyholders and the

Existing SRAL Policyholders

5.1. Similar to my considerations on benefit expectation, I have relied upon the professional

opinion of both the Accountable Actuary of SRZ and Certifying Actuary of SRAL in forming

my opinion related to financial security below.

Materiality of the Transferring Business

5.2. Given that the assets and liabilities transferring under the Scheme are relatively

immaterial when compared to the size of SRZ, I have no reason to believe there would be

any materially adverse impact on the financial security of the Non-Transferring SRZ

Policyholders in this regard.

5.3. For SRAL, I understand that the Transferring Business is less than one quarter of its size if

I compare their assets and liabilities extracted from their financial statements. Considering

the SRZ branches that will be transferred before or in conjunction with the Scheme, this

percentage is likely to be lower as at the Transfer Date assuming the normal course of

business during 2019. Therefore, I have also considered other factors when forming my

opinion on financial security of the Existing SRAL Policyholders.

Capitalisation policies

5.4. Both SRZ and SRAL maintain strong solvency ratios under their respective local regulatory

basis and are governed by the capitalisation policies which aim to maintain a healthy

solvency position. Furthermore, the Certifying Actuary of SRAL has supplemented that

these types of capitalisation policies or guidelines have been operated throughout the

Swiss Re Group over many years and there are many actual examples where capital has

been put into local legal entities very quickly once requested.

5.5. Given the Scheme will not change any of the capitalisation policies, I have no reason to

believe the abovementioned mechanism would be materially adversely affected by the

Scheme.

Other group wide policies on risk and reserving

5.6. I have been informed that, none of the group wide policies will be changed as a result of

the Scheme. Risk policies, risk control frameworks and technical reserving policies of

both SRZ and SRAL are the ones that I consider to be more relevant to the financial

security of these policyholders and they are all independent of the implementation of the

Scheme.

Reinsurance portfolio risk profile and solvency position

5.7. SRZ will remain as the ultimate parent company of all the SRAL branches following the

Scheme and the transfers of business of other SRZ branches before or in conjunction with

the Scheme, given SRAL is wholly owned by SRZ. Therefore, from the perspective of SRZ,

there would not be a materially adverse impact on the overall risk profile and solvency

position at a group level. Hence I have no reason to believe the Scheme would have any

materially adverse impact on the financial security of the Non-Transferring SRZ

Policyholders in this regard.

5.8. The risk profile of SRAL as a whole will be changed following the Scheme and the

transfers of business of other SRZ branches before or in conjunction with the Scheme in

24

light of additional reinsurance portfolios. I have not identified any areas where these

additional long term risk exposure are likely to have a materially adverse effect on Existing

SRAL Policyholders. Furthermore, the estimated solvency positions of SRAL under both

the HKIO and SST bases have been improved post-Scheme, as summarised under Table 1

and Table 2. For the same reasons highlighted under paragraph 3.19 and paragraph 3.23,

in the scenario of a Hong Kong branch only transfer, my opinion on the effect of the

Scheme on financial security of the Existing SRAL Policyholders from a solvency

perspective remains the same.

Retrocession and intra-group retrocession

5.9. To supplement my conclusion from the previous paragraph, I have also considered the

risks retained by SRAL. Most of the reinsurance business related to the Existing SRAL

Policyholders are covered by IGR arrangements which would reduce the level of risk

retained by SRAL and these arrangements exist no matter if the Scheme is implemented or

not. On top of this, the SRZHK branch and those SRZ branches transferring before or in

conjunction with the Scheme will enter into IGR agreements with SRZ on equivalent terms

to their prior respective IGR programs. Therefore I think there is unlikely to have any

materially adverse impact to the Existing SRAL Policyholders following the Scheme given

the protection offered by the IGR programs.

Governance / management arrangements

5.10. The governance of SRZ and its legal entities (including SRAL and its branches) is not

expected to be affected by the Scheme as the structure, staff management, and internal

guidelines maintained by the abovementioned entities around corporate governance are

independent of the Scheme. In addition, the management committee charters are already

in place whether or not the Scheme proceeds and I have no reason to believe these,

together with the philosophy of governance will be materially changed by the Scheme.

Regulatory environment

5.11. The Scheme is not expected to lead to any changes to the regulatory framework, solvency

practice, corporate governance and policyholder protection rules that apply to SRZ and its

legal entities (including SRAL and its branches).

Other considerations for all policyholders of SRZ and SRAL

Group structure

6.1. As Swiss Re Ltd remains as the ultimate parent of the Swiss Re Group after the

restructuring and all the Swiss Re Group policies continue to apply, I do not expect any

materially adverse impact to the Transferring Policyholders, Non-Transferring SRZ

Policyholders and the Existing SRAL Policyholders, as a result of the change in group

structure.

Policyholder services and operational changes

6.2. The main policyholder services provided by the SRZHK branch, SRZ and its legal entities

(including SRAL and its branches) include underwriting and ongoing administration of

reinsurance contracts, receipt of premiums, adjudication and payment of claims. The

Scheme itself would not cause any changes to the personnel providing these services in

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the abovementioned entities. Therefore, I do not expect to see any materially adverse

impact on the service provided as well as the service standards after the Scheme is

implemented.

6.3. The Scheme is also not expected to lead to any changes on the operational aspects,

including business continuity and meeting regulatory requirements in financial reporting.

In particular, I am informed that the SRALHK branch will continue to operate in the same

office with the same personnel and internal functions, utilise the existing Swiss Re Group

resources and follow the same Business Unit Continuity Plan, as they are with the current

SRZHK branch.

Conclusion

7.1. Taking account of the above considerations, in my opinion,

▪ The Scheme will not have a materially adverse effect on the reasonable expectations

of the policyholders of SRZ and SRAL respectively and, in particular, the Transferring

Policyholders with regard to benefits and levels of service.

▪ The Scheme will not have a materially adverse effect on the financial security of the

policyholders of SRZ and SRAL respectively and, in particular, the Transferring

Policyholders.

▪ I am satisfied that the proposed Scheme provides sufficient safeguards to ensure

that the Scheme operates as presented.

Reliances and limitations

8.1. This summary is subject to the same reliances and limitations clauses as set out in the full

version of my Independent Actuary report dated 24 June 2019.

8.2. This summary has been translated into Chinese. If there is any inconsistency or ambiguity

between the English version and the Chinese version, the English version shall prevail.

Paul Sinnott

Fellow of the Institute and Faculty of Actuaries (FIA)

Independent Actuary

24 June 2019