Transcript of keynote presentation from RMS’s Exceedance customer conference

Released 27 May 2021

Introductory video with music, images and captions: ‘Natural catastrophe’, ‘Cyber attack’, ‘Business interruption’, ‘Wind events’, ‘Systemic risks’, ‘Climate change’. ‘To succeed in 2021 and beyond; Exceedance 2021 outperform’.

Compère: Ladies and gentlemen, please welcome RMS Chief Executive Officer, Karen White.

[Section excluded from video on dmgt.com due to copyright considerations: Introductory music: ‘The Best’, Turner]

Karen White, CEO, RMS: Welcome to Exceedance and thanks for joining us today.

[Section excluded from video on dmgt.com due to copyright considerations: Karen White, CEO, RMS: I chose to kick us off with 's ‘Simply the best’ this year for good reasons. Yeah, it's an amazing song, and yeah, I'm definitely stuck in the musical past, and yes, I've been a fan of Tina’s forever. But there's more to it than that.

A little trivia: ‘Simply the best’ was released in 1991, when Tina was already 52 years old. This woman was born in 1939 and the came out about five years after she absolutely crushed it with her ‘Break every rule’ world tour. The show was phenomenal. I remember it. She got 180,000 people to show up for her in Rio, breaking not just every rule but all kinds of records. Let's face it, the probability of an over-50, black, female rock artist, with a particularly challenging past, pulling all that off is infinitesimal. If we modelled it, it would no doubt be a one in 100 year event.

I promise, I'm getting to the connection of Tina back to us. Tina’s been dubbed ‘the queen of rock'n'roll’, but I've always thought of her differently. I think of her more like the queen of reinvention: smart, agile, adaptive.

This year, I think we've all gone through some form of reinvention ourselves and, I got to tell you that a broader reinvention has been top of mind for me most days, as the pandemic hit us hard, alongside everything we already have on our plates and stuff we see coming: the different pressures, dynamics and the new insurance-industry-competitive-threats, that I think are coming around the corner.

The song itself, ‘Simply the best’, is also so apropos right now.]

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Being the best matters a ton more in times of challenge, and in times of change. All the cracks in the foundation show then, you know?

So, we've been working on a new framework this past year, that helps us better define what it means for RMS to help our clients to be the best. What are the quality, what standards, partnerships, the transparency, the innovation, agility, investments, and what are the outcomes that we should hold ourselves accountable for in the industry and to you?

One of my personal heroes is a VC named John Doerr. He published a great book on the subject called ‘Measure what matters’. He finally wrote down what I've seen in practice over the years, that has led to some really extraordinary outcomes, including Google among them, all in moments of massive industry changes. It's a good read in case you’ve run out of stuff to binge watch.

For RMS it's clear we need to hold ourselves to a high set of standards to help you outperform, and we need to measure that. It's not just about the quality of our science and our tech, that we're proud of, what we think about our team, and the depth of our investments, but it's also about defining the very specific standards around ‘best’, and around ‘outperform’, to measure how we've done against those. And then to go one step further and measure the value to you.

It's also really clear, we're not alone in this thinking. The pandemic lit a match to our sense of urgency around other potential so called ‘black swan’ events, and all their impacts globally. In turn, Boards, investors, C-suite, they're all asking the right questions about what else is coming on the risk map; how well prepared we are, or not, for it; and how we're measuring that. And actions we need to be taking today and over time around these risks.

At the same time, they're asking really tough questions about the return on investments for risk management, demanding to understand what they're getting for these significant capital outlays, as they should. And it's not just the insurance industry. I can promise you, there isn't a Board in the world, and you know this, not having this conversation at some level, with climate change, systemic risk, supply chain, business interruption, pandemic, as well as the broad asset and credit risk being front and centre for many.

Our theme this year is to outperform. Let me drill down a minute into what that means for us. Our fundamental goal at RMS is to support you in getting the best possible risk outcomes. Some of the key measures of your success will, of course, include loss ratios and earning stability.

So, this year, as part of that framework I mentioned, we did a deep dive, drawing from public data from global insurance and reinsurance companies over the past five years. What we were looking to measure were the risk and business outcomes that our customers were achieving versus others in the market. Given our roots as scientists and the healthy market scepticism we anticipated from you, we welcomed scrutiny and we asked Oxford Economics to do an independent review of all this as well.

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What we and Oxford found was this. Companies engaged with RMS, who were increasing their engagement with RMS, outperformed the peer group that either wasn't working with us at all, or was decreasing their engagement with us.

The results are pretty compelling. The RMS client group over these five years, averaged a 2% lower cat loss ratio. That 2% translated to more than $27 billion in avoided cumulative cat losses over those five years for our customers. As you can guess, a severe catastrophe year, like 2017, yielded twice the average avoided losses, a 4% lower cat loss ratio.

The RMS customer group also had a higher and more stable return on equity. They achieved 2.1 points higher ROE values over five years and also, also stayed within a range that is half as wide as the non-RMS peer group.

And of course, that stability translates to other positive outcomes as well. Hey, we get that it's not just RMS driving these outcomes. If you take great models and science and tech and drop them into a poorly run shop, it doesn't become a great business overnight. We understand that those of you engaging with us are also making quality-risk investments a priority overall, because you place a lot of value on it, you're willing to invest in it.

You're also investing in your own teams and data and systems and otherwise to have the best possible views of risk for your business. That's why I said ‘partnership’ earlier, I really believe it's a partnership between us that optimises for these outcomes. I also believe that partnership approach is going to be even more important and interesting as we set out to tackle the much more complex risk environment that we see coming. We’d be thrilled by the way to share with you all this analysis.

Another aspect of supporting your outperformance, that we measure, is all around event response. We’ll continue to measure how we do with each event. We’ll continue to focus on transparency. And we can demonstrate today that we have the best record in the industry. An example, with American hurricanes our midpoint losses total of $85.7 billion, which was within just 2% of the actual total losses reported downstream, when all was said and done.

Event response is a big part of what we all do today, but it's going to grow even more in importance in a world of more frequent, severe and systemic events.

For that reason, we're committed to investing more in event response to bring you new capabilities. In fact, Moe and Cihan are up next, and they're going to show you some of the early new event response innovations that we're launching now.

I want to switch gears, from outperformance, and talk about which risks we think will have a greater impact going forward, and where we're spending a lot of our time and investment now, and over the coming years.

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First, of course, getting through the pandemic. Next, is the increasing frequency and severity of some of the mature primary perils, and secondary perils, which as a class are having loss impacts more in line with primary perils now. The two most complex sets of risk on our list today are climate change and systemic risk.

Let's start with the pandemic. $36 billion of losses from Covid have been reported so far. Dowling and others peg losses at up to $80 billion, so there's still a significant amount working its way through the system.

Losses are coming in at a far slower pace than anything we've seen previously. There remains a lot of uncertainty and coverage issues like around BI (Business Interruption). But BI ultimately will be less than half the losses overall; with professional and commercial liability, D&O (Directors & Officers insurance), speciality lines accounting for a significant share when it's all said and done.

There is a concern that Covid is ongoing and impacts will continue to linger and linger for a meaningful time and that losses are going to creep up, and we're paying close attention to that. One driver is that many event cancellation covers were multi-year. Lots of eyes are also on the Olympics in Japan. There's a valid view that outside of these large shocks, this could potentially move to a pay-as-you-go situation and be a persistent drag on insurers’ earnings for years to come. We're layering on potential residual impacts of the pandemic into our own thinking right now.

There's another more impactful and permanent outcome of the pandemic though. Yes, some insurers saw large and expected payouts, revenue declines and uncertainty. And we all see the cost cutting resulting from that. But, at the same time, at a kind of a breath- taking scale, Covid-19 has been a catalyst for change, and the industry has gone through an accelerating digital transformation over the last 12 months, surpassing what many thought could be achieved in over five years or more.

The market kind of shocked itself. Let's take Lloyd's, the oldest insurance market in the world, they've laid out plans to save £800m within a couple of years by moving processes online.

Lloyd's Chairman, Bruce, Bruce Carnegie-Brown, he went as far as to say that the trading room could end up looking like a coffee shop again, which seemed to fuel a rumour in London that the trading boxes were already headed for the museum next year. Who would have thought a year ago that we would be talking about this?

The fact is this: half of P&C executives surveyed this year by Deloitte agreed that the pandemic showed how unprepared their business was to weather this economic storm. And only 25% of them could agree they had a clear vision and action plan to maintain operational and financial resilience during the crisis. And that's at the one-year mark of the pandemic.

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In my own conversations with executives, I can report there's a growing awareness of the ways in which tech can play a larger role in achieving greater resilience and in outperforming in more complex risk environments. And moves to the cloud are picking up as a result. Not just at RMS, but we see digital-first strategies now a higher priority at a growing number of clients and significant expense management and cost cutting is underway to free up spending for this accelerated digitalisation.

So for me, the inertia kinda feels gone. We've experienced that ourselves, through greater adoption of our own cloud platform than we’d anticipated. We now have insurers, reinsurers, brokers from all geographic regions who’ve come on to the RMS platform over the past year. Some have turned off RiskLink on premises and are fully in production for nat cat risk management on Risk Modeler, solely in the cloud.

Let's have a listen to what some of our colleagues are saying about the growing role of technology, big data and digital investments in the industry’s future.

Jean-Paul Conoscente, CEO, Global P&C, SCOR: I think the industry is often praised for its stability, but the world is rapidly changing, and I think the industry has to adapt with it, and I think as an industry we have adapted quite well. You know, you look at Covid, which has been a sort of a big surprise, in terms of how it’s unfolded, affecting more P&C than life relief from an insurance point of view, and yet the industry has been able to adapt very well.

I think, as well, it's been a lot of investments into technology, data, systems, which is positioning the industry overall very well. Data driven, technology and systems, we believe will be fundamental to the insurance and reinsurance market going forward, enable better risk insights, better understanding and better servicing of clients, and better identification management of market cycles.

Rob Bentley, CEO, Global Strategic Advisory, Guy Carpenter: I think that the potential is extraordinary. You know, I think though it's very, in some ways, hard to see. The opportunity exists to use big data and analytics in strategic planning and product innovation, and how we compete, how we choose to compete, who are competitors actually are.

I think there's a tremendous opportunity in the customer dimension, and I'm sure we'll talk a little bit about that as we move forward. Distribution and customer acquisition are tremendous opportunities. Underwriting. I think we're all very interested in the additional information that is available to all of us as we as we move forward, that will come as a result of big data, and there's an opportunity to address claims and claims adjudication, as well as form mitigation strategies and, and reduce costs, and, you know, I think that, again, it's a little bit like if we were back in in Wabash, Indiana: the potential is really all in front of us.

Dominic Christian, Global Chairman, Reinsurance Solutions, AON: Any hint of complacency, we lose, we fail. So, if the the whole time you have to be constantly looking at propositions, but you have to be, you have to be sort of out there and

5 be a place where people want to make propositions. So Lloyd’s, for instance, had 640 insurance approaches to their innovation lab. Putting your statement out there, that we have an innovation lab, is quite interesting. And AON did the same when we got involved in California and things like that.

So, you, sort of, have to be seen as someone who is very open to the idea of change. I think that over the next three to five years will be greater than the last 20, in significance. We need to think firstly to continue to build, or build more faster, in a faster way, an architecture that means that we operate more efficiently. Greater automation needs to get to centre stage.

Charles Fry, CEO, Acacia Holdings Ltd: For me, the most exciting change, which I think we’re going to come on to talk to a bit in more detail, is around some of the technological advancements and how that can really benefit the industry as a whole.

Alexander Hanks, Executive Director – Head of Actuarial & Analytics, Price Forbes & Partners Ltd: I personally believe that the insurance industry is at a crossroads, transitioning from traditional manual ways of working, Excel and paper-based, to a more dynamic, data- driven world that embraces the new techniques of data science, and all of the efficiency savings and deeper insights that it can bring.

That's where Risk Modeler on RMS cloud platform, Risk Intelligence, came in. We worked with RMS as early adopters, making full use of Risk Modeler’s API-first development approach to fully integrate modelling with our own cloud tools, switching off RiskLink and Risk Browser in the process. Gone are the days of working with spreadsheets, copying and pasting and relying on manually re-running modelling jobs. The automation work has taken manual time-consuming tasks away and we are able to spend much more time on interpreting modelling results and providing deeper insights to our clients.

Vivek Syal, Group Chief Risk Officer, Tokio Marine Kiln: One thing in the last 12 months that I think the whole industry’s experienced is that necessity is the mother of invention. You know, we quickly, within the industry, really flipped from, from being an industry that’s seen itself and being fairly critical of itself as not evolving so quickly and then all of a sudden, we did. I think the counter to that, however, is how often does that invention necessarily stick. So, I think mindset becomes really important for me, you know, as the insurance sector starts to transition through and forward in the next few years, or the next few decades in fact. My data, for me, is, is absolutely key and becoming increasingly so.

I couple that with technological deployment, as we said earlier, I think we've all spoken about that: so data captured, integration, automation of processes. All of those things that go with that and then stronger risks selection. I think the one thing I would say, perhaps I would say this, you know, in the position that I am, is that I think the rise of a more

6 strategic risk function, and I think is, is started. We've seen that already I, you know, I would argue, but I think we're seeing that more and more.

Neil Bramley, Analytics Executive, Gallagher Re: Gallagher was keen to be at the front of the queue for Risk Modeler. Our need was to deliver easier access to our staff, wherever they are based, for faster analytics, increased range of outputs and moving data more efficiently. The SaaS system has enabled us to grow the Gallagher group analytical capability tremendously in the last 12 months, and our usage stats are through the roof compared to last year.

Alice Underwood, Global Leader, Insurance Consulting and Technology, Willis Towers Watson: Making more use of the data that we already have is such a, such an untapped potential and it's way cheaper and easier than going out and finding entirely new sources of data. So we have, we have new stuff already that, you know, we have it, we’re just not using it. Something that we're going to be seeing more and more, and that's the use of more continuous streams of data, instead of point in time snapshots of data.

I think the insurance industry is sort of, well, we're not the quickest to change of all the industries that are out there maybe that's because we're in the risk business. We tend to be a little risk averse, we tend to be cautious about making changes but I do think that the experience that we've lived through over the last 12 to 15 months, as the pandemic really made itself felt all around the world, the insurance industry was able to change its ways of operating much more quickly than I think we would have guessed.

Michael Duncan, Formerly Group Head of Underwriting Excellence, AT Zurich Insurance: I think for the insurance industry, we’re at the start of an Industrial Revolution, compared to the rest of the world which is now coming into the fourth industrial revolution. And our steam engine is going to be data. So, I can see us actually challenging the current product suite that we have with risk and data analytics and, and now creating products that are for certain customer segments will make a lot of sense.

Amer Ahmed, CEO, Allianz Re: The possibilities are seemingly limitless. I think I would put in a little bit of caution. From my point of view, I think there's a number of challenges for us as an industry, to be able to kind of reap these possibilities and potential. And so, you know, what, what examples or situations would I describe? One is, we as insurers seem to capture a lot of data, but we don't do much with it, unfortunately. It seems to be extremely difficult to get data out of our systems, because the systems’ landscapes are fractured.

And then, if you can get it out of the systems, then, oftentimes it's incomplete or not great quality. So, I think the starting point is not ideal. So, when you look at the next three, five years, if we're going to get ourselves ready to be able to reap these benefits, I think we need to do quite a bit of work in terms of laying the foundation. Oftentimes, perhaps, we think we have to do this all ourselves. And I wonder whether actually insurers could partner with

7 folks who actually are the data scientists, AI guys, and we can marry our business knowledge with their capabilities, perhaps this can be a whole lot faster.

Charles Fry, CEO, Acacia Holdings Ltd: When it comes to the adoption of new technology in the industry, it's not something that insurance has generally been at the forefront of. But that makes the decision for RMS to invest in their platform and their technology platform event bolder, and actually even more important. And again, I think it's a really, really good step in dragging insurance industry into the next century.

When I think about RMS as a strategic partner, one of the things I've been most impressed, and in particular in the last three to four years, from the leadership team, is their commitment to invest in the future. And now that's not just investing in the modelling, which of course is critical, it's also investing in the underlying platform, such as the cloud platform launched last year and the work around RDOS (Risk Data Open Standard), it’s been really impressive. And I love the way they embrace working with clients as partners.

Karen White, CEO, RMS So our commitment to you is continued investment in our cloud platform and enhanced modelling and analytics to go along with it.

On to climate change. The focus on climate change had, of course, its own momentum before Covid, but that too picked up steam. Boards rightly asked, ‘what else is out there we haven't accounted for?’, and they re-examined the risk registers.

There seems to be a collective shift as industries come to terms with how big an impact climate change is going to have, perhaps sooner than they thought. Hedge funds and asset managers calling us now to get their arms around climate change impacts on their assets and their portfolios and even around credit risk. I find they're often the canary in the coal mine, and then other markets soon follow.

In our private discussions with you all, we find there are a large number of you making small ball moves related to climate change already, and a far smaller number already with a full plan, making big ball moves. I've been a little surprised at how many of you haven't quite yet landed on an initial approach, but it's understandable in the context of Covid. We see that changing, even in the coming months, because of a handful of drivers worth talking about.

The first, of course, is your need to better understand the near-term impact of climate change on pricing, underwriting, risk management, and to build that into the business now. Right behind that will be developing a longer-term view of these risks to build resilience.

Next is the regulatory and reporting front. We'll see so many more mandates on this industry coming, the PRA (Prudential Regulation Authority) is going to finalise its stress testing over summer, and when it lands it's going to be a significant undertaking. There's a growing demand for more extensive ESG and TCFD (Task force on climate-related financial

8 disclosures) and some governments, the UK, New Zealand, are looking to actually mandate a TCFD, or some form of climate change, reporting. This list goes on and on and will force investments in understanding climate change impacts.

By the way, I do have concerns that the many regulatory mandates coming could impose different and fragmented standards and stress testing on the industry, that are going to be challenging, at best, to meet. And it could end up meaning that we don't actually get a global risk index out of all those efforts. I have a bigger concern that the reporting mandates imposed are the right ones, meaning they’re largely aligned with what you actually need to do to understand the risk to run your business, near and long term, rather than being more in the camp of costly box-checking exercises. I think we have an opportunity to lead from the front foot here, and that we really should.

The other key drivers we see are stuff you’re already seeing yourselves, right. Increasing and more aggressive investor demands, customer demands and what your Boards are expecting of you in terms of your understanding of climate change applied to your business.

And then, of course, we're seeing the wild-card lawsuits already. In case you missed it, New York City has recently sued Exxon, BP and Shell over climate change, already.

So, here's what you can expect from RMS in all of this. For years, we’ve built the impacts of climate change to date into the relevant core models, but that's not enough to meet these new needs. For the last few years, we've been quietly investing in building climate change model framework and actual climate change models.

In June, we’ll launch the first of our climate change models, starting with NAHU (North Atlantic Hurricane), European Flood and European Windstorm. We see a climate change signature across other perils and we're going to launch more and more of these models over the next year. Expect another announcement on the next set of climate change models over the summer sometime.

We've also formed an advisory team of experts that's available to you to help assess climate change risk impacts, and to answer mandates of your Boards, management and regulators.

As we now turn to nat cat risk, we see shifts that add complexity and new challenges to that part of the risk business as well. The frequency and severity of some primary perils is increasing, but at the same time secondary perils as a class are responsible for increasing devastation and losses and catastrophe. In the last 10 years, severe weather losses from secondary perils were actually higher than hurricane losses by 13%. Last year SCS (Severe Convective Storm) losses were higher than any other nat cat.

Another area we're going to focus down on is gaining a deeper and broader understanding of some of the systemic risks that are potentially triggered by a given nat cat event. For example, in the 2011 earthquake in Japan, systemic failings and the estimation of the tsunami hazard led to three nuclear reactor meltdowns, led to a plume of contamination,

9 which led to the only manufacturer of nano particle glitter paints, of all things, to cease production for three months, preventing all major auto manufacturers from making a whole suite of the best-selling cars for that period of time.

We can also speculate on some of the systemic impacts of the next big California earthquake, but they will be multiple and they will be complex, whether it's gas pipelines breaking and catching fire; or people having to evacuate whole neighbourhoods because of liquefaction removing all water and waste pipes; or the windblown fires; or the great wave of litigation that will follow against builders, architects, planners and many others, as people realise, and come to grips with, the impact of not having earthquake insurance.

Our forward commitment here is threefold. First, continue investments in our primary models. Second, to invest in secondary models; as first class citizens, we don't think ‘good enough’ works here. RMS has built models for secondary perils and included them as sub- perils in our models for many years. Flood is number one secondary peril in Asia-Pac. Now, we're closing an important gap by adding three new inland flood models for that region.

Our third focus, with respect to our core model business, is to work on advanced big data and analytics solutions that can address the extreme correlations that we see stemming from some nat cat events and the related exposures and accumulations.

Which brings us to systemic risk. These risks are gaining heightened attention now. Think back to 2011 and the Tohoku earthquake that I mentioned earlier. Soon after that, the Thai floods compounded to create a supply-chain disruption in computer hardware and camera technology, which had knock-on effects in many of the technology consumables markets.

We didn't really learn our lessons then because we haven't yet invested heavily enough to better understand these complex risks. It's daunting, it's challenging, but we saw similar supply-chain disruption from the Tianjin port explosion in 2015: $3.5 billion in insured losses and another $9 billion in supply-chain disruption impacts.

Even today, as we review the supply-chain disruption of a poorly-steered Evergreen container vessel in the Suez Canal: $5.1 billion a day impact from westbound traffic and $4.5 billion per day from eastbound traffic interruptions. Per day. Imagine if some local rebel group had sunk this or any other vessel there of all the pinch points of global supply. This may be the world's carotid artery. It's the narrowest and most risky, but there are lots of other points of failure and points of risk we need to consider globally as well, with respect to getting our arms around, supply chain risk and BI.

We can ask ourselves where the next material systemic loss will come from. Could it be a cyber attack on a major tech company? A scale down a critical infrastructure? Or a major earthquake in the Bay Area, which has a material impact on residents and businesses and the trillions of dollars of intangible assets of Silicon Valley companies?

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As with all systemic risks, awareness, risk insights, data quality are really key. And we are making investments to improve the quality of data available, and the advanced analytics needed, to bring greater clarity to the underlying risk. This in turn can help enable greater insurance product growth opportunities, and in turn, greater economic resilience over time.

Discrete peril by peril modelling is awesome, but it cannot alone meet this particular challenge of understanding the potential impacts of systemic risk and their massive, massive complex correlations. Harnessing the compute and the big data capabilities of the cloud, and other technologies, will play a huge role in moving forward with respect to systemic risk. I also think there's more potential for deeper partnerships with your client companies as they too invest in understanding and mitigating their systemic risk.

We talked about Covid-19 as a systemic risk. Many commentators may regard events such as Covid as a black swan event. But is it? Our job as modellers is to include all potential events in our modelling. Events should be at least foreseeable, and ideally foreseen. The properties of Covid-19 in terms of infectiousness and mortality were well within the range of the pandemics we considered in our own modelling at RMS. We did see it coming, but we didn't act on it, because of recency bias and other competing interests which remain.

So rather than that, we think of Covid-19 more as a grey swan, which was compounded with another grey swan and another grey swan. Grey swans are events that we have seen before. In this case, think of the 1918 pandemic. But, as our minds tend to focus on the more recent past, and we hunker down there, these grey swans are often neglected. The compounding of these grey swans, one on another, requires more attention from the industry and certainly is getting more of our focus these days.

We believe that more and more, it is these grey swans and not black swans that will be reshaping a significant part of our risk landscape. We see it already. Texas winter storm, a small example, and the power crisis there at a cost $20 billion. Consider a month-long power outage in Silicon Valley, or New York and its impacts.

Extreme economic shocks that we’ve seen following the pandemic has had a huge impact on investment portfolios, and it's going to continue to do so for years to come as economies recover from this mountain of debt the governments have now accumulated. How many models factor this level of correlation across geography, lines of business and asset classes? All require greater investigation and, over time, as models, big data, and predictive analytics pay more attention to the impact of these massively complex correlations, we will see greater resilience emerging both in the insurance industry and the economy as a whole. That's what we think.

In the face of all this growing complexity, it's worth spending just a minute on our competitive environment and to mention big tech and InsurTech. Jamie Diamond, somebody I admire a great deal, the CEO of JP Morgan, said this about new competitive threats from FinTech: “Be frightened. We have plenty of resources, a lot of very smart people. We've just got to get quicker, better, faster..”, and, “as you look at what we've done

11 you'd say we've done a good job, but the other people they've done a good job too”. Paypal, Square, Stripe in financial, and tech giants, Amazon, Apple and Google are names the bank is keeping an eye on, all on their radar.

Should we too be considering big tech as potential competitors over the next 5, 10 years? What about InsurTech? There's a lot of InsurTech roadkill, those that get into the business and don't really understand our regulatory environment. And there are lots of point products that are pretty cool, but they’re masquerading as companies. But we see real exceptions to those. Assurance IQ is one. It was founded by a co-founder of my last company, Addepar, but within about three years, they were acquired by Prudential for $2.5 billion. The reason? Their cloud-based AI platform surfaced some 17 million best-risk customers and beyond that Prudential calculated it could actually cut $100m in operating costs through the Assurance IQ cloud platform being applied to their legacy business.

Churchill said, oh my goodness Churchill said a lot of very interesting things but, this time, Churchill said, “never let a good crisis go to waste”. So far, most of the accelerated digital transformation in our industry has been focused on cost-cutting measures, operational efficiencies and customer experiences. And that's all goodness.

But, there's a lot further to go, a lot more to do, and a lot more strategic steps to take. You can't cost cut your way to growth. You can't exclude and carve out your way to growth and into new markets, as you know. And depending on your lines of business, perhaps only nominal improvements to premiums may be possible. But, by leveraging models, new innovations and your own capabilities, you can almost always, almost always, gain a better view of risk and achieve improvements in terms of your portion of losses from individual catastrophes, and have an enormous impact in that way on outperformance on the bottom line.

There is more leverage there for your business. Cloud-based modelling, data and analytics solutions can help you unlock it, working with what you have, working with your core competency.

We're investing significantly into the future of risk management. We're focused on leveraging leading science and tech to better manage risks on the cloud platform because today’s solutions, we don't think are enough to manage the future, more complex, risk landscape that we see coming.

And this, so far, so far with what we've done, has contributed to our clients, over the last five years, saving $27 billion in losses. But there's the other more important side of that same coin and dodging the losses. Leveraging tech to gain a greater risk insight helps you avoid surprises, yes, but it also lets you confidently deploy more capital and develop new products and new business models and new services, fuelling growth and building new and deeper competitive moats, and building greater resiliency.

Most organisations today still view their risk management as a cost centre. We believe they should not. In such a complex risk landscape, risk management can absolutely be a profit

12 centre and it should be. We're confident that the power of the cloud, advanced modelling, analytics, coupled with the industry's deep expertise and know-how, can enable us to reinvent and transform.

You know, since the internet emerged in the 1990s, every single time an industry embraced an open, cloud platform, and the new technology along with it, new business models emerged, the market reinvented itself and the impacts in all cases were multi-trillions of dollars, without exception: e-commerce, search, social media, entertainment, payments, hospitality, transportation, supply chain, others, now banking, with their challengers.

Regulated industries are always touched last. Banking’s turn came and now, I think, our turn is here. Maybe it will be the first industry where the impacts are not measured in trillions, but that seems unlikely given the history of all these other industries that went before us.

So, we're not going to let a good crisis go to waste. The impact of what we do in the next five or 10 years of building-back-better as we transition and transform the industry is going to be on par with, I really believe, perhaps even greater, than these other industry shifts we've already seen over the last 30 years. It's really interesting to study them.

We're looking forward to partnering with you in the coming year as we make this happen together. Thank you, and here’s to a great year ahead.

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