Ironshore Insurance Ltd. Financial Condition Report (“FCR”) For Year Ending: 31st December 2017 CONTENT: SUMMARY .......................................................................................................................................... 2 1. BUSINESS AND PERFORMANCE ............................................................................................. 3 1.1 Business ........................................................................................................................... 3 1.2 Underwriting Performance ............................................................................................. 6 2. GOVERNANCE STRUCTURE .................................................................................................... 9 2.1 Governance ..................................................................................................................... 9 2.2 Fitness and Proper Requirements ................................................................................... 9 2.3 RM and Solvency Self‐Assessment ................................................................................ 12 2.4 Internal Controls and Internal Audit ............................................................................. 13 2.5 Outsourcing ................................................................................................................... 15 3. RISK PROFILE .......................................................................................................................... 15 4. SOLVENCY VALUATION ......................................................................................................... 17 5. CAPITAL MANAGEMENT ......................................................................................................... 19 5.1 Eligible Capital ............................................................................................................... 19 5.2 Regulatory Capital Requirements ................................................................................. 20 5.3 Approved Internal Capital Model .................................................................................. 20 6. SUBSEQUENT EVENTS .......................................................................................................... 21 LIST OF ABBREVIATIONS ............................................................................................................... 22 1 SUMMARY This document represents the Financial Condition Report (“FCR”) that is required to be published by Ironshore Insurance Ltd. (“IIL” or “the Company”). This report covers the Business and Performance of IIL, its Governance Structure, Risk Profile, Valuation for Solvency Purposes and Capital Management. The ultimate administrative body that has the responsibility for all of these matters is the IIL Board of Directors. The Board is supported in discharging this responsibility by Group’s governance structures, including its Committees, Senior Management and Internal Control Functions. 2 1. BUSINESS AND PERFORMANCE 1.1 Business Name of Insurer: Ironshore Insurance Ltd. Supervisors Insurance Supervisor Bermuda Monetary Authority BMA House 43 Victoria Street, Hamilton Bermuda Approved Auditor Statutory and Generally Accepted Accounting Principles (“GAAP”) Reporting Ernst & Young Ltd. 3 Bermudiana Road Hamilton, HM08 Bermuda Ownership Details and Overview of Operating Segments IIL was incorporated under the laws of Bermuda and is registered as a Class 4 Bermuda Insurance Company to provide specialty property and casualty insurance and reinsurance on a global basis to commercial customers. IIL is a wholly owned subsidiary of Ironshore Inc. (“Ironshore”) a Cayman Islands company formed in 2006. Ironshore was established by an investor group led by Robert Clements, John Clements and Robert Deutsch in December 2006 through a private equity placement of over $1.03 billion. A further $300 million private placement investment was completed in July 2009. Ironshore is currently a wholly owned subsidiary of Liberty Mutual Holding Company (“Liberty Mutual”). The acquisition of all stock of Ironshore by Liberty Mutual closed on May 1, 2017. Liberty Mutual is a diversified insurer with operations in 29 countries and economies around the world. Liberty rank 75th on the Fortune 100 list of largest corporations in the U.S. based on 2016 revenue. As of December 31, 2017, Liberty Mutual had $125.6 billion in consolidated assets, $105.2 billion in consolidated liabilities, and $38.3 billion in annual consolidated revenue. Liberty employs more than 50,000 people in over 800 offices throughout the world and offer a wide range of insurance products and services, including personal automobile, homeowners, accident & health, commercial automobile, general liability, property, surety, workers compensation, group disability, group life, specialty lines, reinsurance, individual life and annuity products. 3 The Ironshore Group underwriting business is organised into three operating platforms: United States (“US”), Bermuda, and International. US The US operating segment writes a range of specialty casualty products, property, healthcare liability, professional lines, political risk, construction, energy, environmental, surety, yacht, and aviation on both a US Excess & Surplus Lines and an admitted basis. The US operation consists of Ironshore Holdings (U.S.) Inc. ("Ironshore Holdings U.S." or “Holdings”) and its principal subsidiaries Ironshore Indemnity Inc. (“III”) and Ironshore Specialty Insurance Company (“ISIC”). Holdings is incorporated in Delaware and is a wholly owned subsidiary of IIL. Bermuda The Bermuda operating segment provides property catastrophe and property all-risk insurance for small to mid-sized commercial risks, excess casualty, financial lines, and healthcare products. The Bermuda platform consists of IIL, which was incorporated under the laws of Bermuda on October 19, 2006 and is a registered Class 4 insurer under the Insurance Act 1978 in Bermuda and related regulations and amendments thereto. IIL commenced underwriting in late January 2007. IIL also operates two independent branches in Singapore and Canada. The Singapore Branch, is registered as a direct insurer to carry on general insurance in Singapore effective January 26, 2012, and the Canada Branch, which writes property and casualty insurance for Canadian-domiciled risks effective March 29, 2014. International The International segment consists of Ironshore Europe Designated Activity Company ("IEDAC") incorporated in Ireland, Ironshore International Ltd., Pembroke Managing Agency (“PMA”), Ironshore Agency Ltd ("IAL") all incorporated in England and Wales, Ironshore Canada Ltd. ("ICL") incorporated in Canada, and Ironshore Australia PTY Ltd, ("IAPL") incorporated in Australia, The International operations write primarily through PMA through Lloyd’s Syndicate 4000, benefiting from Lloyd's licenses to underwrite insurance in multiple jurisdictions globally, and through IEDAC, providing marine, short tail, specialty property and specialty casualty insurance. 4 Ironshore Group structure 5 1.2 Underwriting Performance Specialty Property & Casualty IIL has established a Property & Casualty business focused on both critical and non-critical catastrophe business in Bermuda and globally. IIL provides this platform through in-house highly trained Underwriters. All risks in excess of an individual underwriter's authorities are referred to underwriting executives for further review and consideration. Property All Risk Policies including wind and quake; and Inland Marine programs The limits being offered currently are up to $50M on properties with or without catastrophe exposed locations. The minimum Premium is $100,000 for cat exposed property. The minimum deductible is $25,000. All classes of business are eligible providing minimum premium amounts are reached. Casualty Primary General Liability – The required minimum retention is $25,000 for primary accounts, although many of them will have significantly higher retentions. Emphasis is on self-insured retentions or large deductibles. Umbrella – Umbrella coverages may provide limits up to $50M gross with a net retention of no more than $10M. The Umbrella coverages offered are self-contained and not strictly a follow-form product. Interest in higher risk accounts result in fewer competitors and a greater opportunity for the lead $10M net limit threshold. Excess Liability – Excess Liability may provide excess limits as part of a large layered excess program, typically in the first $100M of the tower. Gross limits of $50M are available based on underwriter’s discretion. Credit The credit products are organized around the international and domestic trade flows and foreign investment strategies of our clients. Internationally and domestically domiciled manufacturing and trading companies and financial institutions benefit from flexible underwriting guidelines and availability of country limits. Traditional failure to pay insurance coverage is available on private obligors as well as public sector sovereign and non-sovereign entities. On the political risk side, currency inconvertibility, non-transfer risk, confiscation, expropriation, nationalization and deprivation insurance are several of the perils that IIL will consider. Financial Lines Director and Officer Liability – These policies typically include additional coverage features such as employment practices liability insurance (“EPLI”), to a degree not found in common