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CARE

(Contingent Asset Relief Equity)

Re/Insurance Industry Challenges in the Global Markets. The rapidly changing regulatory environment, with the Risk-based Capital Regulation, Enhanced Minimum Capital Requirement, the Capital Adequacy and Solvency Margins, has resulted in either mergers and acquisitions or insurers as well as reinsurers finding it difficult to retain the books of business and cutting on underwriting portfolios. In their report Capital Adequacy and Insurance Risk-Based Capital Systems, J. David Cummins and Richard D. Phillips observe: The insurance industry is heavily regulated in every developed economy worldwide, with regulation focusing primarily on solvency. During the past fifteen years, nearly every major regulatory jurisdiction has either revised or is considering major revisions in its regulatory system with respect to solvency surveillance, with an emphasis on introducing risk-based capital regulation. Risk-based capital (RBC) regulatory systems for insurance were first introduced in Canada and the U.S. in 1992 and 1994, respectively. Japan introduced its Solvency Margin Standard in 1996, and Australia adopted a risk-based system in 2001. The United Kingdom adopted its enhanced capital assessment framework in 2004, the Netherlands introduced a new system in 2006, and Switzerland adopted the Swiss Solvency Test (SST) in 2006. Efforts are currently underway to harmonize solvency regulation in the European Union (E.U.) with the implementation of the Solvency II risk-based capital standards anticipated in 2012 to replace the Solvency I system that was adopted in 2001. In the U.S., the National Association of Insurance Commissioners (NAIC) announced its Solvency Modernization Initiative in 2008, which will include a reevaluation of the U.S. RBC system, among other objectives. The development and testing of Solvency II regime has seen substantial attention in the last few years, including concerns, controversies and commentaries, but the fact remains that in the changing dynamics of the industry, Solvency II promises to be the catalyst for change within the insurance industry worldwide. According to the Briefing Notes Insurance Governance Leadership Network published on Feb 09,2012 by Tapestry Networks, Inc The increasingly important European dimension: Many participants view the European Union (EU) as even more influential in insurance than it is in banking for example, through the EU directive known as Solvency II, which is intended to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements.... The newly established EIOPA, which has substantial input into Solvency II, may be more important for the industry than its counterpart, the European Banking Authority (EBA) is for the banking industry... Increasingly, the [supervisors] of the world will simply be implementing EIOPAs policies, predicted one director. And Guy Carpenters report Succeeding Under Solvency II - Pillar One: Capital Requirements states: Despite its nominally European focus, Solvency II presents a wide range of considerations - and opportunities - to insurance entities worldwide. This new regulatory framework will enact a fundamental change in the way the European insurance industry looks at risk and risk management practices, All businesses that have operations, subsidiaries or affiliates in Europe, write coverage in Europe or do business with insurers in Europe should be preparing now for these wide-ranging changes. Taking Solvency II as the benchmark, and keeping in firm view the fact that same or similar regulations will be promulgated around the globe, the cost of doing business will have a new meaning for insurance and

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reinsurance companies, with the additional load of implementation and maintenance of capital adequacy. In two of Guy Carpenter research reports Succeeding Under Solvency II - Pillar One: Capital Requirements and Impact Of Solvency II On Primary Insurance Companies: Cost Considerations, it is stated that The cost of maintaining required levels of capital will rise substantially under the Solvency II regime. The capital requirements promulgated by QIS 5 for non-life insurers (before diversification) have been raised overall by approximately 15 percent over QIS 4 and are approximately three to four times greater than Solvency I capital requirements.... Consequently, the relative profitability and economic attractiveness of specific products will change under the new solvency regime. And Implementation costs are a major additional expense in an environment where insurers are already struggling to maintain profitability during an inopportune time in the underwriting cycle. The ultimate goal of the Solvency II initiative is to create a more secure and safe environment for policyholders. However, the substantial costs to the industry as a whole are such that the more immediate impact may be the exact opposite of what was intended. Indeed, the overall implementation costs for Solvency II are difficult to overstate. A November 2010 PricewaterhouseCoopers LLP (PwC) survey indicates that the industry-wide Solvency II implementation cost is on course to exceed the European Commissions estimate of EUR3 billion (1). Lloyds of London is expecting to spend GBP250 million in total on implementation, with annual ongoing Solvency II-related expenses of about GBP60 million to GBP70 million. Multinational insurers in the United Kingdom have set aside roughly GBP100 million for Solvency II implementation. A Morgan Stantley + Oliver Wayne research report titled Solvency 2: Quantitative & Strategic Impact - The Tide is Going Out states: Our company analysis suggests that non-life 350% companies will see the greatest increase in capital 300% requirements and the most reduced solvency ratios. 250% Exhibit 22 shows the change in the solvency ratio 200% between Solvency 1 and Solvency 2 for the four 150% fictitious companies used in our model, which include a diversified reinsurer (Fantasy Re) and a 100% 50% pure primary non-life company (Accidental P&C). 0% Both of these companies suffer from a larger drop in Mosiac Mystic Global Life Fantasy Re. Accidental P&C regulatory solvency coverage than the pure life Composite Company company (Mystic Global Life) and the composite Solvency I Sovency II (Mosaic Composite). This will not come as a surprise to many of the larger companies that already manage to risk-based rating agency capital models. Solvency 1 non-life regulatory capital requirements have long been recognised by the rating agencies as an inadequate measure of risk. We expect the major reinsurers, in particular, to maintain good Solvency 2 buffers on the standard QIS5 model, and this may be further improved through the use of internal models. As we discuss below, reinsurers benefit from a strong diversification benefit. However, it is possible that many non-life insurers find the capital requirements quite steep particularly given the increase in many of the capital charges for non-life risk between QIS4 and QIS5. Companies that do not have the resources or data to use company-specific factors, full or partial internal models may be at a particular disadvantage.

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GOLDASSURANCE ASSET MANAGEMENT COMPANYS CARE.


In light of these impending Enhanced Capital Adequacy / Solvency requirements, it has become crucial for Re/Insurance companies to employ innovative methods and approach to meet regulatory requirements while minimizing the cost of additional capital, for retaining the current business, in addition to increasing market penetration and profits. Goldassurance Asset Management Company, registered in the Federal Territory to Labuan has been structured to act as Financial Services Managers to cater to this need of the hour. Aiming to exceed the expectations of our investors and partners in generating regular income by best possible utilization of our capacity; our revenue comes from offering asset support and capacity enhancement, against premium management, to major insurance/reinsurance companies, for them to underwrite larger portfolios and increase profitability. In essence the assets are used to provide a proportion of the security underpinning diverse insurance /reinsurance policies and share in the returns associated with underwriting that policy. For the comfort of our clients this capacity/ solvency support is confirmed by a bank on behalf of Goldassurance Asset Management Company Limited. Included in our basket of novel, customer- oriented products is CARE (Contingent Asset Relief Equity). CARE is a Contingent Capital structured instrument, to support insurance/ reinsurance companies in their time of need, towards addressing an opportunity inflow of any book of business. They can now pick any book of business without worrying about capacity limitations John C. Coffee, Jr. feels that Contingent capital is an idea whose time is comingboth within the United States and internationally. Its special virtue is that it responds to the problem of high risk-correlation among major financial institutions without relying on the ability of regulators to always make wise and farsighted decisions in politically heated crises. Although use of contingent capital may be costly, this cost is another way to tax the externality that arises when creditors come to believe that some financial institutions are too big to fail. (Systemic Risk After Dodd-Frank: Contingent Capital And The Need For Regulatory Strategies Beyond) According to the article title Contingent Capital vs. Contingent Reverse Convertibles for Banks and Insurance Companies by Christopher L. Culp, published in Journal of Applied Corporate Finance, a Morgan Stanley Publication in Fall 2009 Contingent capital is a type of put option that entitles a company to issue new paid-in financial capital on or before some future date. Unlike paid-in financial capital, the contingent capital p Simplified Paid-in Capital Structure u Securities r Insurer or Investor c Reinsurer h Cash a s e r Simplified Contingent Capital Structure / i Securities Investor Insurer or Reinsurer s (Option Writer) (Option Buyer) GAAMCO s Cash u e r Put Option

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Put Option Fee Source: Modified according to Munich Re (2001).

receives no cash and issues no new securities when the facility is placedand, indeed, it must periodically pay a premium (called a commitment fee) to the providers of the contingent capital. Though a relatively new concept and product, the structure of CARE is not very complex or complicated. In the words of Robert P. Hartwig and Claire Wilkinson in their article An Overview of the Alternative Risk Transfer Market: Contingent capital is similar to a line of credit except that access to the capital is conditional (contingent) upon the occurrence of (i) an insured event and (ii) an impact of a predetermined size on some measure of company financial performance (such as certain financial statement items) (Culp 2005). And Christopher L. Culp in Contingent Capital: Integrating Corporate Financing And Risk Management Decisions Like any ordinary option, contingent capital can be characterized by a number of key features: (1) the underlying asset (or just the underlying); (2) the exercise style of the option (European or American or other); (3) the time period (or tenor) of the option; and (4) the strike price. In addition to these standard attributes of normal options, contingent capital facilities also often contain barriers, or second triggers, that are linked directly to their risk management role. Though Contingent Capital often either compliments or substitutes reinsurance but Contingent capital is a relatively new type of convergence product, connecting insurance and capital markets, but its use should be considered as an excellent element of post-loss funding ... Unlike insurance-linked securities, which contain aspects of insurance/reinsurance and securities, contingent capital facilities are structured strictly as funding/banking facilities or securities transactions, with no element of insurance contracting. (Drs. Vronique Bruggeman, Capital Market Instruments for Catastrophe Risk Financing) Further strengthening the concept Christopher L. Culp states in his article Catastrophe Reinsurance and Risk Capital in the Wake of the Credit Crisis: Risk capital is an essential component of a P&C insurers economic balance sheet especially in years like 2008 because it helps insurers cover unexpected losses that jeopardize the capacity of insurers to honor their claims payment obligations and preserve their ability to underwrite new business. External risk capital is provided by firms like reinsurance companies, whereas internal risk capital is provided by investors in the debt and equity securities issued by the insurance company ... Risk capital may also either be paid-in or contingent ... As such, the decision of how much risk capital to hold and in what form must be weighed carefully by investors in P&C insurance company stocks ...At no time have these decisions been more important than in todays environment ... Losses by several reinsurers, however, have precipitated ratings downgrades, balance sheet weakness, and capacity reductions, all of which also should impact an insurers choice of an external risk capital provider...In our view, it is critical for insurers to compare external and internal risk capital in a consistent conceptual framework. The essential first step in that undertaking is to frame properly the question to be answered. The right question to ask is not How much reinsurance should we buy?, but rather How much reinsurance should we buy from external parties instead of from investors in our own securities, from whom, and in what form? thus not only differentiating Contingent Capital from Reinsurance but also clarifying its complimentary and substitute nature.

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Insider Quarterly observes the Rise of contingent capital stating: Scor provided a public demonstration of the contingent capital model when the first EUR75mn tranche of its EUR150mn contingent facility with UBS was triggered by Q1 cat losses in July...The French reinsurer lined up the contingent capital facility with UBS - to which it ultimately issued shares at a pre-agreed strike price - late last year as an alternative source of retro protection.And IQ understands that contingent capital-style transactions have been pursued by a wide array of reinsurers with their bankers, with at least half a dozen deals at various stages of completion. According to sources, the facilities - which typically see carriers pay up front to secure a mezzanine layer of capital below senior debt to be drawn down under pre-agreed triggers - are being peddled by investment banks with insurance-focused teams, such as Goldman Sachs, Deutsche Bank, Credit Suisse and UBS, along with the big three reinsurance brokers...Indeed, the handful of public transactions announced so far in 2011 are likely to represent only a fraction of the overall volume of deals getting done.

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BENEFITS OF CONTINGENT CAPITAL In the banking sector a greater emphasis is placed on liquidity of capital to protect against potential runs on deposits, which rules out most forms of contingent capital; For insurers, however, the longer term nature of their liabilities means that contingent capital is a much more valuable resource as long as reliance can be placed on the counterparty's willingness and ability to pay. (Eligible capital for insurance companies By Christophe Ollivier, Financial Institutions Group, CALYON) Contingent capital is low-cost off-balance sheet alternative (Culp, 2002a) Contingent capital structures, however, provide insurers and reinsurers with the right, but not the obligation, to issue specified security in the future at specified terms regarding price, triggering event and the time frame... The predetermined price is very important for insurance companies as after the occurrence of catastrophic event it is usually very hard to obtain financial resources at prices that were prevailing before the occurrence of the triggering event and in addition, reinsurance and retrocession markets capacity becomes scarce and expensive. (Vladimir Njegomir and Rado Maksimovi - Risk Transfer Solutions For The Insurance Industry in Economic Annals, Volume LIV, No. 180) The costs of structuring contingent capital deals are much lower than are for catastrophe bonds as these deals are made through private placements (Culp, 2006) and usually the main cost is option fee paid to option writer at agreed intervals. Additional benefits of contingent capital include balance sheet protection when it is most needed and access to financing with neither a corresponding increase in leverage nor a dilution of shareholders equity (Benfield, 2008). The economic motivation of the insured corporation is to have access to less expensive capital than it could obtain through capital markets or bank loans after the occurrence of the trigger event. The terms and conditions of contingent capital financing can be highly tailored and can thus vary widely: loans can be fixed or floating rate, securities can be issued as common equity, debt or preferreds... Contingent capital can be structured in various forms, but generally, two broad classes are considered: contingent debt and contingent equity ... (Capital Market Instruments for Catastrophe Risk Financing by Drs. Vronique Bruggeman, LL.M.) Additionally, contingent capital structures can address risks that are unhedgeable or cannot be adequately mitigated with traditional capital markets tools. Moreover, potential tax deductibility from ongoing interest payments if debt funding is used can be seen as another benefit of contingent capital use. Because the terms of the capital injection are pre-agreed to, the company generally receives more favourable terms than it would receive if it were to raise capital after a large loss, when it is likely to be in a weakened financial condition. Under these conditions, contingent capital can provide a cost efficient solution, aiming at the prevention of insolvency and at the prevention of a threat to planned investment projects due to a lack of disposable funds. ( SwissRe (1999). Alternative Risk Transfer (ART) for Corporations: a Passing Fashion or Risk Management for the 21st Century? Sigma No. 2/1999., 2728.)

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Paramount Features: Entry Rules: 1. Only Registered Insurance/ Reinsurance Company qualify. 2. Approval by GAAMCO Management for qualification. (Based on assessment of the following: Audited Accounts for three consecutive years Proposed Portfolio of Underwriting (EPI + Loss Ratio projections) KYCC) 3. Contingent Capital Provision Agreement under CARE, entailing the following: 1. GAAMCO will commit to, upon the occurrence of a pre-decided triggering event (Trigger), purchase equity (Asset) at a pre-set price (Price) for a fixed period of time (Tenure), thus providing the client with a capital infusion. (As per standard contingent capital contracts) 2. GAAMCO will offer these services against Financial Fees (Commitment Fees) 4. The Re/insurance Company will agree to deposit Premium with the designated bank of GAAMCO, in trust, for the tenure of engagement. All claims will be forwarded to GAAMCO for imbursements and the residual income will be shared 50/50 between the Re/insurance Company and GAAMCO. 5. Early cancellation of arrangement is subject to a penalty clause Penalty is pro-rata based on time before expiry of tenure. (Terms of Reference are attached for ready reference - Annexure 1)

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Annexure 1

TERMS OF REFERENCE + TARIFF With Insurance / Reinsurance (R/I) Customers


1. R/I Company is required to fill in a proposal form with KYC + KYCC particulars and submit it to GAAMCO with a nominal (non-refundable) processing fee. This fee is usually negotiable. (Proposal Form enclosed Annexure 2) 2. CARE Contingent Capital Agreement will be signed between R/I Company and GAAMCO, defining the Asset, Tenure, Trigger, Commitment Fee, Price etc. 3. Pre LOC advice and / or a Pre-BG will be provided to the R/I Companies by GAAMCO through their Bankers via SWIFT MT799 4. R/I Company will deposit Commitment Deposit with the designated bank of GAAMCO This Commitment Fees will in all cases be non refundable. The Commitment Deposit amounts to 1/12th of the EPI Undertaking. 5. R/I Company will provide an EPI Undertaking that the minimum EPI to be generated against the Contingent Capital Agreement should not be less than the 100% of the value of facility (Draft of EPI Undertaking enclosed Annexure 3) 6. GAAMCO will upon receipt of the Commitment Deposit have a Banking Instrument issued to the R/I Company for confirmation of the CARE Contingent Capital Agreement. 7. All Premia generated by the R/I company shall be deposited with the designated Bank of GAAMCO, to be held in trust for the tenure of the agreement. 8. R/I Company will be at liberty to draw on the premia, being held in trust be designated Bank, to meet the contingencies of claim up to a maximum of 62% inclusive of Insurers and Reinsurers retention. (Draft Letter of Indemnity attached Annexure 4) 9. The Maximum Limits are as follows: Insurance Companys Retention Reinsurance Companys Retention Production Cost Claim Reserves : 15% : 17% : 20% : 62% (Comprising Ins. Retention 15% + Reins. Retention 17%; Claim Reserves with GAAMCO = 30%)

10. Upon Maturity of tenure GAAMCO will appropriate from the residual amounts after claim withdrawals made by the R/I Company a sum of 20% of the total deposits for the R/I Companies and or theirs brokers towards production cost, and 5% for GAAMCO towards management cost. 11. The net savings from the above will be shared between the R/I Company and GAAMCO 50:50. 12. This 50% of the net residual deposit, taken by GAAMCO is the Commitment Fees (Consideration) for the CARE Contingent Capital Agreement. (The financial structure is elaborated in Annexure 5)

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Annexure 2

PROPOSAL FORM
CASE NO._____________________ CORPORATE: Full Name of Institution Registration Number Registration Address Physical Address (if different from Registration Addr.) Business Telephone No. E-mail Address

: : : : : : :

Fax No.:

DETAILS OF SIGNATORY - CORPORATE AND INDIVIDUAL: Name : Date and Place of Birth : Nationality : Passport Number : Date of Issue: Date of Expiry: Title within the Corporation : Mobile Phone Number : Do you speak English? : Email Address : PORTFOLIO TO BE UNDERWRITTEN

_____________________________________________________________________________________________________ _____________________________________________________________________________________________________ _____________________________________________________________________________________________________ _____________________________________________________________________________________________________ _____________________________________________________________________________________________________


TYPE OF BUSINESS
TYPE CAPACITY EPI LOSS RATIO PRODUCTION COST

Fire Marine Motor Miscellaneous

___________________________
Authorized Signature With Company Seal (Notarized)

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Annexure 3 ESTIMATE PREMIUM INCOME (EPI) UNDERTAKING


(INTEGRAL PART OF THE AGREEMENT TO BE) DATE: TO: (PROVIDER) SUBJECT: LETTER OF UNDERTAKING FOR DEPOSIT OF PREMIA WITH THE DESIGNATED BANK OF GOLDASSURANCE ASSET MANAGEMENT COMPANY LIMITED, TO BE HELD IN TRUST FOR THE TENURE OF ENGAGEMENT, REFERENCE THIS CARE- CONTINGENT CAPITAL AGREEMENT IN THE AMOUNT OF ( (AMOUNT) ) DEAR SIRS, REFERENCE IS MADE TO CARE- CONTINGENT CAPITAL AGREEMENT IN THE AMOUNT OF ( (AMOUNT) ) BETWEEN YOUR COMPANY GOLDASSURANCE ASSET MANAGEMENT COMPANY LTD. AND OURSELVES. WE HEREBY, CONFIRM AND DECLARE WITH FULL CORPORATE RESPONSIBILITY THAT THE EXPECTED PREMIUM INCOME FOR THE PORTFOLIO OF BUSINESS DECLARED IN OUR INITIAL REQUEST DATED: , IS USD (USD AMOUNT IS WORDS) WE FURTHER UNDERTAKE TO DEPOSIT THE PREMIUM GENERATED, NO LESS THAN 100% IN VALUE OF THE FACE VALUE OF CARE CONTINGENT CAPITAL AGREEMENT WITH THE DESIGNATED ACCOUNT OF GOLDASSURANCE ASSET MANAGEMENT COMPANY LIMITED DESCRIBED HEREUNDER:
BANK NAME: BANK ADDRESS: ACCOUNT HOLDER: SWIFT CODE: BANK ACCT NUNMBER: BANK OFFICER NAME: BANK TEL: BANK FAX:

Annexure 2
Annexure 3

WE FURTHER UNDERSTAND AND AGREE THAT THE PROCESSING CHARGES PAID FOR THE PROCESSING OF CARE CONTINGENT CAPITAL AGREEMENT ALONG WITH ALL DOCUMENTS ARE RETURNED AND/ OR ARE NOT REFUNDABLE, AND THAT COMMITMENT DEPOSIT, AMOUNTING TO NO LESS THAN 1/12 OF THE EPI OF THE FACE VALUE OF THIS GUARANTEE IS TO BE DEPOSITED IN THE AFOREMENTIONED DESIGNATED BANK ACCOUNT OF GOLDASSURANCE ASSET MANAGEMENT COMPANY LIMITED, AND THAT MONTHLY CESSION OF VALUE NO LESS THAN 1/12TH OF THE TOTAL EPI IS TO BE DEPOSITED IN THE AFOREMENTIONED DESIGNATED BANK ACCOUNT OF GOLDASSURANCE ASSET MANAGEMENT COMPANY LIMITED, FAILING WHICH THIS CONTINGENT CAPITAL AGREEMENT WILL AUTOMATICALLY BE CANCELLED

THIS UNDERSTANDING IS ALSO BE BINDING ON OUR SUCCESSORS, ASSIGNEES AND TRANSFEREES INCLUDING BANKERS, RECEIVERS AND ANYBODY ELSE DIRECTLY OR INDIRECTLY INVOLVED ON OUR SIDE, THE SIDE OF THE BENEFICIARY. SIGNATURE AND COMPANY STAMP (NOTARIZED)

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Annexure 4

LETTER OF INDEMNITY
This is to indemnify that the agreement between the parties are based on the following terms and conditions; 1) The total losses of the year will not exceed 62% of the premium income earned in any treaty year (inclusive of Insurers and Reinsurers retention). Treaty arrangements being valid and subject to continuity year over year. 2) Total losses in the context of this clause shall mean the losses paid in the current year plus the reserve for outstanding losses at the end of the current year less the reserve for outstanding losses from the previous year. 3) The loss ratio shall be calculated by dividing the total losses by the earned premium and expressed at a percentage. 4) Earned premium shall mean the premium income of the current year, plus the premium reserve from the preceding year less, the premium reserve for the current year. 5) The loss participation shall be taken into account when calculating the incurred losses for the profit commission calculation. 6) Both parties reserves the right to insure their exposure for excess of loss at their respective costs In witness whereof, the undersigned parties have placed their signatures below this date and shall initial each page of this indemnification agreement.

For and on behalf of R/I Company Name: Title: NIC / Passport No.: Date:

For and on Behalf of GAAMCO Name: Title: NIC / Passport No.: Date:

Witnessed By

Name: NIC / Passport No.: Address: Date:

Name: NIC / Passport No.: Address: Date:

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Process Flowchart
Duly Signed CARE - Contingent Capital Agreement

Duly filled proposal Form Receipt of request for capacity enhancement by a Insurer/Reinsurer(A) to GAMCO Processing Fee, Commitment Deposit, Terms and any other details are intimated to A by GAMCO Receipt of Processing Fees into the Bank Account of GAMCO Pre- LC / BG Advice is issued and Transmitted by GAMCOs Bank to A A will deposit Commitment Deposit (nonrefundabel) in GAMCOs designated bank account. Monthly premia generated not Less than 1/12 of EPI Undertaking. Processing Fees is NonRefundable and estimated at ad valorem basis Requisite Documents will include:

Three consecutive year Audited Accounts EPI Undertaking (minimum acceptable 100 % of face value of Contingent Capital Agreement) Loss Ratio Indemnification (Max L/R 60 % of EPI)

Letter of Credit / Bank Guarantee is issued and Transmitted by GAMCOs Bank to A

CARE Agreement will be conditional upon:

The premium to be held in trust by GAMCO, for the tenure of engagement.


A will forward intimation of claims to GAMCO for settlement, during the tenure of the banking instrument. 20% Production Cost to be paid to A by GAMCO for onward paymentfrom earned premiums only 5% Management Cost to be paid to GAMCO

Upon Maturity of tenure, the residual income is shared 50/50 between A and GAMCO

Residual income = Deposits Claims Prod. Cost (20%) Management Cost (5%)

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Financial Flowchart

Premium Reciept Insurancce Company 100%


Retention (Ins. Co.) 15%
Retention (Reins. Co.) 17% Production Cost 20%

Reinsurance Company 85% - Cession

GAAMCO 68%

Claims 30% Max.

Management Cost 5%

Net Profit 13%

Gaamco 6.5%

Reinsurance Co 6.5%

Loss Ratios are spread between the o Insurance Company o Reinsurance Company o Claim Reserves with GAMCO A tripartite agreement can/may be made between the three parties to address claim contingencies in a ratio mutually agreeable between them. The drawdown value of the Banking instrument will decrease pro-rata with all withdrawals (in lieu of Insurance/ reinsurance retention, Production, Claims etc)

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Annexure 5

CARE Contingent Asset Relief Equity


(A Proprietary product of Goldassurance Asset Management Co. Ltd.) LEGEND Beneficiary of LOC/BG has to be Re-Ins / Insurer (Explaining the terms of Reference)
An Insurance company can approach with a book of business along with a set of additional documents (i.e. Proposal form, KYC, KYCC) as per the TOR defined above to GAAMCO. A Re-insurance company can also directly approach with a book of business along with a set of additional documents (i.e. Proposal form, KYC, KYCC) as per the TOR defined above to GAAMCO. GAAMCO will issue a Pre LOC advice / Pre-BG to the Reinsurer as per the volume of the book of business. On receipt of Commitment Deposit GAAMCO will release the LOC / BG.

UNIT OF CALCULATION IS 100

Basic Mobilization source an insurance company 15

100-15 = 85

Re-insurance Company 17

85-17 = 68

Gold Assurance 68

Bal 68

Claim Reserves 30

68-30 = 38

30% of 100% shall be retained as claim/loss reserves. Total Claim Ratio amounts to 62% including Insurers and Reinsurers retention.

Residual Income (Gross) 38

38
Marketing cost includes all commissions, fees and expenses to bring that book of business to GAAMCO. Marketing cost will be disbursed on receipt of All Monthly Deposits. This can be shared with the Re-Ins./Insurance company if it approaches GAAMCO directly.

Less Marketing Cost 20

38-20 = 18

Management Cost 5

18 - 5 = 13

GAAMCO will deduct its Management cost on every receipt of monthly deposit.

Net Profit 13

13

Appropriation of Net Profit will be calculated after all the deductions from 1 to 7 above at the end of the year. If the actual loss stays under the declared ratio the remaining will be kept aside until the expiry of all policies / LOC.

Gold Assurance Investors 13 - 6.5 13 / 2 = 6.5

Calculated Net Profit will be divided into 2 as one part for the Investors of Goldassurance.The other part is to share with the Customer (Insurance / Re insurance Company)

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