QatarRe Annual Report and Financial Condition Report 2016 by Qatar Reinsurance Company Limited

Creating lasting value

Annual Report 2016 including financial statements and financial condition report

Overview 1 Introduction and Key Financial Highlights 2 At a glance 3 Our message Strategy and performance 12 Message from the Chief Executive Officer 18 Key activities and achievements 20 Underwriting overview 23 Financial performance overview 27 Risk management Corporate governance 30 Chairmanâ&#x20AC;&#x2122;s introduction to corporate governance 32 Board of Directors 34 Committees of the Board Financial statements 36 Independent Auditorâ&#x20AC;&#x2122;s Report 38 Consolidated statement of financial position 39 Consolidated statement of income 40 Consolidated statement of comprehensive income 40 Consolidated statement of changes in equity 41 Consolidated statement of cash flows 42 Notes to the consolidated financial statements Financial condition report 72 1. Business and performance 78 2. Governance structure 88 3. Risk profile 92 4. Solvency valuation 94 5. Capital management 96 6. Subsequent event 97 7. Declaration Additional information 98 Our parent company 99 Glossary of selected insurance and other terms 104 Contact us

Every day, insurance businesses around the world rely on Qatar Re to help them keep their promises. We write all major property and casualty, and specialty lines of business and are trusted to get everything precisely right. Qatar Re brings stability to a world that is changing faster than ever. By connecting deep sector experience to technical underwriting expertise, we are able to tackle the most exacting of reinsurance challenges, managing risk and uncertainty with precision in the US, Europe and the Far East. In tough times our business has grown. Backed by a parental guarantee from Qatar Insurance Company S.A.Q. (â&#x20AC;&#x153;QICâ&#x20AC;?), we are largely insulated from the turbulence of world financial markets. And because of our unusually flat structure, our people are able to respond clearly and quickly to market conditions and clientsâ&#x20AC;&#x2122; changing needs.

Key financial data 2011 to 2016

Gross written premiums USD 1,249.37 million 1,156.2

115.6

103.2

2011

2012

336.6 2013

1,249.4

535.9

2014

2015

Net profit USD 38.0 million

2016

38.0 25.0 15.9

2011

3.3 2012

0.5 2013

2014

2015

2016

94.2

98.5

2015

2016

(9.9)

Full financial year combined ratio 98.5% 121.3

2011

111.6

118.5

2012

2013

108.2

2014

Net technical result USD 54.0 million

64.7

54.0

27.7 2011 (14.5)

Qatar Re Annual Report 2016

2012 (3.9)

11.2 2013

2014

2015

2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

At a glance Six strategically important locations.

London

Zurich

Bermuda

Doha

Dubai

Singapore

Gross written premiums by domicile of reinsured 2016 Europe Americas Asia Africa Oceania

17%

Gross written premiums by line of business 2016

1% 1%

14% 67%

Property Catastrophe North American Property Property (outside North America) Casualty (including Motor) Marine and Aviation Agriculture Credit and Financial Risks Facultative Lloydâ&#x20AC;&#x2122;s Capacity

5% 2% 4% 4% 13%

5% 8%

55%

Qatar Re Annual Report 2016

We serve our markets through a number of dedicated lines of business, each offering a unique accumulation of highly specialist knowledge and experience.

We serve our markets through a number of dedicated business lines, each offering a unique blend of highly specialist knowledge and experience. Combining long-term client support with flexible product offerings, our aim is to provide solutions that meet the needs of our customers wherever they are.

1 Property Catastrophe

The Property Catastrophe team offers lead quotations for proportional and non-proportional treaty reinsurance in property catastrophe. We use proprietary pricing and wellunderstood modelling tools, strict accumulation control, an integrated portfolio management approach and we write against one single balance sheet.

2 North American Property

The North American Property Treaty unit positions us as a quoting market for both proportional and non-proportional business. Our experienced team of underwriters focuses on any type of short tail treaty reinsurance within North America. Business is sourced directly from North American based brokers from our Bermuda office.

3 Property (outside North America)

Our team underwrites a worldwide account of property per risk and multi line outside North America and offers lead quotation services for both proportional and non-proportional treaty reinsurance for property portfolios. Qatar Re also provides multi line risk excess, pro rata and casualty solutions to our per risk customers.

4 Casualty (including Motor)

Our Casualty team operates around the world, using their deep knowledge of local markets and technical expertise to provide quotations and reinsurance structuring on a proportional as well as non-proportional basis. We target lines in motor, public and product liability; employers’ liability; workers’ compensation; professional indemnity and directors’ and officers’ liability.

Qatar Re Annual Report 2016

5 Marine and Aviation

The unit underwrites a worldwide account, underwriting programmes that cover insurance exposures emanating from three separate global industries: marine, general aviation, and satellites. These all share a common risk characteristic of low frequency but high severity losses. We generally avoid exposure to major airline businesses.

6 Agriculture

Our Agriculture specialists offer a range of solutions, with packages ranging from standard quota share and stop loss contracts to more specific treaty or facultative covers. We operate in all major risk classes such as crop-hail or multi-peril crop, livestock, aquaculture, bloodstock, pet and forestry, serving clients of varying sizes in both mature and developing markets.

7 Credit and Financial Risks

In Credit and Financial Risks, we help clients diversify their reinsurance panels, with capital not dependent on western equity markets, and offer credit, surety and political risk covers on a proportional and non-proportional basis. We also have a dedicated team that focuses on structured finance/reinsurance, mortgage indemnity, and residual value insurance.

8 Facultative lines of business

We offer lead capacity in commercial lines for business written out of the regional hub, in Dubai, for a number of major international programmes: property, power generation, energy, engineering, marine, casualty lines and professional indemnity.

9 Lloyd’s Capacity

We use our Lloyd’s Corporate Member to facilitate the provision of third party capital to carefully selected businesses. We also reinsure other capital providers to such businesses. This participation is typically on a proportional basis of the whole account and therefore we share the risk/reward characteristics in the same way; an excess of loss basis is also used on occasion.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Qatar Re Annual Report 2016 4

We have a set of proven value drivers that define how we do things. Every day.

Qatar Re Annual Report 2016 5

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

We are Connected

Bermuda

Qatar Re Annual Report 2016 6

Proximity to our clients and brokers In 2016, we have further consolidated our presence in Bermuda, expanding both corporate head office and underwriting functions. In addition, we have taken major steps to strengthen our proximity to clients in the Middle East and Africa as well as in Asia by establishing branch offices in the Dubai International Financial Centre and in Singapore.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

We are Inventive

Dubai

Qatar Re Annual Report 2016 8

Focusing on innovative entrepreneurship Looking back on the year we again recorded respectable bottom and top line growth for Qatar Re. We continued to benefit from the low volatility of a number of complex and bespoke transactions. We remained firmly committed to supporting innovative entrepreneurship in insurance where we see the potential for innovation in product design, risk management, distribution or financing.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

We are Stable

Zurich

Qatar Re Annual Report 2016 10

Commitment to excellent financial security Qatar Re continues to benefit from a rating of ‘A/Stable’ from S&P Global Ratings and ‘A (Excellent)’ from A.M. Best. These ratings reflect the underlying financial strength of Qatar Re, the wider QIC Group, and an increasingly diverse Qatar Re investor base that provides noncorrelated capacity.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Coping with ‘grey swans’ Message from Gunther Saacke, Chief Executive Officer

In last year’s CEO message I referred to ‘sharply increased volatility in the economic and political environment coupled with the generally downwardtrending parameters of our industry’ as the set of challenges facing any reinsurer. What we have actually witnessed in 2016 dwarfs this statement.

Qatar Re Annual Report 2016 12

Global economic growth has slowed further and remains anaemic. The US, the Eurozone and Japan suffered a reduction in economic growth of up to 0.5 percentage points whereas emerging and developing economies managed to stabilise following a bumpy ride in 2015.

We believe that on this foundation our Company has not only become a truly contemporary reinsurer but also a resilient operation that is less vulnerable to adversity than market tracking competitors. The value of corporate resilience has undoubtedly increased sharply during 2016.

Developments on the political front were even more dramatic, with two major ‘grey swans’ wrong-footing most pundits: Britain’s decision to leave the European Union and Donald J. Trump’s election as US President.

Solid overall performance Looking back on the year we again recorded respectable bottom and top line growth for Qatar Re. We continued to benefit from a number of complex and bespoke transactions. Also, in times of turbulence, Qatar Re remained firmly committed to supporting innovative and entrepreneurial cedents where we see the potential for innovation in product design, risk management, distribution or financing. These carefully selected and vetted ventures benefited from our private equity-style support and our willingness and capacity to ‘follow their fortunes’.

Both events epitomise a broad backlash against globalisation and an increasing inequality of income distribution perceived to be associated with it. For the reinsurance industry, the two most immediate effects were a sharp devaluation of the British Pound and significantly steepening yield curves. Longer term, should economic nationalism prevail, the impact on global reinsurance as one of the world’s most international businesses could be devastating indeed. Combining modernity with resilience These economic and political challenges presented by the year 2016 were compounded by a continued degradation of the global reinsurance trading environment. Rates as well as terms and conditions kept softening, albeit at a slowing pace. At the same time, the tailwind of belowaverage catastrophe losses vanished whilst interest rates remained at rock-bottom levels, with ever more difficult reinvestment decisions. Against this tumultuous backdrop, Qatar Re continued to benefit from the distinct advantages of a still young and legacy-free operation. Our teams have further optimised the Company’s strategic mix and operating model around our proven value drivers: proximity to our clients and brokers, commitment to excellent financial security, advanced capturing and integration of data, development of knowledge intense products and services and focus on innovative i.e. nonreplicative entrepreneurship. Qatar Re Annual Report 2016

Having said this, as a global franchise, we had our ‘fair’ share in the extraordinary frequency of large losses recorded across the globe in 2016 which left their mark on our underwriting results. At the same time, we fared better than many specialty carriers who lack our global footprint and diversification.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Message from the Chief Executive Officer continued

Given the continuous degradation of global reinsurance market conditions, our focus in 2016 was to consolidate our book of business. Maintaining price adequacy was paramount and inevitably meant that we shed underpriced business. Our ability to replace it with more attractive, mainly project based opportunities testifies to the effectiveness of Qatar Re’s business model. Our distinct focus on knowledge-intense areas and client segments has once more yielded low dependency on highly commoditised and irresponsibly priced lines and segments of business. Slowing premium growth In 2016 we grew our gross premiums written by 8% to USD 1.25 billion, compared with USD 1.16 billion in the previous year. This growth was achieved despite active portfolio management and the subsequent cancellation of unprofitable business. In addition, we weathered the sharp post-Brexit depreciation of the British Pound which shed close to 20% of its value until the end of the year. About 50% of our portfolio is denominated in Pounds. As a result, Qatar Re was disproportionately affected by its devaluation. After an unchanged 70% quota share cession to our parent Qatar Insurance Company (“QIC”), net premiums earned expanded by 43% to USD 351 million, against USD 245 million in 2015. As the price adequacy of traditional low frequency, high severity business continued to erode in 2016, we put even more emphasis on structured reinsurance, with more predictable Qatar Re Annual Report 2016

levels of profitability. In addition, our teams seized capital management, innovative retail distribution and scientific underwriting opportunities with an increasing number of risk carriers and originators, providing solvency relief and structured growth financing solutions with low capital intensity.

Surging net income on the back of strong investment results Net income for 2016 rose to USD 38 million, compared with USD 25 million for 2015, an increase of 52%. This achievement was largely driven by a strong improvement in net investment income which came in at USD 33 million, a three-fold increase from USD 11 million in 2015. This performance partially reflects the growth of our net investment portfolio (cash and cash equivalents plus investments less short-term borrowings) which expanded by 68% year-over-year from USD 625 million to USD 1.05 billion, mainly as a result of premium cash flow from reinsurance business and a capital injection from QIC Group in the amount of USD 200 million. Increased allocations to fixed income securities, improved yields on cash and cash equivalents and higher dividend income following a rebalancing of our equity portfolio also contributed to our strong investment performance. Qatar Reâ&#x20AC;&#x2122;s asset allocation as at 31 December 2016 continues to be conservative and prudent, with fixed income securities accounting for the lionâ&#x20AC;&#x2122;s share of 62%, followed by cash and cash equivalents at 32% and equity investments at 6%. The favourable investment performance has been offset by a decrease in our net underwriting result which amounted to USD 54 million in 2016, after USD 65 million in the previous year. The loss ratio on net earned premiums increased from 67.9% in 2015 to 72.9%, reflecting more frequent large losses and rising catastrophe losses. To some extent the reduced underwriting income reflects our deliberate decision to run relatively high retentions on the facultative book of business because we are part of a strongly capitalised group and committed to our mission as risk underwriters rather than risk traders.

Qatar Re Annual Report 2016

We further strengthened our reserves in 2016, in line with our very conservative and prudent reserving philosophy. As in previous years, our still young portfolio did not enjoy any support from positive prior-year reserve developments which, for the industry as a whole, accounted for another relief of close to five combined ratio percentage points in the 2016 results. By contrast, we further strengthened our reserves in 2016, in line with our conservative and prudent reserving philosophy. In this light, Qatar Reâ&#x20AC;&#x2122;s underwriting performance was robust in 2016 as we clearly benefited from a growing and more resilient, globally diversified multi line franchise.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Message from the Chief Executive Officer continued

Including net commissions, the combined ratio, based on net premiums earned, was 98.4%, compared with 93.8% in 2015. The administrative expense ratio dropped to 13.8% in 2016, down from 20.2% in 2015 even though we continued to invest in analytical, convergence, specialist underwriting and Enterprise Risk Management skills. Measured against gross written premiums this ratio reduced to an excellent 3.8%, an exceptionally low level in the global reinsurance space, in particular for a young company like ours. Qatar Re’s superior cost-efficiency reflects the quality of our teams which benefit from decentralised decision-making and are spared the frustrations and frictional cost of rigid matrix-type or committee-driven environments characteristic of many competitors. Further improved financial strength Our clients continue to benefit from a full parental guarantee by QIC, which was capitalised at USD 2.33 billion as at 31 December 2016. Qatar Re’s own shareholders’ equity stood at USD 772 million by year end, after USD 532 million in 2015. As in the previous year, we will retain our 2016 earnings, further bolstering the capitalisation of the Company.

Qatar Re Annual Report 2016

Strengthened presence in the global reinsurance centres of Bermuda, Dubai and Singapore During the reporting period we have further consolidated our presence in Bermuda, expanding both corporate head office and underwriting functions. As a result, we are reaping increasing benefits from Bermuda’s Solvency II equivalence and the ease of access to the North American insurance market it affords. Our combination of traditional catastrophe and solvency relief products, backed by Qatar Re’s superior security and expertise, continued to prove popular among US cedants. In addition, we have taken two major steps to strengthen our proximity to clients in the Middle East and Africa as well as in Asia by establishing branch offices in the Dubai International Financial Centre and in Singapore. In Dubai, a highly experienced team has joined us and now offers lead capacity in commercial lines for business written out of the regional hub for a number of major international programmes. Cautiously optimistic outlook A reversal of fortunes in global reinsurance markets remains elusive. This state of affairs, compounded by heightening political risks, suggests a cautious outlook. The challenges ahead, however, will put a growing premium on Qatar Re’s entrepreneurial and individualised client approach. We will continue to seek, capture and bring to fruition project based opportunities with insurance entrepreneurs and innovators who require bespoke solvency relief and capital management solutions. Overall, barring any major disruptive events, we expect continued measured and profitable growth for Qatar Re.

We will continue to seek, capture and bring to fruition project based opportunities with insurance entrepreneurs and innovators who require bespoke solvency relief and capital management solutions.

Qatar Re Annual Report 2016

I would like to take this opportunity to thank our parent company for their unwavering commitment to growing Qatar Re in a similar way as they grew their own franchise. Steadily and systematically, they grew QIC into the Middle Eastern regionâ&#x20AC;&#x2122;s No. 1 insurer by net profit, premium income and assets. My particular gratitude goes to our brokers and clients. The trust and loyalty they have shown has enabled us to become a global Top 30 reinsurer within just four years. Finally, I am very grateful to our staff. Throughout the Companyâ&#x20AC;&#x2122;s growth and consolidation they have kept their commitment and willingness to go the extra mile, as characteristic of a fast-paced start-up environment. I look forward to working with all our stakeholders towards our ultimate objective of boosting diversity, efficiency and entrepreneurialism across the worldâ&#x20AC;&#x2122;s insurance and reinsurance markets. Gunther Saacke Chief Executive Officer and Board Member

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Strategy

Key activities and achievements During 2016, we continued to make progress against our main strategic objectives while also delivering a solid overall result.

Our focus has been on building a truly contemporary reinsurer that is resilient and less vulnerable to adversity than market tracking competitors. To this end, during 2016 we have made progress by improving our proximity to clients, strengthening our capital base and continuing to support insurance entrepreneurs. Proximity to clients and brokers: –– Established our branch in Singapore. –– Started preparations for our London branch application. –– Brought in experienced talent to prepare our facultative business for further growth. –– Increased the breadth of our underwriting capability in Bermuda. Strengthening our capital base: –– Agreed a capital injection of USD 200 million from our parent in Q4 2016. –– Set in motion a Tier 2 capital raise of USD 450 million to complete in Q1 2017 which both increased our financial capacity and diversified our investor basis with a heavy investor participation from Asia and Europe. –– Migrated our internal capital model to adoption as a ‘business as usual’ tool. –– Continued to grow a well-diversified, volatility protected book that is prudently reserved. Supporting insurance entrepreneurs: –– We continue to bring on new clients who benefit from the capital relief we provide in the form of reinsurance based on the principle of alignment of interests. –– We focus on the collection and aggregation of data to make knowledge intense underwriting decisions. –– In collaboration with our insurance affiliate QIC Europe Limited, we bring reinsurance solutions to fields that are typically too small to take advantage of the reinsurance markets, such as specialist areas of our agricultural book.

Financial strength

Qatar Re continues to benefit from a rating of ‘A/Stable’ from S&P Global Ratings and ‘A (Excellent)’ from A.M. Best. These ratings reflect the underlying financial strength of Qatar Re and the exceptional support provided by our ultimate parent QIC. As at 31 December 2016, the Company’s healthy capital position was reflected by its capital coverage ratios. Qatar Re has a capital coverage ratio of 436% against the Bermuda Solvency Capital Requirement of USD 186 million.

Qatar Re Annual Report 2016

Even with this strong financial position, at the end of 2016 the Company actively pursued an initiative to raise Tier 2 capital. This process completed during the first quarter of 2017 with the issue of USD 450 million Reg S Perpetual Subordinated Tier 2 Fixed Rate Reset Notes guaranteed on a subordinated basis by QIC to institutional investors. The issue attracted over 290 orders of more than USD 6.5 billion in total, and achieved a balanced global distribution of investors comprising 30% Asia, 29% UK, 20% Middle East, 19% Continental Europe and 2% from other regions. The initial coupon has been set at 4.95% per annum. The rationale for this further strengthening was multi-faceted: –– Preparation for continued careful growth in those lines where market conditions allow. –– Market conditions allowing for an overall reduction in cost of capital to the QIC Group. –– Diversification of investor base. Qatar Re continues to benefit from a whole account quota share agreement with QIC. In 2016, this was a 70% quota share and in 2017 Qatar Re has reduced this participation to 50% in order to improve capital efficiency.

Business model

Our business model and operational structure are designed to provide proximity to clients and optimise operational and cost efficiency. This is based on the principle of distributed decision making within a simple, responsibility focused, organisational structure. Our underwriting teams are based in Bermuda, Dubai, Singapore and Zurich – and we have plans to open an underwriting branch in London during 2017, subject to regulatory approval. In each underwriting location we have local multi-disciplinary support, such as underwriting operations, claims and finance. Our main operational support hubs are in Zurich and Doha. In 2017, we anticipate London will also become an important operational support hub, alongside the establishment of the underwriting branch. Our Head Office is in Bermuda. This is where we routinely hold our Board and Executive Committee Meetings and where corporate functions such as Risk Management, Outwards Reinsurance, Compliance and Company Secretarial are based.

Qatar Re Annual Report 2016

Following the move of our domicile to Bermuda in November 2015, Qatar Re has adapted to become operationally independent of the wider QIC Group, with the exception of investment management which continues to be outsourced to our affiliate, Qatar Economic Advisors. While operationally independent, Qatar Re contributes to, and participates in, a range of Group activities and initiatives, and seeks to take advantage of Group synergies where appropriate. Current examples include Qatar Re migrating to a software platform used by an affiliate and the wider group making greater use of Qatar Re’s exposure management technology.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Underwriting overview Qatar Re remains a core operation for the QIC Group providing a fundamental source of diversification and long term profitable growth.

The Company underwrites a broad and well diversified international portfolio of treaty and facultative reinsurance, mitigating the volatility which can be experienced in a less diverse portfolio. The portfolio of business consists of largely low volatility business, much of it being Quota Share business with limited risk appetite for Catastrophe retention. Qatar Re’s general philosophy is to strictly manage underwriting risk through rigorous underwriting techniques based around high quality modelling and exposure management. The expectations of underwriting performance are explicit for each risk assumed and where the Company delegates underwriting, such as for certain North American lines, it does so within specified parameters and limits. Underwriting exposures are managed using defined limits and by actively monitoring correlation and aggregation risk. The Company focuses on lines of business where specialist underwriting skills drive results via pricing and risk selection. The Qatar Re team consists of experienced underwriters, actuaries, risk managers, claims professionals, engineers and various other specialists, combining in-depth technical and business expertise with industry experience across all markets. Having established and grown the business, the Company maintains a discipline of not ‘defending’ and retaining poorly performing accounts. Measures are in place to assess and address weaknesses and vulnerabilities where they exist. The Company looks to grow in classes and sectors which are performing well, and will not hesitate to reduce exposure in poorly performing accounts and lines of business. Scale, infrastructure and rating allow access to business globally which supports the ability to grow while continuing to focus on pricing and risk selection. The Company has developed an infrastructure and has extended its reach geographically, which enables diversification from a heavy preponderance of European business. Qatar Re shares clients’ values in localised presence through a global network that supports a ‘close-to-cedant’ vision by providing proximity to clients’ core operations through a head office in Bermuda, and branch and representative offices in Dubai, London, Zurich and Singapore.

Qatar Re Annual Report 2016

Gross written premiums Gross written premiums by business segment for the reporting period 2016 2015 USD (’000) USD (’000)

Line of Business

46,055 56,077 157,011 682,606 94,709 66,670 56,973 59,755 29,515 1,249,371

48,266 31,318 118,860 605,048 39,974 158,480 44,263 51,490 58,505 1,156,203

During 2016 the Company continued to deliver solid portfolio growth across its key lines of business, geographical markets and client segments. With the very challenging market environment in 2016, where there was no shortage of capacity and with reinsurers protecting their book and income, Qatar Re was successful in increasing its gross written premiums by 8.1% to USD 1.25 billion, compared with USD 1.16 billion in 2015. This growth was achieved despite the sharp depreciation of the British Pound which had an adverse impact on the UK sourced business. As the price adequacy of traditional ‘volatility’ business continued to deteriorate in 2016, Qatar Re has increased its focus on structured reinsurance and the more predictable levels of profitability it generates. Gross written premiums by business segment for the reporting period 2016 2015 USD (’000) USD (’000)

Territory

Africa Americas Asia Europe Oceania Total

11,681 159,788 207,223 861,997 8,682 1,249,371

8,985 180,308 167,255 790,795 8,860 1,156,203

Property Catastrophe and North American Property

The Property Catastrophe and North American Property portfolios showed moderate growth and performance in 2016. North American primary rates continue to strengthen due to catastrophe losses, which has improved Qatar Re’s margins for profit.

Qatar Re Annual Report 2016

Qatar Re has been increasingly approached to price on renewals which demonstrates a favourable sign of acceptance from the market. In addition, the majority of the property per risk North American book was comprised of new business in 2016 as we see brokers seeking Qatar Re out to discuss business opportunities. Qatar Re is expanding its reach in the North American broker market as the Company demonstrates the ability to write multiple lines which, in turn, provides a broader reach with greater frequency in contacting the producing brokers and clients. As capital increases Qatar Re has a greater profile in the USA that will make Qatar Re an acceptable counterparty to certain larger companies that only consider ceding risk to reinsurers of a certain size.

Property (Outside North America)

The Company continues to grow its International Property book in a very competitive market through a build out of its MGA business model to select risk from attractive primary business, while controlling prices and acquisition costs. Premium grew from USD 118.9 million in 2015 to USD 157.0 million in 2016.

Casualty

The Company continues to grow the casualty book at a steady rate. Over 80% of the casualty business is derived from International Motor which has performed at a 90.5% technical ratio. Reserves at year end have not been adjusted in line with the UK Government decision to reduce the Ogden discount rate from 2.5% to minus 0.75%. This impact will be reflected in the 2017 results. This reduction in the Ogden discount rate has contributed to the rate increases that are being seen in 2017. Qatar Re have expanded their exposure in the North American market in late 2016 through the expansion of the underwriting team. As a result, further opportunities are expected to materialise in the North American market, especially with the added capital raise in the first quarter of 2017.

Marine and Aviation

The Marine book saw a significant growth in premium from USD 16.1 million in 2015 to USD 49.41 million in 2016. The Marine pro rata treaty book has more than doubled and has performed relatively well despite the Tullow Oil and Tianjin large loss. The Company remains very selective in its choice of business, focusing on large company underwriting experience now nestled in the smaller operations. The Company also continues its reduction in the Offshore Energy footprint and Marine Major Risks footprint through a combination of declinature and line reduction. There was similar growth in the Aviation book from USD 23.9 million in 2015 to USD 45.3 million in 2016. In Aviation the Company continues its focus away from the high end major airline exposures where rates are not as attractive.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Underwriting overview continued

Agriculture

Margins on Agriculture business came under significant pressure in 2016 which was reflective of reinsurers looking to diversify away from the traditional lines. This has resulted in a reduced exposure in North American business with growth in diversifying lines such as pet and equine. The overall result has been a considerable reduction in the total amount of premiums that the Company has written in 2016 (USD 66.7 million) versus 2015 (USD 158.5 million).

Credit and Financial Risks

Credit and Financial Risks consist mainly of Credit and Surety business and Structured Lines of reinsurance. Market results within Credit and Surety have remained stable over the last couple of years. Premium written shows a marginal increase of 33.5% over 2015. However margins for reinsurers have become tighter due to a deterioration in general terms and conditions. Nevertheless, Credit and Surety remains very attractive business considering the continuous good performance. Structured Lines wrote premiums of USD 11.6 million (2015 USD 10.3 million). The Company maintains a disciplined underwriting strategy of only considering Structured deals with substantial margins and providing opportunities to further diversify its portfolio.

Facultative

Qatar Re has recorded premium of USD 59.8 million as Facultative reinsurance in 2016. This premium has been split into the general area of Property (USD 30.2 million), Energy (USD 26.9 million) and Engineering (USD 2.6 million). Premium written as Property Facultative close to doubled compared to 2015, while Energy and Engineering saw marginal decreases in business written. The Company continues to assess its global facultative position with a focus on underwriting strategies, portfolio management and the management of related expenses through the optimisation of resources.

Lloydâ&#x20AC;&#x2122;s Capacity

We use our Lloydâ&#x20AC;&#x2122;s Corporate Member to facilitate the provision of third party capital to carefully selected businesses as well as providing reinsurance to other capital providers to such businesses. The related premiums for 2016 amounted to USD 29.5 million (2015 USD 58.5 million).

Qatar Re Annual Report 2016

Summary income statement

Financial performance overview Qatar Re has shown consistent growth in net profits since inception. The net profit for 2016 was USD 38.0 million at a 98.5% combined ratio, compared to net profit of USD 25.0 million with a combined ratio of 94.2% in 2015.

Gross Written Premiums Net Earned Premiums Net Claims Incurred Net Commission Net Underwriting Result Operating Expenses Net Foreign Exchange Investment Return Net Profit Ratios: Claims Ratio Commission Ratio Expense Ratio Combined Ratio

2016 USD (â&#x20AC;&#x2122;000)

2015 USD (â&#x20AC;&#x2122;000)

1,249,371 351,242 (256,032) (41,181) 54,029

1,156,203 245,036 (165,631) (14,673) 64,732

(49,847) 1,173 32,691 38,046

(48,349) (2,073) 10,673 24,983

72.9% 11.7% 13.9% 98.5%

67.6% 6.0% 20.6% 94.2%

Net profit USD millions

38.0 25.0 15.9

2011

3.3 2012

0.5 2013

2014

2015

2016

94.2

98.5

2015

2016

(9.9)

Combined ratio % 121.3

2011

Qatar Re Annual Report 2016

111.6

118.5

2012

2013

108.2

2014

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Net technical result USD millions

Financial performance overview

64.7

27.7

continued 2011 (14.5)

The deterioration in the combined ratio mainly reflects a higher than expected number of risk losses reported during the year. However, robust underwriting in the soft market and the absence of any major catastrophe events during the financial year held the underwriting performance in the positive despite a large loss impact of over USD 95 million. Despite this deterioration in the combined ratio, net profit for the year has increased directly as a result of improved investment performance in 2016 compared to 2015.

Net underwriting results Gross written premiums USD millions 1,156.2

115.6

103.2

2011

2012

336.6 2013

1,249.4

535.9

2014

2015

2016

Qatar Re Annual Report 2016

54.0

2012 (3.9)

11.2 2013

2014

2015

2016

The net underwriting result decreased from USD 64.7 million in 2015 to USD 54.0 million in 2016. The loss ratio on the Company’s net earned premiums increased from 67.6% in 2015 to 72.9% in 2016. These results reflect an unusual number of individual attritional losses in line with the rest of the market’s experience and is inclusive of large loss impact of over USD 95 million. Included in the large losses were losses of USD 14.0 million from the Tullow Oil damaged floating platform, USD 14.0 million from the E.On power station loss, USD 6.5 million for property catastrophe exposure on Hurricane Matthew, and USD 2.8 million on the Canadian wildfires. The Company will continue to adopt a disciplined underwriting approach which will look for continued growth in classes and sectors which are performing well and a reduction in our commitment to poorly performing sectors by declining or discontinuing some accounts. The growth in Agriculture reinsurance in 2015 was primarily recorded in the US where margins were attractive. Margins came under considerable pressure in 2016 as reinsurers looked to diversify away from the traditional lines, resulting in a significant reduction in the business written in 2016 with premiums amounting to USD 66.7 million in 2016 versus USD 158.5 million in 2015. The net loss ratio for the year amounted to 71.1% and the net commission ratio 13.7%. The Casualty lines including Motor showed steady growth in premiums written by 13% year-on-year, amounting to USD 682.6 million in 2016 versus USD 605.0 million in 2015. The growth was partially deflated by the devaluation of the British Pound which impacted much of the UK Motor premiums. The net loss ratio for 2016 amounted to 76.4% with an 11.1% net commission ratio. Gross written premiums in the Marine and Aviation line saw growth from USD 40.0 million in 2015 to USD 94.7 million in 2016. In Aviation the Company continues its focus away from the high end major airline exposures where rates are not as attractive. The Aviation loss ratio for 2016 was 73.7% with a commission ratio of 10.5%. The Marine pro rata treaty book has more than doubled and has performed relatively well despite the Tullow Oil large loss. We have been very selective in our choice of business, focusing on large company underwriting experience now nestled in the smaller operations. The Marine combined net loss and commission ratio amounted to 88.4%.

The Property lines consisting of Property Cat, Property North America and Property International saw steady growth during the year from a total gross premium of USD 198.4 million in 2015 to USD 259.1 million in 2016. Property Cat contributed USD 46.1 million in premium written with a loss ratio of 35.5%, absent any large major catastrophe events. The combined Property lines saw a net loss ratio of 72.4% with a net commission rate of 10.4%. Credit Surety written premium increased to USD 45.4 million in 2016 versus USD 34.0 million in 2015. Favourable loss development on prior years contributed to the reduction in the loss ratio down to 40.1%.

Net investment income 2016 USD (’000)

Interest Income Dividends Advisory Fees Net Realised Gains/(Losses)

37,975 3,855 (2,606) (2,476) 36,748 (4,057) 32,691

Financing Costs Net Investment Income

2015 USD (’000)

22,283 1,873 (1,704) (9,568) 12,884 (2,211) 10,673

Net investment income grew significantly over the year, from USD 10.7 million in 2015 to USD 32.7 million in 2016. Net investment income USD millions 32.7

27.4 19.6 8.3 2011

13.2

2012

10.7 2013

2014

2015

2016

The Company has experienced stable investment returns on the back of improved interest income on time deposits and on an improved bond book. This experience coupled with lower write downs of equity investments has resulted in an increase in net investment income to USD 32.7 million in 2016 (2015: USD 10.7 million).

Qatar Re Annual Report 2016

The improvement in the overall return is also impacted by an increase in invested assets comparing year-on-year, as a result of the merger with Antares Re in December 2015 as well as an addition capital contribution of USD 200 million in the fourth quarter of 2016 (refer to the balance sheet analysis).

Operating and administrative expenses

Operating and administrative expenses can be summarised as follows:

Employee Related Costs Rental Expenses Maintenance and IT Expenses Other Expenses Operating and Administrative Expenses Foreign Exchange (Gain)/Loss Total Expenses

2016 USD (’000)

2015 USD (’000)

33,434 3,411 3,180 8,824

30,986 2,796 2,845 10,784

48,899 (1,173) 47,726

47,411 2,072 49,483

Increases in employee related costs is reflective of the Company’s recruitment in the key growth areas within the Company. The headcount at the end of 2016 totalled 161 versus 105 at the end of 2015. Rental expenses have increased by USD 0.6 million which has been mainly driven by the opening of new offices in Singapore and Dubai, and the expansion of the office in Bermuda. Other expenses include travel expenses of USD 3.0 million (2015: USD 1.1 million) which has increased in line with our international expansion. Offsetting this increase is a decrease of USD 4.0 million in intercompany service charges as the Company has become more self-sufficient with the increase in its personnel and internal operations. The Company experienced a foreign exchange gain of USD 1.2 million in 2016 versus a loss of USD 2.1 million in 2015. The Company does not speculate on foreign currency and actively hedges a large portion of its foreign currency assets and liabilities. The foreign exchange gain has been the result remaining net liability positions in foreign currency at a time that the US Dollar has strengthened. One major factor that has played a significant part in the strengthening of the US Dollar has been the impact of the ‘Brexit’ vote and the subsequent devaluation of the British Pound.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Reinsurance Contract Assets as presented on the balance sheet consist of reinsurance recoverable balances and unearned ceded premiums on business ceded outwards to reinsurers. The growth in these assets are in line with growth of inward business assumed by Qatar Re and the related Reinsurance Contract Liabilities consisting of loss reserves and unearned assumed premium. The relationship between the reinsurance assets and the liabilities remains relatively consistent at 70% for 2016 versus 69% for 2015.

Financial performance overview continued

Summary balance sheet

The Net Reinsurance Contract liability position amounted to USD 478.9 million at the end of 2016 versus USD 386.1 million at the end of 2015. The movement in the net liability position has been driven by an occurred net loss of USD 256.0 million less net paid losses in the year of USD 138.6 million. The historic event of ‘Brexit’ has led to a devaluation in the British Pound which gave rise to the reduction of British Pound denominated reserves. This in part has been a major contributor in the positive foreign exchange impact on reserves and the reduction of USD 24.7 million on net reserves.

2016 USD (’000)

2015 USD (’000)

Cash and Cash Equivalents Investments Reinsurance Contract Assets Insurance and Other Assets Total Assets

717,698 714,595 1,129,827 1,076,110 3,638,230

319,699 721,987 855,141 990,378 2,887,205

Reinsurance Contract Liabilities Provisions, Reinsurance and Other Payables Due to Related Parties Short Term Borrowing Total Liabilities

1,608,685

1,241,290

A large portion of the Insurance and Other Assets consists of net premiums receivable and premiums withheld totalling USD 921.2 million and USD 839.1 million for 2016 and 2015, respectively. The increase in receivables of USD 82.2 million is in line with the overall increase in business written for the year.

146,399 727,001 384,392 2,866,477

138,776 558,979 416,412 2,355,457

The amount due to related parties consists primarily of reinsurance premiums net of reinsurance recoveries due to our parent company QIC under and intercompany retrocession agreement. Outstanding amounts are interest free and are settled on a regular basis.

771,753

531,748

3,638,230

2,887,205

Equity Total Liabilities and Equity

Total investments inclusive of cash and cash equivalents grew from USD 1,041.7 million at the end of 2015 to USD 1,432.3 million at the end of 2016. The growth of USD 390.6 million has been fuelled by net cash inflow from underwriting activity, investment returns during the year, and an additional capital injection of USD 200 million in the fourth quarter of 2016. Our investment strategy is heavily weighted towards fixed income and cash deposits, with concentration limits also in place. We invest in a combination of sovereign and high investment grade fixed income securities, seeking enhanced investment returns through access to certain Gulf Cooperation Council (“GCC”) country investments. The balance of the portfolio is invested in equities and mutual funds.

Qatar Re Annual Report 2016

As a part of the Company’s margin trading strategy, the Company uses short-term borrowings to finance its fixed income securities. The amount of these borrowings amounted to USD 384.4 million and USD 416.4 million at the end of 2016 and 2015, respectively. Shareholder equity USD millions 771.8 531.7

65.9 2011

120.9

166.2

2012

2013

225.5 2014

2015

2016

Shareholders’ Equity has increased from USD 531.7 million at the end of 2015 to USD 771.8 million at the end of 2016. Of this increase in equity of USD 240.1 million, USD 38.0 million was derived from net profits and USD 2.0 million from the appreciation in fair value of available-for-sale investments. The remaining increase is as a result of an additional capital contribution from the parent company QIC of USD 200.0 million in the fourth quarter of 2016.

Risk management framework

Risk management Strong risk management has always been an important part of Qatar Re’s philosophy. In 2016, we added additional team members with enterprise risk management and capital management skills.

Qatar Re maintains a robust and effective risk management framework. Risk governance is a major component of the overall risk management framework and defines clear roles and responsibilities for the oversight and management of risk. The risk management framework is embedded throughout the Company and allows for an integrated approach to the identification, assessment, control and mitigation of risk. The Risk Register specifies the overall risk profile of Qatar Re. The quarterly Risk Register attestation process facilitates the Risk Management Function in the delivery of independent challenge of the risk owners’ assessment of the Company’s inherent and residual risk profile and control environment. Further information on the risk management framework can be found in sections 2.3 and 3.2 of the Financial Condition Report.

Risk appetite and tolerance

The concepts of risk appetite and tolerance are central to our approach to deploying capital. We define risk appetite as the total level of risk that the Company is prepared to seek in the pursuit of its strategic objectives. The risk appetite and tolerance statements were reviewed and updated during 2016. The revised statements are more granular and comprehensive, covering all material categories of risk to which we are exposed. These statements are embedded within the Company. The below table highlights our main categories of risk appetite and tolerance. We also define risk appetite and tolerance statements relating to strategic and reputational risk, and did not operate outside appetite on any of these items during 2016.

Principal risks

Qatar Re’s principal risks are measured and assessed within the Commercial Insurer’s Solvency Self-Assessment (“CISSA”) processes. Insurance risk, which includes Premium, Reserve and Catastrophe risk, is the predominant risk to which Qatar Re is exposed, with relatively limited investment risk. Our assessment of the capital required to support these risks is based on the Company’s internal capital model. The graph below shows the key drivers of our own view of the capital required to support each category of risk to which we are exposed, demonstrating that insurance risk drives 79% of our CISSA capital. Principal risks % Premium and Reserve risk Catastrophe risk Market risk Credit risk Operational risk

8% 7% 6% 53% 26%

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Risk management continued

In comparison to many other Bermuda Class 4 reinsurers, Qatar Re has a relatively modest risk appetite for natural catastrophe events, with a greater appetite for less volatile lines attracting mostly attritional losses. To illustrate this point, in 2016 Qatar Re’s largest loss caused by a single natural catastrophe was only its fourth largest loss overall. This related to a hail storm in the Netherlands, for which the Company’s estimated loss is circa USD 7.5 million. The large motor proportional book is designed to be relatively predictable, with exposure limited to a corridor of tail risk. This book was not impact by the Q1 2017 reserve adjustments made as a result of the change in the Ogden discount rate.

We manage our exposure to insurance risk through our overall underwriting control framework which includes defined limits, pricing models, peer review processes and oversight from the Underwriting/Portfolio Management Committee (“UPMC”). The Exposure Management Framework defines the methodologies used by Qatar Re to measure its risk exposure and to ensure that the aggregation of risk is well understood. The exposure limits set out in our risk appetite and tolerance statements are monitored on a monthly basis using our Exposure Management Tool, which records aggregated exposure limits and models our exposure to risk over various return periods. The Exposure Management Tool also enables us to monitor our exposure to a range of Realistic Disaster Scenarios. Reserve risk is managed within our Actuarial Function through defined reserving best practices which are overseen and approved by the Reserving Committee. Qatar Re runs a well-diversified portfolio of insurance risks, which can be seen from the below graph.

Outside of Insurance risk, Qatar Re is exposed to QIC in its capacity as the sole investor (prior to the issuance of third party capital in the first quarter of 2017), as the most significant outwards reinsurer, and through our credit rating being derived from the rating of QIC. Operational dependency on the group has reduced over 2016, and is now limited to only one material intra-group outsourcing contract relating to investment advisory services. Financial dependency is also reducing, with the reduction in the amount of risk ceded to QIC for the 2017 underwriting year, and with the successful diversification of our investor base through the third party capital raise. Further detail on our risk profile can be found in section 3 of the Financial Condition Report (page 88).

Underwriting years 2015

46%

2016

46%

Motor Property Agriculture Property Catastrophe

Qatar Re Annual Report 2016

Casualty XL Marine and Aviation Lloyd’s

8% 6%

9% 12%

11% 5%

Property (outside N. America) Faculative

6% 8%

5% 5%

4% 4%

3% 3%

North American Property Credit and Financial Risk

Summary of status against risk appetite and what we have done to manage the risk category during 2016: Risk increased since 2015 Risk decreased since 2015 Risk remained the same since 2015 Risk catergory and description

Key trends and status of risk appetite during 2016

Overall risk appetite and tolerance Measures which focus on capital requirements and probability of loss.

Solvency coverage improved since 2015 following a capital injection during Q4 2016. –– 436% coverage of Bermuda Solvency Capital Requirement. –– Minimum of 173% of a targeted capital requirement. –– The internal model view of the expected frequency of not making a profit is one year is one year less frequent than the frequency allowed for within our appetite.

Within appetite.

Insurance risk exposure measures Qatar Re limits exposures on various bases including modelled Probable Maximum Loss (“PML”) by peril region and programme limits.

Catastrophe risk exposure increased in aggregate since 2015, but is lower as a proportion of GWP reflecting increasing level of diversification. Maximum modelled 1 in 250 PML was 85% of appetite (net of external reinsurance, gross of affiliated reinsurance).

Within appetite.

Operational risk measures A comprehensive set of risk measures are deployed, including multiple probability and severity data points.

Broadly consistent with 2015 despite growth. The key change has been improving the quality of internal controls.

Within appetite.

Exposures to reinsurers Qatar Re’s outwards reinsurance programme is focussed on highly rated or fully collateralised reinsurers, with risk appetite and tolerance statements to set limits.

Broadly consistent with 2015 –– Outwards reinsurance is now centrally managed by a dedicated team. –– Our external reinsurance exposures remain quite limited and are with highly rated carriers. –– All non-affiliated single counterparty exposure is at a level which is less than half of our defined appetite.

Within appetite.

Investment and concentration risk Investment appetite is conservative but some geographic concentrations exist.

Reduced exposure to equities and decreased concentration risk since 2015. We operated outside our appetite but within tolerance in relation to regional concentration of investments, though country level exposures remained within appetite.

Outside appetite but within board approved tolerance.

Liquidity risk Qatar Re constantly manages its asset and liability matching and maintains a significant portion of investments in highly liquid assets.

Broadly consistent with 2015. We now also manage our liquidity risk with reference to our PMLs.

Within appetite.

Foreign exchange risk Our foreign exchange risk is measured by assessing the probability of foreign exchange losses and defined limits are in place for asset and liability matching by currency.

Reduced exposure to currency mismatch risk by implementing further hedges of British Pound denominated liabilities. Modelled probability of foreign exchange losses is well within appetite.

Within appetite.

Qatar Re Annual Report 2016

Trend in 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Chairmanâ&#x20AC;&#x2122;s introduction to corporate governance Qatar Re is governed using a typical governance structure for a Bermudian company with two non-independent Non-Executive Directors, three independent Non-Executive Directors and an Executive Director.

Qatar Re Annual Report 2016

The Board has designated various committees to support its work and the Board and committees meet no less than four times per year, with at least three meetings taking place in Bermuda. On the advice of the Board, the CEO has assembled three management committees to support him with the management of the Company. A summary of the governance structure is shown on the following page. During 2016, substantial strengthening of the second and third lines of defence took place as Qatar Re now operates as a standalone regulated entity in Bermuda. This involved the appointment of a new Chief Risk Officer, new Head of Compliance and PwC as the outsourced internal audit function. In December 2016, the Board approved the appointments of Richard Sutlow as Chief Financial Officer and Sandeep Nanda as Chief Investment Officer, both joining from affiliates. Mr. Sutlow formally took up his role from 1 March 2017 and Mr. Nandaâ&#x20AC;&#x2122;s commencement is pending as he completes his existing responsibilities. In early February 2017, Alastair Speare-Cole resigned as Chief Underwriting Officer and from the Board. On 14 February, the Board appointed Luke Roden as Chief Underwriting Officer for Short Tail Classes and Michael van der Straaten as Chief Underwriting Officer for Long Tail and Specialty Classes.

Board and committee structure

Board of Directors

Purpose: The Board is responsible for setting corporate strategy, reviewing and monitoring managerial performance at an acceptable level of risk. The Board will direct and govern Qatar Re’s activities and protect the interests of stakeholders.

Investment Committee

Audit Committee

Purpose: To assist the Board in the coordination and oversight of Qatar Re’s investment portfolio.

Purpose: To assist the Board in its oversight of the integrity of the financial statements, effectiveness of internal control and oversight of internal and external auditors.

Qatar Re Annual Report 2016

Risk and Capital Committee

Chief Executive Officer

Purpose: To assist the Board overseeing and challenging the risk management and capital management activities.

Reserving Committee

Executive Management Committee

Underwriting/ Portfolio Management Committee

Purpose: To assist the CEO in the oversight and management of technical reserves in Qatar Re’s financial balance sheet.

Purpose: To assist the CEO in ensuring the effective management of the organisation in accordance with its objectives and values.

Purpose: To assist the CEO in developing and setting the underwriting policies and strategy and providing oversight of the overall portfolio.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Board of Directors The Company’s continuation from the Qatar Financial Centre to Bermuda led to the formation of a new Board in late November of 2015. The current Board includes three independent Non-Executive Directors, two Non-Executive Directors (non-independent) and one Executive Director, providing an appropriate balance of skills, experience, knowledge and independent challenge.

Qatar Re Annual Report 2016

Executive Director

Non-Executive Directors

Gunther Saacke Executive Director

Sunil K. Talwar Non-Executive Director & Chairman

Gunther Saacke started his career in 1991 with Hannover Re. Over the last two decades he has established a track record of successfully building and integrating high-profile teams of industry specialists across all major property, casualty and specialty lines.

Sunil Talwar is the Qatar Insurance Group’s Deputy CEO, Chief Financial Officer and Head of International Operations. He joined the Group in 1986 and has played a leading role in elevating the Group to its position as one of the leading insurance groups in the region.

More recently he worked as Head of Reinsurance at Endurance in London and served as founding Chief Executive and Chief Underwriting Officer of Novae Re, a multi line reinsurance operation in the Lloyd’s market. Mr. Saacke combines outstanding entrepreneurship with a consistent focus on risk management, portfolio efficiency and optimisation.

In addition to his overall financial and general management responsibilities, Mr. Talwar is responsible for executing the QIC Group’s investment strategy, which involves the management of assets in excess of USD 2 billion. He has been instrumental in driving the Group’s international growth and in implementing its strategy of diversifying its revenue base.

Mr. Saacke graduated in Philosophy from the Sorbonne and the University of Hamburg.

Mr. Talwar is a qualified Chartered Accountant and a member of the Institute of Chartered Accountants of India.

Ali Saleh N. Al Fadala Non-Executive Director

George Andrew Prescott Independent Non-Executive Director

David John Forcey Independent Non-Executive Director

David Sykes Independent Non-Executive Director

Ali Saleh N. Al Fadala is the Qatar Insurance Group’s Senior Deputy Group President and CEO. Mr. Al Fadala joined the Group in 1986 and has held various roles including as Chief Executive Officer of Al Damaan Islamic Insurance Company.

George Prescott was Deputy Chief Executive of Ecclesiastical Insurance Group (“EIG”) from 1997 until his retirement in 2009, following an industry career spanning four decades. In his role with EIG he was responsible for the Group’s investment, finance, internal audit and compliance functions. Mr. Prescott also served for a number of years as a Non-Executive Director on the boards of Mapfre Reinsurance, Commerce Insurance (US), Mapfre USA and was a member of the Association of British Insurers’ Investment Committee. He currently holds a number of non-executive appointments.

David Forcey is a senior market figure with over four decades of experience in international and reinsurance broking. Prior to his retirement he held various senior positions and directorships at Aon Limited, including as Managing Director, Deputy Chairman and Chairman. Before joining Aon in 1996, Mr. Forcey held senior roles with Steel Burrell Jones Group plc and Jardine Thompson & Graham Limited.

Mr. David Sykes has 20 years’ experience in insurance management and accounting in Bermuda. Most recently he was Senior Vice President with Marsh IAS Management Services in Bermuda. Mr. Sykes has worked with a variety of insurance companies including those in the professional sports, healthcare, energy and marine industries. He has also been instrumental in providing formation and management services to several new insurance and reinsurance companies in Bermuda including sidecars, Lloyds’ syndicates and Bermuda reinsurance groups.

Mr. Al Fadala also serves on the boards of various other QIC Group companies and affiliates including Q Life & Medical Company LLC, QIC Europe Limited and Al Damaan Islamic Insurance Company. He is also a director of Qatari Unified Bureau Insurance WLL and Commercial Bank of Qatar QSC.

Mr. Prescott holds a degree in Spanish and French from the University of London. He is also a qualified Chartered Accountant and Fellow of the Institute of Chartered Accountants in England and Wales.

Mr. Forcey is an Associate of the Chartered Insurance Institute.

Mr. Sykes holds a degree in Applied Mathematics from the University of Warwick. He is also a Member of the Institute of Chartered Accountants of England and Wales and an Associate of the Chartered Insurance Institute.

Correct at time of publishing and reflects Alastair Speare-Cole’s resignation from the Board of Directors with effect 6 February 2017.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Risk and Capital Committee

Committees of the Board The Board has appointed various committees to assist it in the effective discharge of its duties, although it continues to retain ultimate responsibility. Terms of Reference have been established for each committee.

Audit Committee

The Audit Committee is composed of George Prescott (Chairman), David Forcey and David Sykes and meets at least quarterly. The Committee’s role is to assist the Board in providing independent oversight of the effectiveness of internal controls and in monitoring the performance of the internal and external audit functions. Its key responsibilities include providing assurance on the integrity and/or activities of: –– Financial reports and statements –– The system of internal control –– Internal and external Audit functions. The Chairman of the Audit Committee reports regularly to the Board on key findings, risks and issues identified by both internal and external audit and by the Committee in the discharge of its oversight responsibilities. The Audit Committee also performs the role of the Remuneration Committee.

Qatar Re Annual Report 2016

The Risk and Capital Committee is composed of George Prescott (Chairman), David Forcey, Sunil Talwar and Gunther Saacke and meets at least quarterly. The Committee’s role is to assist the Board in providing oversight of the Company’s risk management, capital management and exposure management activities. Its key responsibilities include: –– Oversight of current and future potential risk exposures, including determination and monitoring of actual exposures against risk appetite and tolerances –– Providing guidance on the implementation of the risk management framework, including risk appetite and risk reporting –– Ensuring the maintenance of sufficient economic and regulatory capital and allocation of capital –– Promoting a risk aware culture. The Chairman of the Risk and Capital Committee reports regularly to the Board on matters including the status of material risks, changes to the Company’s risk profile and environment, emerging risks, capital adequacy and exposure management.

Investment Committee

The Investment Committee is composed of Sunil Talwar (Chairman), George Prescott, David Sykes and Gunther Saacke and meets at least quarterly. The Committee’s role is to assist the Board in providing oversight of the performance and management of the Company’s investment portfolio. Its key responsibilities include: –– Development and maintenance of an appropriate investment strategy –– Monitoring the implementation of the investment strategy, the asset allocation and the values of the invested assets –– Monitoring the performance of the investment manager and investment advisers. The Chairman of the Investment Committee reports regularly to the Board on matters including the performance of invested assets, material changes in asset allocation, liquidity and market outlook.

Executive Management Committees

The Company has also established various Management Committees, including an Executive Management Committee, Reserving Committee and Underwriting/Portfolio Management Committee. These Committees are composed of senior executives and subject matter experts from within the business and report to the Board and relevant committees via the Chief Executive Officer. Terms of Reference have been established for each committee and they generally meet at least once a quarter.

Governance framework

Committee of the Board Management Committee

Business Operational Function Key Control Function

Board of Directors Gunther Saacke Executive Director

Ali Saleh N. Al Fadala Non-Executive Director

Sunil Talwar Non-Executive Director & Chairman

George Prescott Independent Non-Executive Director

Risk and Capital Committee

Investment Committee

–– Sunil Talwar (Chairman) –– George Prescott –– David Sykes –– Gunther Saacke

David Forcey Independent Non-Executive Director

David Sykes Independent Non-Executive Director

Audit Committee

–– George Prescott (Chairman) –– David Forcey –– Sunil Talwar –– Gunther Saacke

–– George Prescott (Chairman) –– David Forcey –– David Sykes

Executive Management Committee

Risk Management (Andrew Smith)

Internal Audit (Outsourced to PwC)

Underwriting/ Portfolio Management Committee

Compliance (Adam Young)

Reserving Committee

Actuarial (Claude Perret)

Investments

Legal

Finance

Underwriting

Claims

First Line of Defence

Second Line of Defence

Third Line of Defence

Correct at time of publishing and reflects Alastair Speare-Cole’s resignation from the Board of Directors with effect 6 February 2017.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Independent Auditor’s Report The Shareholders Qatar Reinsurance Company Limited Bermuda Report on the consolidated financial statements Opinion

We have audited the accompanying consolidated financial statements of Qatar Reinsurance Company Limited (the ‘Company’) and its subsidiary (together the ‘Group’), which comprise the consolidated statement of financial position as at 31 December 2016 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to our audit of the se consolidated financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of management and those charged with governance for the financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Qatar Re Annual Report 2016

In preparing the consolidated financial statements, management is responsible for assessing the Group‘s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: –– Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control; –– Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control; –– Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management;

–– Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statement s or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern; and –– Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the under lying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Doha – Qatar 18 February 2017

For Deloitte & Touche Qatar Branch

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Consolidated statement of financial position As at 31 December 2016

31 December 2016 USD (’000)

31 December 2015 Restated USD (’000)

1 January 2015 Restated USD (’000)

5 6 7 8, 26 9

717,698 1,073,765 1,129,827 714,595 2,345 3,638,230

319,699 988,004 855,141 721,987 2,374 2,887,205

128,169 305,354 341,878 527,111 1,868 1,304,380

10 20, 26 11 7

146,399 384,392 727,001 1,608,685 2,866,477

138,776 416,412 558,979 1,241,290 2,355,457

79,932 240,684 221,804 536,418 1,078,838

12 13 19 14

1,000 – 695,368 (10,984) 86,369 771,753

1,000 – 495,368 (12,943) 48,323 531,748

200,549 2,652 – (999) 23,340 225,542

3,638,230

2,887,205

1,304,380

Notes

Assets Cash and cash equivalents Premiums and other receivables Reinsurance contract assets Investments Property and equipment Total assets Liabilities and equity Liabilities Provisions, reinsurance and other payables Short term borrowing Due to related parties Reinsurance contract liabilities Total liabilities Equity Share capital Share premium Contributed surplus Fair value reserve Retained earnings Total equity Total liabilities and equity

These consolidated financial statements were approved by the Board of Directors on 14 February 2017 and signed on their behalf by following signatories; Sunil Talwar Chairman

Gunther Saacke CEO and Board Member

Qatar Re Annual Report 2016

Consolidated statement of income For the year ended 31 December 2016

Notes

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired risk reserve Net earned premiums

15 15

Gross claims paid Reinsurance recoveries Movement in net outstanding claims Commission income Commission expense Net underwriting results

31 December 2016 USD (â&#x20AC;&#x2122;000)

31 December 2015 USD (â&#x20AC;&#x2122;000)

1,249,371 (885,810) 363,561 (12,319) 351,242

1,156,203 (812,777) 343,426 (98,390) 245,036

15 15 15 15

(450,155) 311,589 (117,466) 220,041 (261,222) 54,029

(195,716) 123,304 (93,219) 148,389 (163,062) 64,732

Investment income Finance costs Net investment income Total income

16 16 16

36,748 (4,057) 32,691 86,720

12,884 (2,211) 10,673 75,405

Operating and administrative expenses Depreciation Profit for the year

17 9

(47,726) (948) 38,046

(49,483) (939) 24,983

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Consolidated statement of comprehensive income For the year ended 31 December 2016

31 December 2016 USD (’000)

31 December 2015 USD (’000)

Profit for the year

38,046

24,983

Other comprehensive income (OCI) OCI to be reclassified to profit or loss in subsequent period Net changes in fair value of available-for-sale investments Total comprehensive income for the year

1,959 40,005

(11,944) 13,039

Consolidated statement of changes in equity For the year ended 31 December 2016

Balance as at 1 January 2015 Profit for the year Net changes in fair value on available-for-sale investments Total comprehensive income for the year Merger of Antares Re with the Group (Note 24) Shares issued during the year Reduction of share capital (Note 12) Balance as at 31 December 2015 Profit for the year Net changes in fair value on available-for-sale investments Total comprehensive income for the year Contribution from parent company Balance as at 31 December 2016

Qatar Re Annual Report 2016

Share capital

Share premium USD (’000)

Contributed surplus USD (’000)

200,549 –

2,652 –

– –

– – – 32,967 (232,516) 1,000 –

– – – 16,483 (19,135) – –

– – – 1,000

– – – –

Fair value reserve USD (’000)

Retained earnings USD (’000)

Total equity USD (’000)

(999) –

23,340 24,983

225,542 24,983

– – 243,717 – 251,651 495,368 –

(11,944) (11,944) – – – (12,943) –

– 24,983 – – – 48,323 38,046

(11,944) 13,039 243,717 49,450 – 531,748 38,046

– – 200,000 695,368

1,959 1,959 – (10,984)

– 38,046 – 86,369

1,959 40,005 200,000 771,753

Consolidated statement of cash flows For the year ended 31 December 2016

31 December 2016 USD (’000)

31 December 2015 USD (’000) Restated

38,046

24,983

948 (36,748) 221 16 2,483

939 (10,673) 165 – 15,414

(85,761) 92,709 7,512 168,022 184,965 (110) 4,057 188,912

(591,420) 191,609 51,409 337,186 4,198 (32) 2,211 6,377

9,351 (935) 36,748 45,164

(80,281) (1,456) 10,673 (71,064)

Financing activity Net movement in short-term borrowings Additional capital contribution Interest paid Proceeds from new shares issued Net cash generated from financing activity

(32,020) 200,000 (4,057) – 163,923

175,728 – (2,211) 49,450 222,967

Increase in cash and cash equivalents Add: Cash and cash equivalents from business combinations Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year

397,999 – 319,699 717,698

158,280 33,250 128,169 319,699

Note

Operating activities Profit for the year Adjustments for: Depreciation of property and equipment Investment income Provision for employees’ end of service benefits Loss on disposal of property and equipment Movements in working capital Premiums and other receivables Net movement in insurance reserves Provisions, insurance and other payables Due to related parties Cash generated from operations Employees’ end of service benefits paid Finance costs Net cash generated from operating activities Investing activities Net cash movements in investments Purchase of property and equipment Investment income realised Net cash generated from/(used in) investing activities

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016

1. Legal status and principal activities

Qatar Reinsurance Company Limited (the ‘Company’) is a company engaged in the business of reinsurance and registered under the laws of Bermuda Monetary Authority (“BMA”) as a Class 4 insurer. The Company was authorised by the Bermuda Monetary Authority on 24 November 2015 under the name of ‘Qatar Reinsurance Company Limited’ and Registration No. 50896. The Company was originally incorporated in Qatar Financial Centre Doha, Qatar (“QFC”) with the name and registration number of ‘Qatar Reinsurance Company LLC’ and No. 00117 respectively and conducted its business under legal supervision of Qatar Financial Centre Regulatory Authority (“QFCRA”). With effect from 2 December 2015, the Company changed its legal domicile from QFC Qatar to Bermuda, by means of continuance under Bermuda companies law, after obtaining the regulatory approval from QFCRA. The address of Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The consolidated financial statements incorporate the financial information of the Company and its subsidiary (the ‘Group’) all of which having December 31 as financial year end. The Company is fully owned by a single shareholder – QIC Capital LLC, Doha, Qatar. The ultimate parent company of the Group is Qatar Insurance Company S.A.Q. Doha, Qatar. The Company operates from Bermuda and has branches in Switzerland, United Arab Emirates, Singapore and representative office in United Kingdom.

Subsidiary

The Company holds 100% share capital of Qatar Reinsurance Services LLC, Doha Qatar. The subsidiary is a limited liability company registered with QFC, Qatar and primarily engaged in providing management services to the Group. The incorporation date of the subsidiary is 13 October 2015.

Qatar Re Annual Report 2016

2. Application of new and revised International Financial Reporting Standards (“IFRS”)

In the current financial year, the Group has adopted certain new and revised standards and interpretations, which is mainly: –– IAS 14 – IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. The revised standard issued by IASB and IFRIC interpretations which are effective from the accounting period commencing 1 January 2016, had no significant effect on the financial statements of the Group for the year ended 31 December 2016. The following IASB Standards and IFRIC interpretations issued but, are not mandatory for the year ended 31 December 2016, have not yet been adopted by the Group: –– IFRS 9 ‘Financial Instruments’ – was issued to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. IFRS 9 simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Temporary exemption: For the company with insurance contracts as per IFRS 4 and meeting the criterion for engaging in predominantly insurance activities (‘Predominance criterion’), the amendment in 2016 provided the option to continue current IFRS accounting and to defer the application of IFRS 9 until the earlier application of new insurance standards or periods beginning on or after 1 January 2021 (the ‘sunset clause’). The amendment also provides the company with insurance contracts within scope of IFRS 4 with an option to apply IFRS 9 in full nut to make an adjustment to profit or loss to remove the impact of IFRS 9 (‘overlay approach’). The assessment on Predominance criterion are expected to be made at the reporting entity level and at the annual reporting date immediately preceding 1 April 2016 (e.g. 31 December 2015). Thereafter it should not be reassessed, unless there is a significant change in the entity’s activities that would trigger mandatory assessment. As per the initial assessment made by the Group, IFRS 9 Financial Instruments will be applicable for annual periods beginning on or after 1 January 2018;

–– IFRS 15 ‘Revenue from Contracts with Customer’ – IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. –– Certain consequential amendments to IFRS 7 ‘Financial Instrument disclosures’ and IAS 39 (Revised) due to application of IFRS 9, detailed above. –– Annual improvement – 2012-2014 cycle – IFRS 5 ‘Noncurrent Assets Held for Sale and Discontinued Operations’, IFRS 7 ‘Financial Instruments: Disclosures’, IAS 19 ‘Employee Benefits’ and IAS 34 ‘Interim Financial Reporting’. The Group is currently in the process of evaluating the potential effect of these amendments in the presentation of the financial statements. A number of new standards, amendments to standards and interpretations that are not yet effective for the year ended 31 December 2016 have not been applied in preparing these financial statements. The Group does not expect the proposed amendments which will become mandatory for the financial statements for the year 2017 or thereafter, to have a significant impact on the financial statements.

3. Significant accounting policies Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for available for sale financial assets and held for trade financial instruments that are measured at fair value. These consolidated financial statements are presented in United States Dollars (USD and rounded to the nearest thousand (USD ‘000), unless otherwise indicated.

a) Consolidation, translation and financial instruments

i) Basis of consolidation Subsidiaries The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company directly or indirectly as at December 31 of each year. Subsidiaries are all entities over which the Company has control. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiary companies are prepared for the same reporting period as the Company, using consistent accounting policies. Control is achieved when the Company directly or indirectly (i) has power over the subsidiary, (ii) has exposure or rights to variable returns from its involvement with the subsidiary and (iii) has the ability to use its power to affect those returns. The Company reassesses whether or not it controls a subsidiary and facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. All significant intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of income and within equity in the consolidated statement of financial position, separately from Company shareholders’ equity.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

3. Significant accounting policies continued

When the Group ceases to control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in the consolidated statement of income. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to the consolidated statement of income. Business combination Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisitionrelated costs are recognised in consolidated statement of income as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirerâ&#x20AC;&#x2122;s previously held in equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed as at date of acquisition. If the net of the acquisition date amounts of identifiable asset acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree (if any), the excess is recognised immediately in the consolidated statement of income as a bargain purchase gain. Common control transactions Business combinations involving the transfer of business and net assets in a transaction under common control, are accounted for at the carrying values of the underlying net assets of the transferred business. There are no bargain gain or goodwill on transfer of assets recognised by the Group on common control transactions.

Qatar Re Annual Report 2016

Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Groupâ&#x20AC;&#x2122;s cash-generating units (or groups of cashgenerating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in the consolidated statement of income. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. ii) Foreign currency Foreign operations The individual financial statements of the Group entities are presented in the currency of the primary economic environment in which they operate (functional currency). For the purpose of these consolidated financial statements, the results and financial position of each subsidiary are expressed in the presentation currency of the Company. The assets and liabilities of foreign operations are translated to United States Dollars using exchange rates prevailing at the reporting date. Income and expenses are also translated to United States Dollars at the exchange rates prevailing at the reporting date, which do not significantly vary from the average exchange rates for the year. Foreign currency translation reserve is not shown separately under equity due to insignificance of the amount. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences are recognised in other comprehensive income.

Foreign currency transactions Foreign currency transactions are recorded in the respective functional currencies of Group entities at the rates of exchange prevailing at the date of each transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the respective functional currencies at the rate of exchange prevailing at the yearend. The resultant exchange differences are included in the consolidated statement of income. iii) Financial instruments Financial instruments represent the Groupâ&#x20AC;&#x2122;s financial assets and liabilities. Financial assets include cash and cash equivalents, insurance and other receivables and investments. Financial liabilities include short-term borrowings and other payables. Financial asset or liability is initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the consolidated statement of income. Recognition The Group initially recognises cash and cash equivalents, insurance and other receivables, short-term borrowings and other payables at the date that they originate. All other financial assets and liabilities are initially recognised at the trade date or settlement date when the Group becomes a party to the contractual provisions of the instrument. De-recognition The Group derecognises a financial asset when the contractual rights to receive cash flows from that asset expire or it transfers the right to receive the contractual cash flow of that asset in a transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred. Any interest in the transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired. Measurement The measurement of financial assets and liabilities is disclosed under accounting policy for respective financial assets and liabilities.

Qatar Re Annual Report 2016

Fair values of financial instruments Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties on an armâ&#x20AC;&#x2122;s length transaction at the measurement date. Differences can therefore arise between the book values under the historical cost method and fair value estimates. Underlying the definition of fair value is a presumption that an enterprise is a going concern without any intention or need to liquidate, curtail materially the scale of its operations or undertake a transaction on adverse terms. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the profit or loss as they arise. Fair values of marketable investments are determined by reference to their bid prices at the close of business at the reporting date. In respect of unquoted available for sale financial assets, the fair value is determined based on various valuation techniques, as deemed appropriate. The fair values of the Groupâ&#x20AC;&#x2122;s other financial assets and financial liabilities are not materially different from their carrying values. Impairment of financial asset At each reporting date, the Group assesses whether there is objective evidence that any financial asset is impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be estimated reliably. Objective evidence that financial assets are impaired can include default or delinquency by a customer or insurer or reinsurer, indications that the customer or insurer or reinsurer will enter bankruptcy or the disappearance of an active market for a security. In addition for an investment in equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Impairment loss on assets are recognised in the consolidated statement of income and reflected as an allowance against receivables or investments.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

3. Significant accounting policies continued b) Reinsurance operations

i) Premiums and other receivables Premiums and other receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of the receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the consolidated statement of income. After initial measurement, premiums and other receivables are measured at amortised cost as deemed appropriate. Premiums receivables are derecognised when the derecognition criteria for financial assets, as described in Note 3 (a) (iii), have been met. ii) Reinsurance contract assets The Company cedes insurance risk in the normal course of business as part of its businesses model. Reinsurance assets represent balances recoverable from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurersâ&#x20AC;&#x2122; policies and are in accordance with the related reinsurance contract. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Company may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer. The impairment loss is recorded in the income statement. iii) Reinsurance and other payables Reinsurance and other payables are recognised when due and measured on initial recognition at the fair value of the consideration received less directly attributable transaction costs. Subsequently, reinsurance and other payables are measured at amortised cost, as deemed appropriate.

Qatar Re Annual Report 2016

iv) Gross written premiums Gross written premiums are recognised when written and include an estimate for written premiums receivable at period end. Gross written premiums comprise the total premiums receivable for the whole period of cover provided by reinsurance contracts entered into during the accounting period. Gross written premiums also include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods. Premium on reinsurance contracts are recognised as revenue (earned premiums) proportionally over the period of risk coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date are reported as the unearned premium reserve. v) Premiums ceded to reinsurers Reinsurance premiums comprise the total premiums payable for the reinsurance cover provided by retrocession contracts entered into during the period and are recognised on the date on which the policy incepts. Reinsurance premiums also include any adjustments arising in the accounting period in respect of retrocession contracts incepting in prior accounting periods. Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. vi) Reinsurance contract liabilities Reinsurance contract liabilities include the outstanding claims provision and the provision for unearned premium. Reinsurance contract liabilities are recognised when contracts are entered into and premiums are charged. Provision for outstanding claims Provision for outstanding claims is recognised at the date the claims are known and covers the liability for losses and loss adjustment expenses based on loss reports from independent loss adjusters and managementâ&#x20AC;&#x2122;s best estimate. Claims provision also includes liability for claims incurred but not reported as at the reporting date. The liability is calculated at the reporting date using a range of historic trends, empirical data and standard actuarial claim projection techniques. The current assumptions may include a margin for adverse deviations. The liability is not discounted for the time value of money.

Unexpired risks reserve The provision for unearned premiums represents that portion of premiums received or receivable, after deduction of the reinsurance share, which relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the nature and type of reinsurance contract written by the Company. Reinsurance contract liabilities are derecognised when the contract expires, discharged or cancelled by any party to the insurance contract. At each reporting date, the Company reviews its unexpired risk and a liability adequacy test is performed in accordance with IFRS 4 to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the income statement by setting up a provision for premium deficiency. vii) Gross claims paid Gross claims paid include all claims paid during the year and the related external claims handling costs that are directly related to the processing and settlement of claims. viii) Commission earned and paid Commissions earned and paid are recognised at the time the policies are underwritten or deferred and amortised over the same period over which the corresponding premiums are recognised in accordance with the earning pattern of the underlying reinsurance contract.

c) Investment activities

The Group classifies its investments into financial assets at fair value through profit or loss and available for sale financial assets. The classification depends on the purpose for which the investments were acquired or originated. i) Non-derivative financial instruments All investments are initially recognised at cost, being the fair value of the consideration given including acquisition charges associated with the investment.

Qatar Re Annual Report 2016

Financial assets at fair value through profit or loss (Held for trading) Financial assets at fair value through profit or loss include financial assets held for trading and those designated upon initial recognition at fair value through profit or loss. Investments typically bought with the intention to sell in the near future are classified as held for trading. These investments are carried at fair value (marked to market) with any gain or loss arising from the change in fair value included in the profit or loss in the year in which it arises. Available for sale – Quoted Subsequent to initial recognition, investments which are classified ‘available for sale – quoted’ are re-measured at fair value. The unrealised gains and losses on re-measurement to fair value are recognised in other comprehensive income and accumulated under the heading of fair value reserve until the investment is sold, collected or otherwise disposed of, or the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the consolidated statement of income for the year. Available for sale – Unquoted shares and private equity The fair value of these investments cannot be reliably measured due to the nature of their cash flows, these investments are therefore carried at cost less any provision for impairment. ii) Fair value reserve This represents the unrealised gain or loss of the year-end fair valuation of available for sale investments. In the event of a sale or impairment, the cumulative gains or losses recognised under the investments fair value reserve are included in the consolidated statement of income for the year. iii) Investment income Interest income Interest income is recognised in the income statement as it accrues and is calculated by using the effective interest rate method, except for short-term receivables when the effect of discounting is immaterial. Dividend income Dividend income is recognised when the right to receive the dividends is established or when received.

d) General

i) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the consolidated statement of financial position. The cash equivalents are readily convertible to cash.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

3. Significant accounting policies continued

ii) Property and equipment Property and equipment, including owner-occupied properties, are carried at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are charged to the consolidated statement of income during the financial period they are incurred. The assets’ residual values, useful lives and method of depreciation applied are reviewed and adjusted, if appropriate, at each financial year end and adjusted prospectively, if appropriate. Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. Impairment losses are recognised in the consolidated statement of income as an expense. An item of property and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the consolidated statement of income in the year the asset is derecognised. iii) Depreciation Depreciation is provided on a straight line basis on all property and equipment and investment properties, other than freehold land which is determined to have an indefinite life. The rates of depreciation are based upon the following estimated useful lives: Buildings Furniture and fixtures Motor vehicles

15 to 20 years 2 to 5 years 3 years

Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate at each financial year end. iv) Impairment of non-financial assets An assessment is made at each reporting date to determine whether there is objective evidence that an asset or group of assets is impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and an impairment loss is recognised for the difference between the recoverable amount and the carrying amount. Impairment losses are recognised in the consolidated statement of income.

Qatar Re Annual Report 2016

v) Provisions The Group recognises provisions in the consolidated financial statements when the Group has a legal or constructive obligation (as a result of a past event) that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provision is created by charging the consolidated statement of income for any obligations as per the calculated value of these obligations and the expectation of their realisation at the reporting date. vi) Employees’ end of service benefits Provision is made for amounts payable in respect of employees’ end of service benefits based on contractual obligations or respective local labour laws of the group entities, whichever is higher, and is calculated using the employee’s salary and period of service at the reporting date. vii) Taxation Previously, the Company was subject to tax at zero percent as per QFC tax regulations applicable in Qatar. In Bermuda, there is no tax on reinsurance activities based on the tax assurance certificate issued in favour of the Company by Ministry of Finance. viii) Share capital The Company has issued ordinary shares that are classified as equity instruments. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity. ix) Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

4. Critical judgements and key sources of estimation uncertainty

In the application of the Company’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations, that management has made in the process of applying its accounting policies and that have the most significant effect on the amounts recognised in financial statements:

Classification of investments

Quoted securities are classified either held for trading or as available for sale. The Company invests substantially in quoted securities either locally or overseas and management has primarily decided to account for them for their potential long term growth rather than the short term profit basis. Consequently, such investments are recognised as available for sale rather than at fair value through profit or loss. Financial assets are classified as fair value through profit or loss where the assets are either held for trading or designated as at fair value through profit or loss. The Company invests in mutual and managed funds for trading purpose.

Impairment of financial assets

The Company determines whether available for sale financial assets are impaired when there has been a significant or prolonged decline in their fair value below cost. This determination of what is significant or prolonged requires considerable judgment by the management. In making this judgment and to record whether impairment occurred, the Company evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology and operational and financial cash flows.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Claims made under insurance contract

Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and management estimations for the claims incurred but not reported. The method for making such estimates and for establishing the resulting liability is continually reviewed. Any difference between the actual claims and the provisions made are included in the statement of income in the year of settlement. As of 31 December 2016, the net estimate for unpaid claims amounted to USD 287,036 thousand (2015: USD 194,233 thousand).

Qatar Re Annual Report 2016

For certain line of businesses (non-life), in order to estimate the liabilities, the expected loss ratios are calculated for all underlying insurance contracts. The amounts estimated as the difference between the current estimated losses and the reported loses are set aside as the incurred but not reported reserve for the losses that have been incurred but which are not yet known or have still to be reported.

Impairment of insurance and other receivables

An estimate of the collectible amount of insurance and other receivables is made when collection of the full amount is no longer probable. This determination of whether these insurance and other receivables are impaired entails the Group evaluating, the credit and liquidity position of the policyholders and the insurance companies, historical recovery rates including detailed investigations carried out as at reporting date and feedback received from their legal department. The difference between the estimated collectible amount and the book amount is recognised as an expense in the statement of income. Any difference between the amounts actually collected in the future periods and the amounts expected will be recognised in the statement of income at the time of collection. As of 31 December 2016 the net carrying values of insurance receivable and reinsurance receivables amounted to USD 586,546 thousand (2015: USD 770,677 thousand) and provision for impairment on insurance receivable and reinsurance receivable amounted to USD 355 thousand (2015: USD 355 thousand).

Liability adequacy test

At each reporting, liability adequacy tests are performed to ensure the adequacy of insurance contract liabilities. The Group makes use of the best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities in evaluating the adequacy of the liability. Any deficiency is immediately charged to the statement of income.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

5. Cash and cash equivalents Cash in hand and bank balances Time deposits (with original maturity of less than 3 months)

2016 USD (’000)

2015 USD (’000)

65,195 652,503 717,698

27,035 292,664 319,699

2016 USD (’000)

2015 USD (’000)

6. Premiums and other receivables Premiums receivables Due from insurance companies Provision for bad and doubtful receivables Other receivables Deferred commission Deposit premium/Funds withheld Accrued income Prepayments Local debtors Advances against indemnity Others receivables

Qatar Re Annual Report 2016

586,901 (355) 586,546

771,032 (355) 770,677

144,112 334,695 6,972 676 185 67 512 487,219 1,073,765

144,018 68,413 3,953 473 132 38 300 217,327 988,004

7. Reinsurance contract liabilities and reinsurance contract assets 2016 USD (’000)

2015 USD (’000)

485,174 477,130 646,381 1,608,685

181,559 423,567 636,164 1,241,290

338,859 336,409 454,559 1,129,827

118,966 291,927 444,248 855,141

146,315 140,721 191,822 478,858

62,593 131,640 191,916 386,149

2015 Reinsurance contract Retrocedant’s liabilities share USD (’000) USD (’000)

Net USD (’000)

Gross reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

Retrocedants share of reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

Net reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

Movements in claims provision during the year are as follows: 2016 Reinsurance contract Retrocedant’s liabilities share USD (’000) USD (’000)

As at 1 January Claims incurred during the year Claims paid during the year As at December 31

605,126 807,333 (450,155) 962,304

410,893 575,964 (311,589) 675,268

Net USD (’000)

194,233 231,369 (138,566) 287,036

246,338 554,504 (195,716) 605,126

145,324 388,873 (123,304) 410,893

101,014 165,631 (72,412) 194,233

Movements in provision for unearned premium during the year are as follows: 2016 Reinsurance contract Retrocedant’s liabilities share USD (’000) USD (’000)

As at 1 January Premiums written during the year Premiums earned during the year As at December 31

Qatar Re Annual Report 2016

636,164 1,249,371 (1,239,154) 646,381

444,248 885,810 (875,499) 454,559

Net USD (’000)

191,916 363,561 (363,655) 191,822

2015 Reinsurance contract Retrocedant’s liabilities share USD (’000) USD (’000)

290,080 1,156,203 (810,119) 636,164

196,554 812,777 (565,083) 444,248

Net USD (’000)

93,526 343,426 (245,036) 191,916

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

8. Investments

Held for trading investments Managed funds Available-for-sale investments Qatari public shareholding companies Quoted shares – International Bonds Total available for sale investments – net Total

31 December 2016 USD (’000)

31 December 2015 Restated USD (’000)

11,293

12,753

38,165 11,276 653,861 703,302 714,595

63,017 11,862 634,355 709,234 721,987

Motor vehicle USD (’000)

Total USD (’000)

9. Property and equipment Furniture and fixtures USD (’000)

Cost At 1 January 2015 Additions during the year Disposals during the year At 31 December 2015 Additions during the year Disposals during the year At 31 December 2016

3,237 1,456 – 4,693 935 – 5,628

267 – (21) 246 – (191) 55

3,504 1,456 (21) 4,939 935 (191) 5,683

Accumulated depreciation At 1 January 2015 Charge during the year Disposals during the year At 31 December 2015 Charge during the year Disposals during the year At 31 December 2016

1,517 852 – 2,369 914 – 3,283

119 87 (10) 196 34 (175) 55

1,636 939 (10) 2,565 948 (175) 3,338

Net Book Value: At 31 December 2016 At 31 December 2015

2,345 2,324

– 50

2,345 2,374

Qatar Re Annual Report 2016

10. Provisions, reinsurance and other payables Deferred commission Due to reinsurance companies Accrued expenses Other payables: Employees’ end of service benefits (Note 10.1) Board of Directors’ remuneration payable Local creditors Other credit balances

2016 USD (’000)

2015 USD (’000)

100,869 33,442 8,176

100,396 23,762 11,780

537 29 2,336 1,010 146,399

635 – 2,203 – 138,776

2016 USD (’000)

2015 USD (’000)

10.1 Employees’ end of service benefits Balance at the beginning of the year Charge for the year Adjusted during the year Payment made during the year Balance at the end of year

11. Due to related parties

635 221 (209) (110) 537

502 165 – (32) 635

This represents balance due to Qatar Insurance Company S.A.Q. (the ‘ultimate parent company’) and its subsidiaries for transactions which occurred during the year. Pricing policies, terms and payment for these transactions are approved by the parent company’s management. The transactions with related parties are disclosed in Note 21.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

12. Share capital

The authorised share capital of the parent company is 1,200,000 ordinary shares of USD 1.00 each (2015: 1,200,000 shares of QR 1 each). The issued and fully paid in cash share capital is 1,000,000 ordinary shares of USD 1.00 (2015: 1,000,000 ordinary shares of QR 1 each). The movement in the share capital of the Company is as follows: Authorised share capital

No. of shares

73,000,000 shares of QR 10 each – 73,000,000 shares of QR 10 each – 85,000,000 shares of QR 10 each – 500,000,000 shares of USD 1 each (498,800,000) shares of USD 1 each 1,200,000 shares of USD 1 each 1,200,000 shares of USD 1 each

As at 1 January 2014 55,491,290 Issuance of rights shares 17,508,710 As at 31 December 2014 73,000,000 Issuance of rights shares(i) 12,000,000 Share capital before change of legal domicile 85,000,000 Less: Reduction in share capital(ii) – Share capital on change of legal domicile(ii) 85,000,000 Less: Reduction in share capital(iii) (84,000,000) As at 31 December 2015 1,000,000 As at 31 December 2016 1,000,000

Par value

Total in QR (’000)

Total in USD (’000)

QR 10 QR 10 QR 10 QR 10

554,913 175,087 730,000 120,000

152,449 48,100 200,549 32,967

QR 10 – USD 1 USD 1 USD 1 USD 1

850,000 – – – – –

233,516 (148,516) 85,000 (84,000) 1,000 1,000

(i) During 2015, the Company issued 12,000,000 shares at a price of QR 15 (including share premium of QR 5 per share) totalling to QR 180,000 thousand (USD 49,450 thousand) to the existing shareholders as at 31 March 2015, which was fully subscribed and paid by the shareholders. The share capital increase of QR 120,000 thousand (USD 32,967 thousand) and contribution towards share premium of QR 60,000 thousand (USD 16,483 thousand) was recognised in the consolidated statement of changes in equity; after obtaining the QFC’s regulatory approval to increase the authorised share capital to 85,000,000 equity shares of QR 10 each. (ii) Pursuant to change of legal domicile to Bermuda in the year 2015, the Company modified its authorised capital to 500,000,000 equity shares of USD 1 each. Immediately after the change in legal jurisdiction, the paid up share capital of the Company stood at 85,000,000 shares of USD 1 each. Additional paid up capital amounting to USD 148,516 (thousand) was cancelled and transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity. (iii) On 31 December 2015, the authorised share capital of the Company reduced from 500,000,000 equity shares of USD 1 each to 1,200,000 equity shares of USD 1 each. On the same date, the issued and paid up share capital of the Company reduced to 1,000,000 equity shares of USD 1 each. Additional paid up capital cancelled amounting to USD 84,000 thousand is transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity. (iv) On 28 November 2016, the shareholder of the Company contributed additional capital of USD 200,000,000 into the Company

13. Share premium

The share premium reflects the amount received in excess of the par value of the shares issued. In 2015, the amount is fully transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity.

14. Fair value reserve

The fair value reserve arose from the revaluation of available for sale investments as per the accounting policies detailed in Note 3.

Qatar Re Annual Report 2016

15. Segment information (a) Segment information

For management reporting purposes, the Company is organised into two business segments – Marine Aviation and Fire and General. These segments are the basis on which the Group reports its operating segment information. No operating segments have been aggregated in arriving at the reportable segment of the Group.

Segment statement of income for the year ended 31 December 2016

Marine and Aviation USD (’000)

Property and Casualty USD (’000)

Total Underwriting USD (’000)

Investments USD (’000)

Un-allocated (Expenses)/ Income USD (’000)

Total USD (’000)

The Group’s Dubai Branch Performance included in Total* USD (’000)

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired premium reserve Net earned premiums

94,709 (72,501) 22,208

1,154,662 (813,309) 341,353

1,249,371 (885,810) 363,561

– – –

1,249,371 (885,810) 363,561

54,709 (40,606) 14,103

(4,839) 17,369

(7,480) 333,873

(12,319) 351,242

– –

(12,319) 351,242

(7079) 7,024

Gross claims paid Reinsurance recoveries Movement in net outstanding claims Commission income Commission expense Net underwriting results Investment income Finance costs Net investment income Total income Operating and administrative expenses Depreciation Segment results

(15,176) 9,592 (8,487) 10,938 (11,859) 2,377

(434,979) 301,997 (108,979) 209,103 (249,363) 51,652

(450,155) 311,589 (117,466) 220,041 (261,222) 54,029 – – – 54,029 – – 54,029

– – – – – – 36,293 (4,057) 32,236 32,236 – – 32,236

– – – – – – 455 – 455 455 (47,726) (948) (48,219)

(450,155) 311,589 (117,466) 220,041 (261,222) 54,029 36,748 (4,057) 32,691 86,720 (47,726) (948) 38,046

(1,875) 1,551 (5,305) 6,658 (6,080) 1,973 – – – 1,973 (3660) (21) (1,708)

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

15. Segment information continued

Segment statement of income for the period ended 31 December 2015

Marine and Aviation USD (’000)

Property and Casualty USD (’000)

Total Underwriting USD (’000)

Investments USD (’000)

Un-allocated (Expenses)/ Income USD (’000)

Total USD (’000)

The Group’s Dubai Branch Performance included in Total* USD (’000)

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired premium reserve Net earned premiums

39,974 (28,403) 11,571

1,116,229 (784,374)

1,156,203 (812,777) 343,426

– – –

1,156,203 (812,777) 343,426

1,076 (660) 416

(381) 11,190

(98,009) 233,846

(98,390) 245,036

– –

(98,390) 245,036

(407) 9

(15,560) 9,579 (4,160) 5,462 (5,372) 1,139

(180,156) 113,725 (89,059) 142,927 (157,690) 63,593

(195,716) 123,304 (93,219) 148,389 (163,062) 64,732 – – – 64,732 – – 64,732

– – – – – – 12,610 (2,211) 10,399 10,399 – – 10,399

– – – – – – 274 – 274 274 (49,483) (939) (50,148)

(195,716) 123,304 (93,219) 148,389 (163,062) 64,732 12,884 (2,211) 10,673 75,405 (49,483) (939) 24,983

– – (5) 54 (5) 53 – – (169) (116)

Assets and liabilities of the Group are commonly used across the operating segments.

16. Net investment income 2016 USD (’000)

Interest income Dividends Advisory fee Gain/(loss) on sale of available for sale financial assets Impairment losses on investments Other gains/(losses) Less: Finance costs Net Investment income

Qatar Re Annual Report 2016

37,975 3,855 (2,606) 2,449 – (4,925) 36,748 (4,057) 32,691

2015 USD (’000)

22,283 1,873 (1,704) (1,528) (8,155) 115 12,884 (2,211) 10,673

17. Operating and administrative expenses Employees related costs Rental expenses Maintenance and IT expenses Professional fees Travel expenses Board of Directors’ remuneration (Note 18) Miscellaneous expenses

2016 USD (’000)

2015 USD (’000)

33,484 3,411 3,180 1,812 2,993 326 2,520 47,726

30,986 2,796 2,845 1,277 1,120 824 9,635 49,483

18. Board of Directors’ remuneration

In accordance with the Articles of Association of the parent company, the Board of Directors’ remuneration for the year 2016 has been proposed at USD 326 thousand (2015: USD 824 thousand).

19. Contributed Surplus

The Contributed Surplus recognised in the consolidated statement of changes in equity is distributable to the shareholder as a dividend in the normal course of business, subject to certain restrictions and provisions in this respect in Bermuda Companies Act 1981. The Contributed Surplus as at year end comprises of the following:

(i) On cancellation of shares after change in legal domicile (ii) On merger of Antares Re business as on 31 December 2015 (iii) Contribution from parent company during the year

2016 USD (’000)

2015 USD (’000)

251,651 243,717 200,000 695,368

251,651 243,717 – 495,368

2016 USD (’000)

2015 USD (’000)

384,392

416,412

20. Short-term borrowings Borrowings against fixed income securities

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

21. Related parties

(a) Transaction with related parties

These represent transaction with related parties. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions and directors of the Group and companies of which they are key management personnel. Pricing policies and terms of these transactions are approved by the Group’s management and are negotiated under normal commercial terms. Significant related party transactions were:

Reinsurance premium to QIC Reinsurance recoveries Commission from QIC

2016 USD (’000)

2015 USD (’000)

839,149 310,204 213,508

790,240 115,740 186,839

2016 USD (’000)

2015 USD (’000)

1,981 154 2,135

1,562 195 1,757

(b) Compensation of key management personnel Salaries and other short term benefits Employees’ end of service benefits Total

Outstanding related party balances at reporting date are unsecured and interest free. Also, the Board of Directors’ remuneration proposed for the year ended 31 December 2016 is detailed in Note 18.

22. Financial instruments and risk management

The Group in the normal course of its business derives its revenue mainly from assuming and managing insurance and investments risks for profit. The Group is mainly exposed to the following risks: –– Insurance risk, –– Credit risk, –– Liquidity risk, –– Market risk and –– Operational and systems risk. The Group has designed, established and maintains a robust and effective risk framework that is used in the implementation of the strategic objectives and business plan. The framework provides a basis for understanding the risks the Group is exposed to and its ability to identity, assess, control and mitigate them.

Qatar Re Annual Report 2016

(a) Governance framework

Risk appetite is set by the Board and takes into account responsibilities to the shareholder, policyholders and other stakeholders. Management are authorised to operate within defined appetite, subject to various authorities and controls.

(b) Capital management framework

The Group is subject to both internal and regulator imposed capital requirements. During the period, the Group has complied with internal capital requirements and those mandated by applicable regulators. The external capital requirements are those prescribed by the Bermuda Monetary Authority notably the Enhanced Capital Requirement; and those required in relation to our branches in Dubai and Singapore. The Group has not applied for any variations to the standard method of calculation in any jurisdiction.

An overall risk management framework is deployed by the Group which considers risk and controls in the context of overall risk appetite. This considers the frequency and severity of identified risks along with qualitative factors and determines the residual risk exposure. For the main financial risk areas (insurance, market, credit) additional quantitate techniques are used to manage exposures against the specific risk appetite.

(d) Insurance risk

The principal risk the Group faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual compensation paid and subsequent development of long-term claims. Therefore the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities. The Group manages the insurance risk through the careful selection and implementation of its underwriting strategy and guidelines together with the adequate reinsurance arrangements and proactive claims handling. The Group principally issues general insurance contracts which mainly constitute marine and aviation, and property and casualty lines of business. The concentration of insurance risk exposure is mitigated by careful selection and implementation of the underwriting strategy of the Group, Underwriting limits are in place to enforce risk selection criteria and an exposure management framework limits exposure to peak peril zones within the context of defined risk appetite.

Qatar Re Annual Report 2016

The Group, in the normal course of business, in order to minimise financial exposure arising from large claims, enters into contracts with other parties for reinsurance purposes. Such reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. A significant portion of the reinsurance is effected under quota share arrangements, treaty, facultative and excess-of-loss reinsurance contracts. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements. The Group has in place strict claim review policies to assess all new and ongoing claims. The Group further enforces a policy of actively managing and prompt pursuing of claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the Group.

Key assumptions

The principal assumption underlying the liability estimates is that the Groupâ&#x20AC;&#x2122;s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future, for example one-off occurrence changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgment is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimated. Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

22. Financial instruments and risk management continued Sensitivities

The general insurance claims provisions are sensitive to the key assumptions shown below. It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process. The analysis below is performed for possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, net profit and equity. Change in assumptions

Impact on liabilities USD (’000)

Impact on net profit USD (’000)

Impact on equity USD (’000)

31 December 2016 Incurred claim cost Incurred claim cost

10% -10%

25,603 (25,603)

(25,603) 25,603

– –

31 December 2015 Incurred claim cost Incurred claim cost

10% -10%

16,563 (16,563)

(16,563) 16,563

– –

Claims development table

The Group maintains reserves in respect of its insurance business in order to protect against adverse future claims experience and developments. The following tables show the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each reporting date, together with cumulative payments to date. The top half of each table below illustrates how the Group’s estimate of total claims outstanding for each accident year has changed at successive year-ends. The bottom half of the table reconciles the cumulative claims to the amount appearing in the consolidated statement of financial position. With the exception of the proportional and non-proportional reinsurance business, an accident-year basis is considered to be most appropriate for the business written by the Group. Given the nature of reinsurance claims and the difficulties in identifying an accident year for each reported claim, these claims are reported separately and aggregated by reporting year (reporting year basis) – that is, with reference to the year in which the Group was notified of the claims. This presentation is different from the basis used for the claims development tables for the other insurance claims and entities of the Group, where the reference is to the actual date of the event that caused the claim (accident-year basis). Accident year

2013

At end of accident year One year later Two years later Three years later Four years later Five years later Current estimate of cumulative claims incurred Cumulative payments to date Total net outstanding claims provision Current estimate of surplus/(deficiency) % Surplus/ (deficiency) of initial gross reserve

Qatar Re Annual Report 2016

139,608 135,449 137,259 132,383 – – 132,383 (91,247) 41,136 7,225 5%

2014

241,753 277,443 279,991 – – – 279,991 (151,779) 128,212 (38,238) -16%

2015

517,004 440,937 – – – – 440,937 (247,835) 193,102 76,067 15%

2016

882,718 – – – – – 882,718 (282,864) 599,854

Total

1,736,029 (773,725) 962,304

(e) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. The following policies and procedures are in place to mitigate the Group’s exposure to credit risk: A credit risk policy setting out the assessment and determination of what constitutes credit risk for the Group has been established and policies and procedures are in place to mitigate the Group’s exposure to credit risk: –– Compliance with the receivable management policy is monitored and exposures and breaches are regularly reviewed for pertinence and for changes in the risk environment. –– For all classes of financial assets held by the Group, other than those relating to reinsurance contracts, the maximum credit risk exposure to the Group is the carrying value as disclosed in the consolidated financial statements at the reporting date. –– Reinsurance is placed with reinsurers approved by the management. To minimise its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers. To minimise its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsures and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsures. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment. Age analysis of financial assets as at the year end is as follows: 31 December 2016

Cash and cash equivalents Premiums and other receivables

31 December 2015

Cash and cash equivalents Premiums and other receivables

< 30 days USD (’000)

31 to 60 days USD (’000)

438,792 866,784 1,305,576

278,906 7,474 286,380

< 30 days USD (’000)

31 to 60 days USD (’000)

150,357 729,213 879,570

84,084 8,866 92,950

Above 120 days USD (’000)

Total USD (’000)

– 3,097 3,097

– 40,960 40,960

717,698 921,426 1,639,124

61 to 90 days 91 to 120 days USD (’000) USD (’000)

Above 120 days USD (’000)

Total USD (’000)

– 94,316 94,316

319,699 839,222 1,158,921

61 to 90 days 91 to 120 days USD (’000) USD (’000)

– 3,111 3,111

85,258 429 85,687

– 6,398 6,398

Impaired financial assets

At 31 December 2015 there are impaired insurance and other receivables of USD 355 thousand (2014: USD 355 thousand). For assets to be classified as ‘past–due and impaired’ contractual payments must be in arrears for more than 90 days. No collateral is held as security for any past due or impaired assets. The Group records all impairment allowances for loans and receivables in a separate impairment allowance account. A reconciliation of the allowance for impairment losses for loans and receivables is as follows:

At 1 January Charged during the year At December 31 (Note 6)

Qatar Re Annual Report 2016

2016 USD (’000)

2015 USD (’000)

355 – 355

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

22. Financial instruments and risk management continued (f) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial liabilities. At an overall level, the Group’s defined risk appetite is such that we maintain sufficient liquidity to pay two 1 in 250 year events in any year. We also manage our average duration of assets to be no longer than our average duration of liabilities. At an operational level liquidity requirements are monitored on a daily/weekly/monthly basis and management ensures that sufficient funds are available to meet any commitments as they arise.

Maturity profiles

The table below summarises the maturity profile of the financial assets and financial liabilities of the Group based on remaining undiscounted contractual obligations, including interest payable and receivable. For insurance contracts liabilities and reinsurance contract assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities. Unearned premiums and the reinsurer’s share of unearned premiums have been excluded from the analysis as they are not contractual obligations. 31 December 2016

Financial assets: Non derivatives Available-for-sale investments – Debt securities Qatari Public shareholding companies Quoted shares – International Held for trading investments – Managed Funds Premiums and other receivables Reinsurance contract assets Cash and cash equivalents

31 December 2016

Financial liabilities: Non derivatives Reinsurance and other payables Short-term borrowings Due to related parties Reinsurance contract liabilities

Qatar Re Annual Report 2016

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

266,834 38,165 11,276 11,293 198,579 45,242 717,698 1,289,087

44,893 – – – 721,889 555,746 – 1,322,528

342,134 – – – 958 74,280 – 417,372

653,861 38,165 11,276 11,293 921,426 675,268 717,698 3,028,987

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

45,530 384,392 124,989 245,388 800,299

– – 601,157 627,422 1,228,579

– – 855 89,494 90,349

45,530 384,392 727,001 962,304 2,119,227

31 December 2015

Financial liabilities: Non derivatives Reinsurance and other payables Short-term borrowings Due to related parties Reinsurance contract liabilities

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

70,053 63,017 11,862 12,753 678,083 131,269 319,699 1,286,736

315,510 – – – 131,448 207,423 – 654,381

248,792 – – – 29,691 72,201 – 350,684

634,355 63,017 11,862 12,753 839,222 410,893 319,699 2,291,801

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

26,751 416,412 446,182 193,321 1,082,666

– – 92,013 305,473 397,486

– – 20,784 106,332 127,116

26,751 416,412 558,979 605,126 1,607,268

(g) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors affecting all securities traded in the market. The Group limits market risk by maintaining a diversified portfolio and by continuous monitoring of developments in equity and bond markets. In addition, The Group actively monitors the key factors that affect stock and bond market movements, including analysis of the operational and financial performance of investees.

i) Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The table below summarises the Group’s exposure to foreign currency exchange rate risk at reporting date by categorising assets and liabilities by major currencies. 31 December 2016

Cash and cash equivalents Premiums and other receivables Investments Total Assets Provisions, reinsurance and other payables Short-term borrowings Total Liabilities *

Others mainly represents exposure in reporting currency-United States Dollars.

Qatar Re Annual Report 2016

QR USD (’000)

EURO USD (’000)

GBP USD (’000)

Others* USD (’000)

Total USD (’000)

654,070 130 38,165 692,365

6,830 69,531 – 76,361

1,365 560,262 – 561,627

55,433 443,842 676,430 1,175,705

717,698 1,073,765 714,595 2,506,058

676 – 676

12,649 – 12,649

45,084 – 45,084

87,990 384,392 472,382

146,399 384,392 530,791

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

22. Financial instruments and risk management continued 31 December 2015

Cash and cash equivalents Premiums and other receivables Investments Total Assets Provisions, reinsurance and other payables Short-term borrowings Total Liabilities *

QR USD (’000)

EURO USD (’000)

GBP USD (’000)

Others* USD (’000)

Total USD (’000)

292,554 – 63,017 355,571

1,532 90,963 – 92,495

5,609 470,527 305 476,441

20,004 426,514 658,665 1,105,183

319,699 988,004 721,987 2,029,690

– – –

15,059 – 15,059

46,451 – 46,451

77,266 416,412 493,678

138,776 416,412 555,188

Others mainly represents exposure in reporting currency – United States Dollars.

The analysis that follows is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax and equity due to changes in the fair value of currency sensitive monetary assets and liabilities including insurance contract claim liabilities. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. Changes in variables

Currency

Impact on profit or loss 31 December 31 December 2016 2015 USD (’000) USD (’000)

Euro GBP

+10% +10%

2,709 17,666 20,375

5,479 20,689 26,168

Euro GBP

-10% -10%

(2,709) (17,666) (20,375)

(5,479) (20,689) (26,168)

The method used for deriving sensitivity information and significant variables did not change from the previous period.

Qatar Re Annual Report 2016

ii) Interest rate risk

Interest rate risk is the risk that the value of future cash flows from a financial instrument will fluctuate because of changes in market interest rates. The Group invests in securities and has deposits that are subject to interest rate risk. Interest rate risk to the Group is the risk of changes in market interest rates reducing the overall return on its interest bearing securities. The Group’s interest risk policy requires managing interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities. The Group limits interest rate risk by monitoring changes in interest rates in the currencies in which its cash and investments are denominated and has no significant concentration of interest rate risk. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit or loss and equity. Changes in variables

Currency

Qatari Riyals Qatari Riyals

+50 basis points -50 basis points

31 December 2016 Impact on Impact on profit or loss equity USD (’000) USD (’000)

1,341 (1,341)

31 December 2015 Impact on Impact on profit or loss equity USD (’000) USD (’000)

(10,789) 10,789

91 (91)

(4,752) 4,752

The Group’s interest rate risk based on contractual arrangements is as follows: Up to 1 year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

Cash and cash equivalents Investments

717,698 266,834 984,532

– 44,893 44,893

– 342,134 342,134

717,698 653,861 1,371,559

Short-term borrowings

384,392

–

Up to 1 year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

Cash and cash equivalents Investments

319,699 70,053 389,752

– 315,510 315,510

– 248,792 248,792

319,699 634,355 954,054

Short-term borrowings

416,412

–

31 December 2016

31 December 2015

Qatar Re Annual Report 2016

Effective interest rate (%)

2.27% 3.90%

Effective interest rate (%)

1.77% 4.92%

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

22. Financial instruments and risk management continued

Price risk is the risk that the fair value of or income from a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group’s equity price risk exposure relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices, principally investment securities not held for the account of unit-linked business. The Group’s price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector and market and careful and planned use of derivative financial instruments. The Group has no significant concentration of price risk. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit or loss and equity. Changes in variables

Currency

Qatar Market International Markets Qatar Market International Markets

+10% +10% -10% -10%

31 December 2016 Impact on Impact on profit or loss equity USD (’000) USD (’000)

– 1,129 – (1,129)

3,817 1,128 (3,817) (1,128)

31 December 2015 Impact on Impact on profit or loss equity USD (’000) USD (’000)

– 1,275 – (1,275)

6,302 1,186 (6,302) (1,186)

The method used for deriving sensitivity information and significant variables did not change from the previous period.

(h) Operational and systems risk

Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Group cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. The Group has detailed systems and procedures manuals with effective segregation of duties, access controls, authorisation and reconciliation procedures, staff training and assessment processes etc. with a compliance and internal audit framework. Business risks such as changes in environment, technology and the industry are monitored through the Group’s strategic planning and budgeting process.

(i) Capital management

Objectives are set by the Company to maintain a strong credit rating and healthy capital ratios in order to support its business objectives and maximise shareholders’ value. The Company manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. The Company fully complied with the externally imposed capital requirements during the reported financial year and no changes were made to its capital base, objectives, policies and processes from the previous year.

Qatar Re Annual Report 2016

(j) Classifications and fair values

The following table compares the fair values of the financial instruments to their carrying values: 31 December 2016 Carrying amount Fair value USD (’000) USD (’000)

Currency

Cash and cash equivalents Loans and receivables: Premiums and other receivables Reinsurance contract assets Investments: Held for trading Available for sale investments

Reinsurance and other payables Short-term borrowings Due to related parties Insurance contract liabilities

31 December 2015 Carrying amount Fair value USD (’000) USD (’000)

717,698

319,699

921,426 675,268

839,222 410,893

11,293 703,302 3,028,987

12,753 709,234 2,291,801

45,530 384,392 727,001 962,304 2,119,227

26,751 416,412 558,979 605,126 1,607,268

23. Determination of fair value and fair values hierarchy

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy. The different levels have been defined as follows: –– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities –– Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) –– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Notes to the consolidated financial statements For the year ended 31 December 2016 continued

23. Determination of fair value and fair values hierarchy continued

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

31 December 2016 Held for trading Available for sale

31 December 2015 Held for trading Available for sale

Level 1 USD (’000)

Level 2 USD (’000)

Level 3 USD (’000)

Total fair value USD (’000)

– 703,302 703,302

11,293 – 11,293

– – –

11,293 703,302 714,595

– 709,234 709,234

12,753 – 12,753

– – –

12,753 709,234 721,987

24. Business combination under common control

With effect from 31 December 2015, the Company merged the business with Antares Reinsurance Limited (a Bermudan company with registration number of EC 40716), a fully owned subsidiary of Antares Holding Limited UK. Antares Holding Limited UK, in turn, owned by Qatar Insurance Company SAQ, the ultimate parent company of the Group. The regulatory approval of this merger was granted on 25 January 2016 with an effective date of merger on 31 December 2015. The transaction is considered as transaction under ‘common control’ as the control of the Company and Antares Reinsurance Limited vested with Qatar Insurance Company SAQ. Accordingly, there is no goodwill or gain on bargain purchase recognised by the Group. The book value of the identifiable assets and liabilities of Antares Reinsurance Limited as at the date of merger were the following: As at 31 December 2015 USD (’000)

Assets Cash and cash equivalents Insurance and other receivables Investments Total assets Liability Provisions, reinsurance and other payables Total liability Book value of net assets merged with the parent company

33,250 91,230 126,539 251,019 7,302 7,302 243,717

Net book value of assets transferred to the parent company is recognised as ‘Contributed Surplus’ account in the equity. The net cash inflow to the Group out of this merger transaction is USD 33,250 thousand.

Qatar Re Annual Report 2016

25. Comparative figures and restatement of prior years’ financial information

The financial statements for the year ended 31 December 2015 have been restated and the impact is set out below. Apart from the restatement, certain comparative figures have been reclassified to conform to current year presentation and have no impact on the previously reported profit or equity position of the Group.

Investments and short-term borrowings

As part of the Group’s margin trading strategy, the Group uses borrowings to finance its fixed income securities. The Group previously followed an accounting policy whereby borrowings were offset against the total fixed income investments in the presentation of its financial statements. In 2016, the Group has adapted certain clarifications issued by IASB on IAS 32 Financial Instruments: Presentation whereby it presented fixed income investments and borrowings on a gross basis on the face of the statement of financial position and due to the principle of consistency, comparability and requirements of IAS 8, the prior year’s figures have been restated. The aforementioned restatement does not have any financial impact on the Group’s net income, earnings per share, retained earnings, total equity, and OCI for the period or the Group’s operating, investing and financing cash flows. The above matters (i) has been reclassified by restating each of the affected financial statements line items for the prior period as follows: As at 31 December 2015 As reported previously Adjustment USD (’000) USD (’000)

Statement of financial position items: Investments (i) Short-term borrowings (i)

Qatar Re Annual Report 2016

305,575 –

416,412 416,412

Restated USD (’000)

721,987 416,412

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Financial condition report For the financial year ending 31 December 2016.

Qatar Re Annual Report 2016 70

72 72 73 74 75 77 77

1. Business and performance 1.1 The Company 1.2 Ownership structure 1.3 Group structure 1.4 Underwriting performance 1.5 Investment performance 1.6 Other material income and expenses

78 78 80 84 86 86 87 87 87

2. Governance structure 2.1 Board and Senior Executives 2.2 Fitness and proprietary requirements 2.3 Risk management and solvency self-assessment 2.4 Compliance function 2.5 Internal control framework 2.6 Internal audit function 2.7 Actuarial function 2.8 Outsourcing

88 88 89 91 91

3. Risk profile 3.1 Material risk exposures 3.2 Risk mitigation 3.3 Material risk concentrations 3.4 Investment of assets in accordance with the prudent person principle 91 3.5 Stress testing and sensitivity analysis 92 4. Solvency valuation 92 4.1 Valuation of assets for solvency purposes 92 4.2 Valuation of liabilities for solvency purposes 94 5. Capital management 94 5.1 Eligible Capital 95 5.2 Capital requirements 96 96 96 96

6. Subsequent event 6.1 Tier 2 capital raise 6.2 Ogden discount rate 6.3 Management changes

97 7. Declaration

Qatar Re Annual Report 2016 71

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

1.1 The Company

1. Business and performance

Qatar Reinsurance Company Limited (“Qatar Re” or “the Company”) is licensed as a Class 4 insurer by the Bermuda Monetary Authority (“BMA”) and is a global multi line reinsurer writing all major property, casualty and specialty lines of business. The Company operates from its headquarters in Bermuda and through its branches in the Dubai International Financial Centre (“DIFC”), Singapore and Switzerland, a representative office in the UK and a service company in the Qatar Financial Centre (“QFC”) in Doha, Qatar. The Company has been built around what we believe are the essential value drivers:

A leading global reinsurer recognised for the quality of our security.

–– Proximity to our clients and brokers –– Commitment to excellent financial security –– Market leading data capture and integration –– Development of knowledge intensive products and services –– Focus on innovation We aim to be a leading global reinsurer recognised for the quality of our security and claims payments. It is our firm belief that a respected and successful reinsurance business can be built to suit today’s world, and remain sufficiently nimble and flexible to meet the evolving challenges ahead. We work closely with our clients to understand their business and to help improve the overall quality of their portfolio and risk profile. We actively seek to support insurance entrepreneurs. We build relationships with clients who possess a superior access to and knowledge of their preferred areas of business. We seek to add value for our clients by providing meaningful line sizes and often bespoke technical support. In deploying our capacity in a risk managed way, the concepts of risk tolerance and risk appetite are central to our approach. Qatar Re defines risk appetite as the total level of risk that the Company is prepared to seek in the pursuit of its strategic objectives. During 2016, risk appetite and tolerance statements were reviewed and updated and the revised statements are now more granular, providing for greater clarity on specific appetite across the range of different risk categories. These statements are embedded within the Company and cover all material categories of risk to which we are exposed. There were no breaches of risk appetite in 2016. In addition to the Board approved risk appetite and tolerance limits, there are a number of different managerial level limits that are used across different functions to manage risk exposures within the approved risk appetites.

Qatar Re Annual Report 2016

The contact details of our insurance supervisor and approved auditors are as follows: Insurance Supervisor Bermuda Monetary Authority BMA House 43 Victoria Street Hamilton Bermuda

Bermuda

Our ultimate parent company is regulated by the Qatar Central Bank (“QCB”) and aspects of this take into account the consolidated position of the Group, which includes Qatar Re. This is not akin to group supervision in a Solvency II context.

1.2 Ownership structure

Approved Auditors – Bermuda Statutory Reporting Deloitte Ltd. Corner House 20 Parliament Street Hamilton Bermuda

Bermuda

Qatar Re is a wholly-owned subsidiary of QIC Capital LLC, which in turn is a 95.74% majority-owned subsidiary of Qatar Insurance Company S.A.Q., Doha, Qatar (“QIC”), the ultimate parent of the QIC Group of companies and a leading Qatari publicly-listed insurer with an underwriting footprint across the Middle East, Africa and Asia. QIC was the first domestic insurer in Qatar and is currently the largest insurance company in the Middle East and North Africa (“MENA”) with total shareholders’ equity of USD 2.3 billion (as of 31 December 2016). There are no single shareholders whose ownership percentage exceeds 10%, with two separate Qatari government employee pension funds managed by pension fund trustees holding a combined 13.5% of shares, 10-15% owned by various members and associates of the Qatari royal family, 7% owned by foreign institutional investors, with the remainder of shares being free float. QIC is among the highest rated insurers in the Gulf region with a rating of A/Stable from S&P Global Ratings and A/Excellent from A.M. Best. Qatar Re is backed by a parental guarantee from QIC and is also currently rated A/Stable by S&P Global Ratings and A (Excellent) by A.M. Best.

Approved Auditors – IFRS Accounts Deloitte & Touche – Qatar Branch Al Ahli Bank Head Office Building Suhaim Bin Hamad Street Al Sadd Area, Doha Qatar

Doha

Qatar Re Annual Report 2016

The Board and shareholder have approved the appointment of EY as our auditors for Bermuda statutory reporting and IFRS reporting for the financial year commencing on 1 January 2017. The appointment remains subject to regulatory approval.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

1. Business and performance continued

1.3 Group structure Figure 1.3: Qatar Insurance Company S.A.Q. (“QIC”) – International structure

Qatar Insurance Company S.A.Q. (State of Qatar)

QIC Capital LLC (Qatar Financial Centre)

QIC Europe Limited (Malta)

Branch Office (London) Branch Office (Milan)

QIC International LLC (Qatar Financial Centre)

Qatar Reinsurance Company Limited (Bermuda)

Antares Group Holdings Limited (UK)

Subsidiaries and Branch Offices (Gulf Cooperation Council Countries)

Branch Office (Singapore)

Antares Managing Agency Limited (UK)

*Rep. Office (London) Branch Office (DIFC) Qatar Re Services (QFC)

Antares Underwriting Asia pte (Singapore)

Antares Syndicate 1274 at Lloyd’s

Branch Office (Zurich) * Qatar Re London branch office planned for 2017 – branch application has been submitted to the Prudential Regulation Authority (“PRA”). Note: This structure chart shows only the key international subsidiary companies. It does not include, for example, the Antares Lloyd’s Corporate Members or certain subsidiary companies of QIC Capital LLC.

Qatar Re Annual Report 2016

1.4 Underwriting performance 1.4.1 Underwriting strategy

Qatar Re is committed to encouraging innovation in insurance, supporting insurance entrepreneurs by offering tailored reinsurance solutions to our clients through our flexibility and efficiency. We underwrite a low volatility, increasingly diversified international portfolio of treaty and facultative reinsurance, and have limited risk appetite for catastrophe risk retention. A significant proportion of our portfolio is quota share business which has a similar risk profile as primary business. We have built out our infrastructure and have extended our reach geographically, which enables us to diversify geographically from a heavy predominance of European business. We write the following dedicated lines of business, protecting us from the volatility which can be experienced in a less diverse or catastrophe heavy portfolio: –– Property Catastrophe –– North American Property –– Property (outside North America) –– Casualty (including Motor) –– Marine and Aviation –– Agriculture –– Credit and Financial Risks –– Facultative –– Lloyd’s Capacity The projected ultimate gross premiums as per the business plan are expected to increase the level of diversification and further reduce volatility across our book over the business planning horizon, as can be seen in Figure 1.4.1.

Figure 1.4.1: Gross premium by underwriting year – 2014 to 2017 USD million 517

17%

1,152

1,434

1,768

3% 3% 4%

4% 5% 4%

8% 8%

6% 11%

7% 5% 12%

3% 4%

6% 4% 14%

14% 2% 9% 54%

52%

53%

2016†

2017*

30%

2014†

2015†

Casualty (including Motor) Property N. America Marine and Aviation Credit and Financial Risks Lloyd’s Capacity

Property (outside N. America) Agriculture Facultative Property Catastrophe

† Ultimate at December † Ultimate as atasDecember 2016.2016. * Projected Ultimate Result as2017 per Business 2017 Business * Projected Ultimate Result as per Plan. Plan.

We also write a significant whole account quota share reinsurance contract for our sister company, QIC Europe Limited (“QEL”)(i). The quota share comprises business written via QEL’s MGA and coverholder arrangements such as household property, pet, marine, residual value insurance and other classes that would not usually be ceded to reinsurance markets. Qatar Re’s general philosophy is to strictly manage our underwriting risk through rigorous underwriting techniques based around high quality modelling and exposure management. Our expectations of underwriting performance are explicit for each risk. (i) QEL is domiciled in Malta and is a wholly-owned subsidiary of QIC. It was established in 2014 and is authorised to write all non-life classes of insurance and reinsurance business throughout the European Economic Area (“EEA”).

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

1. Business and performance continued

1.4.2 Underwriting results

During 2016 the Company continued to deliver solid portfolio growth across its key geographical markets, lines of business and client segments. In 2016, Qatar Re increased its gross written premiums by 8.1% to US Dollar (“USD”) 1.25 billion, compared with USD 1.16 billion in 2015. Net earned premiums grew by 43.3% to USD 351.2 million, compared with USD 245.0 million in 2015. This growth was achieved despite a withdrawal from lines of business which are no longer considered attractive, and the sharp depreciation of the British Pound (“GBP”). As the price adequacy of traditional low frequency, high severity business continued to deteriorate in 2016, Qatar Re has increased its focus on structured reinsurance and the more predictable levels of profitability it generates. The net underwriting result decreased from USD 64.7 million in 2015 to USD 54.0 million in 2016. The loss ratio on the Company’s net earned premiums increased from 67.6% in 2015 to 72.9%. These results reflect an unusual number of individual attritional losses in line with the rest of the market’s experience. We will grow in classes and sectors which are performing well and reduce our commitment to poorly performing sectors by declining or discontinuing some accounts. Despite the decrease in the net underwriting result, net income for 2016 rose by 52.3% to USD 38.0 million, compared with USD 25.0 million for 2015, driven largely by strong investment performance (see section 1.5). Figure 1.4.2a: Underwriting performance by business segment Gross written premiums by business segment for the reporting period 2016 2015 USD (’000) USD (’000)

Line of business

Property Catastrophe North American Property Property (outside North America) Casualty (including Motor) Marine and Aviation Agriculture Credit and Financial Risks Facultative Lloyds Capacity Total

46,055 56,077 157,011 682,606 94,709 66,670 56,973 59,755 29,515 1,249,371

48,266 31,318 118,860 605,048 39,974 158,480 44,263 51,490 58,505 1,156,203

Figure 1.4.2b: Underwriting performance by geographical region Gross written premiums by business segment for the reporting period 2016 2015 USD (’000) USD (’000)

Territory

Africa Americas Asia Europe Oceania Total

Qatar Re Annual Report 2016

11,681 159,788 207,223 861,997 8,682 1,249,371

8,985 180,308 167,255 790,795 8,860 1,156,203

1.5 Investment performance

Net investment income grew significantly over the year, experiencing a three-fold increase from USD 10.7 million in 2015 to USD 32.7 million in 2016. Our investment strategy is heavily weighted towards fixed income and cash deposits, with concentration limits also in place. We invest in a combination of sovereign and high investment grade fixed income securities. The balance of the portfolio is invested in equities and mutual funds. The return on investments for the reporting period was as follows: Figure 1.5: Investment performance 2016 Market value % return USD (’000) USD (’000)

Currency

Fixed Income Bonds Equities Cash Total

653,862 60,734 717,698 1,432,294

4.9% (3.7)% 2.1% 4.8%

2015 Market value % return USD (’000) USD (’000)

634,354 87,632 319,699 1,041,685

4.3% (10.4)% 2.3% 4.1%

Net investment income for 2016 of USD 32.7 million is net of finance costs of USD 4.1 million. Net investment income for 2015 of USD 10.7 million is net of finance costs of USD 2.2 million.

1.6 Other material income and expenses

The main expenses outside of our underwriting and investment expenses relate to employee compensation. As we grow and develop our business and expand geographically, we have increased our headcount from 105 staff at the end of 2015 to 161 staff at the end of 2016. The below table shows a breakdown of our operating and administrative expenses: Figure 1.6: Expenses Expense

Employee related costs Rental expenses Maintenance and IT expenses Other expenses* Total *

2016 USD (’000)

2015 USD (’000)

33,434 3,411 3,180 7,701 47,726

30,986 2,796 2,845 12,856 49,483

Professional fees, travel expenses, Board of Directors’ remuneration, intercompany service charges, foreign exchange, etc.

The reduction in Other expenses was driven by a decrease in foreign exchange charges and reduced intercompany service charges. As the Company matured and developed its own infrastructure, less intercompany service expenses were incurred. The strengthening of the USD to the GBP and Euro has been the main driver in the reduction of foreign exchange charges. Excluding Other expenses, the increase in the operating expenses from $36.6 million to $40.0 million is as expected and in line with similar growth in business written during the year. The ratio of Operating and Administrative expenses to gross and net written premiums remains constant when comparing 2016 to 2015.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

2.1 Board and Senior Executives

2. Governance structure Qatar Re has established a sound and effective Corporate Governance framework that is appropriate to the size, nature, complexity and risk profile of the Company. This framework was further strengthened during 2016. The governance framework supports the sound and prudent management of the Company’s activities to ensure the protection of policyholders and other stakeholders.

Qatar Re Annual Report 2016

2.1.1 Structure, roles and responsibilities

The Board is responsible for ensuring that proper systems and oversight of risk management are in place and standards for compliance are being adhered to. At the time of publishing, the Board of Directors consists of three independent Non-Executive Directors, two Non-Executive Directors (non-independent) and one Executive Director, providing an appropriate balance of skills, experience, knowledge and independent challenge. At the end of the reporting period, there were two Executive Directors on the Board (Gunther Saacke and Alastair Speare-Cole). Alastair Speare-Cole resigned from his role as Chief Underwriting Officer on 31 January 2017 and from the Board of Directors with effect from 6 February 2017. The Board has appointed an Investment Committee, a Risk and Capital Committee and an Audit Committee to assist it in the effective discharge of its duties, although it continues to retain ultimate responsibility. In addition to the Committees of the Board, the Company has also established an Executive Management Committee (“ExCo”), a Reserving Committee and an Underwriting and Portfolio Management Committee to assist the Chief Executive Officer and Senior Executives in discharging their duties and responsibilities in relation to the prudent management and oversight of the Company’s activities. The Board’s oversight responsibilities include: –– ensuring that the Company is effectively directed and managed; –– ensuring that its activities are conducted with due care, skill and integrity; –– confirming that Corporate Governance policies and practices are developed and applied in a sound and prudent manner. –– developing high level strategy and objectives; –– reviewing and approval of business plans and budgets; –– ensuring sufficient capital is held to maintain the Company’s ongoing solvency; –– overseeing the Risk Management Framework, including setting the Company’s risk appetite and tolerances; –– appointing senior executives; –– approving the financial statements; –– setting and overseeing the effectiveness of the Company’s Governance Structure and Internal Control System; and –– reviewing and approving significant policies and procedures.

Figure 2: Governance framework

Governance framework

Committee of the Board Management Committee

Business Operational Function Key Control Function

* Outsourcing arrangement ‘approved’ by the Bermuda Monetary Authority

Board of Directors Gunther Saacke Executive Director

Ali Saleh N. Al Fadala Non-Executive Director

Sunil Talwar Non-Executive Director & Chairman

George Prescott Independent Non-Executive Director

Risk and Capital Committee

Investment Committee

–– Sunil Talwar (Chairman) –– George Prescott –– David Sykes –– Gunther Saacke

David Forcey Independent Non-Executive Director

David Sykes Independent Non-Executive Director

Audit Committee

–– George Prescott (Chairman) –– David Forcey –– Sunil Talwar –– Gunther Saacke

–– George Prescott (Chairman) –– David Forcey –– David Sykes

Executive Management Committee

Risk Management (Andrew Smith)

Internal Audit (Outsourced to PwC*)

Underwriting/ Portfolio Management Committee

Compliance (Adam Young)

Reserving Committee

Actuarial (Claude Perret)

Investments

Legal

Finance

Underwriting

Claims

First Line of Defence

Second Line of Defence

Third Line of Defence

Correct at time of publishing and reflects Alastair Speare-Cole’s resignation from the Board of Directors with effect 6 February 2017.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

2.1.3 Pension and early retirement schemes

2. Governance structure continued The Board meets at least quarterly and at other times as required, and carries out its duties within established terms of reference. The Board is provided with accurate, appropriate and timely information to enable it to monitor and review key areas, including the performance of the Company and the key risks to which it is exposed. Qatar Re has adopted a ‘Three Lines of Defence’ model to ensure appropriate segregation of roles and responsibilities across the Company. The segregation of responsibilities applies across all business functions and various layers of review exist within each business function and between committees and the Board of Qatar Re. These controls are audited on a regular basis by the Company’s internal and external auditors. The Board committees’ responsibilities are segregated as follows: –– Risk and Capital Committee (“RCC”) – provides oversight of the Company’s risk management, capital management and exposure management activities. Key responsibilities include: oversight of current and future potential risk exposures, including the determination and monitoring of actual exposures against risk appetite and tolerance; providing guidance on the implementation of the risk management framework; ensuring the maintenance of sufficient economic and regulatory capital and allocation of capital; and promoting a risk aware culture. –– Investment Committee (“IC”) – provides oversight of the performance and management of the Company’s investment portfolio. Key responsibilities include: development and maintenance of an appropriate investment strategy; monitoring the implementation of the investment strategy, asset allocation and value of invested assets; and monitoring the performance of the investment manager and investment advisers. –– Audit Committee (“AC”) – provides oversight of the effectiveness of internal controls and monitoring the performance of the internal and external audit functions. The Audit Committee also assumes the responsibility of a Remuneration Committee.

2.1.2 Remuneration Policy

The Company’s Remuneration Policy sets out the principles and practices for the development, implementation and application of the employee remuneration framework. This policy is aimed at promoting sound and effective risk management and does not encourage excessive risk taking activities. All staff of the Company are in scope of the policy, including Board members, the Executive Committee members and key internal control function holders. The remuneration scheme includes both fixed and variable components. These are appropriately balanced so that the fixed component represents a sufficiently high proportion of the total remuneration to avoid employees being overly dependent on the variable components.

Qatar Re Annual Report 2016

Members of staff in some of our locations benefit from a standard default percentage of annual salary for pension (or pension benefit equivalent) employer scheme. As the Company does not operate any defined benefit pension schemes, it is not exposed to funding issues associated with such defined benefit pension liabilities.

2.1.4 Material transactions with shareholder controllers, persons who exercise significant influence, the Board or Senior Executive

Qatar Re entered into a quota share reinsurance agreement with its ultimate parent company, QIC, whereby 70% of the net business written by Qatar Re during 2016 was ceded to QIC. This percentage has been reduced to 50% for business underwritten in 2017. QIC has some limited participation in other reinsurance agreements. Qatar Re has an inward variable quota share agreement with QEL, which is a wholly owned subsidiary of QIC. Three of the directors of Qatar Re are also directors of QEL (Gunther Saacke, Sunil Talwar and Ali Saleh N Al Fadala).

2.2 Fitness and proprietary requirements 2.2.1 Fit and proper processes for assessing the Board and Senior Executives

Resourcing within the Company is managed by the Human Resources function, which sets the minimum standards for the appointment and promotion of individuals throughout the organisation. The Company ensures that Board members and senior executives are fit and proper to discharge their responsibilities in accordance with the following definitions: –– Fit – their professional qualifications, knowledge and experience are adequate to enable sound and prudent management of the Company’s activities. An assessment of whether an individual is ‘Fit’ shall involve an evaluation of the person’s professional qualifications, knowledge and experience to ensure they are appropriate to the role. It shall also demonstrate whether the person has exercised due skill, care, diligence, integrity and compliance with relevant standards that apply to the area or sector in which the individual has worked. –– Proper – a person is of good repute and integrity. An assessment of whether a person is ‘Proper’ shall include an evaluation of a person’s honesty, reputation and financial soundness. This will include, if relevant, criminal convictions or disciplinary offences. The Fit and Proper Policy covers the initial and ongoing procedures to be applied in order to confirm that the relevant individuals meet the specified ‘Fit and Proper’ requirements, together with relevant regulator notification and reporting responsibilities.

Figure 2.1.1: Board and committee structure

Board and committee structure

Board of Directors

Investment Committee

Audit Committee

Purpose: To assist the Board in the coordination and oversight of Qatar Re’s investment portfolio.

Purpose: To assist the Board in its oversight of the integrity of the financial statements, effectiveness of internal control and oversight of internal and external auditors.

Qatar Re Annual Report 2016

Risk and Capital Committee

Chief Executive Officer

Purpose: To assist the Board overseeing and challenging the risk management and capital management activities.

Reserving Committee

Executive Management Committee

Underwriting/ Portfolio Management Committee

Purpose: To assist the CEO in the oversight and management of technical reserves in Qatar Re’s financial balance sheet.

Purpose: To assist the CEO in ensuring the effective management of the organisation in accordance with its objectives and values.

Purpose: To assist the CEO in developing and setting the underwriting policies and strategy and providing oversight of the overall portfolio.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

2. Governance structure continued

2.2.2 Professional qualifications, skills and expertise of the Board and Senior Executives Board of Directors

Gunther Saacke Executive Director and Chief Executive Officer Gunther Saacke joined the Company in 2013 and is the CEO of Qatar Re, a post which he has held since he joined. He has a Bachelor’s degree in Philosophy from the Sorbonne University in France and a Magister Atrium from the University of Hamburg. He started his career in 1991 with Hannover Re. Since then, he has worked for a number of reinsurance companies gaining experience across all major property and casualty classes as well as in specialty lines. More recently, he worked as head of Reinsurance at Endurance in London and served as founding Chief Executive and Chief Underwriting Officer of Novae Re, a multi line reinsurance operation in the Lloyd’s market.

Qatar Re Annual Report 2016

Sunil Talwar Non-Executive Director and Chairman Mr. Sunil Talwar joined QIC in 1986 with responsibility for managing QIC’s finance function and is currently Group CEO – International Operations. He is currently responsible for developing and managing the international operations of the Group. He is a qualified Chartered Accountant and a member of the Institute of Chartered Accountants of India. Prior to joining the Group, he worked with Mannai Corporation in various capacities, the last being as Regional Coordinator – Middle East. Ali Saleh N Al Fadala Non-Executive Director Mr. Ali Saleh N Al Fadala joined QIC in 1986 and is currently the Senior Deputy Group President and CEO, a post which he has held since 2013. He is primarily responsible for assisting the Group President and CEO in managing the operations of the Group. He attended Lynwood Community College in the United States. During his time with the Group, he has worked in various departments and has spent time as Head of Technical, handling claims and reinsurance, and as CEO of Damaan after it was founded in 2010. Prior to joining the Group he worked at the Qatar Civil Affairs Bureau for five years. He represents QIC on the boards of The Commercial Bank (P.S.Q.C.) and various Group entities.

George Andrew Prescott Independent Non-executive Director George Prescott was Deputy Chief Executive of Ecclesiastical Insurance Group (“EIG”) from 1997 until his retirement in 2009, following an industry career spanning four decades. In his role with EIG he was responsible for the Group’s investment, finance, internal audit and compliance functions. Mr. Prescott also served for a number of years as a Non-Executive Director on the boards of Mapfre Reinsurance, Commerce Insurance (USA) and Mapfre USA and was a member of the Association of British Insurers’ Investment Committee. He currently holds a number of non-executive appointments. Mr. Prescott holds a Bachelor’s degree in Spanish and French from the University of London. He is also a qualified Chartered Accountant and Fellow of the Institute of Chartered Accountants in England and Wales. David John Forcey Independent Non-Executive Director David Forcey has over four decades of experience in international and reinsurance broking. Prior to his retirement he held various senior positions and directorships at Aon Limited, including as Managing Director, Deputy Chairman and Chairman. Before joining Aon in 1996, Mr. Forcey held senior roles with Steel Burrell Jones Group plc and Jardine Thompson & Graham Limited. Mr. Forcey is an Associate of the Chartered Insurance Institute.

David Sykes Independent Non-Executive Director David Sykes has 25 years’ experience in insurance management and accounting in Bermuda. David is the Managing Director of Strategic Risk Solutions (Bermuda) Ltd (“SRS”), the largest independent insurance manager in the world. Prior to joining SRS, he was Senior Vice President with Marsh IAS Management Services in Bermuda. Mr. Sykes has worked with a variety of insurance companies, including those in the professional sports, healthcare, energy and marine industries. He has also been instrumental in providing formation and management services to several insurance and reinsurance companies in Bermuda, Lloyd’s syndicates and Bermuda reinsurance groups. Mr. Sykes holds a Bachelor’s degree in Applied Mathematics from the University of Warwick. He is also a Member of the Institute of Chartered Accountants of England and Wales and an Associate of the Chartered Insurance Institute. Alastair Speare-Cole Director (until 6 February 2017) Alastair Speare-Cole resigned in early 2017.

Senior Executives

Gunther Saacke Chief Executive Officer See biography in directors’ section. Luke Roden Chief Underwriting Officer – Short Tail Classes Luke Roden has a track record of developing and maintaining large, profitable portfolios of treaty reinsurance business over the last 24 years and has been central to the development of the Company since his appointment in 2012. Mr. Roden has lived and worked in North America, Europe, Bermuda and the Middle East during his career. Mr. Roden formerly held the position of Deputy Chief Underwriter but was promoted following a decision of the Board on 14 February 2017. Mr. Roden is now responsible for all short tail classes of business underwritten by the Company. He is also Head of Ceded Reinsurance and the regulatory Principal Representative of Qatar Re in Bermuda. Michael van der Straaten Chief Underwriting Officer – Long Tail and Specialty Classes Michael van der Straaten began his career at Lloyd’s as a Box Manager and Non-Marine Property Treaty Underwriter. Mr. van der Straaten joined Qatar Re in December 2016 from Chubb Tempest Re where he held the role of Deputy Head of London and Head of Casualty, overseeing the development of the international casualty and motor portfolios. Prior to this, Mr. van der Straaten held various underwriting positions with a primary focus on casualty lines alongside wider management responsibilities.

Qatar Re Annual Report 2016

Mr. van der Straaten was initially appointed as Deputy Chief Underwriter but was promoted on 14 March 2017 following a decision of the Board on 14 February 2017. Richard Sutlow ACII ACMA Chief Financial Officer (from 1 March 2017) Richard was appointed Chief Financial Officer on 1 March 2017. Before joining Qatar Re, Richard was Chief Financial Officer at sister company Antares Managing Agency Limited where, in conjunction with Stephen Redmond, he was responsible for raising capital and establishing the group structure for the Antares venture. This included establishing Syndicate 1274 at Lloyd’s in 2008 and, subsequently, the Antares Managing Agency in 2010. Richard is also Chief Financial Officer of QIC Capital, the parent company of both Antares and Qatar Re. Prior to Antares, Richard was Chief Financial Officer for Württembergische’s UK operations, where his responsibilities also extended to underwriting services, IT, risk management and compliance. Richard’s early career was with Eagle Star Re, where he covered a broad range of finance roles and technical insurance. Richard is an associate of the Chartered Institute of Management Accountants and a Chartered Insurer. Andrew Smith Chief Risk Officer Andrew Smith joined Qatar Re in May 2016 having worked with the Company on its re-domiciliation to Bermuda as a consultant. Prior to joining the Company, Mr. Smith led the financial services risk management and actuarial teams at Ernst & Young in Bermuda. Mr. Smith has spent the past five years in Bermuda, advising and supporting commercial clients 83

and industry associations on the changing risk and capital agenda. Prior to moving to Bermuda, Mr. Smith was with PwC, based in London, working in the London market and internationally with clients across Europe, Asia and the Americas. While Mr. Smith has focused on risk management for most of his career, he is an accountant by training and is a Member of the Institute of Chartered Accountants of Bermuda, a Fellow of the Association of Chartered Certified Accountants and a Member of the Institute of Chartered Accountants in England and Wales. Stephen Tidd Chief Operating Officer Stephen Tidd joined Qatar Re in October 2015 as Head of Operations and was appointed Chief Operating Officer on 1 July 2016. Mr. Tidd has over 25 years’ experience in the insurance industry, including business leadership, general and operations management, and as a technical specialist. Mr. Tidd’s experience extends across both the retail and reinsurance sectors, with a particular emphasis on UK motor insurance. Prior to joining Qatar Re, Mr. Tidd served as Managing Director of Service Underwriting Agency Ltd. Mark Cockroft Chief Actuary Mark Cockroft has more than 20 years’ experience in general insurance actuarial work, with expertise in pricing, reserving and capital modelling for a variety of lines of business and firms. Mr. Cockroft started his career in the London market and international reinsurance operations such as GE Frankona and Endurance. Prior to joining Qatar Re, he chaired the Institute of Actuaries working party, researching the effects of Periodic Payment Orders in

the United Kingdom. Mr. Cockroft is a Fellow of the Institute and Faculty of Actuaries, founding member of the committee for the Gulf Actuarial Society, and a member of International Actuarial Association’s Section for Actuarial Studies in Non-life Insurance. Sandeep Nanda Chief Investment Officer (appointment pending) At a meeting of the Board of Directors held on 8 December 2016, approval was granted for the appointment of Sandeep Nanda as Chief Investment Officer (“CIO”). Sandeep joined the QIC Group in 2003 and is currently Group Chief Investment Officer and Executive Vice President, a post which he has held since 2015. He is a qualified Chartered Accountant and holds a Bachelor’s degree in Commerce from the University of Delhi. He has 23 years’ experience in financial services, including portfolio and treasury management. He is responsible for the day to day management of the investment and treasury department. Prior to joining the Group, he worked at TAIB Bank EC, an investment bank in Bahrain. Sandeep will join Qatar Re on conclusion of his current obligations and subject to regulatory approval. Alastair Speare-Cole Chief Underwriting Officer (until 31 January 2017) Alastair Speare-Cole resigned in early 2017. Parvez Siddiqui Chief Financial Officer (until 1 March 2017) Parvez Siddiqui was Chief Financial Officer of Qatar Re at the end of the reporting period. He remains with the Company but now reports to Richard Sutlow.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

continued

The Enterprise Risk Management (“ERM”) framework is underpinned by three distinct yet interrelated pillars: Capital Management, Exposure Management and Risk Management. This allows for an integrated approach to the management of all identified material risk categories.

2.3 Risk management and solvency self-assessment

This section provides an overview of the key aspects of the overall ERM framework in place within Qatar Re, including the processes and procedures that are used to identify, assess, control and mitigate risks:

2. Governance structure

2.3.1 Risk management processes and procedures

Qatar Re has designed, established and maintains a robust and effective risk management framework. The risk management framework is followed in the implementation of the strategic objectives and business plan. It allows for an appropriate understanding of the nature and significance of the enterprisewide risks to which the Company is exposed, including sensitivity to those risks and the Company’s ability to identify, assess, control and mitigate them. Risk governance is a major component of the overall risk framework and provides for clear roles and responsibilities in the oversight and management of risk. It also provides a framework for the reporting and escalation of risk and control issues across the Company. Qatar Re adopts a three lines of defence approach to managing and controlling risk:

Risk management processes and procedures First Line of Defence

Second Line of Defence

Third Line of Defence

–– Risk owner (operational management) –– Internal control owners

–– Compliance –– Risk –– Actuarial

–– Internal audit –– External audit

Responsible for managing the risk through deployment and execution of controls and management oversight.

Independently reports on the first line of defence activities. Reporting typically involves bringing independent perspective or challenge.

Independently provide assurance over the process.

Qatar Re Annual Report 2016

Risk Register

The Risk Register provides the overall risk profile of Qatar Re and includes the following risk categories: –– Insurance underwriting risk –– Investment, liquidity and concentration risk –– Market risk –– Credit risk –– Operational and systems risk –– Group risk –– Strategic risk –– Reputational risk –– Legal/litigation risk Risk Owners are required to assess the inherent and residual risk position using standardised assessment ratings. As part of the risk and control self-assessment, the risk owners have responsibility to identify and assess the design and performance of the key controls in place to mitigate the impact and probability of each risk event occurring. The key controls and their ratings are documented in the Risk Register, discussed with the control owners quarterly and updated by the Risk Function who also provide challenge to the assessment. The assessment is subject to a quarterly attestation process with independent oversight provided by the Risk Function. Output from the assessment and key changes to the risk profile are reported to and reviewed by the Risk and Capital Committee with escalation to the full Board as appropriate.

Capital Model

Qatar Re has developed its own Internal Stochastic Risk Model, which we use to calculate our own view of the economic capital required to support the Company’s business plan and meet our strategic objectives. The Model is a critical component of the overall risk management framework and feeds into a number of the other risk assessment processes. The Model is calibrated at the 1-in-100 year or 99% tail value at risk (“TVaR”) confidence level over a one year time horizon, which represents the average financial loss arising from the worst 1% of all simulations. The Model assesses the Company’s solvency by analysing its one year profit and loss distribution, including cash flows projected to ultimate.

Exposure Management

The main risk faced by the Company is insurance risk, and the largest component of that risk arises as a result of natural and certain man-made perils. To measure and monitor its exposure, Qatar Re has built its own database and reporting tool, called the Exposure Management Tool (“EMT”). The EMT is under constant development refinement. The output from EMT is used in various applications such as planning and aggregation management. Exposure data (severity and frequency) is recorded in the EMT, which is directly linked to our repository of underwriting and reporting data to ensure the latest information is used in decision making. Different approaches are taken to natural peril catastrophe and non-natural peril catastrophe exposure management: –– Natural peril catastrophe exposure is monitored on a monthly basis through accumulation monitoring of our 1-in-250 year event loss to key peril scenarios in key peril regions. We also recognise that the 1-in-250 year event loss does not capture the whole distribution of possible losses and we therefore also monitor the full exceedance probability curve for a variety of return periods, assessing the loss severity around the 1-in-250 year loss and an aggregated limits view of the maximum possible loss to peril events. –– Non-natural peril catastrophe exposure is measured with reference to line of business specific realistic disaster scenarios (“RDS”), where the methodologies used and scenarios run depend on the nature of the business underwritten. The RDS cover treaty and facultative underwriting of all lines of business.

Emerging risks

Emerging risks are risks that have not yet been fully understood or classified. Emerging risks are evaluated through the lens of the broader risk appetite and risk tolerance statements. The Chief Risk Officer (“CRO”), with input from the wider management team, identifies and prioritises emerging risks for assessment. An Emerging Risk Register is maintained which identifies: –– Description of potential risk impact –– Justification why it is not yet a material or emerged risk –– Early warning signs that the risk is emerging to become material –– Regime for monitoring early warning signs. The Emerging Risk Register is reviewed quarterly by the Risk Management Working Group (“RMWG”) to ensure appropriate coverage of risks. The emerging risk process and results from the emerging risk assessments are reported to the Risk and Capital Committee for discussion.

Risk reporting

The Risk and Capital Committee receives a quarterly risk report that covers the following core risk information: –– Exposures against risk appetite and tolerances –– Results of quarterly self-assessment on Risk Register control activities –– Emerging risks –– Material operational risk events (and near misses) –– Any proposed changes to the risk management framework. Qatar Re Annual Report 2016

The CRO also provides a quarterly written report to the Executive Committee and the full Board which provides a summary of the main risk reporting pack and describes key activities and topical matters.

Management information framework

A management information framework has been established that allows for the monitoring of the following key areas: –– Achievement of strategic objectives –– Business performance –– Investment performance and liquidity –– Concentration exposures –– Reserving adequacy –– Capital requirements –– Material risks faced by the business –– Risk appetite and tolerance –– Effectiveness of the control environment –– Material outsourced functions –– Compliance with laws and regulations.

2.3.2 Implementation and integration of risk management and solvency self-assessment systems

The Risk Function is responsible for developing, implementing and maintaining the risk management framework and associated policies across the Company. Our risk management framework is implemented and integrated through the various committees, processes and procedures described under section 2.3.1. These processes contribute towards our solvency selfassessment, supporting the identification and measurement of all material risks to which the Company is exposed and informing the decision making process. The solvency selfassessment processes are ongoing and operate throughout the year. The Commercial Insurer’s Solvency Self-Assessment (“CISSA”) report summarises the outcome for the Board and Management on an annual basis, and more frequently if our self-assessment changes materially. The 2017 CISSA report was drafted and approved by the Board during February 2017. Some of the key processes that form part of the overall solvency self-assessment process include: –– Risk appetite and tolerance statements (and their ongoing monitoring) –– Business planning processes (and ongoing monitoring of the implementation of the plan) –– Stress and scenario testing (including reverse scenarios and exposure management analysis) –– Risk and control assessment processes that are documented in the Risk Register –– Capital calculations (using both the internal model and BMA standard formula) –– Model validation activities –– Emerging risk assessment processes.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

2.4 Compliance Function

2. Governance structure continued

2.3.3 Relationship between solvency selfassessment, solvency needs and capital and risk management systems

Each element of the Company’s risk management framework contributes to the solvency self-assessment. The solvency self-assessment process is used by Qatar Re directors and management to inform them of the adequacy of the Company’s risk management, economic and regulatory capital and current solvency position. It is used extensively to support the decision making process, in business planning, outwards retrocession analysis, portfolio management, development of appropriate contingency arrangements and plans and in order to prioritise risk mitigation actions. The self-assessment process helps us to identify the key risk drivers of our required capital and facilitates comparisons of alternative strategies to optimise the return on capital. The business plan is prepared over a one year planning horizon and we also maintain a view on a three year horizon based on our view of market fundamentals. The business plan is aligned with the risk appetite statements, which define the type and amount of risks we are willing to accept and manage, along with the types of risks to avoid. Our own view of the associated capital requirements is considered.

2.3.4 Solvency self-assessment approval process

The CISSA report is prepared by the risk management department with contributions from the relevant functions throughout the Company. It is signed by the CRO and reviewed and approved by the Risk and Capital Committee and the Board. The approval process is consistent with the three lines of defence approach to risk management. It is managed by the second line (Risk) and other second line functions prior to approval, with input from the first line through the risk and control assessment process, and a review by the third line (Internal Audit) on a periodic basis. The first such review by Internal Audit is due to occur during 2017.

Qatar Re Annual Report 2016

The Compliance Function acts in an advisory, oversight and assurance capacity to ensure that the Company has the necessary systems and controls to enable it to adhere, on an ongoing basis, to regulatory and legislative requirements. The Compliance Function develops Company-wide compliance policies and procedures, and provides guidance and support on regulatory and legislative requirements. It also ensures that staff receive adequate training on various compliance matters (e.g. anti-money laundering), and that business is written in accordance with applicable licensing requirements. The Head of Compliance maintains an open and cooperative relationship with our regulators and is responsible for promoting and embedding a culture of compliance and integrity throughout the Company. A Compliance Report is prepared quarterly for the Board.

2.5 Internal control framework

The internal control framework seeks to mitigate risks, protect our policyholders and limit the likelihood of losses or other adverse outcomes as well as providing a framework for the overall management and oversight of the business. Controls can take a variety of different forms, including but not limited to the following: –– Approvals and authorisations –– Policies and procedures –– Reconciliations and verifications –– Authority limits –– Management reporting –– Peer reviews. Key controls are captured within the Risk Register and assessed as part of the risk and control assessment process described under section 2.3.1. The specific responsibilities of the Company’s internal control functions are documented in the Governance and Internal Control Policy, and are comprised of the following functions: –– Compliance Function –– Risk Management Function –– Actuarial Function –– Internal Audit Function. Internal and external auditors play a key role in the oversight and assessment of the overall control environment. Findings from audit reviews are shared with and discussed by the Audit Committee and also contribute to risk assessment and solvency self-assessment processes.

2.6 Internal Audit Function

The Internal Audit Function is segregated from all operational functions and provides independent assurance on the effectiveness of the risk management, internal control and governance frameworks. It has unrestricted access to all areas of the organisation so as to effectively conduct internal audit reviews. Findings, action points, weaknesses and failures arising from each review are discussed with the relevant business areas, and reported to the Audit Committee.

2.7 Actuarial Function

The Actuarial Function is responsible for performing and overseeing the estimation of the technical provisions, including assessing the adequacy of methodologies and assumptions and the quality of underlying data. The Actuarial Function also assists in the execution of the risk management framework including the modelling, reporting and quantification of risk, particularly with respect to insurance risk and its effective mitigation. Other key responsibilities of the actuarial function include supporting the underwriting process through pricing and evaluation of risk. The Actuarial Function reports to the Board, CEO and Senior executives on the dependability and sufficiency of the technical provisions to cover policyholder obligations. Supporting the Chief Actuary, Claude Perret is the Deputy Chief Actuary, Head of Reserving and Loss Reserve Specialist for Qatar Re. He is a qualified actuary and a Fellow of the UK Institute and Faculty of Actuaries (FIA 1999) and of the French Institut des Actuaires (ISFA 1992). He has more than 20 years of experience working in general insurance and reinsurance.

2.8 Outsourcing

2.8.1 Outsourcing Policy

We have developed a Board approved Outsourcing Policy which applies to all internal and external outsourcing arrangements. The policy describes how all outsourcing arrangements are arranged, overseen, monitored and managed. The policy is owned by the Chief Operating Officer. Outsourcing is used to complement the Company’s overall business strategy, objectives and risk appetite. We only consider and enter into outsourcing arrangements where they offer improved business performance, both operationally and financially. We do not enter into outsourcing arrangements that will result in an increased level of risk exposure that breaches our risk appetite and tolerance. Qatar Re continues to be responsible and held accountable for the performance and output of any outsourced activities. We recognise the inherent risks associated with outsourcing any of our activities and understand the importance of implementing robust controls.

Qatar Re Annual Report 2016

2.8.2 Outsourced functions

We currently outsource our internal audit activities to PwC. The Internal Audit function reports directly to the Audit Committee and administratively to the Head of Compliance. Where the Head of Compliance may be conflicted, the CRO assumes this role. Qatar Economic Advisors O.P.C. (“QEA”), the wholly-owned investment advisory services subsidiary of QIC, are appointed as Investment Advisors for Qatar Re. QEA provides a range of investment advisory services to the Company under an Investment Advisory Agreement, which outlines the authorities granted, together with an Investment Mandate document which provides more specific policy guidance. The asset mix is closely managed in line with the Investment Mandate to meet liquidity needs and investment return targets. Sufficient funds are held in cash and term deposits to meet short-term liquidity needs. These are held with a variety of financial institutions in multiple locations across the global banking system. Individual limits are established for each institution to provide diversification and management of credit risk. Qatar Re’s principal clearing bank is a major UK listed international banking group, who provide clearing facilities in all the jurisdictions in which Qatar Re operates. Fixed income securities are held with a number of global custodians, principally based in Switzerland. Qatar Re’s small equity portfolio is comprised largely of exchange traded equities. These are held in custody directly on the local exchange. QEA is responsible for monitoring investment performance and providing a quarterly investment report to the Investment Committee. Subject to regulatory approval, the newly appointed Chief Investment Officer (“CIO”) will have executive responsibility for the oversight of the Company’s investment portfolio and the relationship with QEA.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

3.1 Material risk exposures

3. Risk profile Qatar Re has established a sound risk management framework by which risks are identified, measured, mitigated and managed.

We have adopted the following material risk types in order to explain the potential sources of risk and our philosophy surrounding those risks. This sets the scene for the calibration of our risk appetite and risk tolerances: –– Insurance risk –– Market, investment, liquidity and concentration risk –– Credit risk –– Operational and systems risk –– Group risk –– Strategic risk –– Reputational risk –– Legal/litigation risk. The Company’s most material risk categories are outlined below.

Insurance risk

The principal risk faced under our insurance contracts is that the actual claim payments or the timing thereof differ from expectations. This is influenced by the frequency and severity of claims and subsequent development of long tail claims. Insurance risk can be broken down into underwriting, catastrophe and reserve risk. Underwriting risk relates to the unexpired risk on business already incepted or bound and reflects the risk that premiums are not sufficient to cover future losses. Underwriting risk arises as a result of differences in the frequency and severity of claims compared to our expectations. We monitor and measure exposures to underwriting risk through a range of Realistic Disaster Scenarios (“RDS”) as part of our Exposure Management Framework. Catastrophe risk arises primarily from our property catastrophe and other property business lines. Our largest exposures are to US perils. We also have material exposures to non-US perils in both Japan and Europe. We measure our catastrophe risk through our Exposure Management Tool. Reserve risk arises from the inherent uncertainty surrounding the adequacy of the reserves or technical provisions set aside to cover our insurance liabilities. The risk is that the current reserves (including IBNR) are not sufficient to cover the run off of the claims which have already occurred. The main contributor to reserve risk is our non-proportional casualty business (which is longer tailed than other lines of business). In addition to the measurement of insurance risks through the Exposure Management Framework, we also measure and monitor these risks through the quarterly assessment against our risk appetite and tolerance statements and quarterly self-assessment on Risk Register and control activities. We analyse the output from the internal model to understand the relative capital requirements and modelled uncertainty surrounding our portfolio by line of business.

Qatar Re Annual Report 2016

Market, investment, liquidity and concentration risk

Market risk can cause the Company to suffer losses due to unfavourable developments in the financial markets. Market risk arises as a result of our currency exposures, interest rate and default risk on the fixed income portfolio, and equity price risk as a result of the equities we hold within our investment portfolio. As at 31 December 2016, more than 75% of the fixed income portfolio is invested in entities rated ‘A’ or better. Our allocation to equities/alternatives is less than 9% of the overall investment portfolio. Investment risk can arise as a result of implementing an inappropriate investment strategy. The investment strategy is tailored to meet the Company’s business needs, objectives and regulatory requirements. Liquidity risk arises when we are unable to meet our payment obligations as and when they fall due. We measure this risk by assessing the appropriateness of the controls in place to monitor and manage liquidity risk exposure and supplement this with cash flow analysis arising from stress testing exercises such as those conducted as part of the Exposure Management Framework. Concentration risk can arise when the investment portfolio is not appropriately diversified across counterparties, geographical regions and industries. Concentration risk is measured with reference to our risk appetite and tolerance statements, which limit the concentration of asset holdings on a regional, country and counterparty level.

Credit risk

Credit risk arises from both our underwriting and investment activities. This represents the risk of counterparties defaulting and not being able to make payments resulting in losses to Qatar Re. A credit risk event can occur due to the failure of reinsurers to settle claims in full, failure of a broker to pass on premiums or failure of a bank to return cash. The outwards reinsurance team actively monitors exposure to single reinsurance counterparties. The technical accounting department prepares and monitors aged debt reports, establishing provisions for amounts which are not expected to be recovered due to default. Exposure to brokers is captured within a dashboard by the underwriting department. The security rating of all banking and custodian counterparties is monitored on a daily basis.

Operational risk

Operational risk arises from the failure of or inadequate processes, people or systems or from external events that impact the operational capability of the Company. We monitor operational risk exposures through our Risk Register and emerging risk processes which are overseen by the Risk Management Working Group and the Risk and Capital Committee. This Risk Register and emerging risk process also cover strategic risks, reputational risks and legal and litigation risks.

Qatar Re Annual Report 2016

Group risk

Group risk represents the risk arising as a result of being part of an insurance group, including exposures resulting from intra-group transactions. It arises from the relationship we have with our parent group, including the reinsurance cover provided by QIC and the dependence on the Group credit rating and parental guarantee. Operational dependency is limited to only one material intra-group outsourcing contract relating to investment advisory services.

3.2 Risk mitigation

We have established a defined framework of internal controls which seeks to mitigate risks and limit the probability of losses or other adverse outcomes as well as providing a framework for the overall management and oversight of the business. The controls are rated according to their effectiveness of both design and performance, with independent challenge provided by the Risk Management Function. Internal audit provides independent assurance on the performance of the controls. If a new risk is identified, we ensure that it is assessed, measured and managed through the establishment of internal controls, with regular monitoring through the Risk Management Framework. We assess the various risk mitigation techniques and ensure that they are appropriate to the nature of the risks assumed. The Risk Register captures the key controls for each risk and records the assessment of the effectiveness of each control as determined by the risk and control owners. Controls are rated on a red/amber/green basis.

Insurance risk

Our main underwriting and reserving objectives are to ensure that: –– Risks are sufficiently identified and understood on policies prior to accepting business –– Policies are sufficiently priced so as to cover any future losses –– Sufficient reserves are available to cover these liabilities during run-off post-inception. We mitigate our exposure to underwriting risk through a robust suite of underwriting controls which include defined limits, pricing models, peer review processes and oversight from the Underwriting and Portfolio Management Committee (“UPMC”). A number of controls which mitigate against the risk of inadequate pricing and risk selection are in operation. These controls are assessed and documented within the Risk Register, including: –– The underwriting business plan approval process –– UPMC portfolio review and performance monitoring –– Underwriting authority letters –– Loss watch list which acts as an early warning system to identify potential losses –– Documentation of pricing rationale –– Pricing model governance and controls –– Pricing data quality checks.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

3. Risk profile continued Catastrophe risk exposure is managed through our exposure limit framework which is monitored on a monthly basis using analysis from the Exposure Management Tool, with oversight from the UPMC. The Exposure Management Framework provides for real time aggregate monitoring (both frequency and severity) to reduce the risk of unforeseen accumulations arising. Event limits are set by peril and region within the Underwriting Guidelines for all countries where business is written, and the risk function signals to the underwriters when exposure is approaching the allocated limit. Reserve risk exposure is managed within our actuarial function and through defined reserving best practices which are overseen and approved by the Reserving Committee. A number of controls are in place to ensure that reserving processes are adequate and that reserving data is complete and appropriate. These controls are assessed and documented within the Risk Register, including: –– Reserving policy outlining standards and target reserve strength –– Reserving Committee review, challenge and sign off of reserves –– Underwriter review and challenge of reserves –– Independent opinion on reserves. We purchase both treaty and facultative reinsurance to reduce the risk of excessive claims volatility. We enter into reinsurance arrangements within defined limits to ensure that the exposure to counterparty credit risk arising out of reinsurance arrangements does not exceed our defined and risk appetite and tolerance statements. We ensure that the reinsurer provides adequate security by partnering with strongly rated reinsurers and ensuring that full collateralisation is in place for non-rated reinsurers. The Outwards Reinsurance team maintains a list of approved reinsurers which is continually monitored. The Outwards Reinsurance Guidelines document the procedure for the purchase of reinsurance.

Market, investment, liquidity and concentration risk

Our Investment Mandate is intended to limit our exposures to market risk and volatility, and the adherence to these guidelines and their continued suitability are overseen by the Investment Committee. In particular we limit our exposure to assets such as private equity, real estate, hedge funds and other (non-fixed income/non-equity) managed funds. Our Investment Mandate is heavily weighted towards fixed income and cash deposits. The Investment Committee approves and monitors the implementation of the Investment Mandate by the investment advisors. An update on the investment portfolio is included in the Investment Committee meeting materials. Asset allocations are compared to minimum and maximum allocations and constraints per the investment mandate and risk appetite and tolerance statements to ensure compliance.

Qatar Re Annual Report 2016

Liquidity risk is managed through our overall investment strategy which is focused on allocations to more liquid instruments and wider monitoring of the overall liquidity profile of the investment portfolio. Our overall investment portfolio is considered to be very liquid. The actuarial team also provides information to the investment advisors on a quarterly basis relating to the maturity profile of the insurance liabilities in order to facilitate appropriate asset allocations. We use hedging arrangements to mitigate against unfavourable foreign exchange and interest rate movements. To mitigate against concentration risk, our risk appetite limits the concentration of asset holdings on a regional, country and counterparty level, ensuring that our investment portfolio is appropriately diversified.

Credit risk

To minimise our exposure to significant losses from reinsurer insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsures. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment. Minimum security ratings or collateral requirements are in place for reinsurance counterparties. An approval process is in place for accepting all new reinsurers and banking counterparties, with minimum security ratings also in place for all banking counterparties. All brokers are subject to due diligence procedures.

Operational risk

We seek to manage operational risk exposure through the implementation of a robust internal control framework and an effective governance framework, as described in detail in section 2. We have established an effective business continuity plan and disaster recovery plans.

Group risk

We have an excellent relationship with QIC, and ensure that we establish strong governance around our agreements, including certain arm’s-length contractual arrangements. Given our dependence on the Group credit rating, we have significantly increased our involvement in the rating process. We now engage in more active participation and in separate meetings with the rating agencies. We previously were dependent on the Group both operationally and financially. Operational dependency has reduced and is limited to only one material intra-group outsourcing contract relating to investment advisory services. Financial dependency is also reducing. Notably, we reduced the Group quota share to 50% for 2017, and, in March 2017, successfully raised an additional USD 450 million of third party capital. Please see section 6 for more information on the capital raise.

Strategic risk

The risk of business strategy failure is mitigated through the review and sign off of the business plan by the Board and alignment of the business plan, risk appetite, capital requirements and underwriting guidelines. Formal communication of the business plan is provided to our underwriters and business

partners. As outlined in section 2.2, the Company ensures that Board members and senior executives are fit and proper to discharge their responsibilities which includes providing the necessary strategic direction. Stress and scenario testing helps to identify and assess the risks to the business plan.

Reputational risk

The risk of adverse publicity is mitigated through our effective corporate governance framework and Board oversight of our strategies, policies and risk appetite. Risk management is fully integrated into the business planning process, and there is a strong positive culture of compliance with laws and regulations and risk awareness throughout the Company.

Legal/litigation risk

As described under section 2.5, the Compliance Function provides expert guidance on current and proposed regulatory requirements in the jurisdictions in which we operate. The legal team performs ongoing monitoring of material changes in laws and regulations to ensure that the impact of any changes on Qatar Re is communicated to the relevant parties. It also plays a significant role across a number of activities, including the drafting and review of Company policies, management of claims disputes and review of external retrocession transactions.

3.3 Material risk concentrations

The Company’s Board approved risk appetite and tolerance statements govern the concentration limits in relation to counterparties, credit quality, and geographical locations so as to avoid any material risk concentration. The Risk Function, in liaison with the business areas and risk owners, performs a qualitative and quantitative assessment of exposures against the defined appetite and tolerances on a quarterly basis. In addition to the appetite and tolerance limits there are a number of different managerial level limits that are used across different functions to manage risk exposures within the approved risk appetites. For example, investments are managed within the scope of the approved Investment Mandate. Regular reporting of asset positions against the mandate are reported and monitored by the Investment Committee. Similarly, for underwriting risk, catastrophe capacity is allocated across both business lines and key perils/regions. Usage of these allocated limits is then monitored on a monthly basis and overseen by the UPMC. The Exposure Management Tool provides real time monitoring of aggregate risk exposures by peril and region.

3.4 Investment of assets in accordance with the prudent person principle

The investment strategy is heavily weighted towards fixed income and cash deposits. An Investment Mandate is approved by the Board and includes details of permitted investments (including limits), minimum credit ratings and maximum concentrations. The Investment Committee provides oversight of Qatar Re’s investment strategy and performance. The investment strategy ensures that we only invest in instruments that any reasonable individual with objectives of capital preservation and return on investment would own and that are in the best interests of our policyholders. The guidelines only allow for us Qatar Re Annual Report 2016

to assume investment risks that we can properly identify, measure, respond to, monitor, control and report. The guidelines are set so as to ensure we have appropriate and adequate capital, liquidity and ability to meet our policyholder obligations. Cash and term deposits are held with a variety of financial institutions in multiple locations across the global banking system, with individual limits in place for each institution. Fixed income securities are held with a number of global custodians, principally based in Switzerland. Equities are held in custody directly on the local exchange. The newly appointed CIO will have executive responsibility for the oversight of the Company’s investment portfolio and the relationship with QEA, who are appointed as Investment Advisors for Qatar Re and provide a range of investment advisory services to the Company, in accordance with our Investment Guidelines and Investment Mandate.

3.5 Stress testing and sensitivity analysis

The use of stress and scenario analysis is a key element of risk management practice within Qatar Re. A range of stress and scenario tests are performed on an ongoing basis to assess material risks and ensure that we have sufficient capital and liquidity to meet our policyholder obligations as they fall due. Natural catastrophe exposure is monitored using both a stochastic approach (measuring the 1-in-250 year Occurrence Exceedance Probability (“OEP”) Value at Risk (“VaR”)) to determine the probable maximum loss (“PML”), and also on a deterministic basis by aggregating the exposure limits in each scenario zone to determine the maximum possible loss (“MPL”). We use probabilistic vendor models for most important peril region scenarios. Actuarial methods are used to determine loss frequency and severity for peril regions where no vendor model is available. For perils/regions where we have limited exposure, we use statistical software to increase the number of loss events analysed by Monte Carlo simulation. The outcome of this assessment shows that our largest exposures are to windstorms in the North East Coast in the USA. Non-natural peril catastrophe exposure is monitored through realistic disaster scenarios (“RDS”) which are defined for each line of business. 50 scenarios with different frequency and severity assumptions have been defined in order to make assessments on the tail risk. The return period associated with each scenario is determined by expert judgement and, where available, by considering relevant historical observation points. The scenarios which would lead to the highest net loss relate to our agriculture and credit and surety lines of business. We also conduct prescribed stress and scenario testing and analysis as part of our Capital and Solvency Return to the BMA, which helps determine our financial capacity to absorb the materialisation of shocks to both financial market and underwriting conditions. Our reverse stress test scenarios consider the impact of certain extreme events relating to the Group that could cause significant strain on the Company and outline the mitigating factors in place to protect against these. We consider scenarios which would cause both severe financial stress and severe operational stress.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

4.1 Valuation of assets for solvency purposes

4. Solvency valuation The assessment of available and required regulatory capital is made by taking an economic view of our assets and liabilities, in accordance with the BMA’s Economic Balance Sheet (“EBS”) framework. The EBS is produced on a consolidated basis in line with generally accepted accounting principles (“GAAP”) (which in Qatar Re’s case means International Financial Reporting Standards (“IFRS”)) subject to certain regulatory filters and adjustments as prescribed by the BMA. If GAAP principles permit both a fair value model and a non-economic valuation model for valuing an asset or liability, a fair value model is used. All contractual liabilities or contingent liabilities arising from off-balance sheet arrangements are recognised on the EBS.

Qatar Re Annual Report 2016

Cash and cash equivalents, fixed income securities, equities, other investments and all other assets on the EBS are recorded at fair value in line with IFRS, with both changes in fair value and realised gains/losses netted off Statutory Economic Capital and Surplus. In cases where the IFRS principles do not require fair value, we value investments using the EBS Valuation hierarchy, as defined in the BMAs ‘Guidance Note for Statutory Reporting Regime’ for the reporting period’s statutory filing. Receivable balances which are due in more than one year are discounted using the risk-free discount curve.

4.2 Valuation of liabilities for solvency purposes

The main liabilities on the EBS are the technical provisions, net of reinsurance recoverables, which consist of liabilities for claims outstanding and premium provisions. Other liabilities include insurance and reinsurance balances payable, loans and notes payable and lease arrangements.

4.2.1 Valuation of technical provisions

Technical provisions comprise the sum of the best estimate cash flows and a risk margin and are calculated using the BMAs ‘Guidance Note for Statutory Reporting Regime’. The gross and net technical provisions are shown separately. The best estimate liability aims to represent the probabilityweighted average of future cash flows required to settle the insurance obligations attributable to the lifetime of our policies. The best estimate cash flows include future best estimate premium payments, claim payments, expenses expected to be incurred in servicing our policies over their lifetime, investment costs and any payments to and from reinsurers. The best estimate liability is discounted using the currency specific standard rate yield curves as published by the BMA, which are derived from the risk-free interest rate term structure with an illiquidity adjustment. The best estimate is shown separately for outstanding claims provisions (in respect of claims incurred whether reported or not) and premium provisions (in respect of expected future claims events). Premium provisions include an allowance for business which has been bound but not incepted (“BBNI”) at the valuation date.

The risk margin is added to the best estimate to reflect the uncertainty associated with the probability-weighted cash flows. The risk margin is calculated using a cost of capital approach with reference to the insurance risk, counterparty credit risk and operational risk components of the Bermuda Solvency Capital Requirement (“BSCR”) formula. A cost of capital rate of 6% is applied to the cost of capital to cover the full period needed to run off the insurance liabilities. The cost of capital in each future year is discounted using the risk-free discount curve. Considering the relatively young age of the Company, the growing and evolving portfolio and underlying volatility of the reinsurance business written, we do not have a credible volume of our own historical loss development triangles or factors, which increases the need to rely on pricing estimates and suitable benchmarks. We have selected benchmarks which we believe are appropriate to the specifics of our business, and will be substituted for our actual development experience as we build up a volume of statistically credible data.

4.2.2 Recoverables from reinsurance contracts

The best estimate of the amounts recoverable from reinsurance contracts and other risk transfer mechanisms is calculated separately from the gross best estimate. The calculation is based on principles consistent with those underlying the gross best estimate, projecting all cash flows associated with the recoverables and discounting using the standard rate yield curve. The cash flows include reinstatement premiums and any expenses in relation to the management and administration of reinsurance claims. The cash flows take account of timing differences between payment of the gross claims and receipt of the related reinsurance recoverables. An adjustment is made to reflect the expected losses on reinsurance recoverables due to counterparty default. The adjustment is based on an assessment of the probability of default of the counterparty and the average loss resulting from the default.

4.2.3 Valuation of other liabilities

Other liabilities appearing on the EBS are all recorded at fair value in line with IFRS. Amounts payable in more than one year are discounted at the relevant risk-free rate.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

5. Capital management Qatar Re maintains a strong capital position that significantly exceeds regulatory requirements and benefited from a USD 200 million capital contribution from its parent during 2016.

Qatar Re is required by the BMA to hold available statutory capital and surplus of an amount that is equal to or exceeds the Enhanced Capital Requirement (“ECR”). The ECR is the higher of the Bermuda Solvency Capital Requirements (“BSCR”) (the BMA standard formula capital requirement) and the Minimum Margin of Solvency (“MSM”). The BSCR forms part of the regulatory regime that has achieved equivalence with Europe’s Solvency II. The MSM is calculated based on the higher of various metrics from the statutory accounts with a floor set at 25% of the BSCR. Qatar Re’s shareholders’ equity rose to USD 772 million at year end 2016 on an IFRS basis (2015: USD 532 million) following a further USD 200 million contribution from its parent. Qatar Re has retained its 2016 earnings, further bolstering its capitalisation. As noted later in this section the capital base has been substantially strengthened early in 2017.

5.1 Eligible Capital

5.1.1 Capital management

Capital adequacy is maintained with reference to our risk appetite and tolerance statements, which we have defined in terms of our regulatory and internal model solvency ratios. Our risk appetite defines what we seek to achieve based on normal commercial situations. At any given time, our capital management policy is to maintain a strong capital base to enable us to support the business plan based on our own view of the capital required, and meeting regulatory capital requirements on an ongoing basis. The risk management framework is embedded in strategic planning, decision making and budgeting. As part of this framework, we assess the level of capital needed to maintain solvency at the thresholds targeted within our risk appetite and tolerance statements, given our risk profile. The CISSA procedures enable us to identify, assess, monitor, manage and report on the current and emerging risks that the Company faces, and to determine the capital necessary to ensure that overall solvency needs are met at all times. Our Capital Management Action Plan identifies the various thresholds below which available capital may be depleted, and the actions we will adopt to maintain capital adequacy in line with our risk appetite and tolerance statements. We can manage our capital position by either increasing the amount of available capital or by taking action which reduces the required capital. The approach taken is dependent on the specific circumstances of the event giving rise to the depletion of available capital.

5.1.2 Tiers of Eligible Capital

The BMA have introduced a three-tiered capital system which is designed to assess the quality of insurers’ capital resources eligible to satisfy their regulatory capital requirement levels. The tiered capital system (Tiers 1, 2 and 3) classifies capital instruments into a given tier based on their loss absorbency characteristics. The highest quality capital is eligible for Tier 1, which is able to absorb losses under all circumstances, including on a going-concern, run-off, wind-up and insolvency. Tier 2, while providing full protection to policyholders in a wind-up or insolvency, has moderate loss absorbency on a going-concern basis. Tier 3 meets, on a limited basis, some of the characteristics exhibited in Tiers 1 and 2.

Qatar Re Annual Report 2016

Eligibility limits are applied to each tier in determining the amounts eligible to cover regulatory capital requirement levels. Only Tier 1 and Tier 2 capital are eligible to cover the MSM (a minimum of 80% Tier 1 capital and a maximum of 20% of Tier 2 capital). A minimum of 60% of Tier 1 capital and a maximum of 15% of Tier 3 capital must be available to cover the ECR. Our Eligible Capital consists of paid in share capital and retained earnings. All of our Eligible Capital as of 31 December 2016 qualifies as Tier 1 capital under the Eligible Capital Rules, confirming that we meet the eligibility limits applied to each tier to cover the MSM and ECR. There were no material changes to the sources of capital during the reporting period. However, in the first quarter of 2017 the Company successfully raised an additional USD 450 million of capital, which qualifies as Tier 2 capital under the Eligible Capital Rules. Please see section 6 for more information. At the end of the reporting period, the Company’s Eligible Capital was categorised as follows (USD millions): Eligible Capital USD million

Tier

Tier 1 Total

810.0 810.0

5.1.3 Eligible Capital subject to transitional arrangements

At the end of the reporting period, we do not hold any Eligible Capital which is subject to transitional arrangements.

5.1.4 Factors affecting encumbrances affecting the availability and transferability of capital to meet the ECR

We have entered into certain contracts of reinsurance with cedants that require us to fully collateralise or pledge assets equal to the estimated policyholder obligations. Pledged assets are held in trust accounts for the benefit of the cedant. These assets are released to us upon the settlement of the policyholder obligations. We benefit from an investment income received on these assets.

5.1.5 Ancillary capital instruments approved by the BMA

At the end of the reporting period, we do not hold any ancillary capital instruments which have been approved by the BMA to be included in our Eligible Capital.

5.1.6 Differences in shareholder’s equity as stated in the financial statements versus the available capital and surplus The key differences between the shareholder’s equity as stated in the IFRS financial statements and the available capital and surplus as stated in the Economic Balance Sheet are as follows:

Qatar Re Annual Report 2016

–– The reinsurance contract liabilities and reinsurance contract assets in the IFRS financial statements are replaced by the technical provisions in the Economic Balance Sheet. The technical provisions are calculated in accordance with the Insurance (Prudential Standards) (Class 4, Class 3B Solvency Requirement) Rules 2008 as amended. This calculation basis is described under sections 4.2 and 4.3. –– A fair value is calculated on future lease commitments which are not included on the IFRS balance sheet of the Company. The fair value is calculated by taking the total future cash flows associated with the leases and discounting these flows using the relevant risk free discount rates. The resulting fair value is included as a liability on the EBS.

5.2 Capital requirements

Our Board approved risk appetite statements as they relate to the minimum capital and solvency levels are to hold available statutory capital and surplus so that the solvency ratio as determined by the BSCR should not fall below 140%, the solvency ratio as determined by the MSM should not fall below 120%, and the solvency ratio as determined by the internal capital model should not fall below 110%. In addition, we must, at all times, have the ability to raise adequate liquidity to fund two independent 1-in-250 year events on a gross basis requiring liquidity within 12 months. Throughout 2016, we remained in compliance with all of our risk appetite statements.

5.2.1 BSCR, MSM and ECR at the end of the reporting period

At the end of the reporting period, the Company’s regulatory capital requirements were as follows: Requirement

Amount USD million

Minimum Margin of Solvency Bermuda Solvency Capital Requirement Enhanced Capital Requirement

468.5 185.8 468.5

As a Class 4 insurer the MSM calculation limits the credit for outwards reinsurance to 25% of GWP. This results in the MSM (rather than the BSCR) being the driver of our Enhanced Capital Requirement (“ECR”). We expect this position to change as we reduce the QIC quota share cession percentage over the coming years.

5.2.2 Compliance with the BSCR, MSM and ECR

At the end of the reporting period, the Company had total available statutory capital and surplus of USD 810.0 million, exceeding the MSM and ECR by USD 341.5 million and resulting in an ECR ratio of 173%. Our BSCR coverage ratio was 436%.

5.2.3 Approved internal model

This section is not applicable as we do not use an approved internal model for the calculation of our regulatory capital requirements.

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

6.1 Tier 2 capital raise

6. Subsequent event Since the end of the period, Qatar Re has benefited from a successful capital raise and further strengthening of the management team.

On 13 March 2017, we successfully issued USD 450 million Reg S Perpetual non-call 5.5 year subordinated Tier 2 notes, increasing our capital base beyond USD 1.2 billion. The notes are guaranteed on a subordinated basis by QIC and represent the Company’s first debt issuance in the international debt capital markets. The issue attracted over 290 orders of more than USD 6.5 billion and achieved a balanced global distribution of investors comprising 30% Asia, 29% UK, 20% Middle East, 19% Continental Europe and 2% from other regions, successfully diversifying our capital base. The initial coupon has been set at 4.95% per annum. It will be fixed until the first call date in September 2022 when it will be reset to five-year MS plus the initial margin, and will be reset every five years thereafter. The notes have been assigned an issue rating of ‘BBB+’ by S&P Global Ratings and provide eligible Tier 2 capital to further enhance Qatar Re’s financial strength. We will use the additional capital to finance future growth and enable us to respond to increasing demand from existing and new clients for substantial capacity.

6.2 Ogden discount rate

In late 2016, the UK Lord Chancellor launched a review of the discount rate used to determine the lump sum payments made to large motor and bodily injury claimants (known as the ‘Ogden’ rate). On 27 February 2017, it was announced that the rate will reduce from 2.5% to minus 0.75%, effective from 20 March 2017. This significantly increases the cost of lump sum payments made by insurance and reinsurance companies. We have carried out an assessment of the impact the change in rate has had on our UK Motor liabilities. We made an adjustment to our reserve estimate at Q1 2017 due to the impact of the change in the Ogden rate on our UK Motor excess of loss portfolio. The change in the Ogden rate resulted in a strengthening of gross reserves of USD 30.9 million and net reserves of USD 9.3 million on an IFRS basis.

6.3 Management changes

At a meeting of the Board of Directors held on 8 December 2016, approval was granted for the appointment of Richard Sutlow as Chief Financial Officer (“CFO”) and Sandeep Nanda as Chief Investment Officer (“CIO”). Mr. Sutlow took up his role as CFO on 1 March 2017. Mr. Nanda’s appointment is pending. Alastair Speare-Cole resigned from his role as Chief Underwriting Officer (“CUO”) with effect from 31 January 2017 and from the Board of Directors with effective from 6 February 2017. On 14 February 2017, the Board of Directors approved the appointment of Luke Roden and Michael van der Straaten to lead our underwriting function. Luke Roden immediately assumed the role of CUO – Short Tail Classes and also retains his role as Head of Ceded Re. Michael van der Straaten assumed the role of CUO – Long Tail and Specialty Classes following notification to the BMA on 14 March 2017.

Qatar Re Annual Report 2016

This FCR fairly represents the financial condition of the Company in all material aspects during the reporting period.

7. Declaration

Qatar Re Annual Report 2016

Andrew Smith Chief Risk Officer 30 June 2017

Gunther Saacke Chief Executive Officer 30 June 2017

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Founded in 1964, Qatar Insurance Company S.A.Q. (“QIC”) is the ultimate parent of the QIC Group of companies and a leading publicly-listed insurer with a global underwriting footprint. QIC is the dominant insurer in Qatar and the largest insurance company in the Middle East and North Africa region by premiums, profitability, total assets and market capitalisation. It is listed on the Qatar Exchange (Ticker: QATI) and had a market capitalisation of USD 5.6 billion as at 31 December 2016.

Our parent company

QIC is among the highest rated insurers in the Gulf region with a rating of ‘A/Stable’ from S&P Global Ratings and of ‘A/Excellent’ from A.M. Best Europe. Qatar Re and other guaranteed subsidiaries of QIC also share and benefit from these strong ratings.

QIC performance figures, 2010 – 2016 USD millions Shareholders’ equity Gross premium Net profit 968

969

592

2,326

2,293

1,042

655

171

2010

970

703

2011

2012

2013

Total assets USD millions

2014

289

292

282

214

170

166

1,647

1,627 1,542

1,478

2,720

2016

2015

Market capitalisation USD millions 7,889 6,504

1,998

2,135

2,267

2010

2011

2012

Qatar Re Annual Report 2016

3,196

2013

5,618

4,422

2014

2015

2016

1,705

1,588

1,664

2010

2011

2012

3,996

4,159

2014

2015

2,346

2013

2016

Glossary of selected insurance and other terms

Assumed reinsurance That portion of a risk that a reinsurer accepts from an insurer or another reinsurer in return for a stated premium. Attachment point The cumulative dollar amount of loss at which point an excess of loss reinsurance policy becomes applicable. Any losses below this point are not covered by the policy or treaty and are funded by other parties. Attritional losses Losses expected to be incurred under the normal course of business; losses other than major losses. Broker An intermediary who negotiates contracts of insurance or reinsurance, receiving a commission for placement and other services rendered, between (1) a policy holder and a primary insurer, on behalf of the insured party, (2) a primary insurer and reinsurer, on behalf of the primary insurer, or (3) a reinsurer and a retrocessionaire, on behalf of the reinsurer. Capacity The maximum amount of exposure that a reinsurer is willing or able to place at risk. The amount of capacity is commonly driven by legal standards, regulatory restrictions, rating agencies requirements and/or internal guidelines. Casualty reinsurance Reinsurance that is primarily concerned with losses due to injuries to persons and legal liability imposed on the insured for such injury or for damage to the property of others. Catastrophe loss A severe loss, typically involving multiple claimants. Common perils include earthquakes, hurricanes, tsunamis, hailstorms, severe winter weather, floods, fires, tornadoes, explosions and other natural or man-made disasters. Catastrophe losses may also arise from acts of war, acts of terrorism or political instability. Cede, cedent When an insurer transfers some or all of its risk to a reinsurer, it “cedes” business and is referred to as the “cedent.” Claims incurred The total losses and loss adjustment expenses paid, plus the change in loss and loss adjustment expense reserves, including IBNR, sustained by an insurance or reinsurance company under its insurance policies or other insurance or reinsurance contracts typically quoted over a particular period. Claims incurred but not reported (“IBNR”) Reserves established by an insurer for claims on losses that have occurred but have not yet been reported to the insurer. Claims ratio Calculated by dividing “Net Claims Incurred” by “Net Earned Premiums”.

Qatar Re Annual Report 2016

Overview Strategy and performance Corporate governance Financial statements Financial condition report Additional information

Glossary of selected insurance and other terms continued

Exclusions Provisions in an insurance or reinsurance policy excluding certain risks or otherwise limiting the scope of coverage. Expense ratio Calculated by dividing the sum of the “Operating Expenses” and the “Net Foreign Exchange costs” by “Net Earned Premiums”.

Claims reported unsettled Loss reserves based on specific claims reported by reinsureds.

Exposure The possibility of loss. A unit of measure of the amount of risk a company takes on.

Combined ratio Calculated as the sum of the “Claims Ratio”, the “Commission Ratio” and the “Expense Ratio”.

Facultative reinsurance The reinsurance of all or a portion of the insurance provided by a single policy. Each policy reinsured is separately negotiated.

Commercial lines Insurance products that are sold to entities and individuals in their business or professional capacity, and which are not intended for the insured’s personal or household use.

Fixed income securities An investment that pays regular income in the form of a coupon payment, interest payment or preferred dividend on a predetermined basis until a set date (maturity date).

Commission ratio Calculated by dividing “Net Commission” by “Net Earned Premiums”.

Frequency The number of claims occurring during a specified period of time.

Deductible The amount of exposure an insured retains on any one risk or group of risks. The term may apply to an insurance policy, where the insured is an individual or business, or a reinsurance contract, where the insured is an insurance company. See “Retention.”

Gross claims paid Claim amounts paid to insureds or ceding companies before deducting any reinsurance recoveries. Gross written premiums The total consideration or price for reinsurance protection written for a specific period of time.

Directors’ and officers’ liability Insurance that covers liability for corporate directors and officers for wrongful acts, subject to applicable exclusions, terms and conditions of the policy.

In-force Policies that have not expired or been terminated and for which the insurer remains on risk as of a given date.

Duration Measures the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates, and is expressed as a number of years. The bigger the duration number, the greater the interest rate risk.

Limits The maximum amount that an insurer or reinsurer will insure or reinsure for a specified risk, a portfolio of risks or on a single insured entity. The term also refers to the maximum amount of benefit payable for a given claim or occurrence.

Earned premiums That portion of written premium that applies to the expired portion of the policy term. Earned premiums are recognised as revenues under both statutory accounting practice and IFRS.

Lloyd’s Depending on the context, this term may refer to (a) the society of individual and corporate underwriting members that insure and reinsure risks as members of one or more syndicates (i.e., Lloyd’s is not an insurance company); (b) the underwriting room in the Lloyd’s building in which managing agents underwrite insurance and reinsurance on behalf of their syndicate members (in this sense Lloyd’s should be understood as a market place); or (c) the Corporation of Lloyd’s which regulates and provides support services to the Lloyd’s market.

Excess layer Insurance to cover losses in one or more layers above a certain amount with losses below that amount usually covered by the insured’s primary policy and its self-insured retention. Excess of loss reinsurance Reinsurance that indemnifies the insured against all or a specified portion of losses over a specified amount of losses, or the “retention.”

Qatar Re Annual Report 2016

100

Long tail Insurance or reinsurance where claims are likely to be made or where claim amounts are likely to be revisted many years after the period of insurance has expired. Liability reinsurance is an example of long tail business.

Loss development The difference between the original loss or claim as initially reserved by an insurer or reinsurer and its subsequent evaluation at a later date or at the time of its closure. Loss development occurs because of inflation and time lags between the occurrence of claims and the time they are actually reported to an insurer or reinsurer. Loss development also occurs as a result of the ongoing developments of disputes and uncertainties between the time of reporting and settlement. To account for these increases, a “loss development factor” or multiplier is usually applied to a claim or group of claims in an effort to more accurately project the ultimate amount that will be paid. Loss year The calendar year to which a claim is attributed based upon the terms in the underlying policy or contract. Losses and loss expenses “Losses” are an occurrence that is the basis for submission or payment of a claim. Losses may be covered, limited or excluded from coverage, depending on the terms of the insurance policy or other insurance or reinsurance contracts. “Loss expenses” are the expenses incurred by an insurance or reinsurance company in settling a loss. MGA “MGA” or Managing General Agent is an individual or business entity appointed by an insurer/reinsurer to solicit applications from agents for insurance or reinsurance contracts, or to negotiate contracts on behalf of the insurer/reinsurer. If authorised by the insurer/reinsurer, the MGA may effectuate and countersign contracts on behalf of the insurer/reinsurer, thereby binding the insurer/reinsurer. Net claims incurred The sum of “Gross claims paid”, “Reinsurance recoverables” and “Movement in net outstanding claims”. Net commission Comprised of commissions, brokerage fees and insurance taxes. Commissions and brokerage fees are usually calculated as a percentage of premiums and depend on the market and line of business. Acquisition costs are reported after (1) deducting commissions received on ceded reinsurance, (2) deducting costs relating to the successful acquisition of new and renewal insurance and reinsurance contracts and (3) including the amortisation of previously deferred acquisition costs. Net earned premiums The portion of net written premiums during or prior to a given period that was recognised as income during such period. Net (written) premiums Gross written premiums, less premiums ceded to reinsurers.

Qatar Re Annual Report 2016

101

Net underwriting results or net technical results The pre-tax profit or loss experienced by an insurance or reinsurance company that is calculated by deducting net losses and loss expenses and net commissions from net earned premiums. This profit or loss calculation includes reinsurance assumed and ceded but excludes investment income and operating and administrative expenses. Non-proportional reinsurance Reinsurance or insurance that indemnifies the reinsured or insured against all or a specified portion of losses on underlying insurance policies in excess of a specified amount, which is called a “level” or “retention.” Also known as Excess of loss reinsurance, non-proportional reinsurance is written in layers. A reinsurer or group of reinsurers accepts a layer of coverage up to a specified amount. The total coverage purchased by the cedant is referred to as a “program” and will typically be placed with predetermined reinsurers in pre-negotiated layers. Any liability exceeding the outer limit of the program reverts to the ceding company, which also bears the credit risk of a reinsurer’s insolvency or default. Ogden discount rates Rates used in court cases in the United Kingdom to calculate the present value lump sum payment that an insurance company should pay to claimants who have suffered life-changing injuries, in order to cover all of their predicted future losses due to the injury. Outstanding claims Liabilities established by insurers and reinsurers to reflect the estimated cost of claims incurred that the insurer or reinsurer will ultimately be required to pay. Reserves are established for losses and for loss expenses, and consist of claims reported unsettled and IBNR reserves. “Outstanding Claims” includes reserves for both losses and for loss expenses. Per occurrence limitations The maximum amount recoverable under an insurance or reinsurance policy as a result of any one event, regardless of the number of claims. Peril A harmful event or danger which may be covered under an insurance or reinsurance contract as an insured peril or excluded from it. Product liability Insurance that provides coverage to manufacturers and/or distributors of tangible goods against liability for personal injury caused if such products are found to be unsafe or defective. Professional indemnity Insurance that provides liability coverage to directors and officers, attorneys, doctors, accountants and other professionals who offer services to the general public and claim expertise in a particular area greater than the ordinary layperson for their negligence or act that may be deemed unlawful, harmful or contrary to law.

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Glossary of selected insurance and other terms continued Property reinsurance Reinsurance that provides coverage to a party with an insurable interest in tangible property for that party’s property loss, damage or loss of use. Property catastrophe reinsurance Reinsurance that protects the ceding company against accumulated losses in excess of a stipulated sum that arise from a catastrophic event such as an earthquake, fire or windstorm. “Catastrophe loss” generally refers to the total loss of an insurer arising out of a single catastrophic event. Proportional reinsurance Reinsurance in which the reinsurer shares a proportional part of the original premiums and losses of the reinsured. (Also known as pro rata reinsurance, quota share reinsurance or participating reinsurance.) In proportional reinsurance, the reinsurer generally pays the ceding company a ceding commission. The ceding commission generally is based on the ceding company’s cost of acquiring the business being reinsured (including commissions, premium taxes, assessments and miscellaneous administrative expense) and also may include a profit factor. See also “Quota Share Reinsurance”. Quota share reinsurance A proportional reinsurance treaty in which the ceding company cedes an agreed-on percentage of every risk it insures that falls within a class or classes of business subject to the treaty. Reinsurance The practice whereby one insurer, called the reinsurer, in consideration of a premium paid to that reinsurer, agrees to indemnify another insurer or reinsurer, called the ceding company, for part or all of the liability of the ceding company under one or more policies or contracts of insurance that it has issued. Reserves Liabilities established by insurers and reinsurers to reflect the estimated cost of claims incurred that the insurer or reinsurer will ultimately be required to pay. Reserves are established for losses and for loss expenses, and consist of claims reported and unsettled and IBNR reserves. Residual value insurance Guarantees the owner of leased property, or a third party, a particular value at a specified future date, usually the termination date of the lease.

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Retention The amount of exposure an insured retains on any one risk or group of risks. The term may apply to an insurance policy, where the insured is an individual or business, or a reinsurance contract, where the insured is an insurance company. See “Deductible.” Retrocessional coverage A transaction whereby a reinsurer cedes to another reinsurer, the retrocessionaire, all or part of the reinsurance that the first reinsurer has assumed. Retrocessional reinsurance does not legally discharge the ceding reinsurer from its liability with respect to its obligations to the reinsured. Reinsurance companies cede risks to retrocessionaires for reasons similar to those that cause insurers to purchase reinsurance: to reduce net liability on individual risks, to protect against catastrophic losses, to stabilise financial ratios and to obtain additional underwriting capacity. Short tail Insurance or reinsurance where claims are usually made during the term of the policy/treaty or shortly after the policy/ treaty has expired. Property reinsurance is an example of short tail business. Specialty lines A term used in the insurance and reinsurance industry to describe types of insurance or classes of business that require specialised expertise to underwrite. Insurance and reinsurance for these classes of business is not widely available and is typically purchased from the specialty lines divisions of larger insurance companies or from small specialty lines insurers. Structured finance Structured finance is a complex financial instrument offered to borrowers with unique and sophisticated needs. Generally a simple loan would not suffice for the borrower so the more complex and risky finance instruments are implemented. Structured finance products include derivatives, securitised and collateralised debt instruments, credit default swaps and hybrid securities. Shareholders equity (surplus or statutory surplus) As determined under accounting principles, the amount remaining after all recognised liabilities, including loss reserves, are subtracted from all of the recognised assets on the balance sheet. Shareholders Equity is also referred to as Surplus. As determined under statutory accounting principles, it is also referred to as “statutory surplus” or “surplus as regards policyholders” for statutory accounting purposes. Tail value at risk A Risk measure associated with the more general “Value at Risk”. It quantifies the expected value of the loss given that an event outside a given probability level has occurred. Treaty reinsurance Reinsurance contracts under which the ceding company agrees to cede and the reinsurer agrees to assume a defined set of risks of a particular class or classes of business.

Treaty or underwriting year The year in which the reinsurance contract incepts. Exposure from contracts incepting during the current treaty year will potentially affect both the current loss year as well as future loss years. Ultimate loss The total of all expected settlement amounts, whether paid or reserved, together with any associated loss adjustment expenses. Ultimate loss is also the estimated total amount of loss at the measurement date. For purposes of the IFRS statements, ultimate loss is the sum of the inception to date paid claims, claims reported unsettled and IBNR. Underwriter An employee of an insurance or reinsurance company who examines, accepts or rejects risks and classifies accepted risks in order to charge an appropriate premium for each accepted risk. The underwriter is expected to select business that will produce an average risk of loss no greater than that anticipated for the class of business. Underwriting The insurerâ&#x20AC;&#x2122;s or reinsurerâ&#x20AC;&#x2122;s process of reviewing applications submitted for reinsurance coverage, assessing the risks included in the requested coverage, determining whether or not to accept a part or all of the coverage and determining the applicable premiums. Unearned premium The portion of premiums written that is allocable to the unexpired portion of the policy term or underlying risk. Value at risk Estimates how much a set of policies might lose, given normal market conditions and expected losses within a set period of time.

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Bermuda Qatar Reinsurance Company Limited 71 Pitts Bay Road Pembroke, HM08 Bermuda

Dubai Qatar Reinsurance Company Limited Dubai Branch Office 211â&#x20AC;&#x201C;212, Level 2 Gate Village 4, DIFC P.O. Box 506752 Dubai, UAE Singapore Qatar Reinsurance Company Limited Singapore Branch 138 Market Street CapitaGreen #24-04A Singapore 048946 Zurich Qatar Reinsurance Company Limited Pembroke (Bermuda), Zurich Branch Bleicherweg 72 8002 Zurich Switzerland London Qatar Reinsurance Company Limited Representative Office 9th Floor, 71 Fenchurch Street London EC3M 4BS United Kingdom Doha Qatar Reinsurance Services LLC 8th Floor, QIC Building Tamin Street, West Bay Area P.O. Box 24938 Doha, Qatar

Qatar Re Annual Report 2016

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Bermuda Qatar Reinsurance Company Limited 71 Pitts Bay Road Pembroke, HM08 Bermuda