This annual Financial Condition Report (“FCR”) for the year ended 31 December 2020 has been prepared for MS Amlin AG (“MS AAG” or “the Company”). MS Amlin AG is a wholly owned subsidiary of Mitsui Sumitomo Insurance Company, Limited. (MSI) with its ultimate parent being MS&AD Insurance Group Holdings, Inc. (MS&AD). The Company was previously a wholly owned subsidiary of MS Amlin plc, however its share ownership in the Company transferred to MSI on 1 January 2020.
Basis of preparation
This Financial Condition Report has been prepared in line with the requirements as set out in the Swiss Financial Market Supervisory Authority (“FINMA”) Circular 2016/2 “Disclosure – insurers”. The circular expands on Articles 111a and 203a of the Insurance Supervision Ordinance (ISO; SR 961,011) on the FCRs of supervised insurance companies, groups and conglomerates. This report is to meet the regulatory reporting requirements of MS Amlin AG, and for no other purpose and should not be relied upon for any other such purpose.
Financial information included in this report is based on MS Amlin AG’s 2021 Swiss Solvency Test’s (“SST”) Market Consistent Balance Sheet (for Balance Sheet financial information) and the 2020 Swiss CO Annual Report (“Swiss CO”), (for Profit or Loss information); both have been prepared in accordance with their relevant regulatory or accounting standards. Unless stated otherwise, this report represents the position of MS Amlin AG as at 31 December 2020 only and will not necessarily reflect all changes in MS Amlin AG’s operations since that date. All quantitative information in this report is disclosed in USD, MS Amlin AG’s functional currency, unless otherwise specified.
Business and Performance
The Company is a Swiss-domiciled, global specialty reinsurer operating in local and international reinsurance markets, underwriting many classes of business through one capitalised underwriting platform.
The Company was originally established in 2005 as Amlin Bermuda Limited, domiciled in Bermuda. In 2010, the corporate seat of this company was redomiciled to Switzerland and became Amlin AG. The existing Bermuda operations continued as a separate underwriting centre but as a branch of Amlin AG. Amlin AG was renamed as MS Amlin AG during 2016.
MS Amlin AG consists of four businesses: MS Amlin AG Zurich based in Switzerland, MS Amlin AG Bermuda based in Hamilton, Bermuda, binders with the Miami and New Jersey branches of MS Amlin Reinsurance Managers Inc (“ARMi”), and MS Amlin AG Labuan based in Malaysia. The Company is supervised by FINMA, with the Bermuda branch also registered under the authority of the Bermuda Monetary Authority (“BMA”), and the Malaysia branch under the authority of the Labuan Financial Services Authority (“LFSA”).
MS Amlin AG also provides internal reinsurance cover for other MS Amlin entities. These internal contracts are collectively known as “Amber Re” when written by the Bermuda branch or “Azur Re” when written from Zurich. Further details on the various businesses are provided below:
- MS Amlin AG Bermuda: Bermuda writes a portfolio of reinsurance business on a third party basis including property, casualty, financial lines and specialty lines written in both the US and international markets. In recent years there has been a growth in the non-property business.
- MS Amlin AG Zurich: Zurich is focused on business which provides diversification when compared to Bermuda’s book, particularly with regard to natural catastrophe exposures. Accordingly Zurich targets EMEA (Europe, Middle East and Africa) clients for all classes of business.
- Binder with MS Amlin Reinsurance Managers Inc, Miami: Miami is focused on Latin American Property, Accident & Health as well as Credit & Surety business, and is written under binding authority from Zurich.
- Binder with MS Amlin Reinsurance Managers Inc, New Jersey: New Jersey is focused on US Motor and General Liability business, and is written under binding authority from Zurich.
- MS Amlin AG Labuan: Established in 2013 to carry out reinsurance business geographically located in East and South East Asia. The operation stopped writing business in early 2018 and has been put into run-off
- In addition, other MS Amlin entities have placed a number of intercompany reinsurance contracts with the Company. These intercompany reinsurance contracts are - a whole account quota share with Syndicate 2001 (“the Syndicate”), a Lloyd’s Syndicate managed by MS Amlin Underwriting Limited, which covers a percentage of all of the Syndicate’s business, and a number of proportional treaty and excess of loss contracts covering cessions of various classes of business; and
- a 100% quota share agreement with MSI to support MSI’s strategic partnership with Hippo, an American property insurance company, which includes providing them with reinsurance quota share capacity.
MS Amlin AG strategy is executed across MS Amlin AG’s operating platforms, and the business managed accordingly. MS Amlin AG is supported by functions under MS Amlin Business Services (“MS ABS”) who seek to optimise operations and service levels across the MS Amlin entities.
System of Governance
The Company operates a two-tier board governance structure with the Supervisory Board made up of NonExecutive directors who are not actively engaged in the day-to-day management of the Company, of which over one third are independent of the Company. The Supervisory Board appoints a Chairman from its members.
The Executive Board is the Company’s managing body and consists of the Chief Executive Officer and other senior officers and managers of the Company. These appointments are at the discretion of the Supervisory Board.
The Supervisory Board also appoints Board Committees for specific purposes from among its members. Currently these committees comprise:
- the Audit Committee;
- the Risk & Solvency Committee;
- the Underwriting Committee; and
- the Remuneration & Nomination Committee
The Company has a “Fit & Proper Standard” which sets out how the organisation ensures that senior management and other key function holders are fit and proper in accordance with both internal and external regulatory requirements.
Risk management objectives seek to bring business strategy, capital management, and enterprise risk management together to optimise the relationship between these elements to achieve the best long-term sustainable outcome for shareholders, insured parties, employees and other stakeholders. As part of the Risk Management Framework, risk tolerances are monitored and reported on a quarterly basis to the Company’s Risk & Solvency Committee and Boards. Further information on risk management is provided in section 5.2.
The Company operates a system of internal controls. These internal controls contribute to meeting various objectives, including operational effectiveness, reliable financial reporting, compliance with laws and regulations and management of reputational and strategic risk.
The Internal Audit function guarantees its independence and objectivity through direct reporting lines to the MS Amlin AG Audit Committee and Supervisory Board. The Supervisory Board has delegated its responsibility for overseeing the internal audit activity to its Audit Committee. The Internal Audit function’s programme of work is based on an annual audit plan compiled by the Chief Internal Auditor and presented to the MS Amlin AG Audit Committee for approval annually.
The Company has a dedicated Compliance function as part of its management structure. The role of the Compliance function is to provide assurance to the Boards that the Company complies with all regulatory requirements, associated laws, and MS Amlin AG internal policies. The Compliance function reports to the MS Amlin AG Risk & Solvency Committee regarding progress against the Compliance annual plan, regulatory returns, integrity risks, and monitoring activities.
MS Amlin AG has a local actuarial team supported by the actuarial function in MS Amlin Business Services, a service company providing outsourced services to all MS Amlin companies, where required. The core actuarial function focuses on providing capital modelling and reserving services. The pricing actuaries report directly to the underwriting function and there is close co-operation between the pricing actuaries and the core team in the areas of business planning, reserving and setting of technical pricing standards.
Valuation for Solvency purposes
The MS Amlin AG SST 2021 Capital Ratio described in detail later in this report is 208%, which compares favourably with the minimum FINMA SST solvency requirement of 100%. The SST One-year risk capital is USD 859.6m, the risk margin is USD 140.3m, the Target capital is USD 1,000.0m and the SST Risk Bearing Capital is USD 1,930.6m. Please note that the SST 2021 is filed with FINMA April 2021, simultaneously to this document.
As described throughout this document, the MS Amlin AG SST Target Capital continues to be dominated by Premium Risk on a standalone basis, narrowly followed by Reserve Risk. Premium Risk is impacted by natural catastrophes as well as large and attritional losses.
The relevant measure of available own funds is the Risk Bearing Capital (“RBC”) calculated on the SST market consistent balance sheet. MS Amlin AG has net assets under Swiss CO of USD 1,841.3m compared to USD 1,930.6m net assets based on SST market consistent balance sheet.
The adjustments made to move from Swiss CO balance sheet to SST market consistent balance sheet are set out below:
