MILLI RE 2020 ANNUAL REPORT

Activities and Major Developments Related to Activities General Information Financial Rights Provided to the Members of the Governing Body and Senior Executives Research & Development Activities 56 Milli Re Annual Report 2020 The Covid‑19 pandemic, which began in Wuhan, China in December 2019 and spread around the world rapidly is considered to be the biggest challenge humanity faced since Second World War. Resulting in global social and economic disruption, it has undoubtedly been the hottest topic in 2020 for the insurance and reinsurance industry as well. Even though it is still difficult to predict the total economic impact of the pandemic, according to the most recent projections, the total insured loss amount could exceed USD 100 billion. Yet by the end of 2020, total reported losses amounted only USD 29.5 billion, pointing to the fact that it’s going to take a while for the pandemic related losses to fully develop predominantly owing to the ongoing lawsuits regarding business interruption claims coupled with the unforeseeable duration of the pandemic. Total of traditional and alternative reinsurance capital, which declined to USD 590 billion in the first quarter of the year, showed a rapid recovery and reached 2019 year‑end figure of USD 625 billion by the end of September 2020. While traditional capital rose by USD 3 billion to USD 533 billion, alternative capital, declining by 4% compared to the end of previous year, was registered as USD 92 billion. In addition to the significant losses recorded in the recent years, the uncertainty driven by Covid‑19 exerted more pressure on the trapped collateral amount and resulted in diminishing returns for alternative capital investors. Moreover, issues such as climate change, model credibility and deterioration of the losses stood out as other factors affecting the appetite of investors. Global merger and acquisition activity, which gained momentum in the last couple of years with rising new business models, shifts in technology and greater emphasis on cost optimization following the diminishing profit margins, was observed to slow down in 2020 due to the financial market volatility driven by the pandemic. The most notable announcement in this space just before the global spread of Covid‑19 was the merger proposal of Aon to Willis Towers Watson. The new entity is expected to hold a leading position with a transaction volume of USD 80 billion and the deal is likely to be finalized in the first half of 2021. Nonetheless, M&A activity is expected to surge once again in 2021 and beyond, as strategic structural changes as well as industrial transformation will be inevitable in the post pandemic era. Moreover, it is also possible to see increased interest in legacy business as companies are likely to withdraw from certain lines of business and geographies with poor performance. Global Reinsurance Market and Milli Re In addition to the significant losses recorded in the recent years, the uncertainty driven by Covid‑19 exerted more pressure on the trapped collateral amount and resulted in diminishing returns for alternative capital investors. USD 625 billion Total reinsurance capital reached 2019 year‑end figure of USD 625 billion by the end of September 2020.