MILLIMAN REPORTSupplementary Report of the Independent Expert on
the proposed transfer of business from the London
Branch of Tokio Marine & Nichido Fire Insurance Co.,
Ltd. to NRG Victory Reinsurance Limited for the High
Court of England and Wales
22 June 2022

Christopher Clarke, FIA

MILLIMAN REPORTContents
1. PURPOSE AND SCOPE ................................................................................................................................... 3
2. EXECUTIVE SUMMARY ................................................................................................................................... 5
3. CHANGES SINCE THE REPORT IN THE ENTITIES CONCERNED IN THE SCHEME .................................. 6
4. THE IMPACT OF THE SCHEME ON THE TRANSFERRING POLICYHOLDERS........................................... 9
5. THE IMPACT OF THE SCHEME ON THE POLICYHOLDERS OF TMNF NOT TRANSFERRING TO NRG
UNDER THE SCHEME ................................................................................................................................... 13
6. THE IMPACT OF THE SCHEME ON THE EXISTING NRG POLICYHOLDERS ........................................... 14
7. OTHER CONSIDERATIONS .......................................................................................................................... 15
8. FINAL CONCLUSIONS .................................................................................................................................. 18
APPENDIX A

DEFINITIONS ........................................................................................................................... 19

APPENDIX B

KEY SOURCES OF ADDITIONAL INFORMATION ................................................................. 21

APPENDIX CLETTERS OF REPRESENTATION .......................................................................................... 22

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1.

Purpose and Scope

1.1

I, Christopher Clarke, prepared a report (the “Report") to the Court, dated 4 April 2022 and entitled "Reportof the Independent Expert on the proposed transfer of business from the London Branch of Tokio Marine &Nichido Fire Insurance Co., Ltd. to NRG Victory Reinsurance Limited for the High Court of England andWales".

1.2

The conclusions of the Report were largely based on audited financial information up to 31 March 2021 (inrespect of TMNF) and up to 31 December 2020 (in respect of NRG). As there had been some material
developments for NRG since that time, I also used unaudited figures provided by NRG as at 30 June 2021
in preparing the Report. Since preparing the Report, I have been provided with more recent financial andother information in respect of the Companies (the “Additional Information"). Details of the material
elements of the Additional Information are set out in Appendix B.

1.3

In paragraphs 1.43 and 2.3 of the Report, I stated that, shortly before the Court hearing at which an ordersanctioning the Scheme will be sought, I would review any relevant matters which might have arisen since
the date of the Report (I further referred to such a review in paragraphs 1.59, 9.5, 9.24 and 9.35 of theReport). Such relevant matters would typically include:

1.4

the extent to which the operational plans of TMNF or NRG have altered (relative to their position at thedate of the Report);the latest financial statements of TMNF and NRG;

the latest forecast financial statements of TMNF and NRG; andthe most recently prepared figures (actual and forecast) relating to the solvency capital position of TMNF
and NRG.

I also stated in the Report that I would explicitly consider the following items:developments relating to the COVID-19 pandemic and its effects on the Companies; andthe responses received by the Companies to their communications (and how the Companies havereacted to those responses). In particular, I stated that I would comment on any objections raised to the
Scheme.

1.5This report (the "Supplementary Report") provides a brief summary of my review of the Additional
Information and explains how, as a result of my review of the Additional Information, I have changed myconclusions, if at all, from those set out in the Report. As such, the Supplementary Report should beconsidered supplementary to the Report and does not supersede it. Unless stated otherwise in the
Supplementary Report, all analyses and conclusions as set out in the Report remain valid.

1.6

The Supplementary Report should be read in conjunction with the Report and the full terms of the Scheme.
The Supplementary Report has been produced on the same basis as set out at Section 1 of the Report. In
particular, it has the same scope, and is subject to the same reliances and limitations (in particular, thoseset out in paragraphs 1.49 – 1.62 of the Report). Terms used in this Supplementary Report have the same
meanings as in the Report (I have attached, in Appendix A, a list of definitions of terms that, when they first
appear in this Supplementary Report, are shown in bold type).

1.7

Reliance has been placed upon, but is not limited to, the Additional Information, as well as upon theinformation set out in Appendix D of the Report. My opinions depend on the accuracy and completeness of
this data, information and the underlying calculations. I have discussed the Additional Information with theCompanies and have considered how it has changed from similar information provided in support of theReport. Except where stated otherwise, I have not re-reviewed the methodology and assumptions used by
the Companies in their assessments of the liabilities and solvency capital of their respective firms, and I
have not attempted to review in detail the calculations performed. I am unaware of any issue that mightcause me to doubt the material accuracy of the Additional Information, but I give no warranty as to its
accuracy. I accept no responsibility for errors or omissions arising in the preparation of the Supplementary
Report, providing that this shall not absolve my liability arising from an opinion expressed recklessly or inbad faith. I note that the Companies have confirmed to me, in the Letters of Representation that are shownin Appendix C of this Supplementary Report, that, to the best of their knowledge and belief, all data andinformation that they have provided to me is accurate and complete.

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1.8

In all cases, I have requested the most recent information available. The Companies have informed me that
there have been no developments since the date of the Report, other than as provided in the Additional
Information, that might be relevant to the Scheme.

1.9

The Effective Date of the Scheme is now expected to be 20 July 2022.

1.10

I am required to comply with relevant professional standards and guidance maintained by the Financial
Reporting Council and by the IFoA, including TAS 100: Principles for Technical Actuarial Work, TAS 200:
Insurance and Actuarial Profession Standard X3: The Actuary as an Expert in Legal Proceedings. I havecomplied with such standards, subject to the principles of proportionality and materiality.

1.11

In accordance with Actuarial Profession Standard X2, as issued by the IFoA, I have considered whether thisSupplementary Report should be subject to Work Review. I concluded that it should, and I have alsodecided that the Work Review should be conducted by an individual who has not otherwise been involvedin the analysis underlying this Supplementary Report or in the preparation of this Supplementary Report,
but who would have had the appropriate experience and expertise to take responsibility for the work himself.
In other words, I have decided that this Supplementary Report should be subject to Independent Peer
Review. I confirm that this Supplementary Report has been subject to Independent Peer Review prior to its
publication.

1.12

This Supplementary Report has been prepared under the terms of the guidance set out in the Policy
Statement and in SUP18. I have also followed the guidance contained within the FCA’s guidance paper
FG22/1.

1.13

In paragraph 6.5 of the Report, I explained that certain capital requirements are private matters between
insurers and the PRA and, therefore, I was not at liberty to disclose in the Report actual figures relating tothose requirements, or figures by which those amounts could be calculated, other than where consented toby the company concerned. As part of my analysis, I considered the extent to which TMNF and NRG each
held capital in excess of their regulatory solvency levels, and referred to the ratio of the actual capital thatthe entity under consideration held relative to the regulatory solvency capital requirement to be the “Capital
Cover Ratio”. Purely for comparative purposes in the Report, I defined the following terms:
“sufficiently capitalised” refers to a Capital Cover Ratio between 100% and 119%;“more than sufficiently capitalised” refers to a Capital Cover Ratio between 120% and 149%;

“well-capitalised” refers to a Capital Cover Ratio between 150% and 199%; and“very well-capitalised” refers to a Capital Cover Ratio of 200% or more.

In this Supplementary Report, I have adopted the same terminology.
1.14

1.15

The remainder of the Supplementary Report follows, for ease of reference, a structure that is similar to thatof the Report, albeit omitting background information and explanation that does not require repeating:Section 2:

I provide an executive summary of the Supplementary Report.

Section 3: I consider any changes in the information underlying the Report for the Companies. Thisis equivalent to Section 4 of the Report; I have not repeated in the Supplementary Report thebackground to the regulatory environment in which the Companies operate, which was described in
Section 3 of the Report and which has not changed.

Section 4: I consider any changes resulting from the Additional Information in my view of the likely
impact of the Scheme on the Transferring Policyholders. This is equivalent to Section 6 of the Report;
I have not repeated in the Supplementary Report the key provisions of the Scheme, which had
appeared in Section 5 of the Report.

Section 5: I consider any changes, resulting from my review of the Additional Information, in my viewof the likely impact of the Scheme on the TMNF Non-Transferring Policyholders. This is equivalent
to Section 7 of the Report.

Section 6: I consider the likely impact of the Scheme on those who, as at the Effective Date, werealready existing policyholders of NRG. This is equivalent to Section 8 of the Report.

Section 7: I cover more general issues relating to the Scheme and the management of theCompanies. This is equivalent to Section 9 of the Report.

I summarise my conclusions in Section 8.

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2.

Executive Summary

CONCLUSION
2.1

In paragraph 2.1 of the Report, I set out my conclusions in respect of the impact of the Scheme on thevarious groups of policyholders who might be affected. I have considered developments that have occurredsince the date of the Report, including the latest financial statements for NRG and TMNF. While thesedevelopments have resulted in changes to some of the metrics that I have used when formulating my views,
none have created changes of sufficient magnitude that have caused me to revise my conclusions.

2.2

Therefore, in my opinion, provided the proposed Scheme operates as intended, and I have no grounds forbelieving that it will not do so,

2.3

the Scheme will not materially adversely affect the security of benefits to policyholders of either TMNF
(both the Transferring Policyholders and the TMNF Non-Transferring Policyholders) or NRG; and

the Scheme will not have an impact on service standards experienced by either the policyholders of
TMNF or the existing policyholders of NRG.

These conclusions are unchanged from those set out in paragraph 2.1 in the Executive Summary of theReport.

THE IMPACT OF THE SCHEME UPON THE TRANSFERRING POLICYHOLDERS
2.4

I have reviewed updated estimates of the unpaid loss reserves of the Transferring Business, as carriedout by external actuaries as at 31 December 2021, as well as updated financial statements and solvency
calculations for NRG as at the same date, including projections for the business on a post-Scheme basis. I
also considered updated financial information for NICO as at 31 December 2021.

2.5

Based on my review of the updated information, my conclusions concerning the reserve strength and excess
assets of both TMNF and NRG are unchanged from those as set out in the Report. Accordingly, myconclusion remains that the Transferring Policyholders will not be materially adversely affected due torelative differences in the financial strength of NRG post-Scheme and of TMNF pre-Scheme.

2.6

My conclusions regarding matters other than financial strength, including changes in risk exposures, theposition of the Transferring Policyholders in the event of insolvency and policy servicing are also unchanged.
I therefore continue to be satisfied that the Scheme will not affect in a materially adverse way either the
security or the policy servicing levels of the Transferring Policyholders.

THE IMPACT OF THE SCHEME UPON THOSE POLICYHOLDERS REMAINING WITHIN TMNF
2.7

Given the very small size of the Transferring Business relative to that of TMNF generally, the Scheme will
have very little impact on TMNF. As such, I continue to be satisfied that the Scheme will not affect in amaterially adverse way either the security or the standards of policy servicing currently enjoyed by the TMNF
Non-Transferring Policyholders, and by any holders of policies that become Excluded Policies.

THE IMPACT OF THE SCHEME UPON THE EXISTING POLICYHOLDERS OF NRG
2.8

As the updated information provided to me relating to NRG’s financial position (both pre- and post-Scheme)
had not materially changed since that available to me at the time of writing the Report, I continue to besatisfied that the existing policyholders of NRG will not be materially adversely affected due to relative
differences in the financial strength of NRG pre-Scheme and post-Scheme. There were also no changes
affecting other matters, including changes in risk exposures, the position of the Transferring Policyholders
in the event of insolvency and policy servicing.

2.9

Therefore, I remain satisfied that the Scheme will not affect, in a materially adverse way, either the financial
security or the policy servicing levels of the existing NRG policyholders.

APPROACH TO COMMUNICATION WITH POLICYHOLDERS
2.10

I have been informed that all policyholder and other communications concerning the Scheme have been
carried out as per the plans detailed in the Report. As at the time of writing, these communications had only
triggered a small number of general enquiries and no objections to the Scheme had been received.

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3.

Changes since the Report in the entities concerned in the
Scheme3.1

In this section of the Supplementary Report, I set out the elements of the background information and key
metrics relating to the entities involved in the Scheme that differ from those stated in the Report as they arebased on more recent information.

TMNF
3.2

In the Report I provided details from TMNF’s financial statements, on a consolidated basis, for the year to
31 March 2021, i.e. from the latest set of audited financial statements available at the time. Tokio Marine
has now published its financial statements as at 31 March 2022, and I have been provided with a copy of
TMNF’s consolidated financial statements as at the same date.

3.3

These statements show that, in the year to 31 March 2022, TMNF and its overseas subsidiaries saw anincrease in net premiums written of 8% compared to the previous year. TMNF’s balance sheet as at 31
March 2022 showed an increase in net assets of 11% compared to the position as at 31 March 2021,
generated principally by an increase in retained earnings, as well as currency movements. In Table 3.1
below, I summarise the consolidated balance sheet of TMNF as at 31 March 2022, together with how the
Scheme would impact the balance sheet, if it had been implemented as at the same date (this is equivalent
to Table 5.1 of the Report). As can be seen, the impact of the Scheme on TMNF’s balance sheet will beminimal.

TABLE 3.1

SIMPLIFIED CONSOLIDATED BALANCE SHEET FOR TMNF AS AT 31 MARCH 2022 (£ BILLIONS, CONVERTED FROMYEN AT £1=¥161)
Pre-Scheme

Transferring
Business

Post-Scheme

AssetsCash and Bank Deposits
Receivables
Investments
Tangilble Fixed Assets
Intangible Fixed Assets
Other assets
Total Assets

3.61
10.16
74.42
1.97
6.57
11.17
107.890.01

Liabilities
Net Insurance Liabilities*
Outstanding Claims
Underwriting Reserves
Corporate Bonds
Other Liabilities
Total Liabilities

21.57
48.06
1.37
14.20
85.20

0.00

0.00

21.57
48.06
1.37
14.20
85.20

22.69

0.01

22.68

Net Assets

0.01

3.60
10.16
74.42
1.97
6.57
11.17
107.88* TMNF presents the insurance liabilities in its consolidated accounts on a net of reinsurance basis only. Notethat the gross of reinsurance reserves for outstanding claims in relation to the Transferring Business as show nin the accounts of the London Branch as at 31 March 2022 amounted to $76 million, or approximately £58 million(and nil on a net of reinsurance basis).

3.4

TMNF has also published its updated solvency margin ratio as at 30 September 2021, which is essentiallyunchanged from the position as at 31 March 2021 at 762%, although the solvency margin is increased from
¥4.8 trillion to ¥5.1 trillion and the “risks” amount from ¥1.2 trillion to ¥1.3 trillion.

London Branch Business
3.5

Since writing the Report, a new external actuarial review has been completed on the reserves of the London
Branch (which is equivalent to the Transferring Business), based on data as at 31 December 2021. The
external actuaries’ estimate of unpaid claims as at that date amounted to $76.2 million. I discuss in moredetail in Section 4, below, the results of the review.

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3.6

TMNF has also provided me with accounts for the London Branch as at 31 March 2022 as well as its
solvency position as at the same date. The London Branch’s balance sheet as at 31 March 2022 is very
similar to that of a year earlier. Owing to the Reinsurance Agreement with NICO, the London Branch books
nil net technical provisions in its GAAP accounts. The only other material items on its balance sheet remaina short term deposit totalling $30 million, and cash, which, as at 31 March 2022, amounted to $0.3 million.

3.7

In Table 3.2, below, I show updated simplified pre- and post-Scheme balance sheets for the London Branchof TMNF, based on figures as at 31 March 2022 (this is equivalent to Table 5.2 in the Report).

TABLE 3.2

SIMPLIFIED UK GAAP BALANCE SHEET FOR THE LONDON BRANCH OF TMNF AS AT 31 MARCH 2022 (IN US$MILLIONS)
Pre-Scheme

Post-Scheme

AssetsReinsurance Assets
Short Term Deposit
Cash and Equivalents
Total Assets

76.0
30.0
0.3
106.3

76.0
10.0

Liabilities
Insurance Liabilities
Other Liabilities
Total Liabilities

76.0
0.0
76.0

76.0
76.0

0.0
0.0
0.0

30.3

10.0

20.3

Net Assets

3.8

Transferring
Business

86.0

0.0
20.0
0.3
20.3

The solvency figures show that, as at 31 March 2022, the London Branch had eligible own funds of $17.7
million and an SCR of $6.3 million, giving it a Capital Cover Ratio of 281%. This is increased from 260%,
as reported as at 31 March 2021. The increase relates principally to increased own funds, resulting from a
reduction in the provision held for future non-technical expenses (those incurred during the year having
been paid from funds transferred from TMNF head office).

NRG
3.9

In the Report, I based my analysis of NRG’s financial situation on its audited financial statements as at
31 December 2020, as well as on updated financial information as at 30 June 2021, which reflected somematerial developments, in particular its entering into the Columbia Reinsurance contract. Since writing theReport, NRG’s audited financial statements as at 31 December 2021 have become available. As noted in
the Report, NRG’s most recent full reserving exercise had been undertaken based on data as at 31 May
2021 and, as a result of that review, it was likely that NRG would release some reserves by year-end 2021.
I have been provided with a subsequent reserve report that provides details of updated best estimate
reserves for year-end 2021 (based on data as at 30 November 2021). This report showed that claim
movements in the period since 31 May 2021 had not been such as to invalidate the ultimate estimates madeas at that date and, therefore, the updated best estimate was simply set as the previous estimate, rolledforward for payments. That estimate amounted to $108.9 million, gross of reinsurance. It is NRG’s policy tobook reserves at an 80% confidence level. In its accounts at 31 December 2021, NRG booked grossreserves of £103.2 million (equivalent to $139.4 million based on exchange rates at the time). Prior toexchange rate movements, this represented a release in reserves of about £15.4 million compared to thosebooked as at 31 December 2020.

3.10

In Table 3.3, below, I show NRG’s actual balance sheet as at 31 December 2021, together with the expected
impact of the Scheme, had it been implemented as at that date. As in the equivalent table shown in theReport (Table 5.3), I have assumed that NRG will book gross reserves of approximately $98 million for theTransferring Business, consistent with its modelling of the portfolio at an 80% confidence level. At 31
December 2021 exchange rates, this amounts to £72.5 million. As explained in the Report, NRG will receive
a $10 million (£7.4 million at 31 December 2021 exchange rates) fee from TMNF if the Scheme issanctioned, but it intends to hold half of this back ($5 million or £3.7 million) as a provision to cover any
unforeseen expenses. These amounts are also reflected in the Transferring Business column in Table 3.3,
below.

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PRE- AND POST-SCHEME SIMPLIFIED GAAP BALANCE SHEET FOR NRG AS AT 31 DECEMBER 2021 (£ MILLIONS)
Pre-Scheme
AssetsInvestments
Reinsurance Assets
Receviables
Cash and equivalents
Total Assets

285.2
19.1
4.2
10.8
319.2

Liabilities & Equity
EquityInsurance Liabilities
Payables
Other
Total Liabilities & Equity

212.9
103.2
2.9
0.2
319.2

Transferring
Business

72.5
7.4
79.9

3.7
76.2

79.9

Post-Scheme
285.2
91.6
4.2
18.2
399.1

216.6
179.4
2.9
0.2
399.1

3.11

NRG has also provided me with its QRTs as at 31 December 2021 which show its solvency capitalrequirements and own funds. I summarise in Table 3.4, below, NRG’s actual Solvency II balance sheet
and capital requirements as at 31 December 2021, together with how they would have changed if the
Scheme had been implemented as at that date, based on NRG’s latest estimates as at that date.

3.12

The figures shown in Table 3.4, below, for NRG’s own funds and SCR, both pre- and post-Scheme, are littlechanged from those shown in Table 5.4 of the Report, which were based on data as at 30 June 2021.

TABLE 3.4

PRE- AND POST-SCHEME SIMPLIFIED SOLVENCY II BALANCE SHEET AND CAPITAL REQUIREMENTS FOR NRG AS
AT 31 DECEMBER 2021 (£ MILLIONS)
Pre-Scheme

3.13

AssetsInvestments
Reinsurance Assets
Receviables & otherCash and equivalents
Total Assets

291.0
13.7
1.8
7.3
313.9

Liabilities
Technical Provisions
Payables & otherTotal Liabilities

Transferring
Business

Post-Scheme

7.4
56.3

291.0
62.7
1.8
14.7
370.2

106.7
3.1
109.8

52.7
0.0
52.7

159.5
3.1
162.6

Excess assets (own funds)

204.1

3.6

207.7

SCR
Ratio of own funds to SCR

48.4
422%

51.8
401%

MCR
Ratio of own funds to MCR

12.1
1688%

13.0
1603%

48.9

I note that both the gross TPs and respective reinsurance assets for the Transferring Business, as shownin Table 3.4, above, are slightly higher than those shown in the equivalent table in the Report. This isbecause the figures in the Report did not include the full value of the estimated expenses associated with
the Transferring Business within the gross TP figure, only the expected amount of expenses in the event of
the exhaustion of the NICO Reinsurance Agreement. Although all claims handling expenses will be covered
by NICO (unless the limit of the reinsurance is exhausted), the full expected value of the expenses should
be included within the gross TPs, as is the case in Table 3.4. Net of expected reinsurance recoveries, thischange makes no difference to the value of the best estimate TPs and has an immaterial impact on the
SCR.

NICO
3.14

Between 31 December 2020 and 31 December 2021, NICO’s admitted assets grew from $317.4 billion to$383.1 billion. During the same period, its total adjusted capital (i.e. its available capital under the RBC
regime) grew from $189.4 billion to $241.5 billion. At the same time, its capital requirement under the RBC
regime grew from $88.6 billion to $105.1 billion. Its Capital Cover Ratio on this basis therefore grew from214% to 230%.

3.15

NICO continues to have financial strength ratings from Standard & Poor’s of AA+, and A.M. Best of A++.

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4.

The impact of the Scheme on the Transferring Policyholders

RESERVE STRENGTH OF TMNF
4.1

In the Report, I noted that I did not review in detail the reserves of TMNF generally but I did review the Tokio
Marine group’s policy for property and casualty loss reserving. I am unaware of any changes to this policyor any other changes that would affect the strength of TMNF’s reserve generally, since the time of writing
the Report.

4.2

With regard to the reserves of the London Branch of TMNF, as noted above, since writing the Report, an
actuarial review as at 31 December 2021 has been completed. The review was undertaken by the sameactuaries as had carried out the previous review, as at 31 December 2020, which I discussed in the Report.

4.3

The methodology employed by the external actuaries in their most recent review was essentially unchanged
from that of their previous review, as described in the Report. The results of the most recent review, whichhave been adopted by the London Branch, give an estimate of unpaid claims as at 31 December 2021 of$76.2 million. This compares to their estimate of $77.1 million as at 31 December 2020. Allowing for claims
payments during 2021 and foreign exchange movements, this represents an increase in their estimate of
the ultimate cost of claims of approximately $3.0 million (or a little under 4%). This increase largely relates
to the ExCo business, which saw a material increase in incurred loss during the year. Movements on otherreserving classes were less significant. I note that the external actuaries left unchanged the multipliers used
to estimate IBNR Reserve requirements on the ExCo business (in the case of asbestos) or increased themslightly (for pollution and health hazard claims). It is not uncommon to see irregular incurred movements in
portfolios of this type and I do not regard the incurred movements seen during the year to be particularly
unusual. Overall, I believe that the resulting estimates continue to appear reasonable.

4.4

TMNF has also provided me with figures showing the calculation of Solvency II TPs for the London Branchas at 31 March 2022. These use the results of the 31 December 2021 external actuarial review of reserves(rolled forward for payments) as the starting point for the TP calculation, with a number of adjustments madefor expenses, ENID and discounting. This follows the same methodology as set out in the Report.

4.5

Based on my review of the latest materials, I continue to believe that, as at 31 March 2022, the TPs of the
London Branch of TMNF appear reasonable, notwithstanding the uncertainty present.

RESERVE STRENGTH OF NRG
4.6

I based my conclusions concerning NRG’s reserve strength in the Report on the results of its most recent
reserve review, which was undertaken as at 31 May 2021. As noted in paragraph 3.9, above, NRG has notundertaken a further full reserving exercise since that date, but, for the purpose of setting its reserves as at
31 December 2021, it did analyse developments through to 30 November 2021 and has provided me witha copy of a report detailing those developments. This showed that, other than on the FABO portfolio, paid
and incurred claims movements were largely insignificant. The FABO book gave rise to more significant
paid and incurred development, but the amount of incurred development seen was less than expectedbased on NRG’s projections.

4.7

As noted above, for the purposes of setting their best estimate reserves as at 30 November 2021, the NRG
actuaries rolled forward for payments the estimates that they had made as at 31 May 2021. This approach
appears reasonable given the movements seen in the period. As also noted in paragraph 3.9, above, forthe purpose of booking reserves in its accounts as at 31 December 2021, NRG’s policy is to book at an
80% confidence level (i.e. higher than the actuaries’ best estimate). NRG released approximately £15 million
from its reserves as at 31 December 2021 (as compared to those as at 31 December 2020) but, as notedin the Report, a release in reserves had been expected following the results of the actuarial review as at
31 May 2021.

4.8

I have also been provided with the calculations behind NRG’s TPs, as shown in its QRTs as at 31 December
2021. The approach taken to calculating the TPs is unchanged from that explained in the Report, based on
the position as at 30 June 2021.

4.9

Based on my review of the updated materials provided to me as at 31 December 2021, as described above,
I continue to believe that the reserves held by NRG, both in its GAAP accounts, and its Solvency II TPs, arereasonable.

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4.10

If the Scheme is sanctioned, NRG will receive the Transferring Business and, whilst this will continue to bereinsured into NICO under the terms of the Reinsurance Agreement, it will need to establish GAAP reserves
and TPs for this business on a gross of reinsurance basis. As noted above and in the Report, NRG’s policy
is to set GAAP reserves at an 80% confidence level and this will not change as a result of the Scheme. I
have given details in paragraph 3.10, above, of how I expect NRG’s GAAP reserves to increase as a resultof the Scheme.

4.11

For the purpose of preparing projections of NRG’s Solvency II balance sheet, NRG has been using theunpaid loss estimates booked by the London Branch, which, in turn, have been based on the estimates
made by the external actuaries. NRG has provided me with updated projections of its balance sheet andsolvency position, as at 31 December 2021, including the Transferring Business. I note that these do notreflect the latest loss estimates made by the external actuaries for the Transferring Business (which areslightly higher than the amounts that NRG is using, which, in turn, are based on those booked in the London
Branch’s management accounts as at 31 December 2021), as they were not available when NRG wasundertaking its projections.

4.12

Based on the additional information available to me, I have no reason to alter the conclusion that I made in
the Report that, although the implementation of the Scheme will cause the gross of reinsurance reserves of
NRG to increase significantly, it should cause no change in the strength of either NRG’s reserves on a
GAAP basis or NRG’s TPs.

EXCESS ASSETS OF TMNF
4.13

As explained in Section 3, above, I have reviewed TMNF’s latest financial statements as at 31 March 2022,
which show that its net assets have increased since that shown a year before. I have also been provided
with TMNF’s updated solvency margin ratio as at 30 September 2021, which was essentially unchanged
from that as at 31 March 2021, as detailed in the Report.

4.14

Based on the additional information available to me, my view that TMNF is a large, very well-capitalised anddiversified company is unchanged from that expressed in the Report, and, owing to the small size of theTransferring Business relative to the other business of TMNF (and the fact that it is, in any case, wholly
reinsured), this will not change as a result of the Scheme.

EXCESS ASSETS OF NRG
4.15

NRG has provided me with updated calculations of its SCR, as well as its OECR, as at 31 December 2021.
The methodology used to calculate these amounts is unchanged from that used as at 30 June 2021, as
described in the Report, and, as there has been limited movement in the balance sheet between those twodates, the resulting capital requirements and Capital Cover Ratios are not materially different to thosepresented in the Report.

4.16

I can therefore reaffirm the conclusion that I made in the Report that, based on the figures as at 31 December
2021, the policyholders of NRG currently benefit from the financial strength provided by a very wellcapitalised company.

4.17

I have also reviewed NRG’s updated calculations of its SCR on a post-Scheme basis. These have also
been prepared using the same approach as described in the Report. The resulting SCR, MCR and Capital
Cover Ratios are summarised in Table 3.4, above. I note that, in preparing these revised projections, NRG
has used the reserves as booked by TMNF in the management accounts of the London Branch as at
31 December 2021 as the basis for its projections. Since then, the external actuaries have completed theirreview of reserves as at the same date, the resulting unpaid claims estimates of which are slightly greaterthan used by NRG. I note that, had they used the external actuaries’ latest figures, the Capital Cover Ratio
would have been slightly lower, but, based on my calculations, not materially so and not so as to alter myview of NRG as a very well-capitalised company.

4.18

Based on my review of NRG’s updated calculations of its solvency requirements post-Scheme, I have noreason to alter my conclusion that NRG will continue to be a very well-capitalised company after the
implementation of the Scheme.

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MILLIMAN REPORTRELATIVE FINANCIAL STRENGTH ENJOYED BY TRANSFERRING POLICYHOLDERS PRE- AND POSTSCHEME
4.19

In the Report, I compared the financial strength enjoyed by the Transferring Policyholders pre-Scheme tothat expected to be afforded to them post-Scheme.
4.19.1 I noted that the Transferring Policyholders currently benefit from the financial strength provided by avery well-capitalised company and that they will become policyholders of a company that is also
expected to be very well-capitalised. Therefore, relative to the solvency capital requirements of therespective entities, the Transferring Policyholders will see no material change in the financial security
afforded to them. Based on the updated reserve and solvency capital figures provided to me as at
31 December 2021, this continues to be the case.
4.19.2 I also noted that, post-Scheme, the Transferring Policyholders will be more dependent on NICO,
through the Reinsurance Agreement, than they are currently, owing to NRG’s size relative to TMNF.
However, I noted that, even if NICO were unable to honour its obligations under the Reinsurance
Agreement, NRG would still be able to fund the claims of the Transferring Business and remain awell-capitalised company. This remains the case based on the updated financial position. I further
noted that the likelihood of NICO being unable to meet its liabilities under the Reinsurance
Agreement would appear to be remote given its very significant financial strength. As I have
explained in paragraph 3.14, above, NICO’s financial strength (both in terms of the absolute valueof its excess assets and its Capital Cover Ratio relative to its RBC solvency requirements) has
improved relative to the position communicated to me at the time of writing the Report.
4.19.3 I then considered the results of three scenario tests that looked at the ability of NRG to withstand theresults of significantly adverse circumstances post-Scheme. NRG has updated the calculations
behind these scenario tests, based on the latest financial position as at 31 December 2021. The
conclusions from each of the tests is essentially unchanged from that explained in the Report (which
was based on the position as at 30 June 2021). This is to be expected given that the financial positionof NRG, and the reserve position of the Transferring Business, have not changed materially during
the period. I note that the scenario tests did not use the results of the latest reserve analysis of theexternal actuaries as the base position, but slightly lower figures based on the London Branch’s
management accounts as at 31 December 2021. Based on calculations I have performed, if thelatest figures had been used then the results of the Scenario tests would leave NRG slightly worse
off, but not materially so.

4.20

Based on my review of the updated financial information, I continue to be satisfied that the Transferring
Policyholders will not be materially adversely affected due to relative differences in the financial strength of
NRG post-Scheme and of TMNF pre-Scheme.

OTHER CONSIDERATIONS
4.21

In the Report, I also considered a number of other factors, other than financial strength, when assessing
the effect of the Scheme on the Transferring Policyholders.
4.21.1 I considered the effect of the Scheme on changes in risk exposures for the Transferring
Policyholders. The risk exposures, both in TMNF and NRG, are substantively the same as at thetime of writing the Report and the additional information received does not lead me to alter myconclusion that, although the proposed Scheme will lead to some change to the risk exposures of
the Transferring Business, this will not have a materially adverse impact on the security of theTransferring Policyholders' benefits.
4.21.2 I considered the impact of the Scheme on the rights of the Transferring Policyholders in the event of
insolvency. The legal position regarding the position of the policyholders in the event of insolvency
is as set out in the Report. Notwithstanding some differences in the ranking of policyholders in theevent of insolvency arising from the Scheme, I noted in the report that, given that NRG is a very wellcapitalised company and that the scenario tests illustrated that it would be able to meet its obligations
to policyholders in even very adverse circumstances, the likelihood of NRG’s insolvency presently
appears a remote possibility. Based on the latest financial information provided to me, NRG’s
insolvency continues to appear to be a remote possibility. I therefore continue to be satisfied that theTransferring Policyholders will not be materially adversely affected due to relative differences in theirrights pre- and post-Scheme in the event of the insolvency of either TMNF or NRG.

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MILLIMAN REPORT

4.21.3 I also considered the impact of the Scheme on policyholder servicing and on access to complaints
and compensation schemes. The position with regard to these matters is as set out in the Reportand my conclusions in these regards are therefore unchanged.
CONCLUSION FOR THE TRANSFERRING POLICYHOLDERS
4.22

Based on my review of the updated information provided to me, I continue to be satisfied that the Scheme
will not affect in a materially adverse way either the security or the policy servicing levels of the Transferring
Policyholders.

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5.

The impact of the Scheme on the policyholders of TMNF nottransferring to NRG under the Scheme

5.1

In the Report I noted that, if the Scheme is implemented, the position of the TMNF Non-Transferring
Policyholders will be very little changed from that before the Effective Date. The Transferring Business
continues to represent only a very small part of the existing gross reserves of TMNF, and nil on a net ofreinsurance basis. The implementation of the Scheme will lead to TMNF paying a $10 million fee to NRG,
but this amount is very small in relation to the overall assets of TMNF. The TMNF Non-Transferring
Policyholders will therefore experience essentially no change in the financial security to their benefits
provided by TMNF as a result of the Scheme.

5.2

As noted in the Report, there will be no changes to policy administration of the TMNF Non-Transferring
Policyholders as a result of the Scheme.

5.3

The position with regard to any Excluded Policies is unchanged from that described in the Report.

CONCLUSION FOR THE POLICYHOLDERS OF TMNF NOT TRANSFERRING UNDER THE SCHEME
5.4

I continue to be satisfied that the Scheme will not affect in a materially adverse way either the security or
the standards of policy servicing currently enjoyed by the TMNF Non-Transferring Policyholders, and by
any holders of policies that become Excluded Policies.

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6.

The impact of the Scheme on the existing NRG policyholders

6.1

The updated financial information that I have reviewed continues to show that the existing NRG
policyholders currently benefit from the financial strength provided by a very well-capitalised company andthat, assuming the successful completion of the Scheme, NRG will continue to be a very well-capitalised
company post- Scheme, although its Capital Cover Ratios (relative to both SCR and OECR) will be slightly
reduced. This is unchanged from the situation that I described in the Report. As noted in the Report, giventhat the reduction in Capital Cover Ratios is only slight, and that they will still be very high (i.e. significantly
above the threshold for a very well-capitalised company), I do not regard this reduction in Capital CoverRatios to be materially adverse to the existing NRG policyholders. Furthermore, the scenario tests
undertaken (as updated) continue to illustrate that, even with the additional risks associated with theTransferring Business, NRG’s financial position is robust enough to withstand remote outcomes and still
meet its SCR and OECR.

6.2

I therefore continue to be satisfied that the existing policyholders of NRG will not be materially adversely
affected due to relative differences in the financial strength of NRG pre-Scheme and post-Scheme.

OTHER CONSIDERATIONS
6.3

In the Report, I also considered a number of factors, other than financial strength, when assessing the effectof the Scheme on the Transferring Policyholders.
6.3.1 I considered the effect of the Scheme on changes in risk exposures for the existing NRG
Policyholders. I noted that they would become exposed to counterparty default risk with NICO, butthat, given NICO’s financial strength, the counterparty default risk associated with the NICO
reinsurance would be slight. As discussed above, the latest information, as at 31 December 2021,
continues to show that NICO is financially very strong, so my conclusion in this regard is unchanged.
I also noted that the liabilities of NRG would become more concentrated in APH exposures, inparticular in US exposures. However, I stated that, as has been shown in the scenario tests, even in
the event that the reserves for asbestos claims were doubled, the financial resources of NRG aresuch that it should still be a well-capitalised company relative to its SCR. This remains the case
based on the results of the updated scenario tests. As such, I continue to believe that the changes
in risk exposures resulting from the Scheme will not materially adversely affect the existing
policyholders of NRG.
6.3.2 I noted that there will be no changes to the policy administration arrangements of either the existing
NRG business or the Transferring Business as a result of the Scheme. This remains the case.
6.3.3 I also considered the impact of the Scheme in the event of NRG’s insolvency. The legal position of
the policyholders in the event of insolvency is as set out in the Report. Notwithstanding somedifferences in the ranking of policyholders in the event of insolvency arising from the Scheme, I notedin the Report that, given that NRG is a very well-capitalised company and that the scenario tests
illustrated that it would be able to meet its obligations to policyholders in even very adverse
circumstances, the likelihood of NRG’s insolvency presently appears a remote possibility. Thisremains the case based on the updated financial information provided to me. I therefore reaffirm myconclusion that the very small likelihood of NRG becoming insolvent post-Scheme satisfies me thatthe existing NRG policyholders will not be materially adversely affected due to relative differences intheir rights pre- and post-Scheme in the event of the insolvency of NRG.

CONCLUSION FOR THE EXISTING NRG POLICYHOLDERS
6.4

As there have been no material changes in the circumstances, I remain satisfied that the Scheme will notaffect in a materially adverse way, either the financial security or the policy servicing levels of the existing
NRG policyholders.

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7.

Other considerations

THE COMMUNICATION WITH POLICYHOLDERS
7.1

I have been informed that all communications concerning the Scheme have been carried out as per theplans detailed in the Report. This has included:sending notices directly to:o1,092 policyholders;oall reinsurers of the Transferring Business; ando

15 brokers (one more than had originally been intended);

advertising the Scheme in the London, Edinburgh and Belfast Gazettes; in The Times newspaper in
the UK; and in the UK, US, European, Middle East and Asia editions of the Financial Times newspaper;and

establishing a page dedicated to the Scheme on the TMNF website on which interested parties candownload information relating to the Scheme, including the Report.

7.2

A log is being maintained detailing all responses received from policyholders. I have seen a copy of the log
as of 20 June 2022. This showed that five enquiries had been made by policyholders: four requesting detailsof the respective policyholder’s contracts that will be included in the Transferring Business, and one listed
as a “general enquiry”, where the policyholder requested confirmation that the current administrators of theTransferring Business will continue to administer the business after the Scheme takes effect. I understandthat all enquiries were responded to in a timely manner. The log also showed that there had been a total of
91 returns in respect of policyholder notification letters. I am informed that attempts have been made tolocate alternative addresses for these policyholders and, where available, the letter re-sent. No objections
to the Scheme had been received.

7.3

In addition, I am informed that responses have been received from two reinsurers and five brokers. The
correspondence received from the first reinsurer sought clarification of the business that would be includedin the Scheme and a list of the relevant contracts, which were provided. Correspondence received from thesecond reinsurer noted that the parties had agreed to commute the relevant reinsurance arrangement (seeparagraph 7.7 below). TMNF responded to the reinsurer to clarify that it would not be affected by the Scheme
if the commutation was concluded prior to the Scheme taking effect (which it now has).

7.4

A brief summary of the correspondence with the brokers is set out below:


TMNF received an enquiry from one broker as to whether TMNF would like it to notify all relevant
policyholders of the proposed transfer. TMNF responded on the same day confirming that it would bemuch appreciated if the broker could notify all of the relevant policyholders in its records of the Scheme;



TMNF provided clarity to one broker that the Transferring Business only included the business of the
London Branch;

TMNF received a notification from a broker that certain direct policyholders were no longer handled byit. TMNF has in any event written to these policyholders directly;One broker advised TMNF that it no longer handles the relevant business. It provided details of thecurrent brokers for that business and indicated that it would forward TMNF’s correspondence to thecurrent brokers; andOne broker noted that it would not typically write to all relevant policyholders when notified of a proposed
Part VII Transfer but that it would be content to assist TMNF if it were having difficulty in contacting
specific clients. TMNF responded on the same date providing details of one category of clients that it
had difficulty in tracing, namely policyholders covered under a particular pool account, and the broker
agreed that it would look into this matter. I note that, as TMNF had been unable to trace all of thepolicyholders covered by pool accounts, it had applied to the Court for dispensation from therequirement to notify all such policyholders, which was granted.

Conclusion regarding the communications with stakeholders
7.5

I consider that the communications effected by the Companies, as outlined above, have been in line withthe communications plan that I summarised in the Report.

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MILLIMAN REPORTOPERATIONAL PLANS AND CHANGES IN ASSETS AND LIABILITIES UP TO THE EFFECTIVE DATE
7.6

NRG and the London Branch of TMNF have both informed me that there have been no changes to theiroperational plans since the time of writing the Report.

7.7

TMNF has informed me that it has recently agreed with one of its counterparties to commute all inwards
and outwards reinsurance contracts relating to the Transferring Business. TMNF will receive a small
payment for the commutation and it will have, on a net of reinsurance basis (prior to allowing for theReinsurance Agreement), a small, but immaterial, beneficial impact on the reserves of the Transferring
Business.

7.8

The conclusions within this Supplementary Report have largely been based on data as at 31 December
2021. Both NRG and TMNF have represented to me that they will keep me apprised of any developments,
up to the date of the final Court hearing to sanction the Scheme, that may be relevant to me on opining on
the Scheme. To the extent that I do become aware of any matters that would cause me to change myconclusions prior to the Court hearing to sanction the Scheme, I will update the Court accordingly.

IMPACT OF THE COVID-19 PANDEMIC
7.9

In the Report, I stated that I would address in the Supplementary Report developments relating to the
COVID-19 pandemic and its effects on the Companies. I noted in the Report that both TMNF and NRG havebeen able to continue to operate satisfactorily during the pandemic and this continues to be the case. I also
noted that neither the London Branch nor NRG have any claims directly relating to the pandemic, although
it is possible that claims development pattern could be affected or that claims volumes could be affected bymortality due to the pandemic. Based on my review of the latest information provided to me, I have not seen
evidence of any material changes to reserving resulting from the pandemic. As such, my conclusion remainsthat I do not believe that the uncertainty created by the pandemic on reserves alters materially the impactof the Scheme on any affected policyholders.

LEGAL JURISDICTION
7.10

In paragraph 9.31 of the Report, I noted that I had been provided with a draft of a letter from NICO to TMNF
and NRG, in which NICO undertakes to be bound by the terms of the Scheme. I have now been provided
with a final signed copy of this letter.

7.11

I also note that, under the terms of the Scheme, NRG has agreed to undertake: (i) to be bound by the ordersanctioning the Scheme; (ii) that it will not contest the effectiveness of the order in any jurisdiction; and (iii)that it will be bound by any judgment relating to the order.

OTHER
7.12

In paragraph 4.55 of the Report, I stated that NRG intends to obtain, ahead of the Sanctions Hearing for the
Scheme, permission from the PRA and the FCA to be able to effect accident business. NRG has confirmedthat it made its application to the PRA and FCA for such permission on 26 April 2022.

7.13

In the Report, I also reported on the following features:the effect of the Scheme upon the assets of TMNF and NRG;

mis-selling liabilities;the effect of the Scheme upon reinsurers of the Transferring Business;

policyholder expectations;

what would happen were the Scheme not to proceed;

the tax implications of the Scheme; andthe costs of the Scheme.

As at the date of this Supplementary Report, nothing has occurred since the date of the Report that hascaused me to modify in any way:

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MILLIMAN REPORT

the conclusions, if any, that I have drawn regarding the effect of those features upon the Scheme or on
the different groups of policyholders potentially affected by the Scheme.

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8.

Final conclusions

CONFIRMATION OF OPINION
8.1

I have further considered the effect of the proposed Scheme on the policyholders of TMNF and NRG in thelight of the Additional Information made available to me since the date of the Report. In summary, in myopinion, provided the proposed Scheme operates as intended, and I have no grounds for believing that it
will not do so:

the Scheme will not materially adversely affect the security of benefits to policyholders of either TMNF
(both those policyholders being transferred under the Scheme and those who will remain, post-Scheme,
policyholders of TMNF) or NRG; and

the Scheme will not have any impact on service standards experienced by the policyholders of either
TMNF (both those policyholders being transferred under the Scheme and those who will remain, postScheme, policyholders of TMNF) or NRG.

As such, I confirm that my overall opinion and conclusions as set out in Section 10 of the Report are
unchanged.
8.2

In reaching this opinion, I have complied in all material respects with the principles set out in paragraph 10.2of the Report.

DUTY TO THE COURT
8.3

As required by Part 35 of the Civil Procedure Rules, I hereby confirm that I understand my duty to the Court
and have complied with that duty and that I am aware of and have complied with the requirements of Part
35 of the Civil Procedure Rules, of Practice Direction 35 which supplements Part 35 of the Civil Procedure
Rules, and of the Guidance for the Instruction of Experts in Civil Claims 2014.

STATEMENT OF TRUTH
8.4

I confirm that, insofar as the facts stated in this Supplementary Report are within my own knowledge, I havemade clear which they are and I believe them to be true, and that the opinions I have expressed represent
my true and complete professional opinion.

Christopher Clarke
Fellow of the Institute and Faculty of Actuaries
22 June 2022

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Appendix A
TERM
Additional Information
APH
Capital Cover Ratio
Columbia
Columbia Reinsurance
Companies
Court
ENID

Definitions
DEFINITION
Financial and other information in respect of the Companies that has been
provided to me since the date of the Report (as detailed in Appendix B).
Asbestos, pollution, health hazard.
The ratio of available capital to required capital under a particular solvency
capital regime.
Columbia Insurance Company.
A loss portfolio transfer agreement effected as at 1 January 2021, between
NRG and Columbia in relation to the FABO business.
The collective term for TMNF and NRG.
The High Court of Justice of England and Wales.
In estimating the technical provisions under Solvency II, insurers must makeallowance for events not in data (“ENID”), i.e. those possible future events ordevelopments that have not been seen in the historic claims experience of theinsurer.

Excluded Policy

A contract of insurance written or assumed by TMNF under which any liability
remains unsatisfied or outstanding as at the Effective Date and which would
have formed part of the Transferring Business but which, for any reason, is
not transferred by order of the Court pursuant to Part VII of FSMA on the
Effective Date.

ExCo

Excess Insurance Company Limited (UK).

FCAThe Financial Conduct Authority (“FCA”) is the UK regulatory agency that
focuses on the regulation of conduct by retail and wholesale financial services
firms. The FCA operates as part of the regulatory framework implemented
under the Financial Services Act 2012.

FSMA

Financial Services and Markets Act 2000, the legislation under which Part VII
governs the transfer of (re)insurance business between (re)insurance
undertakings.

FSMA Report

A report on the terms of a transfer under Part VII of FSMA, to be prepared byan independent person. The FSMA Report is required in order that the Court
may properly assess the impact of the proposed transfer, including the effecton the policyholders of the insurance companies in question.

GAAP
IBNR

Generally accepted accounting principles, which form the standard frameworkof guidelines for financial accounting used in any given jurisdiction.
Incurred but not reported.

IBNR Reserves

These are reserves in respect of claims that relate to claim events that haveoccurred before the valuation date but which were still to be reported to theinsurer as at that date. For the purposes of this Supplemental Report theyalso include reserves in respect of any perceived shortfall between the
projected ultimate costs and the case estimates for claims already notified.

IFoA

The Institute and Faculty of Actuaries, the professional body for actuaries in
the UK.

Independent Expert

The Independent Expert prepares the FSMA Report and provides it to the
Court in order that it may properly assess the impact of the proposed transfer,including the effect on the policyholders of the insurance companies inquestion. In the case of the Scheme, I have been appointed as the
Independent Expert.

London Branch

A UK branch of TMNF that was opened on 1 March 2021.

MCR

The Solvency II Minimum Capital Requirement – this measure is lower thanthe SCR, and defines the point of intensive regulatory intervention. The MCR
calculation is less risk sensitive than the SCR calculation and is calibrated toa confidence level of 85% over one year (compared to 99.5% for the SCR).

Milliman
NICO
NRGMilliman, Inc.
National Indemnity Company.
NRG Victory Reinsurance Limited

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OECR
Part VII Transfer

Own Economic Capital Requirement. NRG's term for describing its internallyassessed capital requirements.
An insurance business transfer scheme performed in accordance with therequirements set out in Part VII of FSMA.

PRA

The Statement of Policy issued by the PRA entitled The Prudential Regulation
Authority’s approach to insurance business transfers, as updated in
November 2021.
The Prudential Regulation Authority (“PRA”) is part of the Bank of Englandand carries out the prudential regulation of financial firms in the UK, includingbanks, investment banks, building societies and insurance companies. The
PRA operates as part of the regulatory framework implemented under the
Financial Services Act 2012.

QRTs

Quantitative Reporting Templates, which must be completed by insurers andsubmitted to the regulator on a regular basis in accordance with Solvency II.
The QRTs cover a wide range of quantitative financial information about theinsurer including details of its balance sheet, capital requirements andreserves.

Policy Statement

RBC

Reinsurance

Reinsurance Agreement

ReportSchemeRisk-Based Capital, which is the basis of the solvency regime in both Japanand the US.
An arrangement with another insurer whereby risks are shared (or passedon). If reinsurance is termed as being “inwards” then the reinsurer in question
has accepted risk from an(other) (re)insurer; if reinsurance is termed as being“outwards” then the (re)insurer in question has passed risk to a(nother)reinsurer.
A reinsurance agreement entered into on 31 December 2014, pursuant towhich NICO agreed to cover, inter alia, all claim payments made by TMNF in
respect of the Transferring Business, up to an agreed aggregate limit, as wellas certain overhead expenses relating to the business.
References to the “Report” refer to the Independent Expert report dated 4
April 2022
In the context of this Report, the proposal that the Transferring Business of
TMNF be transferred to NRG under the provisions of Part VII of FSMA.

SUP18

Solvency Capital Requirement, which, under Solvency II, is the amount of
capital required to ensure continued solvency over a one-year trading timeframe with a likelihood of 99.5%.
Solvency and Financial Condition Report, which, under Solvency II, each
insurer is expected to publish annually, and which will contain certain
qualitative and quantitative information, the quantitative information being in
the format of certain prescribed QRTs.
The system for establishing (among other things) minimum capitalrequirements for EU (re)insurers under the Solvency II Directive
2009/138/EC.
Section 18 of the FCA Supervision Manual.

Supplemental Report
TMNF

References to the “Supplemental Report” refer to this report.
Tokio Marine & Nichido Fire Insurance Co., Ltd.

SCR
SFCR

Solvency II

TMNF Non-Transferring
Policyholders
Tokio MarineThose holders of TMNF policies that are not being transferred to NRG.
Essentially, this comprises all TMNF policyholders other than those of the
London Branch.
Tokio Marine Holdings, Inc.

Transferring BusinessTechnical provisions as calculated for Solvency II purposes. As such, theydiffer from technical provisions calculated on an IFRS basis.
The business of TMNF that is to be transferred to NRG under the Scheme.

Transferring Policyholders
US

The policyholders of the Transferring Business.
United States of America.

Work Review

Process by which a piece of actuarial work is considered by at least one otherindividual for the purpose of providing assurance as to the quality of the workin question.

TPs

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Appendix B
B.1

Key Sources of Additional Information

In writing this Supplementary Report, I relied upon the accuracy of certain documents provided by TMNF
and NRG (in addition to those listed in the Report). These included, but were not limited to, the following:

AccountsReport and Accounts of NRG as at 31 December 2021



NRG management accounts spreadsheet as at 31 March 2022

Tokio Marine “Information of major subsidiaries' business results for the six months ended September
30, 2021” document, including financial statements for TMNF as at the same date

Spreadsheets showing the management accounts for the London Branch as at 31 December 2021 and
31 March 2022



NICO annual statement for the year ended 31 December 2021

Reserving

NRG internal reserving report detailing the best estimate reserve for the 2021 year-end

Actuarial review of the claims reserves of the Legacy Portfolio of TMNF as at 31 December 2021,
prepared by external actuarial consultants



NICO Actuarial Opinion Summary and Actuarial Report as at 31 December 2021

Risks and Solvency Capital

NRG SFCR for the year ended 31 December 2021



NRG annual QRTs as at 31 December 2021



Spreadsheets showing the calculation of NRG’s SCR and Solvency II TPs as at 31 December 2021



Spreadsheets showing the calculation of NRG’s SCR and Solvency II TPs as at 31 December 2021
including the Transferring Business

TMNF Solvency Margin Ratio disclosure as at 30 September 2021



TMNF London Branch QRTs and workings spreadsheet as at 30 September 2021



TMNF London Branch TP and SCR calculations and ORSA projections as at 31 March 2022



NICO RBC statement for the year ended 31 December 2021

Communications


Copies of the notices that appeared in:oeach of the London, Edinburgh and Belfast Gazettes;o

The Times newspaper in the UK; andothe UK, US, European, Middle East and Asia editions of the Financial Times

Copies of the biweekly returns to the FCA, summarising the responses to the notices (most recently as
at 20 June 2022)

Court documents


Draft of the third witness statement of Yoichiro Yamaguchi

Draft second witness statement of Andrew Wilson



Draft Court Order, sanctioning the Scheme

Signed copy of a letter from NICO to TMNF and NRG in which it undertakes to be bound by the termsof the Scheme.

Other

B.2

Information relating to the items listed above was also gathered during discussions with staff of NRG and
TMNF.

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
21

22 June 2022

Appendix C Letters of Representation

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
2222 June 2022

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
23

22 June 2022

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
24

22 June 2022

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
25

22 June 2022

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
26

22 June 2022

Supplementary Report of the Independent Expert on the proposed transfer of business from the London Branch of TMNF to NRG
27

22 June 2022