SOUTHEAST AND CENTRAL EUROPE TECHNICAL ASSISTANCE FOR CATASTROPHE RISK INSURANCE FACILITY SECO TRUST FUND GRANT No.TF095647 GLOBAL ENVIRONMENT FACILITY SPECIAL CLIMATE CHANGE FUND GRANT AGREEMENT (Kazakhstan: Southeast Europe and Central Asia Catastrophe Risk Insurance Facility Project) GRANT No. TF0A1934 Implemented By “Europa Re Limited” Special Purpose Financial Statements For the Year Ended 31 December 2018 Table of Contents REPORT OF INDEPENDENT AUDITORS ....................................................................................................... 2 1. SUMMARY OF FUNDS RECEIVED AND EXPENSES PAID ..................................................................4 2. STATEMENT OF PROJECT ACTIVITIES .............................................................................................6 3. COMPARISON OF BUDGET WITH ACTUAL AMOUNTS ................................................................... 7 4. INFORMATION ON GRANTS ........................................................................................................... 8 Southeast and Central Europe Technical Assistance for Catastrophe Risk Insurance Facility SECO Grant No TF095647 .........................................................................................................................................8 Kazakhstan-Southeast Europe and Central Asia Catastrophe Risk Insurance Facility Project Grant No TF0A1934 ............................................................................................................................................... 8 5. ACCOUNTING POLICIES.................................................................................................................. 9 6. STATEMENT OF FINANCIAL POSITION ......................................................................................... 10 7. STATEMENT OF DESIGNATED ACCOUNTS ................................................................................... 11 8. STATEMENT OF EXPENDITURE (SOE) ........................................................................................... 12 9. SUBSEQUENT EVENTS.................................................................................................................. 12 EUROPA Re Ltd. Zug ______________________________________ INDEPENDENT AUDITOR’S REPORT to the management on the financial statements for the year ended 31 December 2018 ______________________________________ MAZARS AG H er o s t r a ss e 1 2 CH - 8048 Züri ch Tel .: + 41 44 384 84 44 www.m azars.c h INDEPENDENT AUDITOR’S REPORT TO THE MANAGEMENT OF EUROPA RE LTD. Opinion We have audited the accompanying special purpose financial statements of the “Southeast and Central Europe Technical Assistance for Catastrophe Risk Insurance Facility SECO Trust Fund” (TF095647) and the “Global Environment Facility Special Climate Change Fund Grant Agreement (Kazakhstan: Southeast Europe and Central Asia Catastrophe Risk Insurance Facility Project”, (TF0A1934), which comprise the statement of funds received and expenses paid, statement of project activities and com- parison of budget with actual amounts and notes to the financial statements for the year ended De- cember 31, 2018. We have also audited the Project’s compliance with the conditions of the relevant Grant Agreement. In our opinion, 1. the special purpose financial statements present fairly in all material aspects the statement of funds received and expenses paid of the projects, statement of project activities and compar- ison of budget with actual amounts and notes to the financial statements for the year ended 31 December 2018 in accordance with International Public Sector Accounting Standard: Fi- nancial Reporting Under the Cash Basis of Accounting, (IPSAS—Cash Basis) 2. the funds have been used in accordance with the conditions of the relevant Grant Agreement Basis for Opinion We conducted our audit in accordance with International Standards on auditing (ISAs). Our responsi- bilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are an independent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Switzerland, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Uses We draw attention to Note 5 to the nancial statements, which describes that financial statements are prepared in accordance with cash basis framework. As a result, the nancial statements may not be suitable for another purpose. Our report is intended solely Europa Re Ltd. and the International Bank for Reconstruction and Development/ International Development Association (“World Bank”) and should not be distributed to or used by parties other than Europa Re Ltd. or the “World Bank”. Our opinion is not modi ed in respect of this matter. Responsibilities of Management and Those Charged with Governance for the Special Purpose Financial Statements The management is responsible for the preparation and fair presentation of the special purpose nan- cial statements in accordance with IPSAS-Cash Basis issued by the International Public Sector Accounting Standards Board (IPSASB) within the International Federation of Accountants (IFAC) and with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities” issued by the World Bank's Financial Management Sector Board, and for such internal con- trol as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatements, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting pro- cess. Auditor’s Responsibilities for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the nancial 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 aggre- gate, 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 profes- sional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the special purpose financial state- ments, 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, mis- representations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit proce- dures that are appropriate in the circumstances, but not for the purpose of expressing an opin- ion on the effectiveness of the internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of account- ing estimates and related disclosures made by management. Evaluate the overall presentation, structure and content of the special purpose financial state- ments, including the disclosures, and whether the special purpose financial statements repre- sent the underlying transactions and events in a manner that achieves fair presentation. We communicate with management 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. Zurich, 24.06.2019 MAZARS AG Angelo Accardi Daniel Müller Audit expert Manager Auditor in charge Enclosures: Summary of funds received and expenses paid, statement of project activities, compari- son of budget with actual amounts and notes to the special purpose financial statements. Grants No. TF095647 & TF0A1934 EUROPA RE LTD SUMMARY OF FUNDS RECEIVED AND EXPENSES PAID AS OF 31 DECEMBER 2018 (Expressed in US dollars) 1. SUMMARY OF FUNDS RECEIVED AND EXPENSES PAID IBRD Grant No.TF 095647 Notes 2017 2018 Cumulative OPENING BALANCES 125’320 115’811 Overpaid taxes - - International Bank for Reconstruction and Development 6 125’320 115’811 Transit Account - - ADD: FUNDS RECEIVED BY SOURCES 1’257’935 715’510 7’270’173 International Bank for Reconstruction and Development 1’257’935 715’510 5’482’753 International Bank for Reconstruction and Development (Direct Payments) - - 1’787’420 LESS: EXPENDITURES 1’267’444 732’317 7’171’169 International Bank for Reconstruction and Development 1’267’444 732’317 7’171’169 Consulting services, training, operating costs 1’267’444 732’317 5’383’749 International Bank for Reconstruction and Development (Direct Payments) - - 1’787’420 Consulting services, training, operating costs 1’787’420 CLOSING BALANCES 115’811 99’004 99’004 Overpaid taxes - - - Transit Accounts 7 - - - International Bank for Reconstruction and Development 7 115’811 99’004 99.004 5 Grants No. TF095647 & TF0A1934 EUROPA RE LTD SUMMARY OF FUNDS RECEIVED AND EXPENSES PAID AS OF 31 DECEMBER 2018 (Expressed in US dollars) IBRD Grant No. TF0A1934 Notes 2017 2018 Cumulative Opening Balances 334’159- 169’287 Overpaid taxes - - International Bank for Reconstruction and Development 6 328’097 162’843 Transit Account 6’062 6’443 ADD: Funds received by Sources 666’299 1’505’579 2’671’877 International Bank for Reconstruction and Development 666’299 1’411’028 2’577’327 International Bank for Reconstruction and Development (Direct Payments) - 94’550 94’550 LESS: Expenditures 831’171 1’659’853 2’656’865 International Bank for Reconstruction and Development 831’171 1’659’853 2’656’865 Consulting services, training, operating costs 831’171 1’565’303 2’562’315 International Bank for Reconstruction and Development (Direct Payments) - 94’550 94’550 Consulting services, training, operating costs - - s- CLOSING BALANCES 169’287 15’012 15’012 Overpaid taxes - - - Transit Accounts 7 6’443 1’118 1’118 International Bank for Reconstruction and Development 7 162’843 13’894 13’894 __________________ __________________ Laura Konda Gjinali Orsalia Kalantzopoulos Chief Financial Officer Chief Executive Officer Date: 26 June 2019 6 Grants No. TF095647 & TF0A1934 EUROPA RE LTD STATEMENTS OF PROJECT ACTIVITIES AS OF 31 DECEMBER 2018 (Expressed in US dollars) 2. STATEMENT OF PROJECT ACTIVITIES IBRD Grant No.TF 095647 2017 2018 Cumulative (i) Compensation of Board directors and Board administrative staff 423’072 181’151 1’548’324 (ii) Country risk assessments 61’544 120’401 1’491’537 (iii) Establishing underwriting systems 93’818 27’801 1’394’544 (iv) Auditing Services 65’053 94’326 335’308 (v) Training 12’738 9’509 29’300 (vii) The development of risk models, regulatory work, and acquisition of weather data and whether stations 611’220 299’129 2’372’156 1’267’444 732’317 7’171’169 IBRD Grant No. TF0A1934 2017 2018 Cumulative 1. Project Management 206’461 521’980 745’872 2. Technical Preparation Work 624’710 1’099’290 1’872’411 2.a General Technical services 114’345 471’738 622’623 2.b Actuarial Services 147’550 129’348 352.416 2.c Claims Services - - - 2.d Agriculture Insurance Services - 23’116 23’116 2.e IT Services 362’815 475’088 874’256 2.f PR & Marketing Services - - - 3. Country Risk Assessment - 38’583 38’583 831’171 1’659’853 2’656’865 7 Grants No. TF095647 & TF0A1934 EUROPA RE LTD COMPARISON OF BUDGET WITH ACTUAL AMOUNTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) 3. COMPARISON OF BUDGET WITH ACTUAL AMOUNTS Statement of Project Activities for the year ended 31 December 2018 IBRD Grant No.TF 095647 Actual Planned Variance (i) Compensation of Board directors and Board administrative staff 181’151 181’441 (290) (ii) Country risk assessments 120’401 125’000 (4’599) (iii) Establishing underwriting systems 27’801 30’000 (2’199) (iv) Auditing Services 94’326 93’000 1’326 (v) Training 9’509 10’000 (491) (vii) The development of risk models, regulatory work, and acquisition of weather data and whether stations 299’129 23’386 275’743 732’317 462’827 269’490 IBRD Grant No. TF0A1934 Actual Planned Variance 1. Project Management 521’980 517’154 (4’826 2. Technical Preparation Work 1’099’290 1’446’377 347’087 (a) General Technical Services 471’738 456’225 (15’513) (b) Actuarial Services 129’348 195’752 66’403 (c) Claims Services - 49’459 49’459 (d) Agriculture Insurance Services 23’116 49’551 26’435 (e) IT Services 475’088 668’296 193’208 (f) PR & Marketing Services - 27’094 27’094 3. Country Risk Assessment 38’583 55’767 17’184 1’659’853 2’019’297 359’444 8 Grants No. TF095647 & TF0A1934 EUROPA RE LTD NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) 4. INFORMATION ON GRANTS Southeast and Central Europe Technical Assistance for Catastrophe Risk Insurance Facility SECO Grant No TF095647 The Southeast and Central Europe Technical Assistance for Catastrophe Risk Insurance Facility (SECO Trust Fund Grant No. TF095647) was established in accordance with the Grant Agreement signed on 25 November 2009 between the Europa Re Ltd. (“PIU” or “the Company”) and the International Bank for Reconstruction and Development/ International Development Association ("World Bank"). The objective of the Project is to help provide a better mechanism for dealing with catastrophic risks in the Southeast and Central Europe region by supporting the establishment of the Catastrophe Risk Insurance Facility, which will aim at increasing the number of individuals and small and medium enterprises insured by the private insurance market for catastrophic risks in said regions. The Project consists of provision of financing for the payments by the Recipient for costs and expenses incurred in connection with the establishment of the Facility, including: a. The carrying out of country-risk assessments to devise pricing guidelines for insurance companies that will be selling catastrophic risk insurance policies; b. The development of pricing, underwriting and financial risk-management tools for the Facility, including the establishment of a web-based underwriting platform. c. Compensation for the members, the executive assistant and the Chairman of the Recipient’s board of directors, compensation for the Recipient’s Chief Financial Officer and the carrying out of audits of the Recipient; and d. Provision of procurement training to the Recipient’s staff The World Bank acts as an administrator of grant funds provided by the Swiss State Secretariat for Economic Affairs (SECO) under the Southeast and Central Europe Technical Assistance for Catastrophic Risk Insurance Facility Trust Fund, proposes to extend to the Europa Re Ltd. (“Recipient”) a grant in an amount not exceed USD 2,327,169. - On 3 January 2011, the grant agreement has been amended, where the grant amount has been increased to USD 4,231,835. - On 17 September 17, 2015 an extension of the grant amount of USD 3,000,000 was signed, increasing the amount to USD 7,231,835. - On 6 April 2018 an extension of the grant amount of USD 974,000 was signed, increasing the amount to USD 8,205,835. According to the Grant Agreement the World bank and development would finance 100% of eligible expenditures consisting of consultant’s services, training and operating costs. As per amended grant agreement the Project Closing date is 30 June 2020. Kazakhstan-Southeast Europe and Central Asia Catastrophe Risk Insurance Facility Project Grant No TF0A1934 The Kazakhstan-Southeast Europe and Central Asia Catastrophe Risk Insurance Facility Project Grant No TF0A1934 (the "Project") was established in accordance with the Grant Agreement signed on 25 May 2016 between the Europa Re Ltd. (the "Recipient) and the International Bank for Reconstruction and Development/ International Development Association ("World Bank"). The objective of the Project is to enable the Recipient to assist the Republic of Kazakhstan in developing a modern catastrophe Insurance market infrastructure that will support the launch of affordable, innovative 9 Grants No. TF095647 & TF0A1934 EUROPA RE LTD NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) catastrophe insurance products covering the risks of extreme weather variability. The Project consists of Provision of insurance services and systems in support of launching compulsory and optional climate insurance products developed under the Project for the Republic of Kazakhstan by local insurance companies; developing a sustainable insurance framework for the agricultural sector by developing innovative insurance solutions and modern technologies. The activities shall include: a) the provision of a web-based insurance sales platform with automated pricing and risk underwriting capabilities, a modern claims management system, and big-resolution weather risk data; and b) the development of customized weather insurance products for real property and agriculture, public information campaigns, and interactive web-based consumer education tools, as well as the provision of insurance regulatory assistance The World Bank agrees to extend to the Recipient, on the terms and conditions set forth or referred to in the Grant Agreement, a grant in an amount equal to five million United States Dollars ($ 5,000,000) (“Grant”) to assist in financing the Project. According to the Grant Agreement the World Bank would finance 100% of eligible expenditures consisting of consultant’s services, goods and incremental operating costs. The project’s closing date under the agreement is 31 December 2019. 5. ACCOUNTING POLICIES a) Basis of Accounting These special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard (“IPSAS”) Financial Reporting under the Cash Basis of Accounting issued by the International Public Sector Accounting Standards Board (“IPSASB”), an independent standard-setting body within the International Federation of Accountants (“IFAC”) and incorporate the following principal accounting policies, which have been consistently followed in all material respects and comply with the "Guidelines: Annual Financial Reporting and Auditing for World Bank - Financed Activities” issued by the World Bank's Financial Management Sector Board. These Special Purpose Financial Statements have been prepared under the historical cost convention. Project financing is recognised as a source of project funds when the cash is received. Project expenditure is recognised as a use of project funds when payment is made. b) Period of accounts These special purposes financial statements cover the periods from 1 January 2018 to 31 December 2018. In addition, cumulative project funding and expenditure is presented because it is of more relevance to users of the financial statements. c) Transactions and balances in foreign currencies In accordance with the requirements of the World Bank, these special purpose financial statements are presented in United States dollars ("US dollar", "USD" or “US$”), which is the functional currency of the Project. 10 Grants No. TF095647 & TF0A1934 EUROPA RE LTD NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) 6. STATEMENT OF FINANCIAL POSITION IBRD Grant No.TF 095647 Note 2017 2018 ASSETS AND CUMULATIVE EXPENDITURE Cash in bank 3 115’811 99’004 Transit Accounts - - Cumulative Project expenditure 6’438’852 7’171’169 6’554’663 7’270’173 SOURCES OF FUNDS Project financing 6’554’663 7’270’173 Accumulated Foreign exchange difference - - 6’554’663 7’270’173 IBRD Grant No. TF0A1934 Note 2017 2018 ASSETS AND CUMULATIVE EXPENDITURE Cash in bank 3 162’843 13’894 Transit Accounts 6’443 1’118 Cumulative Project expenditure 997’012 2’656’865 1’166’299 2’671’877 SOURCES OF FUNDS Project financing 1’166’299 2’671’877 Accumulated Foreign exchange difference - - 1’166’299 2’671’877 11 Grants No. TF095647 & TF0A1934 EUROPA RE LTD NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) 7. STATEMENT OF DESIGNATED ACCOUNTS The Designated Accounts maintained with the UBS Switzerland, are designated disbursement account of the Projects to perform the payment of eligible expenditure, within defined limits, which do not require individual authorisation from IBRD. For the year ended 31 December 2018 Designated Account IBRD TF09647 Opening balance 115’811 ADD: Project funds received 715’510 831’321 LESS: Eligible Project expenditure 732’217 732’217 Transit Accounts - Closing balance 99’004 For the year ended 31 December 2018 Designated Account IBRD TF0A1934 Opening balance 169’286 ADD: Project funds received 1’505’579 1’674’865 LESS: Eligible Project expenditure 1’659’853 1’659’853 Transit Accounts 1’118 Closing balance 13’894 *Balances on transit accounts include the outstanding amount of cash in US Dollars and Kazak Tenge (KZT) current accounts of Representative Office Kazakhstan. 12 Grants No. TF095647 & TF0A1934 EUROPA RE LTD NOTES TO THE FINANCIAL STATEMENTS AS OF 31 DECEMBER 2018 (Expressed in US dollars) 8. STATEMENT OF EXPENDITURE (SOE) Under the SOE method, the Projects forwards to the World Bank an application for reimbursement of payments already made using an Application for Withdrawal with SOE forms as the only documentation. IBRD Grant No.TF 095647 For the year ended 31 December 2018 Date of application Application # Required amount Paid amount 20-Jan-2018 47-SECO 197’838 197’838 04-Apr-2018 48-SECO 195’783 195’783 24-Apr-2018 49-SECO 56’688 56’688 17-Jul-2018 50-SECO 129’969 129’969 03-Oct-2018 51-SECO 135’233 135’233 Total for 2018 715’510 715’510 IBRD Grant No. TF0A1934 For the year ended 31 December 2018 Date of application Application # Required amount Paid amount 19-Jan-2018 07-KZD 94’550 94’550 29-Jan-2018 08-KZ - - 28-Feb-2018 09-KZ 200’713 200’713 2-Apr-2018 10-KZ 38’437 38’437 10-Apr-2018 11-KZ 200’000 200’000 24-Apr-2018 12-KZ 219’893 219’893 2-Jul-2018 13-KZ 80’107 80’107 16-Jul-2018 14-KZ 200’000 200’000 6-Sep-2018 15-KZ 71’693- 71’693 3-Oct-2018 16-KZ 400’184 400’184 Total for 2018 1’505’579 1’505’579 9. SUBSEQUENT EVENTS There are no subsequent events after the closing date of this financial statements 13