Florida Insurance Conference On Financial Reporting 2011 Reinsurance Market Conditions

Loss Activity and Capital Impact

GUY CARPENTER 2 June 23, Worldwide Catastrophe Activity has been Significant Upper end of insured losses estimated at $70bn in the first half of 2011 Guy Carpenter estimates that 2011 reinsurance sector natural catastrophe losses are now more than double natural catastrophe budgets. January to June global contribution of loss: –Asia49% –U.S.29% –AU/NZ21% –EU/Africa/SA1% US tornado/hail losses are more than $15bn through June: average Jan- June losses since 2001 $6.4bn. Earnings event or capital event? What happens if a major hurricane hits? Source: Guy Carpenter, New Zealand EQC, JP Morgan, AIR Worldwide, Ins. Council of Australia, PCS

GUY CARPENTER 3 June 23, 2016 Global Catastrophe Insured Losses Source: Swiss Re, Guy Carpenter

GUY CARPENTER 4 June 23, 2016 Significant Catastrophic Events of 2010 – First Quarter 2011 Source: ISO PCS, Guy Carpenter Earthquake Haiti $200M Earthquake Chile $8,000M Windstorm Xynthia Europe $3,300M Hail Australia $1,040M Weather U.S. $1,045M Hail Australia $1,050M Oil Rig U.S. $3,500M Weather U.S. $2,000M Riots Thailand $500M Floods Europe $280M Floods Europe $675M Floods China $500M Earthquake NZ $4,500M Floods/Tropical Cyclone Australia $4,000M Weather US $1,900M Floods Australia $3,000 Q excluding Japanese earthquake: ˜60% of overall 2010 cat events ˜90% of 2011 nat cat budgets already exhausted Earthquake NZ $14,000M

GUY CARPENTER 5 June 23, Significant Catastrophic Events of 2010 – First Quarter 2011 Source: ISO PCS, Guy Carpenter Weather U.S. $1,900M Fl/Cyclone AU $4,000M Earthquake NZ $14,000M Japanese Earthquake $33,000M $14,235M $6,280M $5,675M $3,000M 1Q2011 cat events: $52.9bn 2010 cat events: $36.0bn

GUY CARPENTER 6 June 23, 2016 Significant Catastrophic Events of 2010 – Second Quarter 2011 Source: ISO PCS, Guy Carpenter Fl/Cyclone AU $4,000M Weather U.S. $1,900M Earthquake NZ $14,000M Japanese Earthquake $33,000M $14,235M $6,280M $5,675M $3,000M 1Q2011 cat events: $52.9bn 2010 cat events: $36.0bn Weather U.S. $1,900M Fl/Cyclone AU $4,000M Earthquake NZ $14,000M Japanese Earthquake $33,000M Weather US $15,300M Q1 2010Q2 2011Q1 2011Q4 2010Q3 2010Q January – May cat events: $68.2bn 2010 cat events: $36.0bn

GUY CARPENTER 7 June 23, Atlantic Hurricane Season Forecast Source: CSU, TSR, Guy Carpenter Colorado State University (CSU) 16 named storms 9 hurricanes 5 major hurricanes – Category 3 or greater Tropical Storm Risk, Inc. (TSR) 16.1 named storms 8.5 hurricanes 4.2 major hurricanes – Category 3 or greater Average season: 10 to 11 named storms, 6 hurricanes, and 2 major hurricanes in the Atlantic, Caribbean, and Gulf of Mexico

GUY CARPENTER 8 June 23, 2016 Earthquakes are slow burners Source: ISO PCS, Guy Carpenter

GUY CARPENTER 9 June 23, 2016 Catastrophe Loss Activity and Impact on Reinsurer Financials As Publicly Disclosed through 6M 2011 Size of bubble denotes catastrophe losses disclosed through 6M 2011 Source: Guy Carpenter Market Information Department’s Catastrophic Loss Summary of publicly disclosed catastrophe losses and financials as of 9/2/2011

GUY CARPENTER 10 June 23, 2016 Evolution of Shareholders’ Funds 2009 – 6M2011 Guy Carpenter Global Reinsurance Composite Source: Guy Carpenter & Company, LLC

GUY CARPENTER 11 June 23, 2016 Additional Factors Having Influence on Market Conditions Source: Bloomberg Data Guy Carpenter & Company, LLC and Highline Low Investment Yields US P&C Sector Aggregate Underwriting Cash Flow Sustainability of US Aggregate P&C Reserve Releases USD bn

Reinsurance Market Summary

GUY CARPENTER 13 June 23, Market Dynamics Jan to March –Limited impact from AIR version change and anticipated RMS change –2010 trend of decreasing rates continued Apr to July –Global Losses –Model Change ­Significant individual company variation ­RMS change was not yet fully integrated into pricing or capacity assessment –Capacity Dynamic ­Some increase in demand ­Reinsurers more carefully allocating capacity ­No expectation for a capacity shortage –Quoting Behavior ­Increasing variability as reinsurers address pricing mechanics and capital assessment

GUY CARPENTER 14 June 23, Market Quoting Behavior – All Florida Clients Traditional Layers Only 2010 variation in average quote ranges from -3% to +3% which is similar to what we saw for Florida Renewals in 2009.

GUY CARPENTER 15 June 23, Market Quoting Behavior – All Florida Clients Traditional Layers Only Substantial increase in quoting variation as the range in 2011 increased five fold to -15% to +16%.

GUY CARPENTER 16 June 23, 2016 June 1, 2011 Firm Order Behavior Average and Range of Layer Firm Order Terms as Compared to Quotes

GUY CARPENTER 6/23/2016 Excess Capacity – Percentage of Authorized Capacity Utilized U.S. Property Catastrophe Programs Placed by GC – January to July

GUY CARPENTER 18 June 23, Florida Market Capacity Excess capacity 2010:30% Excess Capacity 2011:13% Growth in signed lines from 2010 to 2011:37%

GUY CARPENTER 19 June 23, 2016 Distribution of U.S. Property Cat Market Share by Geography Based on Programs Placed by GC in 2011 with Share by Signed Limit

GUY CARPENTER 20 June 23, Risk Adjusted Pricing Trends Rate Change Summary Jan 1 st Renewal Rate Change: …………………………...…. -6% to -10% April 1 st Renewal Rate Change: ……………………….………. flat to +5% May 1 st Summary: ………………………. Limited activity, similar to Apr. 1 June Florida Renewals:……………………………………….+5% to +10% June and July Non Florida Renewals:..…………………….+5% to +10% Risk adjusted pricing measures change in exposure vs. change in premium. Exposure is measured as model expected loss to layer. For this analysis, RMS v9 has been used as consistent model across all renewals. Looking at June and July renewals utilizing different model versions results in a very different view of risk adjusted pricing as follows:

GUY CARPENTER 21 June 23, to 2011 Historical Florida Pricing Comparison

GUY CARPENTER 22 June 23, 2016 What will the market look like at January 1, 2012? Implementation of RMS v11 –Full integration in reinsurers’ pricing and risk assessment process by 1/1/12 –Several reinsurers were close to v11 results in 2010 based on modifications they made to the v9 results –Some reinsurers use their own proprietary models and do not believe their perspective will be impacted based on the current review of v11 –Storm surge results are an issue reinsurers are reviewing Pricing at Jan 1 will be more about willingness to deploy capacity based on market conditions rather than a pure v11 impact US Jan 1 pricing estimates provided by reinsurers are currently flat to +15% It is critical companies/brokers share any alternative views of model results with reinsurers as part of renewal dialogue early in the process While the state of January 1 renewals depends heavily on 2011 hurricane activity, some current market observations include:

Important Disclosure Guy Carpenter & Company, LLC provides this report for general information only. The information and data contained herein is based on sources we believe reliable, but we do not guarantee its accuracy, and it should be understood to be general insurance/reinsurance information only. Guy Carpenter & Company, LLC makes no representations or warranties, express or implied. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Please consult your insurance/reinsurance advisors with respect to individual coverage issues. Readers are cautioned not to place undue reliance on any calculation or forward-looking statements. Guy Carpenter & Company, LLC undertakes no obligation to update or revise publicly any data, or current or forward-looking statements, whether as a result of new information, research, future events or otherwise. The rating agencies referenced herein reserve the right to modify company ratings at any time. Statements concerning tax, accounting or legal matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants and may not be relied upon as tax, accounting or legal advice, which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Guy Carpenter & Company, LLC, except that clients of Guy Carpenter & Company, LLC need not obtain such permission when using this report for their internal purposes. The trademarks and service marks contained herein are the property of their respective owners. © 2011 Guy Carpenter & Company, LLC All Rights Reserved