Aviation War Risks Bruce Carman RAAKS Conference Moscow Good Morning Ladies and Gentlemen! I have prepared a brief overview of the Aviation Hull War market which arguably is one of the most competitive classes underwritten in the specialty insurance market. In 2005 we formed a Consortium underwriting for 7 Lloyd’s syndicates led by 609 & including Atrium’s other syndicate, 570. As a consortium we can write up to a $60m line on any one aircraft – Where the Top values insured (now the Airbus 380) are around the $300m mark. We have a large involvement in Russian aviation both for airlines and General Aviation. We are happy to offer our expertise (both on a facultative and treaty basis) to Russian insurance companies thereby assisting them to give their clients FULL cover for their aviation assets. Aviation War Risks Bruce Carman RAAKS Conference Moscow 9th December 2009

A Brief History of the Class Introduction The Hull “War” Perils A Brief History of the Class Some Recent Events Do YOU need Hull War cover? I will start with a Quick History of the class & a very brief summary of what we are covering Then some Recent Events that have demonstrated where the Risks REALLY lie! A look at the Historical Figures, Followed by how we at Atrium gather information on World Affairs Then how we use the information, both in terms of understanding the Threats AND…how this to help us Underwrite. Last but by no means least, a look at the Threats the “class” faces today.

Hull War & Allied Perils MALICIOUS ACTS SEIZURE WAR CIVIL COMMOTIONS STRIKES SABOTAGE EXTORTION POLITICAL ACTS HI-JACK CONFISCATION LABOUR DISTURBANCES Here is a slide of perils covered under the standard Hull War & Allied Perils policy. I have emphasised proportionally the perils where the losses occur. You will note that War does not really feature and that is simply because it is rarely the cause of a loss. Hi-jack, Terrorism and Malicious Damage on the other hand are the perils where we frequently incur losses. So you don’t have to be operating anywhere hazardous in order to experience a loss that would ordinarily be excluded from your Hull & Liabs policy. NATIONALISATION TERRORIST ACTS

Brief History of Aviation War Hi-jack featured heavily in the late 60’s with the fighting between Israel and Palestine. This was Dawson Field, in Jordan on 6.9.70 where TWA, Swissair & BOAC all had aircraft hijacked with more than four hundred hostages, by the Popular Front for the Liberation of Palestine. The passengers were released but the aircraft destroyed. This resulted in the Aviation Market excluding War (and Allied Perils) from their All Risks policy and so Hull War became a stand alone class.

HI-JACK Allied Perils Indian Airlines - Dec 1999 Ariana Afghan - Feb 2000

MALICIOUS DAMAGE Allied Perils This is a VERY recent loss to a helicopter in the UK sustained through a petrol bomb attack.

CONFISCATION Allied Perils 727 Arrested in Harare So you can see that WAR – ‘per se’ is not the main risk.

GROUND ATTACK Allied Perils 24.7.01 Air Lanka @ Bandaranaike Airport, Colombo , Sri Lanka

SUICIDAL HI-JACK Allied Perils 9/11….when the world viewed Hi-Jacking of an aircraft in a whole new light! U/W’s withdrew capacity from the class in swathes and from this came opportunity for the real risk takers.

Recent events highlighting the threat to Aviation 210Po Polonium 210 - Oct/Nov 2006 Plot to blow up multiple aircraft, Transatlantic using liquid explosives - August 2006 TERRORISM These two examples highlight how the threat to aviation continues to evolve and comes in both conventional and unconventional forms. More than 5,500 airline passengers called hotlines set up to assist travellers who flew recently on three British Airways jets. Traces of radioactive substances were found on two BA 767s by investigators looking into Litvinenko's death. The airline estimated that 33,000 passengers and 3,000 crew and airport personnel had contact with the 221 flights being scrutinised. All of the planes had flown between London and Moscow. In August 2006, terrorists planned to detonate liquid explosives on board several airliners travelling from the UK to the US. Additional security measures were immediately put in place. This sudden imposition caused chaos and delayed flights for days. The restrictions were gradually relaxed in the following weeks. The ability to carry liquids in the cabin is still limited. There have also been a number of recent threats where terrorists have extended their focus to private aircraft because they are useful tools for dispersing WMD or loading with explosives and crashing into selected targets.

Do YOU need Hull War Cover? The Lease Agreement will require it. Flights into Hot-Spot areas. Because losses DO occur & can an operator afford to lose their most valuable asset(s)? So, WHY buy Hull War insurance if you are based and operating in and around an area such as Russia? A Lessor will insist on Hull War being purchased in the Lease Agreement If the Operator does envisage flights into a Hot-Spot then it is MUCH cheaper to have an annual policy than purchase Ad-Hoc insurance. And for ME, MOST IMPORTANTLY because Losses DO occur in non-Hostile areas on a regular basis and we have a number of such claims each year.

THANK YOU! Bruce.Carman@Atrium-uw.com Thank You!