Hurricane Ike The Present and Future Impact on the Property Insurance Market

Expected Losses An Educated Guess at this time Expected to fall between $13 and $21 billion Unknown amount for non-covered losses such as loss of business income, spoilage and flood It is estimated that less the 20% of Galveston residents and businesses purchased flood insurance Texas Windstorm Insurance Association (TWIA) may pay more than $3 billion of the losses TWIA assessments to insurance companies could approach $1 billion*

Claims Reported Most claims have been reported Total number of claims expected to exceed 300,000 Approximately 60% of all reported losses have been looked at by an adjuster or field appraiser Most simple property claims expected to be closed by the end of November, 2008 Larger, complicated claims could extend well into 2009 Some delay in larger property value claims due to coinsurance issues

What is Needed Documentation, Documentation, Documentation Evidence of ownership Independent valuations – Actual Cash Value (ACV) – vs- Replacement Cost Value (RCV) Photos, financial records, receipts Inventory of loss and supporting documentation

Tips Know your adjuster – know his/her phone number and their contact information Document all conversations with your carrier – keep a diary or log of all conversations with brief information about the nature of the conversation If necessary, send your correspondence by certified mail, return receipt requested Don’t be afraid to communicate with your agent Read your policy

Future Expectations No immediate, significant change in pricing. Expect 1 to 3 years before seeing impact Some moderate pricing adjustments in the immediate future Pricing points to change based upon location of risk, construction of risk and age of risk Increased pressure on deductibles and insurance to value (co-insurance) Some shrinkage in capacity

Pricing Points Better pricing to be reserved for newer properties, favorable classes of construction and risks in favorable wind exposure areas Expanding pressure on pricing for lower classes of construction, older risks and risk in highly exposed wind areas There will be some immediate adjustments in pricing that were set into motion before the storm More significant changes in 1 to 3 years

Deductibles and ITV* Increased pressure on wind deductibles. Expect 2% to 5% wind deductibles Expect increased scrutiny on values. Carriers want a clear picture of their exposures in highly concentrated areas like Harris County Avoidance of under-insurance and over-insurance to maximize premium in relation to true exposures * Insurance-To-Value

Capacity Expect carriers to carefully review their concentration of risk Expect carriers to manage their capacity by knowingly diluting their exposure in high concentration Tier 1 & 2 areas and increasing their appetite for properties farther north within the state There is a real possibility of some carriers completely ceasing new property business in the area

What Can You Do? Utilize the better construction classes for future new construction Prepare for higher deductibles to help stabilize premium. Escrow funds sufficient to meet the large deductible Review values & exposures carefully. Maximize the use of your premium dollars Prepare to spend more time on your insurance. More effort and exploration will be needed TWIA? Get involved!

Mark Dalton Insurance Agency Some material used for this presentation was obtained from and used with the permission of the Independent Insurance Agents of Texas (IIAT) and the Perryman Group/IIAT study of Coastal Insurance exposures as prepared in Southwestern Blvd, Suite 106 Sugar Land, TX TEL: