Catlin Group Limited A Global View of Today’s Insurance Issues: Macondo Stephen Catlin Chief Executive Catlin Group Limited September 20, 2010

Catlin Group Limited2 Looking Back 17 Years 1993  Lloyd’s was in the middle of a serious financial crisis  Unlimited liability Names supplied 100% of Lloyd’s capacity  Introduction of ‘corporate capital’  ‘NewCo’ proposed to solve Lloyd’s ‘old year’ problems  Hundreds of relatively small Lloyd’s syndicates (including Catlin) 2010  Lloyd’s has never been stronger financially  Unlimited liability Names supply less than 5% of Lloyd’s capacity  Corporate capital well-established  Equitas successful and sold to Berkshire Hathaway  80 Lloyd’s syndicates (and the Catlin Syndicate is the largest)  Spoke at the Houston Marine Insurance Seminar in 1993  Much has changed in 17 years

Catlin Group Limited3 However, Some Things Have Not Changed 1993  “Lloyd’s remains the dominant force in the energy insurance market.”  A major question over how energy companies will be able to meet financial responsibility requirements following a pollution incident 2010  “Lloyd’s remains the dominant force in the energy insurance market.”  A major question over how energy companies will be able to meet financial responsibility requirements following a pollution incident

Catlin Group Limited4 Our Concerns Also Have Not Changed Reprinted from September 27, 1993 Underwriter bullish on Lloyd’s Market has capacity to excel in energy business: Catlin  “Another question addressed a topic that weighed heavily on attendees’ minds: The Oil Pollution Act of 1990, which expands pollution liability and requires responsible parties to show evidence of financial responsibility to the US Coast Guard.”

Catlin Group Limited5  The Macondo Disaster  The importance of the US oil and gas industry  Measuring the impact of Macondo  How can insurers respond?  What the future holds post-Macondo? Agenda

Catlin Group Limited6 The Importance of the US Oil/Gas Industry  US share of worldwide oil production 2009: 8.5%  US share of worldwide oil consumption 2009: 21.7%  Direct contribution to US GDP (2007): $450 billion  Deepwater Gulf of Mexico operations were largest contributor to global oil supply growth in 2009  Deepwater production will be major driver of offshore activities  Future offshore expansion beyond Gulf of Mexico  Renewable energy sources now supply only a fraction of the world’s power capacity Source: BP Statistical Review 2009; PricewaterhouseCoopers 2009

Catlin Group Limited7 US Crude Oil Production Trends  Prior to Macondo, US crude oil production was forecast to rise  What will happen now? Source: US Energy Information Administration ?

Catlin Group Limited8 Impact of Macondo  11 people lost their lives  A six-month drilling moratorium estimated to cost 23,000 jobs 1  9,000 jobs directly  14,000 jobs indirectly  Moratorium estimated to cost $2.1 billion in lost economic activity 2  Wider impact on tourism, recreation Sources: 1 Bloomberg 2010; 2 Institute for Energy Research 2010

Catlin Group Limited9 Financial Impact of Macondo  Total estimated economic loss: $40 billion  Funds spent to date: $8 billion 1  Combined $100 billion reduction in market capitalization of companies directly involved (as at 15 th September 2010)  Estimated potential insurance recoveries: $1.5 billion to $3.5 billion 2  Maximum offshore energy market capacity: approximately $5 billion (including liabilities)  Current maximum capacity not deployed for a Macondo scenario Source: 1 BP 2010 (Q2 results); 2 Swiss Re 2010

Catlin Group Limited10 Economic Loss vs. Insurance Limits Total economic loss:$40 billion BP spend to date:$8 billion 1 Working Maximum interest insurance coverage BP65%Captive Anadarko25%$163 million Mitsui10%$175 million Transocean0%$950 million Source: 1 BP 2010

Catlin Group Limited11 Impact To Date on BP  Amounts paid by BP as of September 13, 2010 Payments to third-party claimants$500m Clean-up, containment & relief wells*>$7,500m Total>$8,000m * Includes money spent by government and reclaimed from BP  Equivalent to $55 million per day (145 days)  Does not include escrow funds established by BP Gulf Coast Research Institute$500m Unemployed Rig Workers’ Fund$100m Claims Escrow Fund$20,000m  BP has billed Anadarko $1.2 billion, but payment has been withheld Source: BP 2010; Anadarko 10-Q 2010

Catlin Group Limited12 Impact on Market Capitalization Source: UBS 2010 BPTransocean

Catlin Group Limited13 Impact on Market Capitalization Source: UBS 2010 Mitsui & Co. Ltd.Anadarko

Catlin Group Limited14 Other Impacts of Macondo  US deep-water drilling moratorium  Increased regulatory environment?  Increased financial responsibility standards?  More stringent requirements for operating licences?  Review of contractual responsibilities  Joint Operating Agreements  Operator/Drilling Contractor

Catlin Group Limited15 Other Impacts of Macondo Impact felt globally EU, Norway, Australia undergoing regulatory reviews Indonesia seeking $2.2 billion in compensation from PTTEP for Montara oil spill

Catlin Group Limited16 Other ‘Uninsurable’ Risks  Examples of previous responses by insurance market to similar problems  Nuclear Pool  Established in 1950s  Capacity grown since formation to up to $2 billion currently  Liability limits aggregated over lifetime of unit  Terrorism - TRIA  Response to 9/11  Reinsurance by US federal government  Significant exposure retained by insurance industry  Market capacity has grown to $1.5 billion

Catlin Group Limited17 Other ‘Uninsurable’ Risks  International Group of P&I Clubs  Commercial reinsurance provided to mutual insurers owned by shipowners  Combined purchase  Significant pollution coverage provided including clean up  Led by Catlin

Catlin Group Limited18 Questions for Insurance Market  Can insurers provide enough capacity to adequately protect insureds from financial ruin in case of an incident similar to Macondo?  Can insurers provide appropriate coverage?  Clean up  Fines / penalties  Can insurers satisfy regulatory and other stakeholder requirements?  Speed of payment?

Catlin Group Limited19 Chrysalis  Developed by Catlin in conjunction with Oil and Gas Industry  Launched February 2010 (pre-Macondo)  A response to uncertainty over claims costs/exposures  Additional capacity from recognized market leaders  Single point of access to market  Standard wording  Sustainable pricing  Event limit shared by policyholders  Complementary to existing market placements – OIL  Flexibility to expand

Catlin Group Limited20 Drivers for Maximum Market Capacity  Co-ordinated response from insurers, led by requirements from Oil and Gas Industry  Committed buyers/insurers/regulators/financiers  Certain of exposure/protection  Clarity of coverage  Measure of indemnity  Transparency of risks  No clash potential  Impact of additional exposures arising from same incident  Sustainable pricing  Industry-wide solution

Catlin Group Limited21 Conclusion  Insurance helps manage risk  Uncertain times for Oil &Gas Industry and insurers  Transocean physical damage loss paid within 16 days of incident  Insurers provide a promise to pay  Long-term viability of insurers requires adequate pricing  Success is built upon collaboration

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