© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 INTERDEPENDENCE OF GLOBALIZED PRODUCTION – A NEW RISK DIMENSION Dr. oec HSG Mukadder Erdoenmez Chief Underwriting Officer Casualty, International Middle Markets Insurance – XL Group X Seminário internacional de Gerência de Riscos e Seguros, Sao Paulo, Brazil 23 de Outubro de

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Brazil – one of the major economies in the World RankCountry2012 GDP (USD m) 1United States14'991'300 2China7'203'784 3Japan5'870'357 4Germany3'604'061 5France2'775'518 6Brazil2'476'651 7UK2'429'184 RankCountry2020 GDP (USD m) 1United States22'600'276 2China16'776'346 3Japan6'252'713 4Germany4'183'233 5Brazil3'674'184 6Russia3'432'225 7India3'413'443 Source: PWC Jan 2011; WTO data base

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Brazil‘s foreign trade more than tripled in the last 10 years – now with 1.4% of the worldwide exports & 1.3% of imports Source: WTO data base CAGR 14% CAGR 18% Split Total Exports Country Volume (USD M) Products Volume (USD m ) 1. EU Agricultural products China US10.1 Fuels & mining products Argentina Japan3.7Manufactures32.8 Split Total Imports Country Volume (USD M) Products Volume (USD m ) 1. EU Agricultural products US China14.5 Fuels & mining products Argentina Korea4.5Manufactures72.0

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 The risk landscape of Brazilian companies is changing rapidly Change DriverChange in Risk ProfileNeeds Relevance Short term Long term Globalization of all industry segments is going to accelerate. Increased export activities and higher interdependencies Production and sales structures will gain complexity Global Solutions for the interdependency risks X Raising importance of emerging markets (China, India, Brazil, CEE, Africa) Increased economical activity abroad increases exposure Global solutions with strong local relevance XX Increased use of technology in production and sales Increase of Cyber riskIndustries with new risk profiles & demands X Increase of reputational risks. Protection of global brand Clients are concerned about production standards and quality Reputational cover as a new business X Increased Consumer ProtectionIncreased contract uncertainties Increased service demand by clients X Compliancy of all products & solutions in each and every territory Changing of legal frame work Global compliancy protocol and regime X Aggravation of environmental laws (emission control etc.) International production facilities are exposed Environmental insurance X 4

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Emerging countries‘ growing share of product manufacturing increases their liability for product claims 5 Increased globalization in all manufacturing areas. Labour intensive and mass production is increasingly moved to emerging economies. Countries like Brazil, India and China will move from low profit manufacturing to market leaders in certain manufacturing segments. Increased collaboration between manufacturers and suppliers – and suppliers among each other in product development and manufacturing of parts and final product. Increased complexity of supply chains will be driven by IT technology resulting in new, more efficient production methods % of Worldwide Manufacturing GDP

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 6 The manufacturer of a simple product is exposed to huge indemnification requests in litigious environments The Incident: A significant fire destroyed the premises of the Client C of Company M. Initial information received: a)A Fire/Police report concludes the fire was caused by the self-ignition of approximately 250 litres of frying oil which was contained in an electrically heated deep fryer. b)Total damages (PD and consequential financial loss – BI loss) amount to USD 100m+ as per the property insurer‘s Insurer P assessment. The Manufacturer: Company M’s business focus is the design, manufacturing and installation of fire extinguishing systems. Case Study I.

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Indemnification is requested in many cases – even if the manufacturer assumes no liability Four months after the incident Insurer P informs the Company M that they plan to seek recovery (subrogation) against them for all damages (estimated at USD 100m+) paid to Client C under their property policy. They base their claim on their own expert‘s findings, which in summary stats: Incorrect electric wiring of the oil frying machine. The emergency-stop functionality failed. Inappropriate conception and design of Company M’s fire extinguishing installation as specifically fitted to this individual frying machine. The expert concluded that the inappropriate design of the insured extinguishing system was considered the main cause of the fire‘s severity. 7

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 An in-depth investigation by the insured together with their independent expert strongly disputes the analysis and subsequent conclusions presented to Insurer P. Company M extinguishing system was tailor-made for this individual frying machine. It was properly designed and installed, and per the available evidence adequately responded when it was triggered by the oil‘s self ignition. The success of the system was physically not possible under the circumstances, due to the deep fryer‘s defects – (continuing electricity supply after ignition and release of the extinguishing system). This must be considered the primary and only cause of the subsequent fire damage. Both the insured and the independent expert consider the risk of a liability finding against the insured to be very limited (below 20%) 8 Even if the insured percieves no liability, it incurrs costs of defence against filed cases

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Insurer P filed suit against Company M and five smaller co-defendants, asking for compensation of € 85m in property and business interruption damages and also requesting the Court to declare defendants joint and severally liable for some additional, non quantified business interruption damages sustained by Client C Counsels and experts for Company M continue to believe the insured‘s defense is very strong from a technical perspective. However, there are some concerns with respect to contractual, post-installation‘ consulting obligations. They say there is a 50% risk of a limited contributory negligence finding against Company M, accordingly. The law of joint and several liability applies, where the Plaintiff can recover 100% from a defendant, even if that party‘s contributory negligence is less than that of the other defendants. The amount of coverage for co-defendants is limited 9 The malfunction of a third party product generating a loss can result in a high indemnification for a company

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 The automotive industry is one of the most optimized production industries Recall Notice on the Website of the US National Highway Traffic Safety Agency Involved Product: Diesel fuel filters for Brand X cars Cause of Loss: Dimensional deviation of the top part of the plastic stack forming the filter cartridge allows fuel leakage. The dimensional deviation is the consequence of a change in the manufacturing process in July 2011 Affected Production: Only limited information available. Manufacturer M non specified estimate is that approx. 180‘000 cartridges might potentially be affected. Brand X apparently launched a world-wide service campaign for approx. 100‘000 cars 10 Case Study II.

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 Automotive part suppliers under great commercial pressure – dealing with indemnification requests is difficult Loss quantum: Brand X debit notes show a total recall costs of €1.58m, which apparently incorporates an amount of €526K for the costs of the non-covered replacement products. No underlying detail is available A second update of Brand X shows a significant increase in the debit notes 11 Debit Note No.DateLabourMaterialTotal B , , , B , , , B ,011, , ,526, B , , ,180, B , , , Total 2,353, ,017, ,253, The second loss report received from loss adjuster confirmed the original cause of loss: Dimensional deviation is the consequence of an inadequate drying process for unfinished components. Affected production: Production between September 2010 and May 2011, with a total number of 241‘561 potentially affected filter cartridges. Reserve recommendation to be considered: €2.95m gross and €2.9m net of the applicable deductible, reflecting an anticipated 80% recall completion

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 12 Key Message: The world is becoming increasingly complex – as is the risk profile of our clients

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 14- Red R= 237 G= 28 B= 36 Lt Green R= 141 G= 198 B= 63 Green R= 57 G= 181 B= 74 Cyan R= 0 G= 174 B= 239 Dk Blue R= 45 G= 49 B= 146 Yellow 2 R= 213 G= 206 B= 146 Orange 2 R= 203 G= 125 B= 101 Mag 2 R= 182 G= 114 B= 146 Red 2 R= 239 G= 63 B= 107 LG2 R= 156 G= 162 B=63 Green 2 R= 0 G= 137 B= 143 Cyan 2 R= 0 G= 182 B= 190 DB2 R= 0 G= 65 B= 89 INTERDEPENDENCE OF GLOBALIZED PRODUCTION – A NEW RISK DIMENSION Dr. oec HSG Mukadder Erdoenmez Chief Underwriting Officer Casualty, International Middle Markets Insurance – XL Group X Seminário internacional de Gerência de Riscos e Seguros, Sao Paulo, Brazil 22 October