BRP Program Overview Presentation

Who is Coventry Risk Specialty, LLC  Coventry Risk Specialty, LLC is a Managing General Agent representing Gotham Insurance Company (AM Best Rating A IX) and Lloyds of London at A - XV. The program is written on a non-admitted basis.  Key Individuals of Coventry Risk Specialty  Dan Swain – Underwriting Manager  Randy Roppelt – President

Key Element of the Builders’ Reporting Policy  Due to the financial burden imposed upon today’s builder in this recessed economy, cash flow has become paramount. Our solution for Commercial or Residential General Contractor is the Builder's Reporting Program (BRP). The BRP Program is designed to provide an affordable insurance product that provides the builder with protection of a Designated Project on a “pay as you build basis”.  The Builder’s Reporting Policy (BRP) is a multi-section liability insurance form that is to be offered to residential & light commercial general contractors and developers for designated Projects (site specific developments) and Wrap- Ups. It has been constructed to provide separate coverage sections and premium rating for Premise Operations and Completed Operations and combine the sections into a single master policy form.

 The builder will initially pay only the Premise Operation premium at policy inception. This coverage protects the builder for third party claims that could occur arising from the scheduled structure during the course of construction and the subsequent sales period.  Upon the sale of the scheduled home/unit the builder should have the sale’s funds available to pay for the Completed Operations and Warranty. Completed Operations coverage is provided on a per structure basis and is triggered by: A) reporting the sale of the home/unit including final sale price and B) receipt of the premium payment for Completed Operations C) receipt of the payment for the qualified warranty and D) issuances of the policy endorsement. The bottom line to the builder is that the builders out flow of personal funds is minimized and that the majority of the CGL policy & warranty cost will come from funds received by the builder from the sale of the home to the home buyer.

Why the BRP Program Cash flow advantage to Builder /Policyholder  Deposit CGL premium is only for Course of Construction coverage.  Builder is fully protected while the structure(s) are being built  PAY AS YOU BUILD feature allows Builder/Policyholder to only pay for Completed Operations coverage and Structural Defect Warranty Coverage at time of sale (pay us when you get paid) Most CGL policies require full payment to bind coverage. As such builder is forced to borrow/finance the premium and pay interest on a monthly basis regardless of progress of the project. BRP Coverage advantage to Builder/Policyholder  Completed Operations Coverage for length of State Mandated Liability (no need to purchase additional policies for continuous coverage)  This typically matches the required warranty 10 years Structural coverage  Coverage for Repair work available after structure is completed and sold/transferred  CGL coverage in the event there is a claim arising from the repair of a scheduled home

HBW- an Industry Leader in the Warranty Business is writing an Insurance backed Structural Defect Warranty coverage for every scheduled Home/Unit/Building  HBW 10 year or 2-10 structural warranty required on every scheduled structure (based on financing requirements or insured’s desire) Broad CGL coverage  10 Year Subsidence (subject to compliance with policy terms)  Full Completed Operations Coverage for duration of state required liability (subject to compliance with policy terms) 10 years of tail coverage Competitors typically require you to purchase separate CGL tail coverage for up to 10 years to match builders liability  Subsidence coverage and Completed Operations coverage under the CGL requires the purchase of a 10 year Structural Warranty  Coverage for Repair work after the Structure is completed and sold/transferred

Wide range of eligible new construction projects  Single Family Dwellings  Multifamily Dwellings  Mixed Use Structures  Condominiums  Commercial Many competitors only offer terms for residential only The BRP eligibility guidelines match the Home Builder Warranty Guidelines- so the Warranty and General Liability -Completed Operations go hand in hand. Nationwide territory --- excluding CO, NV, LA & NY Policy Term - up to 48 months. Extensions available for up to an additional 24 months.

Low Minimum Premiums-as low as $7,500  Most CGL policies require full payment at time of binding. BRP only requires initial payment for the CGL covering the course of construction High Policy Limits-  Limits available to $5,000,000/$5,000,000/$5,000,000 Most CGL policies only offer limits of $2,000,000/$2,000,000/$2,000,000; thus requiring Agent to purchase a separate Umbrella policy which is costly. Competitively priced HBW warranty  BRP requires a 10 year Structural warranty It is the intent of the BRP program to have the combined CGL & warranty cost match our competitor’s cost of their CGL.  High commissions paid on all coverages –CGL, Builders Risk & Structural Warranty The BRP is unique; it is our understanding that the BRP is the only builders program that pays the Agent a commission for the Structural Warranty.

2-10 HBW Overview 2-10 Home Buyers Warranty (2-10 HBW) is the nation’s leading provider of new home and commercial insurance- backed warranties HBW offers comprehensive and innovative products to homeowners, home builders, general contractors, and real estate professionals while applying unparalleled underwriting discipline and strict risk management controls. Since their inception in 1980 they have provided warranties on over 2.5 million new homes through 15,000 home builders and 3.5 million resale homes through 62,000 real estate professionals. They have a A+ rating from the Better Business Bureau.

Benefits of the 2-10 HBW Structural Warranty Even the most prudent and professional builders are no match for natural forces such as moving soils, which cause 80% of all structural damage claims. Soil movement causes more property damage in the U.S. than all other natural disasters combined (including earthquakes, tornadoes and flooding). And it only takes one large claim to sideline a thriving business. If you’re a homebuilder or general contractor, protecting yourself from the cost of a structural claim is simply good business. Key benefits of the Warranty include: Transfers the risk of loss due to structural damages to the insurer who covers the cost of repairs or replacements Increases buyers’ and owners’ confidence when they know the largest investment they may ever make is protected for a full 10 years Warranty is fully transferable to subsequent owners should your buyers decide to resell their home or light commercial building Gives you a competitive advantage to help sell homes, move inventory, and win commercial or remodeling bids Ensures that you can accept a buyer closing with an FHA loan

Without a written warranty, there is no “filter” for owner complaints, claims or lawsuits. When you enroll your new homes in a 2-10 Home Buyers Warranty structural warranty program, qualifying structural damages are clearly defined, complaints and claims are handled professionally, and disputes are resolved in arbitration, a shorter and more cost effective process than litigation. Light commercial buildings and remodeling projects have a commercial or remodel specific warranty offering the same benefits and features.

Compare Warranty Benefits to Fire Coverage For nearly 40 years, the 10-year insurance-backed warranty industry has provided a service to homebuilders and their home buyers, enrolling more than 5,000,000 new homes. Out of these, a significant number of claims have been experienced. Since 1977 the 10-year insurance-backed warranty industry has paid out more than $1.1 billion repairing over 50,000 structural claims on behalf of builders participating in these programs. That is, 1% of new homes have experienced major structural damage as defined by the warranty over the 10-year warranty term. The average per structural claim cost in 2012 was $32,500. Compare this to the average frequency of another widely recognized catastrophic event, fire damage. According to data obtained from the National Fire Protection Association and the U.S. Census Bureau, an average of 1.1% of housing units would have experienced major fire damage over a ten year period. The average direct property loss to residential properties due to all reported fires in 2011 was $18,648. In other words the frequency and severity of major structural damages and major fire are comparable. No homeowner would do without fire insurance, and now by partnering with 2-10 HBW, Coventry Risk Specialty can provide builders protection against the risk of structural damages.

Competitive monthly reporting Builders Risk coverage available as part of BRP policy package  Advantages of the BRP policy package 1.Single package policy containing CGL and Builders Risk Coverages. 2.Simplified transference from COC to Completed Operations Coverage. 3.Builders Risk is optional and not required to purchase the CGL. It is our understanding that our monthly reporting form is competitive and provides the builder with additional “cash flow”. Competitors issue stand alone policies (normally not the same carrier as the CGL). There is no cross-references to identify possible lapse in coverage issues.

In addition to our competitive BRP policy package we have also taken the additional steps to benefit our insureds  Partnerships with Construction Professional services to assist our Builder’s with: 1.Risk Management Solutions 2.Warranty Enrollment and Coverage 3.Engineering Reviews of Projects (if required) 4.Services provide by RLCH & HBW  24/7 Help Desk to resolve issues and avoid costly litigation The help desk is designed to provide consultation services to the home owner & builder if there is a question or compliant. It is serviced by Network Adjusters

Submission Requirements BRP Contractors questionnaire – can be downloaded at: ( Acord Application Recent Soils Reports Resumes of Officer/Owners Project Plot Plan

Steps for Selling the BRP  Distribute and mail the Coventry BRP Program brochure to your Retail agents.  Steer Builders & retail agents to the Coventry website to learn about the program.  Educate your Retail agents on the advantages of the BRP including the benefits of a HBW 10 year Structural warranty to fully protect his potential liability arising from the scheduled project.  Call Dan Swain or Randy Roppelt with any questions about the BRP Program  Dan Swain  Randy Roppelt