Page 1 Recording of this session via any media type is strictly prohibited. Page 1 Political Risk Insurance Protecting International Investments April 28, 2014

Page 2 Recording of this session via any media type is strictly prohibited. Mitchell Aucoin Marriott International Inc. Christopher Brophy FTI Consulting Sarah Keeling Sarah Keeling FTI Consulting Political Risk Insurance Speakers

Page 3 Recording of this session via any media type is strictly prohibited. What to Expect 1.Gain insights into the risks businesses are facing throughout the world. 2.Understand basic principles of Political Risk Insurance Coverage 3.Consider the cost-benefit of obtaining Political Risk Insurance. 4.Review specific issues that may arise on Political Risk Claims.

Page 4 Recording of this session via any media type is strictly prohibited. Political Risk Insurance Political Risk Insurance Agenda I.A Risky World II.The Basics of Political Risk Insurance III.Weighing the Benefits of Political Risk Insurance IV.Specifics of Political Risk Claims

Page 5 Recording of this session via any media type is strictly prohibited. I.A Risky World Snapshot of challenging areas around the world. What does political risk mean to different parties? - To an equity investor? - To a bond investor? - To a reinsurance company? Political Risk versus Positive Commercial Events

Page 6 Recording of this session via any media type is strictly prohibited. I.A Risky World The power of government relations and good governance “You are only an election or revolution away from being on the wrong side” Frontier markets: good opportunities or unmanageable risks? Risk: identity, understand, manage and insure against it Risks: corruption, expropriation, workforce instability, border disputes How to mitigate – the right relationships, understand your business’ standing Be a good corporate citizen

Page 7 Recording of this session via any media type is strictly prohibited. II.The Basics of Political Risk Insurance Areas of Coverage Expropriation Political violence Currency inconvertibility

Page 8 Recording of this session via any media type is strictly prohibited. II.The Basics of Political Risk Insurance Offered by Private Insurers and Public Entities Standalone Coverage or Broader Based Country Limits Policy Term Waiting Periods Permanent Loss Supply Chain Disruption Mitigation of Losses

Page 9 Recording of this session via any media type is strictly prohibited. III.Weighing the Benefits of Political Risk Insurance Historical Objective – Until 2001, PR coverage was purchased (via OPIC & MIGA) to protect against confiscation, nationalization & expropriation of Marriott’s financial assets -Fees- Guarantees- Receivables -Loans- Working Capital Sept, Marriott procured 3 yr policy that provided CEN, CI, PV & BI on global basis Marriott has $300k potential CI claim that tests coverage and causes Marriott to rethink its application of PR coverage After careful consideration & evaluation, Marriott terminates its global policy

Page 10 Recording of this session via any media type is strictly prohibited. III.Weighing the Benefits of Political Risk Insurance Benefits Helps offset investment risk in budgeting or financing of projects May lower hurdle rate on project’s ability to move forward Broader coverage terms increasingly provided by private markets Challenges Cost – can be expensive Capacity – Insurers may restrict capacity for certain risks or countries Does not mitigate financial risk (e.g. currency devaluation or inflation) For Lenders, policy typically indemnifies principal & interest payments only (e.g. default interest, taxes, increased costs, etc. not covered) Policies require disclosure of events that might give rise to a claim When to Use? After careful evaluation of business, contractual, and political climate Opening new business (e.g. hotel) in historically unstable region Investing in projects that require heaving permitting and licenses

Page 11 Recording of this session via any media type is strictly prohibited. IV.Specifics of Political Risk Claims Read your policy Put insurer on notice early Consider Waiting Period Manage Mitigation

Page 12 Recording of this session via any media type is strictly prohibited. Questions, Final Comments and Contact Information

Page 13 Recording of this session via any media type is strictly prohibited. KEEP THIS SLIDE FOR EVALUATION INFORMATION/MOBILE APP ETC. Please complete the session survey on the RIMS14 mobile application.