© 2013, X.L. America, Inc.. 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= 141 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 RISK DRIVERS Understanding the Dynamics of Risk in the A/E Industry Insurance and Loss Prevention Education from XL Design Professional and Oswald Companies 1

© 2013, X.L. America, Inc. 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= 141 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 Learning Objectives Develop an understanding of the nature of risk Acquire strategies to manage and respond to risk Learn about business practices that mitigate risk Explore the technical aspects of design and project delivery that influence risk 2

© 2013, X.L. America, Inc. 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= 141 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 Workshop Outline SECTION 1 – The Nature of Risk SECTION 2 – Transferring Risk via Insurance SECTION 3 – Risk Drivers and Your Business 3

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 SECTION 1: What is Risk? 4

© 2013, X.L. America, Inc. 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= 141 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 What is Risk? Derives from the old Italian word riscare: to dare In this sense risk is a choice rather than a fate (Bernstein, Against the Gods) In quality terms, the consequences of variance outside the tolerance limits Chance of loss “Consequences” can be financial, legal, moral or societal

© 2013, X.L. America, Inc. 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= 141 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 Risk Management Fundamentals Avoid Project evaluation Client selection Go/No-Go decision Transfer Insurance Contract Assume Deductible Self- insurance Control Loss prevention Risk management 6

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 The Cost of Risk is Like an Iceberg Direct costs to your firm Revenue required to offset losses = 10 x amount of loss Principals’ time in dealing with the problem Other problems resulting from lack of attention by principals 7

© 2013, X.L. America, Inc. 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= 141 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 More Evidence Annual ACEC survey Number of personnel hours spent defending claims Averaged 80 hours for three years Now almost 200 hours Cost calculation 80 hours x $100 per hour = $8,000 $80,000 of revenue is needed* Typical fee per job is $5,000 * Assuming a 10% profit margin 8

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 SECTION 2: Transferring Risk via Insurance 9

© 2013, X.L. America, Inc. 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= 141 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 Transferring Risk via Insurance One way to transfer risk No product covers everything Must be a fortuitous loss and must adhere to indemnity principle Contract between you and carrier (not your client)

Liability Insurance Policies Professional (PL) Claims made Covers “professional services” Expense within limits General (GL) Occurrence form Excludes “professional services” Expense outside the limits

© 2013, X.L. America, Inc. 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= 141 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 Claims Made Policy Coverage:Coverage Would Apply, Subject to Limits and Deductible for Policy Year 3

© 2013, X.L. America, Inc. 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= 141 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 Project PL Insurance Guarantees limit of coverage Guarantees length of time of coverage Covers all professionals on project Promotes better claims handling Dispute resolution encouraged

© 2013, X.L. America, Inc. 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= 141 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 Project PL Policy

© 2013, X.L. America, Inc. 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= 141 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 Key Parts Professional Liability Insurance Policy What is insured ? “Professional services” of an architect, engineer, construction manager

© 2013, X.L. America, Inc. 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= 141 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 Key Parts Professional Liability Insurance Policy What is insured ? Key Definitions “Professional Services”- every carrier has a different definition “Claim(s)”- always a demand for money or service Loss Prevention Assistance – anything that a reasonable person believes will turn into claim

© 2013, X.L. America, Inc. 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= 141 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 Key Parts Professional Liability Insurance Policy What is insured ? Key Definitions What is excluded? Better covered in another insurance product, i.e, Workers Comp Uninsurable, i.e. nuclear Clarifies intent of insurer, i.e. contractual construction activities

© 2013, X.L. America, Inc. 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= 141 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 Key Parts Professional Liability Insurance Policy What is included ? What is excluded ? Key definitions Who is insured ? Principals, partners, all employees including temporary and retired personnel Not 1099 personnel

© 2013, X.L. America, Inc. 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= 141 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 Underwriting Based on gross fees Areas of discipline Types of projects Types of services Contracts Claims experience Loss Control Measures

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 SECTION 3: Risk Drivers and Your Business 20

© 2013, X.L. America, Inc. 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= 141 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 Claim Statistics

© 2013, X.L. America, Inc. 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= 141 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 What percentage of claims actually go to trial? A.Approximately 5% B.Less than 10% C.12-15% D.Approximately 25% E.Less than 50%

© 2013, X.L. America, Inc. 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= 141 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 When Do Claims Happen?

© 2013, X.L. America, Inc. 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= 141 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 Risk Drivers: Classification of Causes Technical Error and/or omission of a technical nature that results in a loss prevention file or claim Non-technical Breakdown in project management processes or business practices that leads or contributes to a loss prevention file or claim 24

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Negotiation and Contracts Client SelectionProject Team Capabilities Communication Percentage of Claims Affected Top 4 Non-Technical Risk Drivers 13% 16% 24% 27% 6% 23% 25% 39% © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 25

Negotiation and Contract Issues A primary factor in 6% of claims count (frequency) 13% of claims dollars (severity) © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 26

Negotiation and Contract Issues 38%-Unclear or inappropriate scope 16%-No formal project evaluation 12%-No contract before work started 8%-Lack of construction phase services 8%-Other 6%-Lack of mediation clause 5%-No contingency fund 3%-Deal Breakers in contract 2%-Client agreement not reviewed by lawyer 2%-Field staff didn't have/understand contract 1%-Client agreement not reviewed by senior management © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 27

Client Selection Issues A primary factor in 23% of claims count 18% of claims dollars © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 28

Client Selection Issues 44%-Client inexperienced in design issues 22%-Client has history of claims / litigation 17%-Client in Poor Financial Condition 7%-Client behind in fee payments 4%-Contractor selection 4%-No Formal Review of client 3%-Other 1%-Client not receptive to ADR © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 29

Project Team Capabilities A primary factor in: 25% of claims count 34% of claims dollars © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 30

Project Team Capabilities 51%-Inexperienced design staff 20%-Inexperienced on-site staff 18%-Inexperienced project manager 4%-Other 3%-Firm inexperienced in project type 2%-Unqualified back-up staff 2%-Outside firm's normal territory 1%-Insufficient number of staff © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 31

Communication Issues A primary factor in: 39% of claims count 29% of claims dollars © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 32

Communication Issues 51% -Lack of procedures to identify conflicts, errors and omissions 17% -Project issues and potential disputes not handled correctly 13% -Scope of services not explained to client 9%-Lack of documentation re: changes in scope, budget, etc. 6%-Project staff not aware of responsibilities 3%- Other 1%-Regular progress reports regarding changes not approved © 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 33

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Technical Claims Statistics 34

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Comparative Claims Experience 35

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Architects and Engineers 36

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Who Sues A/Es? 37

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Types of Damages 38

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Claim Trigger 49%-Design Error 16%-Construction Defect Detected 7%-Construction Budget Overruns 5%-Bodily Injury- Post Construction, 3rd Party 5%-Construction Schedule Delay 4%-E&O Alleged by Owner in Response to Suit for Fees Owed 4%-Product Failure 3%-Unrelated 3rd Party Action 7%-Other 39

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Frequency & Severity (by major category) 40

© 2013, X.L. America, Inc. 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= 141 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 Infrastructure Projects Claim Trigger 40% E&O (lowest of all) 15% Construction Defect 8% Bodily Injury – 3rd Party, Post-Construction 7% Bodily Injury – Construction Elements Involved 15%Pavement / Curbs / Sidewalks 11% WWTP / Sewage 10% Surveying 6% Storm Water 41

© 2013, X.L. America, Inc. 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= 141 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 Commercial Projects (≤ 9 Stories) Claim Trigger 49% E&O 13% Construction Defect 9% Bodily Injury – 3rd Party, Post-Construction 6% Budget Overruns Elements Involved 11% Other 10% Walls 9% HVAC 6% Foundation / Footings 6% Roofs 42

© 2013, X.L. America, Inc. 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= 141 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 School/University Projects Claim Trigger 51% E&O 14% Construction Defect 10% Budget Overruns 7% Construction Delays Elements Involved 17% HVAC 14% Walls 9% Roofs 4% Floors 4% Storm Water 43

© 2013, X.L. America, Inc. 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= 141 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 Residential Projects Claim Trigger 49% E&O 23% Construction Defect (highest) 7% Suit for Fees (nearly 2x overall) 5% Budget Overruns Elements Involved 14% Foundation/Footing 9% Grading 9% Surveying 8% Walls 5% Beams/joists 44

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Civil Engineers 45

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 CIVIL ENGINEERS Who Sues Civil Engineers? 46

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 CIVIL ENGINEERS Types of Damages 47

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 CIVIL ENGINEERS Claim Trigger 48

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 CIVIL ENGINEERS Frequency & Severity (by project type) 49

© 2013, XL Group plc companies. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 CIVIL ENGINEERS Elements Most Often Involved 50

Risk Management Cycle Client Selection Contract Communication Match Capabilities Project Objectives Staff Increased Profit Internal Investment Improved Project Management Improved Quality 51 © 2013, X.L. America, Inc. 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= 141 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 What direction will your firm take? Identify practice or project management weaknesses that expose your organization to risk Use the Risk Drivers data Contact your XL Group agent or broker, and take advantage of our A/E industry expertise 52

© 2013, X.L. America, Inc.. All rights reserved. I MAKE YOUR WORLD GO 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 Yellow R= 255 G= 255 B= 0 Orange R= 244 G= 121 B= 32 Magenta R= 236 G= 0 B= 141 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 Questions?

Course Evaluations In order to maintain high-quality learning experiences, please access the evaluation for this course by logging into CES Discovery and clicking on the Course Evaluation link on the left side of the page.

© 2013, X.L. America, Inc. 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= 141 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 Legal Disclaimer In the US, the insurance companies of XL Group plc are: Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Insurance Company of New York, Inc., XL Select Insurance Company, and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. This presentation is intended for informational purposes only and does not constitute legal advice. For legal advice, seek the services of a competent attorney. Any descriptions of insurance provisions are general overviews only. THE INSURANCE POLICIES, NOT THIS PRESENTATION, FORM THE CONTRACT BETWEEN THE INSURED AND THE INSURANCE COMPANY. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details. All coverages are subject to individual underwriting judgments and to state legal requirements. XL Group is the global brand used by XL Group plc’s insurance subsidiaries. 55