PROPERTY CLAIM SERVICES Florida Market Challenges to New Insurers May 2, 2011

Approx. 4.4M policies $8B in annual premiums 91% Homeowners 8% Condo Owners 1% Tenants FLORIDA MARKET OVERVIEW

None None None None None None None None None None None 1967 – None None None None None None None None None None None None None None None None None None1996 – None None None None None None None None None None None ? Florida Hurricane History

Governor Scott ’ s Initiatives Return Property Insurance to private competitive markets in Florida. Eliminate Citizens Insurance or return it to actuarially sound rates. Resolve sinkhole claim fraud issues Address mitigation discount fraud

Current Legislation Bill S.B. 408, addresses a number of claim cost drivers, including: sinkhole claims public adjusters replacement-cost coverage issues claim time lines and more.

Being Different Management team with proven success in Florida property insurance – Prior start-up company experience – Agency relationships and market knowledge – Exceptional underwriting and reinsurance expertise Competitive advantages of new insurer – No legacy book – No tail exposure to sinkhole claims – Start with adequate rates – No tail of Public Adjuster claims – Improved legal climate for claims settlement

Timing is Important Florida property market is finally ideal –Regulation and legislation will be favorable –Regulators/ public policymakers open market solutions –Citizens change is creating market opportunities Market conditions working against national carriers – Rating agencies dictate need for coverage of tail – Regulatory relationships strained – Unable to significantly improve quality of portfolios – Many are leaving creating market opportunities

Underwriting  Analyzed the portfolio and individual risks based on profitability, loss potential and premium  Risks evaluated on year and type of construction, local hazard information, and construction characteristics that have mitigation and premium impacts  Performed “what-if” scenarios by analyzing the effects of hurricanes on the portfolio and individual policies  Screen enclosure endorsement, frame only coverage  PML to premium ratio measured on individual risks

Reinsurance, Reinsurance Claims plays a vital role in cost of reinsurance Claims working with Underwriting to define, analyze portfolio Attritional claim handling is critical Catastrophe claim handling life blood

Capital is King Need much more than minimum required by state Need to continually add to capital during the first 3 years of existence Capital is needed to keep ratio’s in line and write business Need surplus for reinsurance retention if wind blows

Keys To Underwriting Profit Execute sound, effective claims and underwriting processes Define target portfolio using best technical tools Manage catastrophe risks with individual policy selection, geographic spread, and reinsurance Address classes of risks and rate adequacy with rate filings Agency training and policy management system edits Establish responsive, continually reviewed and executed claim practices with proper policy language Avoid Sinkhole exposure areas.

Back to Basics Communication between departments Great fundamental claim handling Proper rates and underwriting Learn your lessons and adjust Understand sweet spots around the state Spread the risk