1. Aon Risk Solutions | Energy 0 Energy Market  What is driving today’s market ?

2. Aon Risk Solutions | Energy 1 Supply and Demand

3. Aon Risk Solutions | Energy 2 So what drives demand?  Oil Price  Gas Price  GDP Growth  Interest Rates  Exchange rates  Business Environment

4. Aon Risk Solutions | Energy 3 Lets take a look back at history 2007  Capacity$2.5bn  Rates80% of 1992 benchmark  Oil Price$64  GDP Growth –US2% –Europe3% –Japan2%  Interest Rates –US5% –Europe5% –Japan0.79%  Exchange Rates1GBP : 2USD  Losses80% of premium income

5. Aon Risk Solutions | Energy 4 Oil Price

6. Aon Risk Solutions | Energy 5 Gas Price

7. Aon Risk Solutions | Energy 6 Increased Capital Expenditure In USDm 20072008  Exxon20,85326,143  BP17,83022,658  Valero2,7783,301  Shell24,57635,056  Chevron20,02622,775 Source: Individual company annual reports  Construction projects announced –ExxonMobil – Hebron –Saudi Aramco to invest $129bn in new energy projects over next 5 years  Gave a market outlook for the next 12 months of a favourable market for buyers

8. Aon Risk Solutions | Energy 7 Then in 2008 the World started to change  Potential Israeli attack on Iranian nuclear sites caused record $11 rise in oil price in 24 hours  Oil reaches record price $147 in July  Oil demand outran supply  Speculators investing in futures market exaggerated oil price

9. Aon Risk Solutions | Energy 8 Then in 2008 the World started to change  Fears of repeat of 1973 oil crisis  OPEC accused US of poor economic management  Hurricanes Gustav and Ike in August and September  July 2008 start of credit crunch  US Government steps in to assist Fannie Mae and Freddie Mac  15 th September – collapse of Lehman Brothers  Oil price end year at $38

10. Aon Risk Solutions | Energy 9 The start of 2009  Market uncertainties  Economic Issues  GDP Growth4 th Q 20081 st Q 2009 –US -1.4% -1.6% –Europe -1.9% -2.4% –Japan -2.7% -3.6%

11. Aon Risk Solutions | Energy 10 The start of 2009  Rates were going up  GoM rates/conditions

12. Aon Risk Solutions | Energy 11 The start of 2009  March 2009 Dow Jones had fallen by 45%

13. Aon Risk Solutions | Energy 12 U.S Petroleum Demand Plummeted in ‘Great’ Recession

14. Aon Risk Solutions | Energy 13 Too much spare refining capacity in U.S Source: DOE weekly data through December 2009 and Consultant and Valero estimates

15. Aon Risk Solutions | Energy 14 Margins were on the slide

16. Aon Risk Solutions | Energy 15 What was the knock on effect on demand?  Reduced limits purchased  BI EML’s start to fall  Future projects delayed or cancelled –Saudi Aramco – Manifa –Qatar Petroleum and ExxonMobil – Brazan –Marathon – Detroit refinery expansion

17. Aon Risk Solutions | Energy 16 So what did this mean for the Energy Industry?  Closures of refineries in the United States announced –Valero at Aruba –Valero at Delaware City –Silver Eagle at Salt Lake City –Marathon at Garyville, Louisiana –Western Refining at Bloomfield, New Mexico –Sunaco at Westfield, New Jersey  Internal Pressures within the client base to cut costs

18. Aon Risk Solutions | Energy 17 By year end the world was experiencing…  By 31 st December 2009 Wall Street was up from low by 37%

19. Aon Risk Solutions | Energy 18 3 rd and 4 th Quarter 2009  Stable but rising oil price 1 st March 2009 ($40pb) - 1 st October ($67pb)  Bank crisis solution proposed – UK bailout October 2008  GDP Growth4 th Q 20074 th Q 2009 –US 2% 1.4% –Europe 3% 0.1% –Japan 2% 0.9%  Fewer buyers for GoM than expected  Competition for ex cat was extensive

20. Aon Risk Solutions | Energy 19 As we entered 2010  GDP growth was coming back1 st Q 2010 –US 0.8% –Europe 0.2% –Japan 1.2%  Some construction projects were given the go ahead –Exxon Sakhalin –Nordstream –Goliat 4 th Q 2009 -1.6% -2.4% -3.6%

21. Aon Risk Solutions | Energy 20 What happened to supply?  By 4 th Quarter 2009:  It became apparent that 2008 had actually been profitable ex cat  New players had entered the market led by well known figures  No GoM activity  Investment Income had increased by 15% for some  Balance sheets were being repaired

22. Aon Risk Solutions | Energy 21 What happened to supply?

23. Aon Risk Solutions | Energy 22 Onshore Capacity Changes InsurerYear 2009 USDm 1st Quarter 2010 USD m ACE150200 Allianz150 ARCH100 Chartis200250 CVStarr100 HCC50 LIU125 MARP100 O’Farrell Syn100 Swiss Re150 Torus50100 Validus/Talbot Syn5075 XL50 Zurich100

24. Aon Risk Solutions | Energy 23 Offshore Capacity Changes InsurerYear 2009 USD mYear 2010 USD m Ace200 Allianz100 Arch75 Beazley75 Catlin170 Chartis150 CV Starr75 HCC50 O'Farrell150 Swiss Re150 Torus50100 Watkins6080 XL75 Zurich150

25. Aon Risk Solutions | Energy 24 Going into 2 nd Quarter 2010 2010  Capacity$2.8bn  Rates65% of 1992 benchmark  Oil Price$78  GDP Growth1 st Q 20101 st Q 20094 th Q 2008 –US 0.8% -1.6% -1.4% –Europe 0.2% -2.4% -1.9% –Japan 1.2% -3.6% -2.7%

26. Aon Risk Solutions | Energy 25 Going into 2 nd Quarter 2010 ’70 – ’80 World Average = 3.1% (U.S = 3.0%) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 ■ World ■ U.S

27. Aon Risk Solutions | Energy 26 Going into 2 nd Quarter 2010  Interest Rates –US0.25% –Europe1% –Japan0.1%  Exchange Rates1 GBP : 1.55 USD  Losses75% of premium income forecast

28. Aon Risk Solutions | Energy 27 Going into 2 nd Quarter 2010 1.Low loss activity 2.Strong competition 3.Reduced limits being purchased due to –Lower EML’s –Lower BI values –Lower Margins

29. Aon Risk Solutions | Energy 28 Going into 2 nd Quarter 2010 4. Average limit purchased had dropped to 750 – 1,000 down by 250m 5. Fewer spike limits purchased 6. Regionalisation of markets – Middle East, Singapore, Latin America 7. The fear of signings, which has led to intense rivalry to secure early positions on favoured accounts

30. Aon Risk Solutions | Energy 29 But the main driver way out front was Lack of loss activity Until April 2010 and then… Deepwater Horizon

31. Aon Risk Solutions | Energy 30 What has changed after April 2010?  Onshore- Not a lot!  Offshore- Knee jerk reaction in the ensuing few week - Realisation that insured loss was not a major incident for insurance market - Rates for deepwater still under upwards pressure - However, across the class the knee jerk reaction has now subsided - GoM wind season very quiet so far  Casualty- Is this a game changer? - Re price the product - Re engineer the product

32. Aon Risk Solutions | Energy 31 But what about supply?  Share price of major insurer vs. S&P 500 S&P 500 Company A 1995 2000 2005 2010 +500% +400% +300% +200% +100% 0%

33. Aon Risk Solutions | Energy 32 But what about supply?  Reinsurance market capitalisation –2007USD 411 Billion –2008USD 342 Billion –2009USD 442 Billion  Has Energy capacity decreased?  What will change the market? –Recent estimates suggest a loss of in excess of USD 50 Billion  A more attractive home for capital? –Risk reward equation no longer adds up

34. Aon Risk Solutions | Energy 33 What does this mean for you the buyers?  Strong competition between insurers  Ability to pick and choose your partners  Demand improved terms and conditions A medium term continuation of soft market conditions