1. Risk Management Bill Ferguson, Ray Farmer, Tim Morris, Marty Wingate Insurance Summit 2016 20151212

2. 2 Enterprise Risk Management 20151212

3. 3 What is Enterprise Risk Management Risk Mitigation Risk Opportunity Compliance Loss Minimization Key Risk Management Risk Measurement Strategic Integration Risk-Reward Enhancement Link To Strategy & Mission High Medium Low Risk ControlBalance Sheet Protection Risk/Return Optimization Current State Value Creation Future State Implementation of Quantitative Risk Models 20150918

4. 4 An Approach to ERM ERM Framework Risk Culture/Governance Risk Strategy Risk ID/Prioritization Risk Appetite, Tolerance & Limits Risk Controls Reporting/Communication Risk Assessment Strategic Risks Insurance Risks Financial Risks Operational Risks Emerging Risks Risk Capital Capital Models Financial Models Rating Agency Models Prospective Solvency Assessment Report Synthesis of Key Themes Perform Gap Analysis Deliver Recommendations Develop ORSA Report Enterprise Risk Management Approach 20151212

5. 5 Risk Universe Approach Insurance Carrier Risk Universe Strategic Execution Capital Management Earnings Management Rating Agencies Competition Macro Economic Reputational Emerging Risks Insurance Underwriting Reserving Pricing Claims Management Distribution Reinsurance Natural Hazard Terrorism Financial Investment Market Counterparty Credit Capital Adequacy Financial Flexibility Liquidity Accounting Financial Reporting Budgeting Operational Employee & Culture Information Systems Business Process Financial Crime Service Provider Business Continuity Compliance Legal & Political 20150918 Illustrative

6. 6 Three Parts of the NAIC ORSA Section 1 - Description of insurer’s ERM framework including: Risk culture & governance Risk identification & prioritization Risk appetite, tolerances & limits Risk management & controls Risk reporting & communication Section 2 - Insurer’s quantitative & qualitative assessment of risk exposure to include: Details of risks identified, measurement approaches used & assumptions Quantification of risk for each major risk category Outcomes of plausible adverse scenarios The impact of stressed environments on available capital, considering multiple capital viewpoints if relevant (e.g., regulatory, rating agency) Section 3 - Group risk capital & prospective solvency assessment: Definition of solvency, accounting or valuation regime Time horizon of risk exposure Risks modeled Quantification method Measurement metric Target level of capital Aggregation and diversifica tion NAIC Own Risk & Solvency Assessment requirements are organized into three key sections. Note: ORSA Report to be filed annually with relevant State Insurance Department 20151212

7. 7 ORSA Implementation

8. 8 About Hanover Stone Solutions  HSS is an ERM advisory firm for insurance carriers and regulators.  We help insurance companies: start an ERM strategy, complete ones that need help, or vet existing programs for stakeholders.  We train state insurance departments on ERM that can augment ORSA report review skills.  We conduct ORSA report reviews on behalf of state examiners.  Our model centers around 27 senior advisors: o Former CRO, CEO, CFO, chief underwriters, claims, reinsurance, human resources, compliance, etc. o Partnerships with leading auditing, actuarial, legal, cyber firms. o Former state commissioners: Ernie Csiszar, Jim Schacht and Bill White.  Our focus is on the operational and financial value of ERM, not just the regulatory requirement, which plays to our experience. Compliance is an end product.  Our carrier strategy is to focus on the small-to-middle market of $300 million to $1 billion, although we are seeing increasing interest in firms below $300 million, as well.

9. 9 Tim Morris 49 Archdale Street, Suite 2F Charleston, SC 29401 Phone: 843-723-8701 Cell: 843-437-8316 tmorris@HanoverStoneSolutions.com Contact Information