1. 2008 Cat Market Update Global Reinsurance Division Ken Radigan (212) 266 – 5992 kenneth.radigan@aig.com

2. 2008 Cat Market Update 2007 and 2008 Catastrophes Global Reinsurance Division

3. Swiss Re: Natural catastrophes in 2007 Global Reinsurance Division  More than 20,000 fatalities  Losses of roughly $70bn (US$)  $28bn insured losses.  142 natural catastrophes and 193 man-made disasters.

4. Swiss Re: Natural catastrophes in 2007 Global Reinsurance Division

5. PCS: Natural catastrophes in 2007 Global Reinsurance Division

6. PCS: Natural catastrophes in 2008 Global Reinsurance Division

7. 2008 Natural catastrophes Global Reinsurance Division  Myanmar Cyclone Nargis  China Earthquake AIR Worldwide estimates that total losses to insured and uninsured property from the M7.9 earthquake that struck near Chengdu, China will likely exceed $20 billion USD

8. 2008 Cat Market Update 2008 Reinsurance Market Update Global Reinsurance Division

9. Guy Carpenter: 2008 Reinsurance Market Review Global Reinsurance Division  Casualty treaty reinsurance market is softening in many areas.  Driven by 5 years of underwriting profits.  Difficult lines still subject to tough rating environment.

10. Guy Carpenter: 2008 Reinsurance Market Review Global Reinsurance Division  Global Reinsurance capital increased to $129B in 2007.  20.4% higher than end of 2005.  Retained earnings increased from $40.5B in 2005 to $59.3B in 2007.

11. Guy Carpenter: 2008 Reinsurance Market Review Global Reinsurance Division  Stable Outlook from all rating agencies  Strong balance sheets with record profits in 2006 and 2007.  Threats: underwriting cycle, increase cat activity, subprime crisis

12. Reinsurance Discussion 2008 Reinsurance Market Expectations Global Reinsurance Division

13. AON: Reinsurance Market Update Sept 2007 Global Reinsurance Division

14. AON: Reinsurance Market Update Sept 2007 Global Reinsurance Division

15. Reinsurance Discussion Capital Markets Global Reinsurance Division

16. Capital Markets (cat bonds and sidecars) Global Reinsurance Division  $7.2 billion issued in 2007, $6.2 billion issued in 2006.  Insulated from turmoil of broader credit markets.  Diversifying perils  Willing to support indemnity

17. Capital Markets (cat bonds and sidecars) Global Reinsurance Division  How do they work? Based on modeled statistics. Investors assume risk and expect to make a profit. ROL is multiple of estimated loss. “Secured” reinsurance, ceded limit held in trust.  Example $100M X $500M Probability of attachment 1.0%. Probability of exhaustion 0.75% Expected loss 0.875M (LOL 0.875%) Premium 5.0% + LIBOR, ROL = 5.7 * LOL

18. Capital Markets (cat bonds and sidecars) Global Reinsurance Division  Insurer Motivation Access to additional capacity Multiyear terms “Secured” reinsurance Ideal for short term, high cat exposures  Investor Motivation High returns Uncorrelated Exposure “Modelable” Exposure, easy to analyze and compare statistics Easy to monitor aggregate exposures

19. Capital Markets (cat bonds and sidecars) Global Reinsurance Division  Higher Costs Secured Program No Leverage No Reinstatements Third Party Modeling Structure Fees (SPV) “Uncertainty” charge  Time commitments  Indemnity vs parametric vs PCS Timing concerns with Indemnity

20. Reinsurance Discussion Miscellaneous Topics Global Reinsurance Division

21. Miscellaneous  Reinsurance spreads narrowing, worldwide credit spreads and equity spreads are widening. Insurers more likely to use reinsurance to finance risk.  Capital Markets are currently providing 10 to 25 percent of their catastrophe capacity. This is expected to expand.  Regulatory, rating agency, investor and management emphasis on ERM. Global Reinsurance Division

22. Reference Sources:  Swiss Re: “Natural catastrophes and man-made disasters in 2007.”  Guy Carpenter: “2008 Reinsurance Market Review”  AON: “Reinsurance Now Materially Reducing Insurer Cost of Capital, Reinsurance Market Update, September 2007”  Deutsche Bank: “2007 Year-end Catastrophe Market Review” Global Reinsurance Division

23. Reinsurance Discussion Open discussion Global Reinsurance Division