1. B R I N G I N G F I G U R E S I N T O F O C U S Commodity Prices Spike following Major Disasters: ‘Accounting Issues for Consideration in BI Loss Measurement.’ * Markus Heiss is a Partner at MDD London UK LLP - Mobile: 07730 985 822, Phone: 0207 265 0777; mheiss@mdd.net Date: 30 / 01 / 2007 Prepared for: Opera, London Presented by: Markus Heiss*, MDD

2. Introduction Accounting Issues Legal Issues

3. Introduction Accounting Issues Legal Issues

4. Objective BI Do what the business would have done for the insured had the ‘loss’ not occurred

5. Adjustment Clause Policy Definition: “The Turnover / Gross Profit during the period in the 12 months immediately before the date of the damage” But Variation Clause: “…to which [Rate of Gross Profit, Standard Turnover and Annual Turnover] such adjustments shall be made as may be necessary to provide for the trend of the business either before or after the loss or which would have affected the business had the loss not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable the results which but for the loss would have been obtained during the period after the loss”

6. Projection Dilemma If price spikes occurred – 2 options for projection: No Disaster Disaster

7. Commodity Prices and Disasters Commodities Timing Drivers Price elasticity and leverage

8. Daily Crude Prices – Timing

9. Commodity Price Drivers Market Supply & Demand Contractual Negotiation Competitor Political Climate Domestic and International Issues Environmental Circumstances Financial Markets Market Circle

10. Leverage Effect of Price Changes

11. Refinery Margin Evolution $ per Barrel

13. Segregation of Price Spike Impact on BI Cause Degree Separation Amounts can be put into their buckets

14. Segregation of Price Spike Impact on BI Price Spike Insured EventOther ‘Market’ Reasons Caused by ‘Insured Peril per Policy’ Caused by ‘Physical Loss that Triggered Policy’

15. Impact of Price Changes for BI Measurement

17. Impact of Price Changes for Refinery

18. Impact of Price Changes for Steel Mill

19. Impact of Price Changes for Power Generation

21. Timing Issues – Price Changes and Profitability Correlation Input and Output Timing Buyers or Sellers Market Market Transparency Pricing Mechanism

22. Hurricane Induced vs. Normal Commodity Market Price Changes

23. Accountants Assistance Can we Solve ?; Can we help ? –Identify impact on BI measure –Market price investigations –Separation of loss sustained between market event / period and loss related increases Need to work with other experts / detailed evaluation market situation – determine market price drivers

24. B R I N G I N G F I G U R E S I N T O F O C U S Questions ? * Markus Heiss is a Partner at MDD London UK LLP - Mobile: 07730 985 822, Phone: 0207 265 0777; mheiss@mdd.net Date: 30 / 01 / 2007 Prepared for: Opera, London Presented by: Markus Heiss*, MDD