1. Aon’s 11 th Energy Insurance Training Seminar Upstream Energy Market Update July 2011 Andrew Gray

2. The Energy Market July Review 2010 post Deepwater Horizon rises were circa 15% - 20% Year end renewals subject to reduced rises circa 10% - 15% Two significant losses being the Maersk Gryphon USD 850m and the Polycrest Jupiter USD 285M (USD 160m physical damage plus USD 125m removal of wreck) have given Underwriters the poorest underwriting result in the first quarter for quite some time. The consequence of which is that clients that were subject to the post Deepwater Horizon rises are now renewing with rises of between 5% and 10%. Expect this trend to continue for the remainder of the year. 2

3. The Energy Market THANKYOU 3

4. The Energy Market GET BACK TO WORK……. 4

5. 5 Energy losses 1990 – 2010 Excess of USD 5 million US$ bil global energy losses 1990 – 2010 compared to global energy premium

6. Major Losses 2008Gustav & IkeUSD 4,250,000,000 Other OffshoreUSD 1,500,000,000 USD 5,750,000,000 2009Platform ImpactUSD 750,000,000 Blow-Out USD 425,000,000 Other Offshore USD 1,275,000,000 USD 2,450,000,000 6

7. 7 2009, What happened? Reduced loss activity in 2009 Capacity did not reduce, but GoM wind capacity limited Rate reductions in the 2nd half of 2009 –Underwriters actively compete for new business and market share Investment income recovered, but not to previous levels Industry achieves underwriting profit in 2009

8. Capacity levels for 2010 unchanged Focus on catastrophe models and continued management of aggregates Lloyd’s declined requests from Syndicates for increased capacity Limited new entrants to the market 8 2010, What happened?

9. HOWEVER Continued focus to maintain income on quality accounts Market competition increased as the year went on Investment portfolios providing better returns to insurers. Significant competition for international non-cat onshore End Result 2009 Reductions continue into 2010 9 2010, What happened?

10. Until………… 10 2010, What happened?

11. The Deepwater Horizon Loss 11

12. Major Losses 2010Rig Total Loss USD 560,000,000 Blow-OutUSD 200,000,000 Rig Total Loss USD 235,000,000 USD 995,000,000 12

13. 2010, What happened? And Aban Pearl follows close behind WAKEY !! WAKEY!! Three losses: none of them enough in isolation to change the market but collectively …. The end of the soft cycle, the start of a hard cycle Huge increase in Liability focus Physical Damage Rates + 15% for clean renewals 13

14. 2010, What happened? But can it last…..? New or mobilised capacity is already arriving But so is another reinsurance season…….. 14

15. The Energy Market July Review 2010 post Deepwater Horizon rises were circa 15% - 20% Year end renewals subject to reduced rises circa 10% - 15% Two significant losses being the Maersk Gryphon USD 850m and the Polycrest Jupiter USD 285M (USD 160m physical damage plus USD 125m removal of wreck) have given Underwriters the poorest underwriting result in the first quarter for quite some time. The consequence of which is that clients that were subject to the post Deepwater Horizon rises are now renewing with rises of between 5% and 10%. Expect this trend to continue for the remainder of the year. 15

16. 2011 FPSO GryphonUSD 900,000,000 Rig Total LossUSD 275,000,000 Tornado DamageUSD 150,000,000 ConstructionUSD 150,000,000 BlowoutUSD 40,000,000 USD1,515,000,000 16

17. HOWEVER On 27th June Lloyd’s operation Ascot Underwriting Ltd. announced that it has increased its capacity from £600m to £650m to support its 2011 business plan. Andrew Brooks, CEO of Ascot Underwriting Ltd. said, "Market conditions are changing, providing Ascot with opportunities, particularly in the reinsurance sector. We have increased our capacity for the remainder of 2011 to allow us to maximise these opportunities and expand our business where appropriate 17

18. 2011 INTO 2012 The cycle continues………. Lets wait and see……………. Will the trend in rises continue? How will the Reinsurance market react? 18

19. The Energy Market THANKYOU 19