1. Copyright IndexCo, LLC April 1999 Using The GCCI Bruce B. Thomas Chief Executive Officer IndexCo, LLC

2. Copyright IndexCo, LLC April 1999 Disclaimer This information is in not an endorsement of, or a solicitation to trade in, financial instruments or securities related to, or based on, the indices described herein. It is not and should not be viewed as advertising or sales literature relating to index-based financial instruments or to any other securities. The methodology described herein is subject to change from time to time, and IndexCo does not guarantee the availability or reliability of, or make any other representations or warranties, express or implied, concerning the estimates of damage that result from this methodology or the assumptions, data, or calculations used by the methodology.

3. Copyright IndexCo, LLC April 1999 IndexCo, LLC n Publishes the GCCI –Studies Index performance –www.indexco.com n Purpose –Objectively measure catastrophe losses –Provide standardized basis for risk transfer

4. Copyright IndexCo, LLC April 1999 What is the GCCI? n Index of U.S. insured property losses –Home damage from atmospheric perils –ZIP code level –Published quarterly n Loss-to-value ratio –Paid losses divided by insured value

5. Copyright IndexCo, LLC April 1999 Statistical Validity n 33 of largest US homeowner insurers n Over 40 million transaction records n Over 9,000 ZIPs with an average of: –11 insurance companies –Over 1,200 insured homes –Over $176 million of insured value

6. Copyright IndexCo, LLC April 1999 Hurricane Fran Losses

7. Copyright IndexCo, LLC April 1999 Fran Research n Insurers highly correlated with GCCI n Basis risk can be reduced by: –Using a ZIP code hedge n Basis risk decreases as: –Damage rates increase –Number of insured homes increase

8. Copyright IndexCo, LLC April 1999 Index Benefits n High correlation n Measurable basis risk n Standardization –Reduces transaction costs –Confidentiality –Capacity/ pricing stability n Objectivity/transparency n Information neutral n Standardization –Eliminates management risk –Reduces transaction costs –Helps create liquidity HedgersInvestors

9. Copyright IndexCo, LLC April 1999 BCOE Options n 100% collateralized n Lower transaction costs n Greater liquidity n Anonymity n No coverage conflicts n Credit Diversification n Collateral increases costs n State and regional contracts may give rise to significant basis risk Advantages Disadvantages Best suited to large portfolios that can hedge effectively using a state or regional contract.

10. Copyright IndexCo, LLC April 1999 GCCI-based Bonds n Collateralization n Customized geographic areas help reduce basis risk n GCCI reduces disclosure, provides standardization, improves liquidity n No coverage conflicts n Collateral increases cost n High transaction costs n Potential legal risk n Basis risk Advantages Disadvantages Best used when transaction cost can be spread over a large portfolio.

11. Copyright IndexCo, LLC April 1999 OTC Transactions n Customized geographic areas help reduce basis risk n Low transaction costs n Little disclosure n No coverage conflicts n Credit diversification n Basis risk n Credit risk n Liquidity Advantages Disadvantages Best used for supplemental risk transfer for limited geographic areas (peak exposures).

12. Copyright IndexCo, LLC April 1999 Basis Opportunity

13. Copyright IndexCo, LLC April 1999 Basis Opportunity * Assumes expected losses equal $50.

14. Copyright IndexCo, LLC April 1999 Possible Price Savings Premium Dollars Premium Dollars

15. Copyright IndexCo, LLC April 1999 The GCCI Catastrophe Indices For Hedgers and Investors