1. 2004 Hurricane Season Recap and Observations May 2005 CAS Meeting

2. Proprietary & Confidential Agenda Section 12004 Hurricane Recap Section 2Reinsurance Observations Section 3Catastrophe Model Observations 1

3. 2004 Hurricane Recap

4. Proprietary & Confidential 2004 Hurricane Season Source: Impact Forecasting 2

5. Proprietary & Confidential Source: Impact Forecasting Hurricane Path Discussion 1995 - 2003 3

6. Proprietary & Confidential Source: Impact Forecasting Hurricane Path Discussion 2004 4

7. Proprietary & Confidential ISO Property Claim Service Loss Estimates $Billions 5

8. Proprietary & Confidential PCS Loss Estimates and Return Periods 6

9. Proprietary & Confidential Florida Detail FHCF Payment threshold: $4.5 - $4.9 Billion Per Occurrence 7

10. Proprietary & Confidential 8 Catastrophe Loss as Percent of Property Premium 1992 - 20042004 Countrywide: 18.8%Countrywide: 27.0%

11. Reinsurance Observations

12. Proprietary & Confidential Reinsurance Observations  2004 hurricane events  Excess capacity mitigated rate pressure  Did not drive reinsurance pricing  If there were unmodeled (or not well modeled) losses, experience rating influenced pricing  Reinsurers continue to  Re-evaluate degree of uncertainty around model output  Monitor Florida regulatory developments for impact on exposure to reinsurance layers (“regulatory surge”, deductible issue, FHCF structure, etc.)  Cedents are now more interested in  Understanding and reinsuring aggregate PML’s  Reducing traditional coverage restrictions (i.e. Aon’s efforts to expand hours clause, reduce co-participations, etc.) 9

13. Proprietary & Confidential 2005 Reinsurance Rate and Security Observations  Reinsurer pricing models will reflect cat model changes (likely to be in 2006)  Excess capacity is driving rates down  Significant pockets of restless capital remain – and new capacity continues to arrive  Better rated Lloyd’s market is aggressive  Aon’s leadership in restructuring this market to be more transparent and efficient  Generally led pricing in early 2005  Spiral issues have been reduced  Questions remain about long-term discipline and ongoing profitability  Cedants more focused on security quality  Especially anticipated quality following catastrophic event  Want assistance in measuring reinsurer’s capacity to respond to multiple large catastrophe events 10

14. Catastrophe Model Observations

15. Proprietary & Confidential Summary of Hurricane Loss Estimates Event/Portfolio Data Points Estimated Loss / Actual Loss 11 Hurricane Loss Estimates Based on Post Event Catastrophe Model Analysis

16. Proprietary & Confidential Catastrophe Model Observations  Multi-model analysis provided value  Demand surge happens, based on aggregate losses  Age of building and building codes matter  More refinement is needed in commercial occupancies, e.g. golf courses  Quality, completeness and vintage of exposure data are important  Losses occur at low wind speeds  Unmodeled losses – Flood,Contingent BI, Mold, Off-Site Power interruption  Accuracy of post-event estimates vs. actual loss is not necessarily a test of accuracy of risk estimates (PML evaluation)  Review of 2004 losses still underway – changes if any to damage functions in 2006 12

17. Proprietary & Confidential Anticipated Model Changes  Information still being gathered and analyzed  2005 model updates will be adjusted for frequency and other items  Some changes will be deferred to 2006 (damage functions, etc.)  Lower return period loss estimates  Demand surge  Revised damageability ratios at lower windspeeds  Revised damageability ratios for select construction types  Year of construction  Secondary building characteristics  Upper levels of reinsurance coverage not tested  Possible lack of independence of events 13

18. Proprietary & Confidential FHCF Change Legislation  FHCF Retention drop down on third largest and smaller events  Industry basis - $4.5 billion to $1.5 billion  Loss events ordered on individual company basis  Actuarial rates for CPIC in Monroe County if reasonable competition does not exist – an experiment  OIR to study standard rating territories by 1/15/2006  OIR to study standard policy forms by 1/15/2006  State may ask companies to report exposure and loss data for development of public hurricane model  OIR and Consumer Advocate to have access to models used in support of rate filings  More, including sinkhole provisions 14