1. Proprietary and Confidential “State of the Marine & Energy Market” “A Global Insurer’s Perspective” Don Harrell SVP, LIU US

2. Proprietary and Confidential Market Trends Over supply of capital Overcapacity and high competition Lack of investment income Flat economics & aging infrastructure in the developed world Improving infrastructure & increasing values in the developing world Increasingly concentrated distribution channel New technology Musical chairs of talent

3. Proprietary and Confidential Emerging Issues High exposures & accumulation risk –Chile Earthquake (2010), Thailand Flood(2011), Japan Earthquake / Tsunami (2011), Costa Concordia (2012), Superstorm Sandy (2012), US Floods & Droughts Increasing claims trends – frequency and severity Increasing: –Cost of litigation (e.g. GA/Salvage awards) –Environmental regulation –Sanction compliance (e.g. reputational risk) Changing trading patterns (e.g. Arctic shipping lanes, Northern Sea routes, Panama Canal expansion, etc.) Crew competence / Bridge management / Vessel maintenance / Port congestion

4. Proprietary and Confidential Challenging Macro Environment Depressed Economic Conditions Global trade is flat Lower maintenance budgets due to reduced earnings Ships under-utilized, go for repairs > increase in moral hazard/layups Lower freight rates > reduced asset values > increased CTLs Increasing trend to claim in recessionary environment Minimal investment return, higher credit risk and weakening currencies Market Cycle Defined as Less elastic, flatter and significantly longer

5. Proprietary and Confidential Offshore Energy Trends/Issues ISSUESTRENDS Politicalization of eventsGovernment intervention Coping with market volatilityCycle Management Increasing Fracking activityIncreasing exposures Deepwater drilling resumes in GOMValues continue to increase LNG mega-projectsStretching available capacity Aging assetsIncreasing decommissioning risk More wind capacityLess take up in wind cover More overall capacityLarger wind retentions by Assureds 5

6. Proprietary and Confidential Hull Underwriting Trends/Issues ISSUESTRENDS Overcapacity in the marketPressure on rating and T&Cs Worsening loss ratiosHull technically at loss for 17 consecutive years! Reducing valuesAverage age decreasing Aging assetsIncreased claims costs Exposure to CAT EventsMinimal impact of Superstorm Sandy Growing pressure to make commercial settlements Increase in X-Gratia payments First LNG-powered vessel deliveredValue is 3.5 times the normal tanker 6

7. Proprietary and Confidential Marine Liability Trends/Issues: ISSUESTRENDS Overcapacity / new capacityIncrease in competition Shift in governmental & regulatory response Increase in overall claims costs Media, environmental & political influences on claims process Increase in removal of wreck claims (e.g. Costa Concordia) More litigious environment WWIncreasing indemnity payments Retentions very low relative to events Primary limits & Deductibles remain low First excess layers = working layersImprovement in underwriting discipline 7

8. Proprietary and Confidential Cargo Underwriting Trends/Issues: ISSUESTRENDS Large losses erode resultsSuperstorm Sandy, MOL Comfort Increase vessel / port accumulationFirst Triple E Class -18,000 TEUs Increase in NAT CAT/AccumulationIncrease in Stock Through-Put Increase in government interventionIncrease in Sanctions Increase in Cargo theft lossesIncrease in corruption & economic stability worldwide Overcapacity / intense competitionIncrease New capital in the market Impact from TechnologyImproves consistency of data across the supply chain Global Crisis’ - Syria, Egypt and Suez Canal Increase in exposure & losses 8

9. Proprietary and Confidential Risk Managers’ Perspective on Marine Insurance Market!

10. Proprietary and Confidential Risk Managers’ Key Issues The protracted scarcity of property insurance capacity for windstorm risks The lack of cost-effective contingent business interruption insurance to transfer supply chain exposures Problems over insurance coverage gaps and pricing methodologies Rising anxiety over reputational risk A professed need for more expansive, insurer-provided loss engineering services

11. Proprietary and Confidential E&P Risk Managers’ Trends & Solutions Risk Managers to Assume More Risk Via Higher self-insured retentions or the use of captives Sell, abandon or decommission non-productive assets to reduce aggregations at risk of loss Be more strategic with budgeted resources; and/or Transfer exposures to the capital market s But the Capital Markets Solution Is Problematic These risk solutions have too much of a miss factor to be an effective risk solution for companies with a large diverse reserve portfolio - One Risk Manager

12. Proprietary and Confidential Risk Managers’ Supply Chain Concerns Vulnerability of Companies’ Global Supply Chains to Extreme weather events Other natural or man-made disasters Sole source supplier situation Suppliers’ suppliers defaulting on contracts We are beginning analysis of our supply chain exposures from a risk bearing standpoint. We’re also contractually laying off risks to other providers, and have increased our financial limits substantially in some lines (of insurance) by getting rid of insurance coverage in other lines, being more strategic with our capital resources. We’re taking much more of a `targeted’ approach to risk transfer. - Mr. Hayles Hilcorp Energy

13. Proprietary and Confidential Risk Managers’ Quotes We would find it extremely valuable to have the insurance industry learn more about what these government agencies do and are planning to do. This could even lead to a creative insurance program or some layer of coverage to help us defray the related (compliance) costs. - Ms. Pichè from Black Elk I’d really like to see underwriters think `out of the box’ and create a more effective long-term warranty insurance product.” -Doug Downing Canal Barge

14. Proprietary and Confidential Risk Managers’ Quotes To manage the cycle, we do three things—have healthy self-insured retentions, seek good results and seek a long-term relationship with our insurers, broker, vendors and even the outside firms that provide legal services. -Spencer Murphy, Canal Barge You pay a bit for this, but the upside is that it helps you avoid significant volatility. … The improved visibility is worth it from a budgeting and expense allocation standpoint. -Michael Alvarez First Wind Energy

15. Proprietary and Confidential Risk Managers Quotes To me, our underwriters are an extension of our risk management team. They’re here to help us improve our business, to help this company grow and prosper. They do this by assisting us to reduce losses and, where feasible, to contain them. -Matt Wallace Huntsman Corporation “You need to put a face on the person you’re dealing with. Price and capacity are important, but the responsiveness to claims is more important, and that is where a personal relationship comes into play. -Michael Alvarez First Wind Energy

16. Proprietary and Confidential “Eyeing an Uncertain Future” Current and intruding concerns Supply chain disengagement Disaster planning and recovery Sleepless nights Closer collaborations Coverage considerations The value of long-term relationships Added Value Services - Risk engineering