1. Terrorism Rating Overview Line of InsuranceProductDerivation Commercial PropertyLoss CostAIR Model + ISO Adjustment General Liability Commercial Auto Percentage Loadings To Current Loss Costs ISO Modeling Business OwnersCombination of Property and GL Other Lines (e.g. CIM, Farm) Refer to Company

2. Terrorism Rating Commercial Property AIR Loss Costs Conventional vs NBC International vs. Domestic Property Damage (Bldgs. vs. Contents) Exposure Base: per $100 of Total Value Geographic Detail: by County/City/Zip Code

3. Terrorism Rating Commercial Property AIR Results City/CountyRankLoss Costs (Bldgs. & Cont.) Manhattan1$.173 Chicago4.068 Seattle8.010 Marin County36.001

4. Terrorism Rating Commercial Property Geographic Tiers TierCities/Counties Approx. Loss Costs High HazardNYC, Chicago, SF, DC$.100 Medium HazardLA, Boston, Houston, Phil., Seattle.010 Low HazardRemainder of USA.001

5. Commercial Property Adjustments to AIR Loss Costs Insurance – to – Value – Divide by.80 Nuclear/Bio-Chemical – Multiply by 2.00 Federal Backstop Factor – Insurer Retained Losses  Total Terrorism Losses Loss Adjustment Expenses – Add 5% of Adjusted Losses – No Backstop Adjustment

6. The Terrorism Risk Insurance Act of 2002 – Lines of Insurance Commercial Lines, except: – Crop insurance – Mortgage guarantee – Financial guaranty – Medical malpractice – National flood insurance program – Life and health insurance

7. The Terrorism Risk Insurance Act of 2002 -- Duration Three years, lasting through 2005 First two years mandatory Third year optional

8. Terrorism Rating Impact of Federal Backstop Industry-Retained“Backstopped” Company Deductible 10% Over Deductible Direct Federal Share Federal Recoupment (via Policyholder Surcharges) Losses Above $100 Billion

9. The Terrorism Risk Insurance Act of 2002 - Structure Amount of an insurer’s deductible: – 2002 = 1% of prior year’s earned premium –2003 = 7% –2004 = 10% –2005 = 15% Annual cap – Losses in excess of $100 billion may not be covered; Congressional review

10. Federal Backstop Pricing Modeling Assumptions

11. Federal Backstop Modeling Calculation of Mean Expected Losses Annual Expected Comm. Prop. Terrorism Loss for P.D. (“Conventional” Losses from AIR Model = $1.5 Billion) Business Interruption Losses = 20% of P.D. Losses “NBC” Losses = 100% of “Conventional” Losses Alternative Markets = 20% of Total CP Market Terrorism Loss Allocation by LOB: Comm. Prop. = 50% of Total (All Lines total) = $1.5 Billion x 1.20 x 2.00 x.80 X 2.00 = $5.75 Billion

12. Federal Backstop Pricing Insurer Retention Percentages Program Year 1Program Year 2 Program Year 3 Geographic Tier 2003 2004 2005 High Hazard 40% 55% 70% Medium Hazard 75% 85% 95% Low Hazard 90% 95% 100% Average 47% 61% 74%

13. Commercial Property ISO Loss Costs

14. Terrorism Rating Commercial Property

15. ISO Terrorism Loss Costs Commercial Property “Tier 1” Jurisdictions  Reduction in Tier 1 Loss Costs  Cities sub-divided into Tiers 2 & 3  Habitational further reduced  25% cap on premium increase

16. WASHINGTON, D.C. IMPLEMENTED TERRORISM LOSS COSTS Tier Buildings Loss Cost Year 1 1.030 2.018 3.005

17. Potential Future Revisions Loss Costs Based on AIR Model – NBC – Domestic Terrorism Re-evaluation of current geographic rating approach – New Tiers – Tiers Within Cities Re-Pricing of Federal Backstop – Reflect Insureds Declining Coverage