1 Insurance Specialty Group LLC Introduction to the Asset Protection Program (“APP”) for Residential General Contractors 4501 Circle 75 Parkway, Suite F6200 | Atlanta, GA | (678)

2 Asset Protection Program History Insurance Specialty Group LLC (“ISG”) is a MGA underwriting residential contractors on behalf of AmTrust Financial (A : XIII) for CGL and AXIS Insurance Company (A+ : XV) for Builders Risk. Insurance Specialty Group was formed in 1998 and has underwritten over $700 million of CGL and Builders premiums for residential contractors ISG underwrites many builders with annual home starts ranging from 1 to over 2,000. APP is offered nation-wide using either admitted or non- admitted paper.

3 Asset Protection Program History The APP combines the risk management of a third-party new home warranty, strong sales and subcontractor agreements with broad form CGL and Builders Risk insurance ISG’s inception to date CGL ultimate loss ratio under 50%, proving the APP’s risk management and loss control features protect the builder against frivolous construction defect losses ISG’s inception to date Builders Risk loss ratio under 20% These favorable loss ratios allow ISG to be very creative and offer the most competitive terms and conditions

4 Asset Protection Program Acceptable Exposures The APP can provide comprehensive CGL and Builders Risk Insurance for the following types of construction subject to a maximum $20 million construction value per foundation: –Single Family –Multi-family - fee simple or condo –Mixed Use – commercial on 1 st floor and residential above –Apartments - including those with condo conversion potential –Small Commercial –Residential new home REO purchased from a Bank– ISG can cover prior work subject of inspection

5 The Asset Protection Program Features and Benefits of APP Written warranty contract between builder and purchaser defining the builders obligations and liabilities Purchaser accepts warranty in lieu of implied warranty laws which are very dangerous APP maintains insured’s construction defect liabilities in contract law vs. tort law (litigation) Homeowner conciliation services for 10 years Mandatory arbitration on construction defects for 10 years Proven Sales and Subcontractor agreements provided to insured Insured Structural Defect coverage either through the Warranty (first dollar) or the CGL policy subject to CGL deductible

6 The Asset Protection Program Risk Management Requirements Insured must sign APP Specification Agreement before binding indicating their agreement to utilize/implement: ISG approved sale agreement ISG approved subcontractor agreements Obtain specified limits of subcontractor insurance Obtain additional insured endorsements 100% warranty usage on all homes sold during policy period

7 The Asset Protection Program Loss Control Reviews Accounts with Premium above $50,000 Confirm use of approved Sales and Subcontractor Agreements Compliance with ISG’s Subcontractor Endorsement Certificate review Use of Quality Control Checklists.

8 Review of Insurance Products

9 CGL Coverage Limits Available Bodily Injury & Property Damage Liability – Up to $5 million per occurrence, $5 million general aggregate, $5 million products completed operations aggregate Personal Advertising Injury Liability - $5 million per occurrence, $5 million general aggregate Medical Expenses - $5,000 any one person SIR’s up to $1 million for larger builders are available

10 Annual Practice Policy Admitted and Non-Admitted available Policy term is one year Competitive rates Provides full construction defect coverage including subcontractors’ work Warranty requirement – Insured or Builder Backed Construction Defect Endorsement is available which provides construction defect coverage for homes sold during the policy for 10 years or Statue of Limitation, whichever is less

11 Project or Project Wrap For construction projects with more than three homes in one location Policy period up to three years of construction term Endorsement providing construction defect coverage for homes sold during policy term for 10 years or Statue of Limitation whichever is less. Warranty requirement – Insured or Builder Backed PAY AS YOU SELL – Insured pays for Completed Operations Premium as homes are sold Advantage of Project Policies - One policy covers premise operations for three years and construction defect exposure up to ten years – Buy one policy and buy no other CGL insurance policy for the entire project

12 APP CGL Forms Use of CG Additional Insured's – Managers and Lessors, State or Political Subdivisions, Mortgagee, Assignee or Receiver and Lessors of Leased Equipment Subcontractors Requirement Endorsement – Charge premium for under insured or un-insured Exclusion - Exterior Insulation and Finish System Requirement Omissions Exclusion – Use of Warranty Limited Subsidence Exclusion – Excludes subsidence coverage for operations performed prior to inception of policy

13 Modified Blanket Builders Risk No reporting during annual policy period Exposure estimated at inception and audited at the end of the policy Premium for new starts and homes in inventory is pro- rated based upon actual months in inventory Significant premium reduction over competition due to proration of premium (30% projected savings) Standard Limits: $1.5M per structure / $5M per occurrence

14 Submission Requirement Sign Acord Forms for requested lines of coverage Five year of currently valued loss runs ISG’s Contractors Questionnaire Multiple Named Insured, if applicable Builder Risk Addendum Application

15 Review of Warranty Products

16 Warranty Products HBW is the leading provider of new home structural warranties in the country The HBW warranty offers the broadest warranty protection to the home builder and is fair to the homeowner The HBW warranty defines the builders legal liability of the residential contractor to the homeowner for the following: –One Year Workmanship – (Surety) –Two Years of Systems – HVAC, Electrical, Plumbing (Surety) –Ten Years of Framing and Foundation – ( Fully Insured)

17 Warranty Products HBW has Sales Representatives throughout the country. Agent is responsible for embracing and discussing with the builder the risk management features of the warranty. The HBW Sales Rep is responsible for selling and servicing the warranty. HBW Sales Reps are available to make joint calls to the builder either before or during the presentation of the CGL quote. HBW Sales Reps will provide leads to the agents on builders enrolled into the HBW program who are not in the APP.

18 Warranty Products Types of Warranty Products offered with each APP Product: –Fully insured 2-10 Warranty – Surety Coverage for 2 yrs and Framing and Foundation Structural Coverage for 10 years* –Builder Backed Warranty Uninsured warranty which is reasonably priced due to no insurance coverage. The CGL policy will provide coverage subject to deductible or SIR. –Structural Framing and Foundation Warranty – For commercial and apartment exposures with framing and foundation structural defect coverage for 10 years* *The 2-10 Structural Warranty provides coverage for subsidence/soil movement where many other structural warranties do not

19 Conclusion

20 Conclusion APP offers the comprehensive protection against construction defect claims and litigation Under the APP, the homebuilders legal construction defect obligations are captured in a contract (contract law) versus tort law (litigation). The residential homebuilder is protected against costly construction defect litigation by conciliation and the Federal Arbitration Act. APP provides tested sales and subcontractor agreements APP provides broad and competitive CGL and Builders Risk insurance