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AIRLINE RATE DYNAMICS IN THE INTERNATIONAL MARKET 2002 – 2009

AIRLINE RATE DYNAMICS IN THE INTERNATIONAL MARKET 2002 – 2009 . RUSSIAN AVIATION INSURANCE CONFERENCE 9 December 2009. 2009 TO DATE. Hull & Liability General Trends – 2009 Market. Losses currently totals US$2,240m – the highest on record*

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AIRLINE RATE DYNAMICS IN THE INTERNATIONAL MARKET 2002 – 2009

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  1. AIRLINE RATE DYNAMICS IN THE INTERNATIONAL MARKET 2002 – 2009 RUSSIAN AVIATION INSURANCE CONFERENCE 9 December 2009

  2. 2009 TO DATE 2009 Airline Insurance Market Review Private and Confidential

  3. Hull & Liability General Trends – 2009 Market • Losses currently totals US$2,240m – the highest on record* • Premium currently totals US$1,165m with large volume of premium still to renew • This will result in insurers making a loss in 2009. • Insurers expenses estimated to be in the region of US$300m – Includes reinsurance and other operating expenses • Third straight loss making year • Insurers committed to continue increasing premium levels in 2009 and 2010 * Excluding September 11th, 2001 losses. 2009 Airline Insurance Market Review Private and Confidential

  4. Hull & Liability2009 Net % Premium Movements +17% Airline Insurance Market Review Private and Confidential December 2009

  5. Hull & Liability2009 Hull Rate % Movements +15% Airline Insurance Market Review Private and Confidential December 2009

  6. Hull & Liability2009 Net Liability Rate per Passenger % Movements +18% Airline Insurance Market Review Private and Confidential December 2009

  7. World Wide Airline Hull & Liability Premium and Claims on a Calendar Year Basis2002 – 2009 (Net Leaders Terms US$M) 7 Year Totals (2002-2008) Premium: US$17,120m Claims (inc attritional): US$9,096m Profit to the market: US$8,024m Loss Ratio: 53% *Premium includes all known airlines and an estimate for untracked airlines, and is based on Net London Lead Terms; it is subject to change as more information becomes available **Claims include the estimated figure for attritional losses Airline Insurance Market Review Private and Confidential December 2009

  8. 2002 – 2009 Airline Hull Losses - In Excess Of US$10m (Excluding Hull War) Hull Reserves US$ No of Losses Airline Insurance Market Review Private and Confidential December 2009 Page 7

  9. 2002 – 2009 Airline Losses with more than 50 Fatalities (Excluding War Losses) No of Losses Liability Reserves US$ Airline Insurance Market Review Private and Confidential December 2009 Page 8

  10. Hull & Liability2002 - 2009 Net % Premium Movements Airline Insurance Market Review Private and Confidential December 2009

  11. Hull & Liability 2002 - 2008 AFV Airline Insurance Market Review Private and Confidential December 2009

  12. Hull & Liability 2002 - 2008 Passenger Numbers Passengers Airline Insurance Market Review Private and Confidential December 2009

  13. CONCLUSION • Since 2002 • Fleet Values up 27.75% • Passenger numbers up 45.6% • Hull losses stable • LiabiIity awards erratic, dependant upon Nationalities involved, where cases brought • 2008 Premium only 52% of 2002 level • Average yearly loss since 2002 = USD 1.4B plus attritionals of USD450M ? Plus R/I costs USD300M ? • What level of premium do the market need to be reasonably profitable ?

  14. Selection Criteria used Premium/Index percentage change derived from Airlines renewing with Average Fleet Values of US$100 million and greater. Comparisons made from annual renewal figures year-on-year. Liability rate is calculated as premium per passenger carried. However the basis of liability rating for Airlines varies and can be based solely or on a combination of passengers carried, departures, RPK’s, passenger seats or per aircraft. It should be noted that due to the relatively small sample of renewals in some months, that the comparisons with previous years can be distorted by the renewal of a small number of major risks and should be treated with caution. • Willis Limited Willis Limited, Registered number: 181116 England and Wales Registered address: 51 Lime Street, London, EC3M 7DQ Lloyd's broker authorised and regulated by the Financial Services Authority. This review is intended to inform our clients and others of issues and developments within the aviation insurance markets. Whilst every effort is made to ensure the accuracy of the information contained herein, Willis Limited accept no responsibility for any errors or omissions in the information or its consequences. 2009 Airline Insurance Market Review Private and Confidential

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