PROPERTY CLAIM SERVICES Florida Market Challenges to New Insurers

1. PROPERTY CLAIM SERVICESFlorida Market Challenges to New Insurers May 2, 2011

2. FLORIDA MARKET OVERVIEW • Approx. 4.4M policies • $8B in annual premiums • 91% Homeowners • 8% Condo Owners • 1% Tenants

3. Florida Hurricane History

4. Governor Scott’s Initiatives • Return Property Insurance to private competitive markets in Florida. • Eliminate Citizens Insurance or return it to actuarially sound rates. • Resolve sinkhole claim fraud issues • Address mitigation discount fraud

5. Current Legislation Bill S.B. 408, addresses a number of claim cost drivers, including: • sinkhole claims • public adjusters • replacement-cost coverage issues • claim time lines • and more.

6. Being Different • Management team with proven success in Florida property insurance • Prior start-up company experience • Agency relationships and market knowledge • Exceptional underwriting and reinsurance expertise • Competitive advantages of new insurer • Nolegacy book • No tail exposure to sinkhole claims • Start with adequate rates • No tail of Public Adjuster claims • Improved legal climate for claims settlement

7. Timing is Important • Florida property market is finally ideal • Regulation and legislation will be favorable • Regulators/ public policymakers open market solutions • Citizens change is creating market opportunities • Market conditions working against national carriers • Rating agencies dictate need for coverage of tail • Regulatory relationships strained • Unable to significantly improve quality of portfolios • Many are leaving creating market opportunities

8. Underwriting • Analyzed the portfolio and individual risks based on profitability , loss potential and premium • Risks evaluated on year and type of construction, local hazard information, and construction characteristics that have mitigation and premium impacts • Performed “what-if” scenarios by analyzing the effects of hurricanes on the portfolio and individual policies • Screen enclosure endorsement, frame only coverage • PML to premium ratio measured on individual risks

9. Reinsurance, Reinsurance • Claims plays a vital role in cost of reinsurance • Claims working with Underwriting to define, analyze portfolio • Attritional claim handling is critical • Catastrophe claim handling life blood

10. Capital is King • Need much more than minimum required by state • Need to continually add to capital during the first 3 years of existence • Capital is needed to keep ratio’s in line and write business • Need surplus for reinsurance retention if wind blows

11. Keys To Underwriting Profit • Execute sound, effective claims and underwriting processes • Define target portfolio using best technical tools • Manage catastrophe risks with individual policy selection, geographic spread, and reinsurance • Address classes of risks and rate adequacy with rate filings • Agency training and policy management system edits • Establish responsive, continually reviewed and executed claim practices with proper policy language • Avoid Sinkhole exposure areas.

12. Back to Basics • Communication between departments • Great fundamental claim handling • Proper rates and underwriting • Learn your lessons and adjust • Understand sweet spots around the state • Spread the risk