ENERGY MARKET UPDATE

1. ENERGY MARKET UPDATE

2. MARKET REVIEW SUPPLY FACTORS Number of Insurers Capacity Available Profitability Impact of Losses Insurance Company Regulatory Changes DEMAND FACTORS Company M&A Company Risk Appetite Quality of Risk Oil and Gas Company Regulatory Changes

4. NUMBER OF ENERGY INSURERS WORLD-WIDE

6. SELECTED MAJOR (RE)INSURER RESULTS, 2009

9. Worldwide upstream losses excess of US$1 million 2000-2009( adjusted for inflation)

10. Lloyd’s upstream property/OEE incurred ratios, 1993-2009 (as at Q1 2010)

11. BUT WAIT…

12. AND THEN…. On April 20, 2010, an explosion and fire occurred on the offshore drilling rig Deepwater Horizon, which had been drilling an exploratory well in approx. 5,000 ft of water in the Gulf of Mexico, 52 miles SE of Venice, Louisiana. The platform subsequently sank, with 11 crewmembers missing, and the uncompleted well leaking oil.

13. SUMMARY OF THE LOSS Failed “blowout preventer” and “cement issues” on ultra deep well head in Gulf of Mexico 11 employees killed, rig lost and 5,000 barrels of oil per day still flowing from the broken well-head Potentially largest ever offshore pollution event, expected to eclipse Exxon Valdez Total costs initially estimated at up to USD 12.5bn Largest element of the overall loss is Third Party Liability, estimated at up to USD 12bn for pollution clean up costs and damages Well operators BP are liable for cost of clean up under US law

14. INSURED LOSSES SIGNIFICANT, BUT MANAGEABLE The loss is a major event for the energy insurance market Known estimated Insurance losses are totaling about $1.5b The risks are well-syndicated, with the insured loss spread across a broad range of insurers and reinsurers on a global scale Since BP is self-insured, a large portion of the losses will not hit the insurance industry…..it could have been worse. BP said it will assume liability for all legitimate claims caused by the oil spill. Primary liability for clean up costs will be with BP consortium. So why all the fuss?………

16. THE SITUATION IN NOVEMBER 2010 No further reductions contemplated for the Offshore, However Onshore remains very competitive Rate increases particularly sought for offshore drilling contractor business Sudden flow of requests for brokers to provide pricing and cover for increased Operator Extra Expense and liability programmes Newly launched Chrysalis product becoming more attractive to buyers: US$100 million of unscheduled cover for Assured’s interest Insurers insisting that recent losses have fundamentally changed the market - however, “market shaping” is probably more accurate: Increased underwriting diligence Assureds re-examine limits/coverages purchased Regulators review Certification of Financial Responsibility (COFR)

17. WHAT NEXT? Completion of Gulf of Mexico hurricane season – No losses… Underwriters seeking support for 2011from both management and reinsurers Insurers seek fresh reinsurance terms for 2011, mindful of: Solvency II increased capital requirements Any directive from Lloyd’s Franchise Board – who are in a sceptical mood…

21. Energy Insurer Capacities and Average Rating Levels, 1993-2010 (Excluding Gulf of Mexico Windstorm)

23. Downstream Operating Underwriting Capacities, 2000-09 (Excluding Gulf Of Mexico Windstorm)

24. Worldwide downstream losses excess of US$1 million 2000-2009( adjusted for inflation)

25. Lloyd’s Downstream Energy Property Incurred Ratio, 1993-2009 (AS AT Q1 2010)

26. ENERGY MARKET REVIEW MARCH 2010 Chartis remains a solid player CV Starr becoming more prominent Talbot/Validus maintain momentum Berkshire Hathaway now enters market on quota-share basis Torus increases capacity Zurich start to flex their muscles RSA purchase of GCAN Other markets maintain their position

28. DOWNSTREAM MARKET OUTLOOK More flexible products a possibility Possibility of more competition from upstream market negated by Deepwater Horizon and other losses Buyers still need to demonstrate risk quality: Ammunition still required for insurers to lower rates Buyers may need to look to their broker to change the dynamics of their programme: Re-layering will allow them to take full advantage of an increasingly competitive market

32. IN SUMMARY… Those who will be affected least will be those companies who: Require relatively low policy limits Are not involved in deep water drilling activities Present little or no natural catastrophe exposure Can demonstrate a good track record Have developed positive relationships with key leading insurers Those who will be affected most will be those companies who: Have programmes recognised as “capacity risks” Are exposed to significant natural catastrophe risks Have a poor track record Are involved in offshore (deep water) drilling activities: More cover required for Control of Well and Liability Have “shopped around” during recent market softening and whose programmes are artificially cheap

35. MAJOR UPSTREAM LOSSES 2009

36. North America Downstream Losses Excess of US$10 million recorded to date, 2009

37. International Downstream Losses Excess of US$10 million recorded to date, 2009

38. MAJOR UPSTREAM LOSSES 2010

39. 2010 LOSSES - GLOBAL