Aon’s 11 th Energy Insurance Training Seminar

1. Aon’s 11th Energy Insurance Training Seminar OIL 1 – Coverage and Blending with Market Programmes Balint Pinter & Mike Parry

2. OIL – Oil Insurance Limited • OIL insures physical damage to property, well control and 3rd party pollution liability • 52 member companies (as at July 2011) • One of the broadest policy forms currently available • OIL’s policyholders are also shareholders, who have energy operations. • The Company commenced operations on January 1, 1971 with 16 shareholders • at a time when the Commercial Market Ceased to Provideadequate coverages and big enough limits • Low-cost provider as rates based on pure loss cost • Critical mass to achieve spread of risk and financial strength/stability. • Provides hedge against a frequently volatile commercial insurance market • Generates long-term benefits for shareholders • Unique loss recovery mechanism

3. OIL – Advantages and Disadvantages • Advantages • Mutual – “owned” by its members • Global cover in all terrritories - no OFAC problems • Profit not main driving force e.g. lower cost of capital • Dividends may be returned to policyholders directly or as rate subsidies • Ability to provided “non – standard” covers e.g. pollution, terrorism • No sub-limits for Natural Catastrophe (Earthquake) • No differential for members with a bad loss record Disadvantages • No differential for members with a good loss record • Long term pool share obligation including exposure to GOM Wind • Cost of withdrawal dependent on historic pool performance • Total Withdrawal premium system

4. OIL - Risks Insured vs. Excluded Risks Insured • Physical Damage • Replacement Cost Value • Actual Cash Value Well control, including restoration and redrilling • Pollution Liability • Non gradual (sudden & acc.) • 40/120 days Terrorism Construction Cargo

5. OIL’s Mutual Structure • Basic structure similar to any other corporations: • Shareholders, Board of Directors, Executive Committee, Officers & Staff • Major differences: • Shareholders are the customers (Insureds) • Directors are elected from shareholder body • Investment companies directed by a separate board, which includes senior financial officers from major shareholder companies. • No underwriting per se - each policyholder treated equitably. • All shareholders pay same rate. • One standard policy form for all shareholders.

6. Historical Hurricane Losses

7. Hurricanes - Past Payout Patterns *Payments Scaled for Aggregation Limit

8. How do I join OIL? - Eligibility Criteria • Energy Company must have at least 50% of either (1) Gross Assets or (2) Annual Gross Revenues derived from “Energy Operations¹”. • A minimum of $1 Billion of Gross Assets (PP&E and book value of Inventories). • A minimum credit rating of either “BBB-” (S&P) or “Baa3” (Moody’s). • Companies without external credit ratings can obtain a “shadow rating” or will be subject to financial analysis by OIL staff and may be required to post acceptable security. • 1) As defined in the OIL Shareholders’ Agreement.

9. Eligibility Criteria (Cont’d) • Acceptable 10-year loss history. • Business operations that represent an appropriate spread of risk and “fit” within a mutual framework. • Demonstrated track record of maintaining world-class health, environment and safety standards. • All applications must be approved by OIL Management. • Members whose credit rating falls below established minimum criteria must post security.

10. OIL Members – as at July 2011

11. OIL Membership byHeadquarter Location Number of Shareholders @ 01 July 11 = 52

12. Membership “Count” by Industry Segment

13. Programme option - Limit Structures 100% coverage from OIL Retro or Flat Premium - $100MM Limit Standard Premium - $150MM Limit Policyholder Deductible

14. Limit Structures 60% coverage from OIL Standard Premium - $150MM Limit Self Insured or Com’l Mkt Placement Policyholder Deductible

15. Limit Structures $250MM Part of $750MM Retro or Flat Premium - $100MM Limit Standard Premium - $150MM Limit Commercial or Self Insured - $500MM Limit Policyholder Deductible

16. Net Incurred Losses since 1972 by Geographic Region of Physical Loss Expressed in millions of U.S. dollars * untrended

17. OIL Historical Losses since 1972by Industry Sector

18. Unmodified Gross Assets by Business Sector Total Unmodified Gross Assets @ 01-Jan 2011 = >$2BN* Other 3% * Pharmaceutical assets represent .01%

19. Weighted Gross Assets by Business Sector WGA by Industry Segment WGA by Industry Segment *Total WGA $1,082B *Total WGA $1,308B

20. OIL QUESTIONS ? Aon’s 11th Energy Insurance Training Seminar