STATE OF THE MARKET JANUARY 1, 2014 PROPERTY REVIEW

Agenda

Overview Market Drivers US Overview Quote and Firm Order Behavior Pricing and Structures Market Capacity Renewal Summary & Outlook

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Property Catastrophe Renewal Overview

Pricing & Capacity

Rates on line fell significantly in nearly all regions and business segments Global ROL Index fell 11% Fi orders Firm d were generally ll very aggressive as compared to quotes Pricing was impacted by selection of coverage g changes g and historical factors Capacity was abundant even at aggressive pricing

Coverage
In an increasingly client-centric environment effective solutions were sourced through a combination of products and providers id Individual company priorities impacted how coverage changes were tailored Many y companies p ultimately y focused strictly on price, not changes in coverage

Market Drivers
Abundant supply Near record capital estimated at USD322 billion Li ht global Light l b ll loss activity ti it Near USD40 billion as compared to ten-year average of USD60 billion While much of the newer capital focused on peak catastrophe zones, its presence spurred competition globally

Renewals were characterized by declining pricing and coverage innovation

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Regional Rate on Line Index at January 1, 2014

Data points do not reflect pricing relativities between geographies.

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MARKET DRIVERS

Market Drivers Global Catastrophe Insured Losses: 1970 2013

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February 13, 2014

Market Drivers Quarterly Loss Activity: 2011 2013

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Market Drivers Distribution of Global Catastrophe Insured Losses: 2011 2013

Distribution of Loss 2011

Distribution of Loss 2012

Distribution of Loss 2013

North America contributed 64% of global loss from 1980 2010; however two of the last three years were driven by international losses
GUY CARPENTER February 13, 2014

Market Drivers Evolution of Dedicated Reinsurance Sector Capital: 2012 YE 2013

1. 2012 year 1 year-end end dedicated sector capital estimate was produced jointly by Guy Carpenter and A A.M. M Best Best. All subsequent estimates are solely Guy Carpenters.

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Market Drivers Alternative Capital

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Market Drivers Catastrophe Bond Issuance and Capital Outstanding: 1997 YE 2013

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U.S. Overview

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U.S. Property Catastrophe Renewal Overview

Robust capital and light catastrophe loss activity combined to create significant pricing and coverage pressure.
US R Rate t on Li Line i index d d decreased d 15% The market focused on tailoring solutions and adding value Diversity of placements increased as companies identified their own priorities and pursued structures that best met their combination of coverage and pricing goals Common areas of coverage focus: Extended hours clause Full terrorism coverage excluding NBCR Contractual agreement to advance claims payments Multiple year coverage Improved reinstatement terms Price tended to be the priority for many companies
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QUOTE AND FIRM ORDER BEHAVIOR US PROPERTY CATASTROPHE

Summary of Quote and Firm Order Behavior at January 1, 2014

Reinsurer quoting behavior was relatively stable and largely in line with trends seen for 2013 renewals Relationship of firm order issuance to quotes by program was more aggressive compared to January 1, 2013
Firm orders were issued at an average discount of 9% below the average quote (2013: 7% discount) Firm orders were more aggressive in general on nationwide and larger programs

In general, reinsurers were willing to support renewal or increased lines at pricing levels below initial quotes q

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PRICING AND STRUCTURES US PROPERTY CATASTROPHE

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Summary of Pricing and Structure at January 1, 2014

Risk adjusted pricing declined by 10% to 20% on average
Programs viewed as supporting larger existing margins (such as nationwide carriers) experienced larger decreases Programs with loss activity or development on prior year losses and smaller regional programs viewed with thinner margins experienced smaller decreases

Majority of programs renewed with similar structures, with no clear trends in structure changes

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US Rate on Line Index at January 1, 2014

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1/1/14 represents a 15% decrease from 1/1/13 and a 9% decrease from the 2013 full year calculation.

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Typical US Property Catastrophe Risk Adjusted Price Change by Peak Zones

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Significant variation in individual treaty renewal results due to a variety of factors including loss activity and historical factors.

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MARKET CAPACITY US PROPERTY CATASTROPHE

Summary of Market Capacity at January 1, 2014

Preliminary analysis is based on finalized programs as of 1/13/2013, data is included for a majority of the capacity placed at January 1, 2014 Overall placed capacity on renewal traditional property catastrophe programs reduced slightly (~2%) year over year compared to January 1, 2013 Overall authorized capacity on renewal programs increased significantly (~8%) year over year compared dt to January J 1 1, 2013 Percentage of authorized capacity utilized for placements decreased significantly with 74% taken up at January 1, 2014 vs 85% at January 1, 2014 Non traditional capacity did not have a significant direct impact on traditional property catastrophe programs, representing a small portion of total authorized/signed capacity Impact more substantial on cat aggregate and RPP programs where non traditional capacity represented approximately 25% of capacity

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Excess Capacity Continued to Increase Despite Significant Price Reductions

30.0%

25 0% 25.0% 23% 20% 19%

26% 23%

Total U Unutilized Capa acity

20.0%

15.0% 14% 13% 10.0% 8% 7% 5.0% 6% 8% 7% 7% 13%

15%

1% 0.0%
January February 2011 March 2011
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April 2011

May June 2011

July 2011

January February 2012 March 2012

April 2012

May June 2012

July 2012

January February 2013 March 2013

April 2013

May June 2013

July 2013

January 2014*

*Preliminary

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CONCLUSION: RENEWAL SUMMARY AND OUTLOOK

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Renewal Summary & Outlook

US Insurers saw significant risk adjusted price reductions in the cost of cat reinsurance at January 1, 2024 Program structures and overall market demand for coverage was relatively stable year on year Insurers had greater ability to customize the terms of coverage to suit their unique risk management needs Notwithstanding lower risk adjusted returns, overall supply of capacity from reinsurers increased year on year Resulting g increase in excess capacity p y due to imbalance of supply pp y & demand The trends above are expected to persist for the balance of 2014 resulting in lower risk adjusted pricing for Q2 cat renewals Florida renewals in June will be an important milestone for the market: - Will YOY rate decreases diminish as we lap rate reductions of June 2013? - Will YOY rate decreases continue driven by competition amongst reinsurers?

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Important Disclosure
Guy Carpenter & Company, LLC provides this report for general information only. The information and data contained herein is based on sources we believe reliable, but we do not guarantee its accuracy, and it should be understood to be general insurance/reinsurance information only. Guy Carpenter & C Company, LLC makes k no representations i or warranties, i express or i implied. li d Th The i information f i i is not i intended d d to b be taken k as advice d i with i h respect to any individual situation and cannot be relied upon as such. Please consult your insurance/reinsurance advisors with respect to individual coverage issues. Readers are cautioned not to place undue reliance on any calculation or forward-looking statements. Guy Carpenter & Company, LLC undertakes no obligation to update or revise publicly any data, or current or forward-looking statements, whether as a result of new information, research, future events or otherwise. The rating agencies referenced herein reserve the right to modify company ratings at any time.

Statements concerning tax, accounting or legal matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants and may not be relied upon as tax, accounting or legal advice, which we are not authorized to provide. All such matters should be reviewed with your own qualified advisors in these areas. This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Guy Carpenter & Company, LLC, except that clients of Guy Carpenter & Company, LLC need not obtain such permission when using this report for their internal purposes. The trademarks and ser service ice marks contained herein are the propert property of their respecti respective eo owners. ners 2013 Guy Carpenter & Company, LLC All Rights Reserved