CRL UNDERWRITING MANAGEMENT MEETINGProperty ConsiderationsNOVEMBER 16, 2011

Greg Mann

Managing Director, Marsh USA

Lindsay Grimes

Assistant Vice President, Marsh USA

Atlanta, GA

2MARSH

Property SchedulesDemographic Information

• Basic description of the location of the property– Unique Location Identifiers

Location Number Location Name

– Full Address Street Number Street Name City County State Zip Code Country

– Geographic Location Longitude Latitude

Location Number

Location NameAddress Number

Address City County State Zip Code Longitude Latitude Country

1 Quorom Center 323 W. Jones Street Raleigh Wake NC 27603 12°00'38"W 42°67'18"N United States

3MARSH

Property SchedulesValues

• Detailed breakdown of values by asset class

– Building

– Contents (Personal Property)

– Equipment

– Vehicles

– Business Income

• Additional asset classes added based on exposure

Bldg $ Contents $ Equipment $ Vehicles $ BI $ Total

45,000,000$ 21,000,000$ 12,000,000$ -$ 8,000,000$ 86,000,000$

4MARSH

Property SchedulesPrimary Characteristics

• Basic COPE (Construction, Occupancy, Protection, Exposure) information regarding the risk of the property

– Occupancy Code

– Construction Class

– Construction Description

– Year Built

– Square Footage

– Number of Stories

– Basement

– Number of Buildings

– Flood Zone

– Sprinkler Type

ATC Occupancy ClassATC

Occupancy Code

Unknown 0

Permanent Dwelling (single family housing) 1

Permanent Dwelling (multi family housing) 2

Temporary Lodging 3

Group Institutional Housing 4

Retail Trade 5

Wholesale Trade 6

Personal and Repair Services 7

Professional, Technical and Business Services 8

Health Care Service 9

Entertainment and Recreation 10

Class CodeFrame 1Joisted Masonry 2Non-Combustible 3Masonry Non-Combustible 4Modified Fire Resistive 5Fire Resistive 6

Occupancy Code

ISO Construction

Code

Construction Description

Year BuiltSquare Footage

Number of Stories

BasementNumber of Buildings

Flood Zone

Finished Floor

Elevation

Sprinkler Type

23 4 Masonry, Non-Combustible

1983 85,000 13 Yes 1 A 12 ft. Wet

5MARSH

Property SchedulesSecondary Characteristics

• Detailed COPE (Construction, Occupancy, Protection, Exposure) information regarding the risk of the property

– Building Foundation

– Construction Quality

– Roof Framing

– Shape of Roof

– Type of Roof Covering

– Year Roof Covering last Replaced

– Building Maintenance

– Exterior Cladding

– EIFS

– Wind Pool Eligibility

– Distance to Saltwater

Building Foundation

Construction Quality

Roof Framing

Shape of roof

Type of Roof

Covering

Year Roof covering last

replacedBuilding

MaintenanceExterior Cladding EIFS

Wind Pool Eligibility

Distance to Saltwater

(miles)1-Engineered 1-Certified

Design1-Poured concrete

4-Flat 1-Concrete Fill

2008 1-Maint Enforced

1-Reinforced Mas/Concr

No No 100

6MARSH

Property SchedulesRMS Modeling

• RMS 11.0 Edition

– Released February 28, 2011

– Most carriers have now implemented

– Major Changes

Tenfold increase in damage estimates caused by wind

Inland Filling Model revisions - higher wind speeds extending further from the coast

Increased building vulnerability based on detailed analysis of historical claims data

More emphasis on construction quality, building codes and code enforcement

Research on the durability of roof systems and resulting roof performance

Separate storm surge modeling that simulates surge and wave activity as it relates to storm size, intensity, and speed, as well as geographic features of exposed areas

– Typical range of change in results is between plus 20 percent to plus 100 percent for wind

– New model assumes worst case for missing information

7MARSH

• Advantages of adding builder’s risk project to primary property policy

– All property exposure under one policy

– Control terms and cost (remove contractor’s overhead and profit)

– Build in coverage for existing structure for renovations or additions

• Disadvantages of adding builder’s risk project to primary property policy

– Shared limits

– Greater risk of third party controlling operations (contractors are difficult to control/monitor)

– Potential limited coverage for soft costs and delay in start-up

– Potential for coverage gap based on annual policy term rather than construction period term

– Potential higher deductibles

– Non-expert underwriters may improperly rate the exposure (difficult to underwrite)

Builder’s Risk Advantages versus Disadvantages

8MARSH

• Many appraisals now provide historical replacement cost figures

• Current historical property valuation wording– On historical property, valuation will be based upon the following requirements:

The Named Insured shall provide written notice to the Company , which specifically identifies where the property is located, when it was built, it’s total square footage with an attached appraisal based upon reproduction value that was conducted within the past five (5) years.

At the time of loss, the basis of valuation for historical property, when the Named Insured has not complied, will be replacement cost as defined in K. below. Where the Named Insured has complied with the requirements, the basis of valuation will be Reproduction Cost, if not replaced, at actual cash value. “Reproduction Cost” is defined as the cost to repair, rebuild or replace with material of like, kind and quality compatible to those originally used, including the cost of skilled labor and/or authentic materials necessary to restore the Property as nearly as possible to its original condition.

• Additional products available for historical properties and fine arts

Historical Valuation