DOWNSTREAM INSURANCE MARKET UPDATE

Justin BlackmoreManaging Director, Global Downstreamand Chemicals, Willis Natural Resources

IN 15 MINUTES…

n Capacity

n Losses

n Profitability

n The Outlook for 2015

n Market Issues

CAPACITY (USDM)

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

International

North America Estimated “realistic” market capacities

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2014 DOWNSTREAM LOSSES (EXCESS OF USD10M)

Source: Willis/Willis Energy Loss Database as at January 6 2015 (figures include both insured and uninsured losses)

A PROFITABLE PORTFOLIO?

Source: Willis/Willis Energy Loss Database as at January 6 2015 (figures include both insured and uninsured losses)

ARE THE MAJOR COMPOSITES STILL MAKING MONEY?

Company Combined Ratio on Property/Casualty business 2013:

AIG 98.4%

Swiss Re 83.3%

Munich Re 92.1%

Zurich 95.5%

Liberty Global Specs 95.5%

Source: Company websites

THE OUTLOOK FOR 2015

0

1,000

2,000

3,000

4,000

5,000

6,000

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

0

20

40

60

80

100

120

Onshore Capacities Average Composite Percentage of 1992 rates

USDmEstimated Average Rate Index

(1992=100)

Is there any escape from the laws of supply and demand?

Downstream Capacity versus Rating Levels, 1993 – 2014(Excluding Gulf of Mexico Windstorm)

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Source: Willis

ISSUES FACING THE MARKET TODAY

n Regional v Global Competition

n Resolution of Complex Claims

n Value of Risk Knowledge/Understanding

n Value of Relationships

AND..

n Continuation of Softening Market Trend:

• Fresh leadership options

• Need for Differentiation

• Consideration of Fresh Risk Transfer Products