Florida Property & Casualty Insurance Market Update

Trends, Challenges & OpportunitiesFlorida Chamber of Commerce Insurance Summit

Orlando, FLOctober 27, 2015

Download at www.iii.org/presentations

Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038

Tel: 212.346.5520 Cell: 917.453.1885 bobh@iii.org www.iii.org

2

Insurance Industry Financial Performance

2014 Was a Reasonably Good Year2015: A Repeat of 2014?

2

P/C Industry Net Income After Taxes1991–2015:H1 2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013 ROAS1 = 10.2% 2014 ROAS1 = 8.4% 2015:H1 ROAS = 9.2%

• ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.2% ROAS in 2014, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.

Sources: A.M. Best, ISO; Insurance Information Institute

$1

4,1

78

$5

,84

0

$1

9,3

16

$1

0,8

70

$2

0,5

98

$2

4,4

04 $3

6,8

19

$3

0,7

73

$2

1,8

65

$3

,04

6

$3

0,0

29

$6

2,4

96

$3

,04

3

$3

5,2

04

$1

9,4

56 $

33

,52

2

$6

3,7

84

$5

5,5

01

$3

0,9

72

$3

8,5

01

$2

0,5

59

$4

4,1

55

$6

5,7

77

-$6,970

$2

8,6

72

-$10,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

15:H

1

Net income fell modestly

(-12.5%) in 2014 vs. 2013

$ Millions

5

ROE: Property/Casualty Insurance by Major Event, 1987–2015E

* Excludes Mortgage & Financial Guarantee in 2008 – 2014. Sources: ISO, Fortune; Insurance Information Institute.

-5%

0%

5%

10%

15%

20%

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E

P/C Profitability Is Both by Cyclicality and Ordinary Volatility

Hugo

Andrew

Northridge

Lowest CAT Losses in 15 Years

Sept. 11

Katrina, Rita, Wilma

4 Hurricanes

Financial Crisis*

(Percent)

Record Tornado Losses

Sandy

Low CATs

Modestly higher CATs

9

Return on Equity by Financial Services Sector vs. Fortune 500, 2004-2014*

*GAAP basis. Sources: ISO, Fortune; Insurance Information Institute.

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

04 05 06 07 08 09 10 11 12 13 14

Fortune 500 P/C Insurers Life Insurers Commercial Banks(Percent)

Average: 2004 - 2014

Fortune 500: 13.9% Commercial Banks: 9.8% Life: 8.2%

P/C: 7.1%

Banks and Insurers Have Substantially Underperformed the Fortune 500 Since the Financial Crisis

-5%

0%

5%

10%

15%

20%

25%

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14

*Profitability = P/C insurer ROEs. 2011-14 figures are estimates based on ROAS data. Note: Data for 2008-2014 exclude mortgage and financial guaranty insurers.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.

1977:19.0%1987:17.3%

1997:11.6%

2006:12.7%

1984: 1.8%

1992: 4.5%

2001: -1.2%

ROE

1975: 2.4%

2013 9.8%

2015E 8.8%

Back to the Future: Profitability Peaks & Troughs in the P/C Insurance Industry, 1950 – 2015E*

1969: 3.9%

1965: 2.2%1957: 1.8%

1972:13.7%

1966-67: 5.5%1959:6.8%

1950:8.0%

1950-70: ROEs were lower in this period. Low interest rates,

low inflation, “Bureau” rate regulation all played a role

1970-90: Peak ROEs were much higher in this period while troughs

were comparable. High interest rates, rapid inflation, economic

volatility all played roles

1990-2010s: Déjà vu. Excluding mega-

CATs, this period is very similar to the 1950-1970 period

13

RNW All Lines by State, 2004-2013 Average:Highest 25 States

20

.5

18

.4

14

.6

14

.3

13

.4

13

.3

12

.3

12

.1

12

.0

12

.0

11

.7

11

.4

11

.1

11

.1

10

.9

10

.8

10

.7

10

.7

10

.5

10

.5

10

.3

9.9

9.8

9.8

9.6

9.5

02468

1012141618202224

HI AK VT ME WY ND VA ID NH UT WA SC MA NC OH DC CA OR RI WV CT IA NE SD MT MD

The most profitable states over the past decade are

widely distributed geographically, though none

are in the Gulf region

Source: NAIC; Insurance Information Institute.

Profitability Benchmark: All P/C

US: 7.9%

14

9.2

8.6

8.4

8.3

8.2

8.2

8.1

8.0

7.9

7.7

7.7

7.5

7.4

6.8

6.6

6.4

6.1

5.7

5.3

5.2

5.0

4.3

2.5

1.9

-6.9

-9.3

-14-12-10-8-6-4-202468

10

NM FL TX WI KS MN CO PA US AR IL IN AZ MO KY TN NV NJ GA NY DE MI AL OK MS LA

RNW All Lines by State, 2004-2013 Average: Lowest 25 States

Source: NAIC; Insurance Information Institute.

Some of the least profitable states over the past decade

were hit hard by catastrophes

15

19

.0

14

.3

14

.2

13

.9

13

.7

13

.5

12

.4

12

.1

11

.3

11

.3

10

.8

10

.7

10

.5

9.9

9.9

9.9

9.7

9.6

9.5

9.3

9.2

9.2

9.1

9.0

8.9

8.8

02468

10121416182022

HI ME DC ID VT ND AK NH IA WY OH MN WV AZ OR VA CA RI CO KS CT WI NM MT UT IN

RN

W P

PA

*Latest available.Sources: NAIC.

Hawaii was the most profitable state for auto insurers from 2004-2013

Return on Net Worth: Pvt. Passenger Auto, 10-Year Average (2004-2013*)

Top 25 States(Percent)

16

8.8

8.6

8.6

8.6

8.5

8.3

8.1

7.8

7.7

7.6

7.5

7.5

7.4

7.1

6.3

6.2

6.1

5.9

5.8

5.6

5.0

4.5

4.4

3.8

3.3

-2.5

-3

-1

1

3

5

7

9

NE

MD

SD

WA IL NY

MA

TX

PA

AL

AR

MO

SC

US

NC

TN NJ

DE

GA

KY

OK

MS FL

NV

LA MI

RN

W A

uto

Return on Net Worth: Pvt. Passenger Auto, 10-Year Average (2004-2013*)

*Latest available.Sources: NAIC

Michigan was the least profitable state for auto insurers from

2004-2013

(Percent) Bottom 25 States

17

42

.6

23

.6

21

.0

20

.9

20

.2

20

.0

19

.3

18

.4

17

.6

15

.9

15

.8

15

.6

15

.3

14

.7

14

.6

13

.8

13

.0

12

.2

11

.0

11

.0

10

.8

10

.7

10

.6

19

.0

18

.0

14

.00

5

10

15

20

25

30

35

40

45

50

HI DC DE RI NV CA SC VA AK OR MA NY VT WA UT ME MD CT ID NH NC AZ PA WY MI TX

RN

W H

O

*Latest available.Sources: NAIC.

Return on Net Worth: Homeowners Insurance, 10-Year Average (2004-2013*)

Hawaii was the most profitable state for home insurers from 2004-2013 due to the absence

of hurricanes during this period

(Percent) Top 25 States

18

10

.2

9.9

7.8

7.1

6.6

6.3

5.8

4.2

-0.3

8.0

6.0

-2.8

-3.3

-4.0

-4.3

-5.9

-8.2

-10

.2

-13

.1

-16

.0

-19

.6

-25

.8

-2.4

-2.4-0

.5

-0.4

-30

-25

-20

-15

-10

-5

0

5

10

15

WV NM ND IA NJ US MT WI IL SD NE FL CO MO OH KS IN AR KY MN GA TN AL OK LA MS

RN

W H

O

*Latest available.Sources: NAIC

Hurricanes Katrina and Rita made Louisiana and Mississippi the least profitable states for home insurers

from 2004-2013

Bottom 25 States(Percent)

Return on Net Worth: Homeowners Insurance, 10-Year Average (2004-2013*)

Profitability in Florida’s over the past decades is still

weighed down by the record storm losses of 2004/05

Profitability & Politics

2020

How Is Profitability Affected by the President’s Political Party?

15.10%

9.00%

8.93%

8.65%

8.35%

8.33%

7.98%

7.68%

6.98%

6.97%

5.43%

5.03%

4.83%

4.68%

4.43%

3.55%

16.43%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Carter

Reagan II

Obama II

Nixon

Clinton I

G.H.W. Bush

G.W. Bush II

Clinton II

Reagan I

Nixon/Ford

Truman

Eisenhower I

Eisenhower II

G.W. Bush I

Obama I

Johnson

Kennedy/Johnson

*Truman administration ROE of 6.97% based on 3 years only, 1950-52;. Source: Insurance Information Institute

OVERALL RECORD: 1950-2014*

Democrats 7.72%Republicans 7.85%

Party of President has marginal bearing on profitability of P/C insurance industry

P/C Insurance Industry ROE by Presidential Administration, 1950-2014*

-5%

0%

5%

10%

15%

20%

25%

50

52

54

56

58

60

62

64

66

68

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

BLUE = Democratic President RED = Republican President

Tru

man Nixon/Ford

Ken

ned

y/

Joh

nso

n

Eis

enh

ow

er

Car

ter

Reagan/Bush I Clinton Bush II

P/C insurance Industry ROE by Presidential Party Affiliation, 1950- 2014

Obama

. Source: Insurance Information Institute

23

Profitability and Growth in Florida P/C Insurance

Markets

Analysis by Line and Nearby State Comparisons

24

RNW All Lines: FL vs. U.S., 2004-2013

Source: NAIC.

-40%

-30%

-20%

-10%

0%

10%

20%

30%

04 05 06 07 08 09 10 11 12 13

US All Lines FL All Lines

P/C Insurer profitability in FL is above that of the US

overall over the past decadeUS: 7.9%FL: 8.6%

(Percent)

25

RNW PP Auto: FL vs. U.S., 2004-2013

Source: NAIC.

0%

2%

4%

6%

8%

10%

12%

14%

04 05 06 07 08 09 10 11 12 13

US PP Auto FL PP Auto

Average 2004-2013US: 7.1%FL: 4.4%

26

RNW Comm. Auto: FL vs. U.S.,2004-2013

Source: NAIC.

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

04 05 06 07 08 09 10 11 12 13

US Comm Auto FL Comm Auto

(Percent)

Commercial Auto profitability in FL is

generally below the US average

Average 2004-2013US: 9.2%FL: 4.7%

27

RNW Comm. Multi-Peril: FL vs. U.S.,2004-2013

Sources: NAIC.

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

04 05 06 07 08 09 10 11 12 13

US Comm M-P FL Comm M-P

(Percent)

Average 2004-2013US: 8.9%FL: 7.4%

28

RNW Homeowners: FL vs. U.S.,2004-2013

Sources: NAIC.

-200%

-150%

-100%

-50%

0%

50%

100%

04 05 06 07 08 09 10 11 12 13

US HO FL HO

(Percent)

Average 2004-2013US: 6.6%FL: -0.4%

Even With Returns Near 30 Percent for Much of

the Decade, Florida Insurers Lost Money on

Homeowners Line.

29

RNW Workers Comp: FL vs. U.S.,2004-2013

Sources: NAIC.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

04 05 06 07 08 09 10 11 12 13

US WComp FL Wcomp

(Percent)

Average 2004-2013US: 7.1%FL: 10.5%

All Lines: 10-Year Average RNW FL & Nearby States

2.5%

7.9%

8.6%

11.4%

-6.9%

5.3%

-10% -5% 0% 5% 10% 15%

South Carolina

Florida

US

Georgia

Alabama

Mississippi

Source: NAIC, Insurance Information Institute

2004-2013

Florida All Lines profitability is below the US average and above the regional average

PP Auto: 10-Year Average RNW FL & Nearby States

4.5%

7.1%

7.4%

7.6%

4.4%

5.8%

0% 2% 4% 6% 8%

Alabama

South Carolina

US

Georgia

Mississippi

Florida

Source: NAIC, Insurance Information Institute

2004-2013

Florida PP Auto profitability is

below the US and regional average

32

Top Ten Most Expensive And Least Expensive States For Automobile Insurance, 2012 (1)

RankMost

expensive statesAverage

expenditure RankLeast

expensive statesAverage

expenditure

1 New Jersey $1,219.93 1 Idaho $534.56

2 D.C. 1,154.91 2 South Dakota 556.51

3 New York 1,152.45 3 Iowa 561.26

4 Florida 1,127.93 4 North Dakota 576.08

5 Louisiana 1,112.53 5 Maine 582.43

6 Delaware 1,065.37 6 Wisconsin 598.84

7 Michigan 1,048.87 7 North Carolina 611.48

8 Rhode Island 1,034.50 8 Nebraska 616.78

9 Connecticut 986.73 9 Wyoming 618.81

10 Massachusetts 976.65 10 Kansas 632.07

(1) Based on average automobile insurance expenditures.

Source: © 2014 National Association of Insurance Commissioners.

Florida ranked 4th as the most expensive state in 2012, with an average expenditure for auto insurance of $1,127.93.

Comm. Auto: 10-Year Average RNW FL & Nearby States

4.7%

6.4%

9.2%

9.5%

3.7%

5.7%

0% 2% 4% 6% 8% 10%

South Carolina

U.S.

Georgia

Mississippi

Florida

Alabama

Source: NAIC, Insurance Information Institute

2004-2013

Florida Commercial Auto profitability is below the US and regional average

Comm. M-P: 10-Year Average RNW FL & Nearby States

-1.6%

7.4%

8.9%

10.5%

-6.4%

5.0%

-10% -5% 0% 5% 10% 15%

South Carolina

U.S.

Florida

Georgia

Alabama

Mississippi

Source: NAIC, Insurance Information Institute

2004-2013

Florida Commercial Multi-Peril profitability

is below the US average and above the

regional average

Homeowners: 10-Year Average RNW FL & Nearby States

-13.1%

-0.4%

6.6%

20.0%

-25.8%

-8.2%

-30% -20% -10% 0% 10% 20% 30%

South Carolina

U.S.

Florida

Georgia

Alabama

Mississippi

Source: NAIC, Insurance Information Institute

2004-2013

Florida Homeowners profitability is below the US average and above the regional average

36

Top Ten Most Expensive And Least Expensive States For Homeowners Insurance, 2012 (1)

Rank Most

expensive statesHO average

premium RankLeast

expensive statesHO average premium

1 Florida $2,084 1 Idaho $538

2 Louisiana 1,742 2 Oregon 567

3 Texas 1,661 3 Utah 580

4 Oklahoma 1,501 4 Wisconsin 631

5 Mississippi 1,314 5 Washington 648

6 Alabama 1,248 6 Nevada 674

7 Rhode Island 1,233 7 Delaware 678

8 Kansas 1,213 8 Arizona 691

9 Connecticut 1,160 9 Ohio 721

10 New York 1,158 10 Maine 741

(1) Includes policies written by Citizens Property Insurance Corp. (Florida) and Citizens Property Insurance Corp. (Louisiana), Alabama Insurance Underwriting Association, Mississippi Windstorm Underwriting Association, North Carolina Joint Underwriting Association and South Carolina Wind and Hail Underwriting Association. Other southeastern states have wind pools in operation and their data may not be included in this chart. Based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. Provides “all risks” coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.

(2) The Texas Department of Insurance developed home insurance policy forms that are similar but not identical to the standard forms. In addition, due to the Texas Windstorm Association (which writes wind-only policies) classifying HO-1, 2 and 5 premiums as HO-3, the average premium for homeowners insurance is artificially high.

Note: Average premium=Premiums/exposure per house years. A house year is equal to 365 days of insured coverage for a single dwelling. The NAIC does not rank state average expenditures and does not endorse any conclusions drawn from this data.Source: ©2014 National Association of Insurance Commissioners (NAIC). Reprinted with permission. Further reprint or distribution strictly prohibited without written permission of NAIC.

Florida ranked as the most expensive state for homeowners insurance in 2012, with an average expenditure of $2,084.

Workers Comp: 10-Year Average RNW FL & Nearby States

4.6%

7.3%

7.9%

10.5%

3.1%

7.1%

0% 2% 4% 6% 8% 10% 12%

Florida

Alabama

Mississippi

U.S.

Georgia

South Carolina

Source: NAIC, Insurance Information Institute

2004-2013

Florida Workers Comp profitability is above the US average and above the regional

average

38

All Lines DWP Growth: FL vs. U.S., 2005-2014

Source: SNL Financial.

2.3% 3.

4%

0.5%

-2.1

%

-3.3

%

0.0%

3.7% 4.6% 5.

5%

4.4%

10.3

% 13.9

%

-1.2

%

-9.1

% -6.5

%

1.3%

3.7% 5.

8%

4.3%

3.7%

-15%

-10%

-5%

0%

5%

10%

15%

20%

05 06 07 08 09 10 11 12 13 14

US DWP: All Lines FL DWP: All Lines

(Percent)

Average 2005-2014US: 1.9%FL: 2.6%

39

Comm. Lines DWP Growth: FL vs. U.S., 2005-2014

Source: SNL Financial.

2.6

% 4.6

%

-0.1

%

-4.0

%

-7.3

%

-2.5

%

5.1

%

5.1

%

6.1

%

4.3

%

12

.6%

15

.3%

-3.3

%

-11

.7%

-9.7

%

-3.4

%

2.2

% 5.6

%

5.5

%

6.7

%

-17%

-12%

-7%

-2%

3%

8%

13%

18%

05 06 07 08 09 10 11 12 13 14

US DWP: Comm. Lines FL DWP: Comm. Lines

(Percent)

Average 2005-2014US: 1.4%FL: 2.0%

40

Personal Lines DWP Growth: FL vs. U.S., 2005-2014

Source: SNL Financial.

2.2

%

2.3

%

1.2

%

-0.1

%

1.1

% 2.5

%

2.2

% 4.2

%

5.1

%

4.8

%

8.5

%

1.0

%

-6.5

%

-3.5

%

5.4

%

4.9

%

5.9

%

3.5

%

1.7

%

12

.8%

-11%

-6%

-1%

4%

9%

14%

05 06 07 08 09 10 11 12 13 14

US DWP: Pers. Lines FL DWP: Pers. Lines

(Percent)

Average 2005-2014US: 2.6%FL: 3.4%

41

Private Passenger Auto DWP Growth: FL vs. U.S., 2005-2014

Source: SNL Financial.

0.5%

0.4%

0.0%

-0.3

%

-0.1

%

1.5%

1.5%

3.5%

4.6% 4.9%

-2.9

%

-2.8

%

-3.2

%

3.2%

0.3%

2.6%

-3.3

%

-3.1

%

-5.2

%

-5.2

%

-6%

-4%

-2%

0%

2%

4%

6%

05 06 07 08 09 10 11 12 13 14

US DWP: PP Auto FL DWP: PP Auto

(Percent)

Average 2005-2014US: 1.6%FL: -2.0%

42

Homeowner’s MP DWP Growth: FL vs. U.S., 2005-2014

Source: SNL Financial.

7.4

%

7.4

%

4.2

%

0.5

% 3.8

%

4.9

%

3.8

%

5.7

%

6.2

%

4.4

%

21

.1%

31

.9%

6.7

%

-4.3

%

9.2

%

3.9

% 6.6

%

4.6

%

-0.6

%

-15

.6%

-20%

-10%

0%

10%

20%

30%

40%

05 06 07 08 09 10 11 12 13 14US DWP: HO Lines FL DWP: HO Lines

(Percent)

Average 2005-2014US: 4.8%FL: 6.3%

INVESTMENTS: THE NEW REALITY

43

Investment Performance is a Key Driver of Profitability

Depressed Yields Will Necessarily Influence Underwriting & Pricing

43

Property/Casualty Insurance Industry Investment Income: 2000–2015E1

$38.9$37.1 $36.7

$38.7

$54.6

$51.2

$47.1 $47.6$49.2

$48.0 $47.3$46.2 $46.8

$39.6

$49.5

$52.3

$30

$40

$50

$60

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E

Due to persistently low interest rates,investment income fell in 2012, 2013 and 2014.

1 Investment gains consist primarily of interest and stock dividends. *2015 figure is estimated based on annualized data through Q2.Sources: ISO; Insurance Information Institute.

($ Billions) Investment earnings are still below their 2007 pre-crisis peak

CAPITAL/CAPACITY

56

Capital Accumulation Has Multiple Impacts

Alternative Capital Impacts?

56

57

Policyholder Surplus, 2006:Q4–2015:Q2

Sources: ISO, A.M .Best.

($ Billions)

$487

.1

$496

.6

$512

.8

$521

.8

$478

.5

$455

.6

$437

.1 $463

.0 $490

.8 $511

.5 $540

.7

$530

.5

$544

.8

$559

.2

$559

.1

$538

.6

$550

.3

$567

.8

$583

.5

$586

.9 $607

.7

$614

.0

$624

.4 $653

.4

$671

.6

$673

.9

$674

.7

$672

.4

$662

.0

$570

.7

$566

.5

$505

.0

$515

.6

$517

.9

$400

$450

$500

$550

$600

$650

$700

06:Q

4

07:Q

1

07:Q

2

07:Q

3

07:Q

4

08:Q

1

08:Q

2

08:Q

3

08:Q

4

09:Q

1

09:Q

2

09:Q

3

09:Q

4

10:Q

1

10:Q

2

10:Q

3

10:Q

4

11:Q

1

11:Q

2

11:Q

3

11:Q

4

12:Q

1

12:Q

2

12:Q

3

12:Q

4

13:Q

1

13:Q

2

13:Q

3

13:Q

4

14:Q

1

14:Q

2

14:Q

3

14:Q

4

15:Q

2

2007:Q3Pre-Crisis Peak

Surplus as of 6/30/15 stood at a near-record high $672.4B

2010:Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business .

The industry now has $1 of surplus for every $0.73 of NPW,close to the strongest claims-paying status in its history.

Drop due to near-record 2011 CAT losses

The P/C insurance industry entered 2015in very strong financial condition.

61

Alternative Capital

61

New Investors Continue to Change the Reinsurance Landscape

First I.I.I. White Paper on Issue Was Released in March 2015

Global Reinsurance Capital (Traditional and Alternative), 2006 - 2014

2014 data is as of June 30, 2014.Source: Aon Benfield Analytics; Insurance Information Institute.

Total reinsurance capital reached a record $570B in 2013, up 68% from

2008.

But alternative capacity has grown 210% since 2008, to $50B. It has more than doubled in the past three years.

Alternative Capital as a Percentage of Traditional Global Reinsurance Capital

2014 data is as of June 30, 2014.Source: Aon Benfield Analytics; Insurance Information Institute.

2006 2007 2008 2009 2010 2011 2012 2013 2014

-2%

0%

2%

4%

6%

8%

10%

12%

4.6%5.7% 5.9% 5.8% 5.4%

6.5%

8.4%

10.2%

11.5%

Alternative Capital’s Share of Global Reinsurance Capital Has More Than Doubled Since 2010.

Catastrophe Bond Issuance and Outstanding: 1997-2015:Q2

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*0

5,000

10,000

15,000

20,000

25,000

948.2

874.2

1,062.5

1,142.0

966.9

989.5

1,988.2

1,142.8

1,499.0

4,614.7

7,187.0

3,009.9

3,396.0

4,599.9

4,107.1

5,855.3

7,083.0

8,026.7

3,842.2

4289

5085

7677

13416.4

12538.6

12508.2

12195.7

12342.8

14839.3

18576.9

22867.8

21559.6

New Issuance Outstanding

65

Risk Capital Amount ($ Millions)

Cat Bond Issuance Appears to Be Slowing Down in 2015 from 2014’s Record Pace. Lower Yields on Bonds Explain Some of the Contraction.

Source: Guy Carpenter.

4. M&A UPDATE: A PATH TO GROWTH?

70

Are Capital Accumulation, Drive for Growth and Scale Stimulating

M&A Activity?

70

71

U.S. INSURANCE MERGERS AND ACQUISITIONS,P/C SECTOR, 1994-2014 (1)

$5,1

00

$11,

534

$8,0

59

$30,

873

$19,

118

$40,

032

$1,2

49

$486

$20,

353

$425

$9,2

64

$35,

221

$13,

615

$16,

294

$3,5

07 $6,4

19

$12,

458

$4,6

51

$4,3

97

$6,7

23

$55,825

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

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

Tra

ns

ac

tio

n v

alu

es

0

20

40

60

80

100

120

140

Nu

mb

er o

f tran

sa

ctio

ns

($ Millions)

(1) Includes transactions where a U.S. company was the acquirer and/or the target.

Source: Conning proprietary database.

M&A activity in the P/C sector was up

sharply in 2014 but remains well

below pre-crisis or late 1990s levels.

M&A activity in 2015 will likely

reach its highest level since 1998

75

Growth

Premium Growth Rates Vary Tremendously by State and

Over Time, But…

75

76

-5%

0%

5%

10%

15%

20%

25%

71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*

Net Premium Growth (All P/C Lines): Annual Change, 1971—2015:H1

(Percent)1975-78 1984-87 2000-03

Shaded areas denote “hard market” periodsSources: A.M. Best (1971-2013), ISO (2014-15).

Net Written Premiums Fell 0.7% in 2007 (First Decline

Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.

2015:H1: 4.1%

2014: 4.1%

2013: 4.4%

2012: +4.2%

78

Direct Premiums Written: Total P/CPercent Change by State, 2007-2014

70

.7

36

.7

36

.2

30

.3

29

.4

26

.8

24

.7

23

.7

21

.6

20

.7

19

.2

19

.2

18

.6

18

.1

18

.0

17

.0

15

.2

15

.1

15

.0

14

.9

14

.8

14

.7

14

.4

14

.2

13

.8

13

.5

0

10

20

30

40

50

60

70

80

ND

OK

SD

TX

NE

KS IA VT

WY

CO

MN IN MI

TN AR WI

GA

SC NJ

OH

AK

KY VA

LA

CT

MT

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 StatesNorth Dakota was the country’s growth leader over the past 7 years with premiums written

expanding by 70.7%, fueled by the state’s energy boom

Growth Benchmarks: Total P/C

US: 13.0%

79

Direct Premiums Written: Total P/CPercent Change by State, 2007-2014

13

.4

13

.1

13

.1

13

.0

13

.0

12

.9

12

.4

12

.2

11

.7

11

.0

10

.5

9.4

9.4

9.2

9.1

8.2

6.3

6.0

4.7

2.2

1.3

-0.8

-1.6

-4.3

-7.3

-12

.9

-15

-10

-5

0

5

10

15

MO

NY

UT

US

NM

MS

MA

AL

NC

MD

WA RI

NH IL PA ID ME

CA

OR FL AZ

DC HI

WV

NV

DE

Pe

ce

nt

ch

an

ge

(%

)

Bottom 25 States

Sources: SNL Financial LC.; Insurance Information Institute.

Growth was negative in 4 states and DC between

2007 and 2014

Florida experienced almost no net growth

between 2007 and 2014

80

Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2014

80

.4

36

.8

33

.3

29

.4

24

.8

22

.5

21

.0

20

.6

15

.2

14

.6

13

.9

11

.8

10

.3

8.7

8.5

8.4

8.0

7.9

7.6

7.1

6.6

5.9

5.9

5.8

5.4

4.5

0

10

20

30

40

50

60

70

80

90

ND

SD VT

OK

NE IA KS

TX

WY

AK IN

MN WI

MA

AR

CT

NY

NJ

CO

NM

OH LA

US

MS

NH

MO

Pe

ce

nt

ch

an

ge

(%

)

Sources: SNL Financial LLC.; Insurance Information Institute.

Top 25 States

43 states showed commercial lines growth from 2007

through 2014

Growth Benchmarks: Commercial

US: 5.9%

81

Direct Premiums Written: Comm. LinesPercent Change by State, 2007-2014

4.5

4.4

4.2

4.1

3.9

3.8

3.7

3.3

3.3

3.2

3.1

2.8

2.8

2.2

2.1

1.4

0.9

-1.3

-3.2

-5.3

-6.5

-6.9

-9.2

-10

.7

-19

.9

-22

.2

-25

-20

-15

-10

-5

0

5

10

MI

TN

MD

MT

CA RI

WA

GA

PA

UT IL KY VA

NC

ME

SC ID AL

DC HI

FL

OR AZ

DE

NV

WV

Pe

ce

nt

ch

an

ge

(%

)

Bottom 25 States

Sources: SNL Financial LLC.; Insurance Information Institute.

Commercial lines premium volumes in

FL will likely note return to pre-crisis

levels until 2016

Nearly half the states have yet to see commercial lines premium

volume return to pre-crisis levels

82

Direct Premiums Written: Workers’ CompPercent Change by State, 2007-2014*

35

.1

27

.1

27

.1

24

.4

22

.3

20

.6

18

.7

14

.6

11

.7

9.4

7.5

7.1

6.7

4.2

3.9

3.8

2.7

1.7

0.5

0.1

0.1

0.0

-1.1

-1.1

-1.3

-5

0

5

10

15

20

25

30

35

40

IA CA

SD

NY

OK NJ

CT

KS

NE MI

MS IN

MN

US

NM TX WI

IL

CO

GA

VA

NH PA RI

MD

Pe

ce

nt

ch

an

ge

(%

)

*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.

Top 25 States

Only 21 states have seen works comp premium volume

return to pre-crisis levels

83

Direct Premiums Written: Worker’s CompPercent Change by State, 2007-2014*

-2.6

-2.9

-3.6

-4.8

-6.0

-8.5

-9.1

-9.2

-9.2

-11

.7

-12

.2

-13

.5

-14

.4

-17

.1

-17

.9

-19

.4

-19

.5

-23

.4

-25

.2

-29

.5

-30

.3

-34

.9

-80-75-70-65-60-55-50-45-40-35-30-25-20-15-10-50

VT

DC

MA ID NC AZ

MO LA

TN AR

SC

ME

AK

AL

FL

KY

UT

MT HI

DE

OR

NV

Pe

ce

nt

ch

an

ge

(%

)

Bottom 25 States

*Excludes monopolistic fund states: ND, OH, WA, WY as well as WV, which transitioned to a competitive structure during this period.Sources: SNL Financial LC.; Insurance Information Institute.

States with the poorest performing economies also produced some of the most

negative net change in premiums of the past 7 years

Florida’s construction dependent economy was

devastated when the housing bubble collapsed, causing payrolls and WC

premium volumes to plunge

91

Underwriting Performance

91

Homeowners Insurance Combined Ratio: 1990–2015F

11

3.0

11

7.7

15

8.4

11

3.6

10

1.0 10

9.4

10

8.2

11

1.4 1

21

.7

10

9.3

98

.2

91

.7 96

.4

85

.4 91

.7

11

4.5

10

3.1

10

3.8

11

9.4

10

1.4

87

.7 92

.4 96

.6

11

8.4

11

2.7 12

1.7

80

90

100

110

120

130

140

150

160

170

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14F 15F

1

Homeowners Performance in 2011/12 Impacted by Large Cat Losses. Extreme Regional Variation Can Be Expected Due to

Local Catastrophe Loss Activity

92

Hurricane Ike

Hurricane Sandy

Record tornado activity

Hurricane Andrew

Sources: A.M. Best (1990-2014F);Conning (2015F); Insurance Information Institute.

93

Homeowners Multi-Peril Loss & ALAE Ratio, 2014:Highest 25 States

14

2.8

13

2.6

11

6.0

10

2.5

80

.4

80

.2

74

.6

69

.2

66

.8

66

.8

65

.8

62

.4

60

.7

59

.3

59

.2

58

.7

58

.2

58

.0

56

.4

55

.5

54

.1

52

.4

51

.7

51

.2

51

.1

50

.3

0

20

40

60

80

100

120

140

160

MT NE SD CO IA MI IL VT PA ID WY GA DE MD AR WV WA MO MS WI IN SC OR TN US AZ

Lo

ss &

AL

AE

Rat

io

(%)

Sources: SNL Financial; Insurance Information Institute.

MT had the worst loss ratio in 2014, followed by

NE and SD…

94

Homeowners Multi-Peril Loss & ALAE Ratio, 2014:Lowest 25 States and DC

50

.1

49

.3

48

.9

48

.3

48

.1

47

.7

47

.3

46

.0

45

.8

45

.6

45

.2

44

.1

43

.2

42

.0

41

.0

40

.8

40

.2

37

.7

37

.5

37

.1

36

.2

32

.8

32

.3

28

.0

27

.3

25

.7

0

10

20

30

40

50

60

CA NJ OH TX AL ME KY NC NM NH NY NV UT MN KS DC CT VA AK RI MA ND LA HI FL OK

Lo

ss &

AL

AE

Rat

io (

%)

Sources: SNL Financial; Insurance Information Institute.

OK and FL had the best performances in 2014. Traditionally

high cat-loss states did well last year due to unusually low cat activity

Florida Citizens Exposure to Loss, 2002 – 2015* ($ Billions)

*As of October 6, 2015.

Source: PIPSO; Florida Citizens https://www.citizensfla.com/about/bookofbusiness/; Insurance Information Institute (I.I.I.).

$154.6

$195.5 $206.7 $210.6

$408.8

$485.1

$421.9 $406.0

$460.7

$510.7

$228.9$202.0

$173.4

$429.4

$0

$100

$200

$300

$400

$500

$600

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

FL Citizens exposure to loss is down 66%

($337.3B) from its 2011 peak)

A lack of major hurricanes, ample private sector/reinsurer capital and capital market interest—combined with structural changes to Citizens—have combined to take Citizens policy count and exposure to their lowest levels in many years

Florida Citizens Policy Count, 2003 – 2015* (Thousands)

*As of October 6, 2015. All other figures are as of Dec. 31.

Source: Florida Citizens https://www.citizensfla.com/about/bookofbusiness/; Insurance Information Institute (I.I.I.).

820.3874.0

810.0

1,298.9 1,304.9

1,084.21,029.3

1,283.5

1,472.4

1,314.8

661.2574.1

1,021.7

0

200

400

600

800

1,000

1,200

1,400

1,600

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

A lack of major hurricanes, ample private sector/reinsurer capital and capital market interest—combined with structural changes to Citizens—have combined to take Citizens policy count and exposure to their lowest levels in many years

Florida Citizen’s policy count is down by nearly

900,000 (61%) from its 2011 peak

Private Passenger Auto Combined Ratio: 1993–2017F

10

1.7

10

1.3

10

1.3

10

1.0

10

9.5

10

7.9

10

4.2

98

.4

94

.3

95

.1

95

.5 98

.3 10

0.2

10

1.3

10

1.0

10

2.0

10

2.1

10

1.6

10

2.3

10

2.2

10

2.3

10

2.4

99

.5 10

1.1

10

3.5

80

85

90

95

100

105

110

115

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F

Private Passenger Auto Underwriitng Performance Is Exhibiting Remarkable Stability

97Sources: A.M. Best (1990-2014); Conning (2015F – 2017F); Insurance Information Institute.

98

Florida Average No-Fault Claim Severity, 2009:Q1 - 2015:Q2*

09

:Q1

09

:Q2

09

:Q3

09

:Q4

10

:Q1

10

:Q2

10

:Q3

10

:Q4

11

:Q1

11

:Q2

11

:Q3

11

:Q4

12

:Q1

12

:Q2

12

:Q3

12

:Q4

13

:Q1

13

:Q2

13

:Q3

13

:Q4

14

:Q1

14

:Q2

14

:Q3

14

:Q4

15

:Q1

15

:Q2

$5,000

$5,500

$6,000

$6,500

$7,000

$7,500

$8,000

$8,500

$9,000

$9,500

$10,000

$7

,09

8

$7

,24

6

$7

,46

4

$7

,57

3

$7

,76

7

$7

,84

1

$7

,99

9

$8

,29

1

$8

,44

3

$8

,62

0

$9

,05

9

$9

,32

2

$9

,55

3

$9

,69

1

$9

,30

1

$9

,01

6

$8

,63

8

$8

,42

9

$8

,44

6

$8

,29

7

$8

,22

4

$8

,25

4

$8

,02

7

$8

,06

3

$7

,82

1

$7

,97

9

The Average Cost of No-Fault Claims in Florida Rose Rapidly Until mid-2012 but Has Dropped in Recent Years

*All figures are the average of the most recent four quarters ending in each period,.Source: ISO/PCI Fast Track data; Insurance Information Institute.

No-fault claim severity (average cost per claim) hit

peak in 2012 but is down significantly since then

99

Florida No-Fault Paid Claim Frequency, 2015:Q2*

08

:Q4

09

:Q1

09

:Q2

09

:Q3

09

:Q4

10

:Q1

10

:Q2

10

:Q3

10

:Q4

11

:Q1

11

:Q2

11

:Q3

11

:Q4

12

:Q1

12

:Q2

12

:Q3

12

:Q4

13

:Q1

13

:Q2

13

:Q3

13

:Q4

14

:Q1

14

:Q2

14

:Q3

14

:Q4

15

:Q1

15

:Q2

1.00

1.20

1.40

1.60

1.80

2.00

2.20

1.4

8

1.4

7

1.5

4

1.6

2

1.7

0 1.8

0

1.8

9

1.9

8

2.0

1

2.0

2

2.0

2

1.9

1

1.8

9

1.8

9

1.9

1

1.9

0

1.8

5

1.7

6

1.6

1

1.5

7

1.5

5

1.5

5

1.5

6

1.6

2

1.6

3

1.7

1

1.7

3

The Frequency of No-Fault Claims in Florida Is Rising Once Again

*All figures are the average of the most recent four quarters ending in each period,.Source: ISO/PCI Fast Track data; Insurance Information Institute.

No-fault claim frequency rose until mid-2011 and hit a trough in early 2014 but is once gain

showing some signs of increase

10

9.4

11

0.2

11

8.8

10

9.5 1

12

.5

11

0.2

10

7.6

10

4.1

10

9.7

11

0.2

10

2.5 1

05

.4

91

.1

93

.6

10

4.2

98

.9

10

2.4

10

7.9

10

3.5

94

.8

94

.3

98

.3 99

.210

2.0

11

1.1

11

2.3

12

2.3

90

95

100

105

110

115

120

125

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

F

16

F

Co

mm

erc

ial L

ine

s C

om

bin

ed

Ra

tio

*2007-2012 figures exclude mortgage and financial guaranty segments.Source: A.M. Best (1990-2014); Conning (2015-16F) Insurance Information Institute.

Commercial Lines Combined Ratio, 1990-2016F*

Commercial lines underwriting performance improved in 2013/14 but higher cats, diminishing prior year reserves and rising loss cost trends in some lines could push

combined ratios higher

101

108

Insured Catastrophe Losses

2013/14 and YTD 2015 Experienced Below Average CAT Activity After Very High CAT

Losses in 2011/12Winter Storm Losses Far Above Average in

2014 and 2015108

109

$1

3.0

$1

1.3

$3

.9

$1

4.8

$1

1.9

$6

.3

$3

5.8

$7

.8

$1

6.8

$3

4.7

$1

0.9

$7

.7

$3

0.1

$1

1.8

$1

4.9

$3

4.6

$3

6.1

$1

3.1

$1

5.5

$1

1.0

$75.7

$1

4.4

$5

.0 $8

.2

$3

8.9

$9

.1

$2

7.2

$0

$10

$20

$30

$40

$50

$60

$70

$80

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15*

U.S. Insured Catastrophe Losses

*Through 9/30/15 in 2015 dollars.Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.) Sources: Property Claims Service/ISO; Insurance Information Institute.

2013/14 Were Welcome Respites from 2011/12, among the Costliest Years for Insured Disaster Losses in US History. Longer-term Trend is for

more—not fewer—Costly Events

2012 was the 3rd most expensive year ever for

insured CAT losses

$11.0B in insured CAT losses though

9/30/15

($ Billions, $ 2014)

109

114

Number of National Flood Insurance Program Policies in Force at Year-End, 1980-2015*

Source: National Flood Insurance Program. * As of July, 2015

2.10

4

2.01

7 2.47

8

3.47

7

4.36

9 4.96

2

5.65

6

5.68

4

5.70

0

5.64

5

5.64

6

5.62

0

5.56

9

5.35

1

5.15

1

0

1

2

3

4

5

6

1980 1985 1990 1995 2000 2005 2007 2008 2009 2010 2011 2012 2013 2014 2015*

(mil

lio

ns)

The number of NFIP policies in force has

plunged by 549,000 or 9.6% since 2009, even

as coastal development surges and sea levels rise

116

Top 16 Most Costly Disastersin U.S. History—Katrina Still Ranks #1

(Insured Losses, 2014 Dollars, $ Billions)

$8.1 $9.0 $9.4 $11.4$13.8

$19.3$24.6 $25.3$26.4

$50.2

$7.7$7.3$6.9$5.8$5.7$4.6

$0

$10

$20

$30

$40

$50

$60

Irene (2011) Jeanne(2004)

Frances(2004)

Rita (2005)

Tornadoes/T-Storms

(2011)

Tornadoes/T-Storms

(2011)

Hugo (1989)

Ivan (2004)

Charley(2004)

Wilma(2005)

Ike (2008)

Sandy*(2012)

Northridge(1994)

9/11 Attack(2001)

Andrew(1992)

Katrina(2005)

Storm Sandy in 2012 was the last mega-CAT

to hit the US

Includes Tuscaloosa, AL,

tornado

Includes Joplin, MO, tornado

12 of the 16 Most Expensive Events in US History Have Occurred Since 2004

Sources: PCS; Insurance Information Institute inflation adjustments to 2014 dollars using the CPI.

118

Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1995–20141

0.1%

1.5%5.4%

0.1%

6.2%

6.8%

39.2%

40.7%

1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2014 dollars.2. Excludes snow.3. Does not include NFIP flood losses4. Includes wildland fires5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation.Source: ISO’s Property Claim Services Unit.

Hurricanes & Tropical Storms, $161.2

Fires (4), $6.0

Events Involving Tornadoes (2), $154.9

Winter Storms, $26.9

Terrorism, $24.5

Geological Events, $0.5

Wind/Hail/Flood (3), $21.4

Other (5), $0.2

Wind losses are by far cause the most catastrophe losses,

even if hurricanes/TS are excluded.

Tornado share of CAT losses is

rising

Insured cat losses from 1995-2014

totaled $395.6B, an average of $19.8B per year or $1.65B

per month

Winter storm losses were much above average in 2014/15 are

will push this share up

128

Federal Disaster Declarations Patterns:

1953-2015

128

Disaster Declarations Set New Records in Recent Years

Number of Federal Major Disaster Declarations, 1953-2015*

13 1

7 18

16

16

7 71

21

22

22

0 25

25

11

11

19

29

17

17

48

46

46

38

30

22 2

54

22

31

52

42

13

42

7 28

23

11

31

38

45

32 3

63

27

54

46

55

04

54

5 49

56

69

48 5

26

37

55

98

19

94

76

24

54

143

0

20

40

60

80

100

120

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

*

*Through October 25, 2015.Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute.

The Number of Federal Disaster Declarations Is Generally Rising and Set New Records in 2010 and 2011 Before Dropping in 2012-2014

The number of federal disaster declarations set a new record in 2011, with 99, shattering 2010’s

record 81 declarations.

There have been 2,244 federal disaster

declarations since 1953. The average

number of declarations per year is 36 from 1953-2014, though

there haven’t been that few recorded since

1995.

41 federal disasters have declared so far in 2015*

129

130

Federal Disasters Declarations by State, 1953 – 2015: Highest 25 States*

90

81

76

69

67

61

61

58

57

56

56

56

54

54

53

52

51

51

51

50

47

47

45

44

41

0

10

20

30

40

50

60

70

80

90

100

TX CA OK NY FL KY LA AL AR MO IA WV MS TN IL NE MN KS WA PA OH VA ND SD ME

Dis

as

ter

De

cla

rati

on

s

Over the past 62 years, Florida has had the 5th

highest number of Federal Disaster Declarations

*Through Oct. 25, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/disasters; Insurance Information Institute.

131

Federal Disasters Declarations by State, 1953 – 2015: Lowest 25 States*

43

40

40

39

39

37

36

34

30

29

28

28

27

26

25

25

24

23

23

20

18

17

15

13

12

11

11

0

10

20

30

40

50

NC AK IN GA VT WI NJ NH MA OR HI NM MI PR MD MT AZ ID CO CT SC NV DE DC RI UT WY

Dis

as

ter

De

cla

rati

on

s

Over the past 60 years, Wyoming and Utah had

the fewest number of Federal Disaster

Declarations

*Through Oct. 25, 2015. Includes Puerto Rico and the District of Columbia.Source: FEMA: http://www.fema.gov/disasters; Insurance Information Institute.

132

Natural Hazard Risk Scores, 2014Highest 25 States*

94

.5

79

.7

79

.2

75

.6

72

.1

69

.5

69

.0

66

.8

66

.4

65

.4

64

.9

61

.5

61

.0

60

.9

59

.7

57

.8

57

.3

57

.1

56

.7

55

.3

52

.8

52

.3

51

.9

51

.9

51

.8

0

10

20

30

40

50

60

70

80

90

100

FL RI LA CA MA KS CT OK SC DE OR NJ IA TX NC MO DC MS AR NH ID MD CO NE IL

Ha

zard

Ris

k S

co

re

Note: Score is based on data on 9 natural hazards: flood, wildfire, tornado, storm surge, earthquake, straight-line wind, hurricane, wind, hail and sinkhole.

*Analysis Includes DC. Excludes Alaska and Hawaii due to limited natural hazard risk data.

Sources: CoreLogic release “CoreLogic Identifies US States at Highest Risk of Property Damage Loss from Natural Hazards,” Sept. 10, 2014; Insurance Information Institute.

Florida received the highest Natural Hazard

Risk Score

Workers Compensation Operating Environment

134

Workers Comp Results Have Improved Substantially in Recent Years

134

Workers Compensation Combined Ratio: 1994–2014P

102.

0

97.0 10

0.0

101.

0

112.

6

108.

6

105.

1

102.

7

98.5

103.

5

104.

5 110.

6 115.

0

115.

0

108.

0

101.

0

98.0

121.

7

107.

0

115.

3

118.

2

80

85

90

95

100

105

110

115

120

125

130

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

Workers Comp Results Began to Improve in 2012. Underwriting Results Deteriorated Markedly from 2007-

2010/11 and Were the Worst They Had Been in a Decade. Sources: A.M. Best (1994-2009); NCCI (2010-2014P) and are for private carriers only; Insurance Information Institute. 137

WC results have improved markedly

since 2011

Workers Compensation Premium: Fourth Consecutive Year of IncreaseNet Written Premium

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14P0

10

20

30

40

50

31.0 31.3 29.8 30.5 29.126.3 25.2 24.2 23.3 22.3

25.0 26.129.2 31.1

34.737.8 38.6 37.6

33.830.3 29.9

32.335.1 36.9 38.5

35.3 35.734.3 35.4

33.6

30.128.5

26.9 25.9 25.0

28.6

32.1

37.7

42.3

46.547.8

46.544.3

39.3

34.6 33.836.4

39.541.8

44.2

State Funds ($ B)

Private Carriers ($ B)

Pvt. Carrier NWP growth was +4.3% in 2014, +5.1% in 2013 and 8.7% in 2012

$ Billions

Calendar Yearp Preliminary

Source: NCCI from Annual Statement Data.Includes state insurance fund data for the following states: AZ, CA, CO, HI, ID, KY, LA, MD, MO, MT, NM, OK, OR, RI, TX, UT.Each calendar year total for State Funds includes all funds operating as a state fund that year.

139

2014 Workers Compensation Direct Written Premium Growth, by State*

PRIVATE CARRIERS: Overall 2014 Growth = +4.6%

*Excludes monopolistic fund states (in gray): OH, ND, WA and WY.Source: NCCI.

While growth rates varied widely, most states experienced positive growth in

2014

Workers Compensation Medical Severity:Moderate Increase in 2014

148

Accident Year

Annual Change 1991–1993: +1.9%Annual Change 1994–2001: +8.9%Annual Change 2002–2010: +6.0%

Average Medical Cost per Lost-Time ClaimMedical

Claim Cost ($000s)

$8

.1

$8

.2

$8

.1

$8

.8

$9

.1

$9

.8

$1

0.8

$11

.7

$1

2.9

$1

3.9

$1

5.7

$1

7.1

$1

8.4

$1

9.4

$2

0.9

$2

2.1

$2

3.4

$2

5.0

$2

6.0

$2

6.1

$2

6.8

$2

7.4

$2

8.3

$2

9.4

+6.8%+1.3%-2.1%+9.0%+5.1%

+7.4%+10.1%

+8.3%+10.6%

+7.3%

+13.5%

+8.8%+7.7%

+5.4%

+7.8%+5.8%

+5.9%

+6.9%+4.0%+0.5%

+2.4%+2.4%

+3.2%+4%

5

10

15

20

25

30

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14p

2014p: Preliminary based on data valued as of 12/31/2014.1991-2013: Based on data through 12/31/2013, developed to ultimateBased on the states where NCCI provides ratemaking services including state funds, excluding WV; Excludes high deductible policies.

Cumulative Change = 263%(1991-2014p)

Accident Year

Medical severity for lost time claims was up 4% in 2014, the

largest increase since 2009

THE ECONOMY

156

The Strength of the Economy Will Greatly Influence Insurer Exposure Base

Across Most Lines

156

157

US Real GDP Growth*

* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 10/15; Insurance Information Institute.

2.7%

1.8%

-1.8

%1.

3%-3

.7%

-5.3

%-0

.3%

5.0%

2.3%

2.2% 2.6%

2.4%

0.1%

2.5%

1.3%

4.1%

2.0%

1.3%

3.1%

0.4%

2.7%

1.8%

3.5%

-0.9

%4.

6%4.

3%2.

1%0.

6%3.

9%2.

1% 2.7%

2.6%

2.7%

2.6%

2.6%

-8.9%

4.5%

1.4%

4.1%

1.1% 1.

8% 2.5% 3.

6%3.

1%

-9%

-7%

-5%

-3%

-1%

1%

3%

5%

7%

   2

00

0   

   2

00

1   

   2

00

2   

   2

00

3   

   2

00

4   

   2

00

5   

   2

00

6   

   2

00

7   

08

:1Q

08

:2Q

08

:3Q

08

:4Q

09

:1Q

09

:2Q

09

:3Q

09

:4Q

10

:1Q

10

:2Q

10

:3Q

10

:4Q

11

:1Q

11

:2Q

11

:3Q

11

:4Q

12

:1Q

12

:2Q

12

:3Q

12

:4Q

13

:1Q

13

:2Q

13

:3Q

13

:4Q

14

:1Q

14

:2Q

14

:3Q

14

:4Q

15

:1Q

15

:2Q

15

:3Q

15

:4Q

16

:1Q

16

:2Q

16

:3Q

16

:4Q

Demand for Insurance Should Increase in 2016 as GDP Growth Continues at a Steady, Albeit Moderate Pace and Gradually Benefits the Economy Broadly

Real GDP Growth (%)

Recession began in in June

2009

The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%

Q1 2014/15 GDP data were hit hard by this

year’s “Polar Vortex” and harsh

winter

State Leading Economic Indicators through November 2015

Sources: Federal Reserve Bank of Philadelphia at http://www.philadelphiafed.org/index.cfm ;Insurance Information Institute. 158

Growth in the West is

finally beginning to pick up

The economic outlook for most of the US is generally

positive, though flat-to-negative for 10 states, several

of them energy dependent

159

Real GDP by State Percent Change, 2014*:Highest 25 States

6.3

5.2

5.1

5.1

4.7

3.6

3.1

3.0

2.8

2.8

2.7

2.7

2.5

2.3

2.3

2.3

2.2

2.2

2.1

1.9

1.9

1.9

1.8

1.8

1.8

1.7

0

1

2

3

4

5

6

7

ND TX WY WV CO OR UT WA OK CA ID FL NY GA NH MA US SC OH MI MN LA MT KS PA TN

Pe

rce

nt

Ch

an

ge

(%

)

*Advance statisticsSources: U.S. Bureau of Economic Analysis; Insurance Information Institute.

North Dakota was the economic growth juggernaut of the US

in 2014—by far

Only 7 states experienced growth in excess of 3% in 2014, which is a

growth rate we would see nationally in a more typical recovery

Growth Benchmarks: Real GDP

US: 2.2%

160

1.6

1.4

1.4

1.2

1.2

1.2

1.0

1.0

1.0

1.0

0.9

0.8

0.8

0.8

0.7

0.7

0.6

0.6

0.6

0.4

0.4

0.4

0.2

0.0

-1.2

-1.3-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

DC NC AZ IL RI DE WI KY NM NV MO AR HI MD NE AL SD VT CT IA IN NJ ME VA MS AK

Pe

rce

nt

Ch

an

ge

(%

)Real GDP by State Percent Change, 2014*: Lowest 25 States

*Advance statisticsSources: US Bureau of Economic Analysis; Insurance Information Institute.

Mississippi and Alaska were the

only states to shrink in 2014

Growth rates in 16 states were still below 1% in 2014, including in AL

165

US Unemployment Rate Forecast4

.5%

4.5

%4

.6%

4.8

%4

.9% 5.4

% 6.1

%6

.9%

8.1

%9

.3%

9.6

% 10

.0%

9.7

%9

.6%

9.6

%

8.9

%9

.1%

9.1

%8

.7%

8.3

%8

.2%

8.0

%7

.8%

7.7

%7

.6%

7.3

%7

.0%

6.6

%6

.2%

6.1

%5

.7%

5.6

%5

.4%

5.2

%5

.0%

4.9

%4

.8%

4.8

%4

.7%

9.6

%

4%

5%

6%

7%

8%

9%

10%

11%

07

:Q1

07

:Q2

07

:Q3

07

:Q4

08

:Q1

08

:Q2

08

:Q3

08

:Q4

09

:Q1

09

:Q2

09

:Q3

09

:Q4

10

:Q1

10

:Q2

10

:Q3

10

:Q4

11

:Q1

11

:Q2

11

:Q3

11

:Q4

12

:Q1

12

:Q2

12

:Q3

12

:Q4

13

:Q1

13

:Q2

13

:Q3

13

:Q4

14

:Q1

14

:Q2

14

:Q3

14

:Q4

15

:Q1

15

:Q2

15

:Q3

15

:Q4

16

:Q1

16

:Q2

16

:Q3

16

:Q4

Rising unemployment eroded payrolls

and WC’s exposure base.

Unemployment peaked at 10% in late 2009.

* = actual; = forecastsSources: US Bureau of Labor Statistics; Blue Chip Economic Indicators (10/15 edition); Insurance Information Institute.

2007:Q1 to 2016:Q4F*

Unemployment forecasts have been revised modestly

downwards. Optimistic scenarios put the

unemployment as low as 5.0% by Q4 of 2015.

Jobless figures have been revised

downwards for 2015/16

166

Unemployment Rates by State, September 2015:Highest 25 States*

7.3

6.8

6.7

6.7

6.4

6.3

6.2

6.1

6.0

6.0

5.9

5.8

5.8

5.7

5.7

5.6

5.4

5.4

5.3

5.3

5.2

5.2

5.2

5.2

5.1

5.1

5.1

0

2

4

6

8

WV NM DC NV AK AZ OR MS AL LA CA GA NC SC TN NJ IL RI MO PA AR CT FL WA MD NY US

Un

em

plo

ym

en

t R

ate

(%

)

*Provisional figures for September 2015, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In September, 37 states and the District of Columbia had over-the-month unemployment rate decreases, 6 states had increases, and 7 states had no change.

In

167

5.1

5.0

5.0

4.9

4.6

4.5

4.5

4.4

4.4

4.4

4.3

4.3

4.2

4.2

4.1

4.0

4.0

3.8

3.7

3.6

3.6

3.5

3.4

3.4

2.9

2.8

0

1

2

3

4

5

6

US KY MI DE MA IN OH KS ME OK VA WI ID TX MT CO WY MN VT IA UT SD HI NH NE ND

Un

em

plo

ym

en

t R

ate

(%

)

Unemployment Rates by State, September 2015: Lowest 25 States*

*Provisional figures for September 2015, seasonally adjusted.Sources: US Bureau of Labor Statistics; Insurance Information Institute.

In September, 37 states and the District of Columbia had over-the-month unemployment rate decreases, 6 states had increases, and 7 states had no change.

CONSTRUCTION INDUSTRY OVERVIEW & OUTLOOK

168

The Construction Sector Is Critical to the Economy and the P/C Insurance Industry

168

169

Value of New Private Construction: Residential & Nonresidential, 2003-2015*

Billions of Dollars

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

03 04 05 06 07 08 09 10 11 12 13 14 15*

Non ResidentialResidential

Private Construction Activity Is Moving in a Positive Direction though Remains Well Below Pre-Crisis Peak; Residential Dominates

$298.1

$15.0

$613.7

New Construction peaks at $911.8. in 2006

Trough in 2010 at $500.6B,

after plunging 55.1% ($411.2B)

2015: Value of new pvt. construction hits

$788.0B as of Aug. 2015, up 57.5% from the 2010 trough but

still 13.5% below 2006 peak

169

$261.8

$238.8

$404.7

$383.3

*2015 figure is a seasonally adjusted annual rate as of August.Sources: US Department of Commerce http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.

171

Value of Private Construction Put in Place, by Segment, Aug. 2015 vs. Aug. 2014*

0.4%

15.2%7.7%

-5.0%

25.5%

11.2%

-8.8%

58.4%63.1%

16.5% 16.1%16.9%

43.2%

27.7%

-20%-10%

0%10%20%30%40%50%60%70%

To

tal

Pri

vate

Co

nst

ruct

ion

Res

iden

tial

To

tal

No

nre

sid

enti

al

Lo

dg

ing

Off

ice

Co

mm

erc

ial

Hea

lth

Car

e

Ed

uca

tio

nal

Rel

igio

us

Am

use

men

t &

Rec

.

Tra

nsp

ort

atio

n

Co

mm

un

icat

ion

Po

wer

/Uti

lity

Man

ufa

ctu

rin

g

Private Construction Activity is Up in Most Segments in the Second Half of 2015; Expansion Should Continue

Growth (%) Led by the Manufacturing, Lodging, Office and Amusement & Recreations segments, Private nonresidential sector construction

activity continues to rise after plunging during the “Great Recession.”

*seasonally adjustedSource: U.S. Census Bureau, http://www.census.gov/construction/c30/c30index.html ; Insurance Information Institute.

174

Construction Employment,Jan. 2010—Sept. 2015*

*Seasonally adjusted.Sources: US Bureau of Labor Statistics at http://data.bls.gov; Insurance Information Institute.

5,58

15,

522

5,54

25,

554

5,52

75,

512

5,49

75,

519

5,49

95,

501

5,49

75,

468

5,43

55,

478

5,48

55,

497

5,52

45,

530

5,54

75,

546

5,58

35,

576

5,57

75,

612

5,62

95,

629

5,62

85,

627

5,60

85,

623

5,63

25,

641

5,64

95,

668

5,68

45,

724

5,74

6 5,79

85,

815

5,81

35,

833

5,85

65,

854

5,86

65,

893

5,91

85,

953

5,93

7 6,00

66,

032

6,06

26,

103

6,11

46,

121

6,15

26,

169

6,19

16,

201

6,23

16,

275

6,31

66,

347

6,33

56,

365

6,37

76,

378

6,38

36,

388

6,39

6

5,400

5,500

5,600

5,700

5,800

5,900

6,000

6,100

6,200

6,300

6,400

6,500

Jan-

10F

eb-1

0M

ar-1

0A

pr-1

0M

ay-1

0Ju

n-10

Jul-1

0A

ug-1

0S

ep-1

0O

ct-1

0N

ov-1

0D

ec-1

0Ja

n-11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11Ju

l-11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

122/

30/2

0M

ar-1

2A

pr-1

2M

ay-1

2Ju

n-12

Jul-1

2A

ug-1

2S

ep-1

2O

ct-1

2N

ov-1

2D

ec-1

2Ja

n-13

Feb

-13

Mar

-13

Apr

-13

May

-13

Jun-

13Ju

l-13

Aug

-13

Sep

-12

Oct

-13

Nov

-13

Dec

-13

Jan-

14F

eb-1

4M

ar-1

4A

pr-1

4M

ay-1

4Ju

n-14

Jul-1

4A

ug-1

4S

ep-1

4O

ct-1

4N

ov-1

4D

ec-1

4Ja

n-15

Feb

-15

Mar

-15

Apr

-15

May

-15

Jun-

15Ju

l-15

Aug

-15

Sep

-15

Construction employment is +948,000 above

Jan. 2011 (+17.4%) trough

(Thousands)

Construction and manufacturing employment constitute 1/3 of all WC payroll exposure.

176

(Millions of Units)

New Private Housing Starts, 1990-2021F

1.4

81

.47 1

.62

1.6

41

.57

1.6

0 1.7

1 1.8

5 1.9

6 2.0

71

.80

1.3

60

.91

0.5

50

.59

0.6

1 0.7

8 0.9

2 1.1

01

.13 1

.28 1.4

21

.47

1.4

71

.50

1.5

0

1.3

51.4

61

.29

1.2

0

1.0

11.1

9

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15F 16F 17F 18F 19F20F 21F

Source: U.S. Department of Commerce; Blue Chip Economic Indicators (10/15); Insurance Information Institute.

Insurers Are Continue to See Meaningful Exposure Growth in the Wake of the “Great Recession” Associated with Home Construction: Construction Risk

Exposure, Surety, Commercial Auto; Potent Driver of Workers Comp Exposure

New home starts plunged 72% from 2005-2009; A net

annual decline of 1.49 million units, lowest since records began

in 1959

Job growth, low inventories of existing homes, low mortgage rates and demographics should continue to stimulate new home construction

for several more years

178

Rental-Occupied Housing Units as % of Total Occupied Units, Quarterly, 1990:Q1-2015:Q1

30%

31%

32%

33%

34%

35%

36%

37%

90

:Q1

91

:Q1

92

:Q1

93

:Q1

94

:Q1

95

:Q1

96

:Q1

97

:Q1

98

:Q1

99

:Q1

00

:Q1

01

:Q1

02

:Q1

03

:Q1

04

:Q1

05

:Q1

06

:Q1

07

:Q1

08

:Q1

09

:Q1

10

:Q1

11

:Q1

12

:Q1

13

:Q1

14

:Q1

15

:Q1

Sources: US Census Bureau, Residential Vacancies & Home Ownership in the First Quarter of 2015 (released April 28, 2015) and earlier issues; Insurance Information Institute. Next Census Bureau report to be released on July 28, 2015.

Trough in 2004:Q2 and Q4 at 30.8%

Since the Great Recession ended in June 2009, renters occupied 5.7 million more units (+15.6%).

178

Latest was 36.3% in 2015:Q1

Trend down began in 1994:Q3 from

36.2% in Q2

Increasing percent of

owners

Increasing percent of

renters

179

I.I.I. Poll: Renter’s Insurance

Source: Insurance Information Institute Annual Pulse Survey.

2011 2012 2013 2014 201510%

20%

30%

40%

50%

60%

70%

29% 31%35% 37%

40%

The Percentage of Renters Who Have Renters Insurance Has Been Rising Since 2011.

Q. Do you have renters insurance? 1

1Asked of those who rent their home.

Americans are increasingly choosing to rent, but are slow to understand the

need to insure, exacerbating the underinsurance gap

9. CYBER RISK & CYBER INSURANCE

194

Cyber Risk is a Rapidly Emerging Exposure for Businesses Large and

Small in Every Industry

194

Data Breaches 2005-2015, by Number of Breaches and Records Exposed# Data Breaches/Millions of Records Exposed

*Figures as of June 30, 2015, from the Identity Theft Resource Center,http://www.idtheftcenter.org/images/breach/ITRCBreachReport2015.pdf

157

321

446

656

498

419470

614

400

783

662

117.6

85.692.0

17.522.9

35.7

19.1

66.9

222.5

16.2

127.7

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 *20150

20

40

60

80

100

120

140

160

180

200

220

# Data Breaches # Records Exposed (Millions)

The total number of data breaches (+27.5%) hit a record high of 783 in 2014, exposing 85.6 million records. Through June 30, this year has

seen 117.6 million records exposed in 400 breaches.*

Millions

203

US: External Cyber Crime Costs: Fiscal Year 2014

2%2%

18%

38%

40%

* Other costs include direct and indirect costs that could not be allocated to a main external cost categorySource: 2014 Cost of Cyber Crime: United States, Ponemon Institute.

Information theft (40%) and business disruption or lost productivity (38%) account for the majority of external costs due to cyber crime.

Information theft

Equipment damagesOther costs*

Revenue loss

Business disruption

Data/Privacy Breach:Many Potential Costs Can Be Insured

Source: Zurich Insurance; Insurance Information Institute

Forensic costs to discover

cause

204

Source: Insurance Information Institute research.

The Three Basic Elements of Cyber Coverage: Prevention, Transfer, Response

Loss Prevention

Post-Breach Response(Insurable)

Loss Transfer (Insurance)

Cyber risk management today involves three essential components, each designed

to reduce, mitigate or avoid loss. An increasing number of cyber risk products

offered by insurers today provide all three.

205

206

I.I.I.’s New Cyber Risk Report (Oct. 2015): Cyber Risks Threat and Opportunity

I.I.I.’s 3rd report on cyber risk: Cyber Risk: Threat and Opportunity

Provides information on cyber threats and insurance market solutions

Global cyber risk overview

Quantification of threats by type and industry

Cyber security and cost of attacks

Cyber terrorism

Cyber liability

Insurance market for cyber riskhttp://www.iii.org/white-paper/cyber-risks-threat-and-opportunities-100715

208

Marsh: Percentage of U.S. Companies Purchasing Cyber Insurance Increased in 2014

*Take-up rate refers to the overall percentage of clients that purchased standalone cyber insurance.Source: Benchmarking Trends: As Cyber Concerns Broaden, Insurance Purchases Rise, Marsh Risk Management Research Briefing, March 2015

8%

12%

18%

21%

21%

22%

26%

32%

50%

16%

11%

13%

14%

17%

17%

16%

22%

45%

13%

6%Manufacturing

Communications, Media and Tech

Retail/Wholesale

Power and Utilities

Financial Institutions

Services

Hospitality and Gaming

Education

Health Care

All Industries

Take-up rate 2014* Take-up rate 2013

Ever larger numbers of insureds seek financial

protection via cyber insurance. The

percentage of U.S. companies buying cyber

insurance rose to 16 percent in 2014.

209

Marsh: Total Limits Purchased, By Industry – Cyber Liability, All Revenue Size

Source: Benchmarking Trends: As Cyber Concerns Broaden, Insurance Purchases Rise, Marsh Risk Management Research Briefing, March 2015

$22.0

$4.2

$9.9 $10.5$9.5

$11.1$10.2

$13.2

$19.7

$6.7

$23.5

$10.5$12.0

$14.9

$21.0

$4.4

$22.2

$12.8

All Industries Comms, Media& Technology

Education FinancialInstitutions

Health Care Manufacturing Power andUtilities

Retail/Wholesale Services

Avg. 2013 Limits Avg. 2014 Limits

Average limits purchased for cyber risk rose to $12.8 million for all industries and all company sizes in 2014. Power and utility companies witnessed the sharpest

percentage increase in average limits, at 59 percent.

($ Millions)

212

INDUSTRY DISRUPTORS

Technology, Society and the Economy Are All

Changing at a Rapid PaceWill Insurers Keep Pace?

212

214

Media is Obsessed with Driverless Vehicles: Often Predicting the Demise of Auto Insurance

By 2035, it is estimated that 25% of new vehicle

sales could be fully autonomous models

Source: Boston Consulting Group.

Questions

Are auto insurers monitoring these trends?

How are they reacting?

Will Google take over the industry?

Will the number of auto insurers shrink?

How will liability shift?

215

On-Demand/Sharing/Peer-to-Peer Economy Impacts Many Lines of Insurance The “On-Demand” Economy is or

will impact many segments of the economy important to P/C insurers

Auto (personal and commercial)

Homeowners/Renters

Many Liability Coverages

Professional Liability

Workers Comp Many unanswered insurance

questions

Insurance solutions are increasingly available to fill the many insurance gaps that arise

Source: ISO.

Ridesharing Regulation/Legislation and Status of ISO Filings as of 9/30/15

219

Status of ISO FilingsStatus Ride Sharing

Legislation/Regulation

220

Send in the Drones: Potential Rapid Adoption in Industry; Media Loves It

Drones or Unmanned Aerial Vehicle (UAV) technology is seeing rapid adoption rate in many industries, including insurance

~700,000 drones in US by year-end

FAA granting Section 333 exemptions for commercial use and testing of UAS

FAA will require most drones to be registered by year-end 2015.

At least 5 insurers have received permission to test

Wide variety of applications: claims, pre-event property inspections…

Insurers partnering with construction industry to guide R&D and regulation of UAV use via Property Drone Consortium: www.propertydrone.org

Shifting Legal Liability & Tort Environment

221

Will the Tort PendulumSwing Against Insurers?

221

225

$750,392$653,898

$782,657

$1,045,048 $1,009,788

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

2009 2010 2011 2012 2013

Average Personal Injury Jury Award,2009 – 2013

Average awards in Personal Injury cases

have increased by more than 1/3 in recent years

Source: Current Award Trends in Personal Injury, 54th Edition; Insurance Information Institute.

Business Leaders Ranking of Liability Systems in 2015

Best States

1. Delaware

2. Vermont

3. Nebraska

4. Iowa

5. New Hampshire

6. Idaho

7. North Carolina

8. Wyoming

9. South Dakota

10. Utah

Worst States

41. Arkansas

42. Missouri

43. Mississippi

44. Florida

45. New Mexico

46. Alabama

47. California

48. Illinois

49. Louisiana

50. West Virginia

Source: US Chamber of Commerce 2015 State Liability Systems Ranking Study; Insurance Info. Institute.

New in 2015

Vermont New Hampshire North Carolina South Dakota

Drop-offs

Minnesota Kansas Virginia North Dakota

Newly Notorious

Arkansas Missouri

Rising Above

Oklahoma Montana

229

230

The Nation’s Judicial “Hellholes”: 2014/2015

Source: American Tort Reform Association; Insurance Information Institute

West VirginiaIllinoisMadison County

New York City Asbestos Litigation

Watch List

Atlantic County, New Jersey

Mississippi Delta Montana Nevada Newport News, Virginia Philadelphia,

Pennsylvania

Dishonorable Mention

AL Supreme Court PA Supreme Court

California

Florida

Volkswagen: Massive tort actions, fines, penalties certain. Are others vulnerable? Issue of cheating on

environmental standards and liability looms large.

Assignment of Benefits issue

looms large in FL

www.iii.org

Thank you for your timeand your attention!

Twitter: twitter.com/bob_HartwigDownload at www.iii.org/presentations

Insurance Information Institute Online:

231