USI Southwest Broker Services Capabilities Summary

Complex Risks in Real Estate, Development, Construction, And Private Equity

Market Leader USI is a portfolio company of

Goldman Sachs Capital Partners,

a private equity affiliate of Goldman Sachs & Co.

National Presence / Local Expertise USI has 71 offices in 19 states and

approximately 3,500 business professionals

serving over 60,000 business clients.

Broad Product Resource and Distribution Capability USI provides property, casualty, health & welfare products and financial services in

5 broad categories with over 20 products and services.

Property and Casualty

57%

EmployeeBenefits

34%

USIWorkplace

9%

Property and Casualty

57%

EmployeeBenefits

34%

USIWorkplace

9%

Geographical Diversity

About USI

Broker Services Property / Casualty

Employee Benefits

Alternative Risk

Executive Risk

Environmental Mitigation

Worldwide Market Access

Risk Management Services

Risk Control

Risk Financing

Claim Advocacy

Information Services

Actuarial Analysis

Data Collection & Reporting

Property and Casualty

57%

EmployeeBenefits

34%

USIWorkplace

9%

Property and Casualty

57%

EmployeeBenefits

34%

USIWorkplace

9%

Geographic Diversity

About USI

Broker Services Property / Casualty

Health / Welfare

Wealth Management

Pension / Retirement

USI Workplace

Risk Management Services

Risk Control

Risk Financing / Alternative Risk

Claim Advocacy

Information Services

Actuarial Analysis

Data Collection & Reporting

USI Southwest Real Estate Practice

USI Southwest is a full service insurance brokerage and risk management consulting firm

focused on the needs of the real estate industry.

Our goal is to redefine the role of the insurance broker in real estate financial transactions. We

believe that by developing long-term, strategic relationships with real estate firms and their

advisors, we can improve the efficiency, structure and investment returns on real estate

transactions.

We also believe that as a privately held, strategically focused brokerage, we have the flexibility

and the speed to react more creatively to deal-specific hurdles and the special needs of real

estate companies. Our smaller size does not, however, equate to inexperience: our professionals

have over 10,000 transactions to their credit.

Our combination of industry experience and responsiveness results in meticulous due diligence,

creative and cost-effective insurance solutions, and the development of unique product and

financing alternatives.

USI Southwest is based in Houston, with offices in Dallas, Austin, Albuquerque, and New

Orleans. USI is a portfolio company of Goldman Sachs Capital Partners, a private equity affiliate

of Goldman Sachs & Co.

Due Diligence USI Southwest does not just sell insurance. We are engaged by real estate firms to analyze

business risk, assess risk management practices, interpret coverage adequacy, and design cost

effective solutions. How can your agent or broker sell you insurance if they do not take the time to

understand your business?

USI Southwest applies its unique due diligence perspective to traditional buyers of insurance.

Does your broker/agent provide you with a Risk Analysis Report highlighting the business risks,

operational risks, and financial risk of your business? Do they analyze historical exposures?

Identify future exposures? Discuss current trends? Anybody with a broker's license can sell you

insurance. USI Southwest helps you manage risk.

Business Risks Business risks are inherent to most activities undertaken by a company. Many of the risks

associated with conducting business are not insurable, such as the risk of a new competitor

emerging or that of a company's products becoming obsolete. However, there exists a large body

of exposures, particularly those arising from direct or indirect relationships between a company

and other parties, which do have insurance implications:

• Legal/Contractual Obligations Service commitments

Indemnifications provided (and received)

Product delivery, performance, and reliability standards

Employment contracts

Equipment and real estate leases

• Strategic and Financing Initiatives Mergers and acquisitions

Joint ventures

Partnerships

Public and private debt and equity issues/placements

• Supply Chain Management

Vendors

Suppliers

Resellers/Retailers

Contingent business interruption exposures

Operational Risks Operational risks are defined as those risks associated with the day-to-day operations of a

business enterprise. As one would expect, operational risks are dependent on the operations of

the organization. Operational risks for real estate companies are different than those of

manufacturing or technology firms.

Operational risks are the most easily transferred risks to third parties. The pricing of the risk

transfer is the most uniform.

• Coverage associated with operational risks include:

Workers' compensation

Business interruption

Property

Liability

USI Southwest is uniquely qualified to assess operational risk. We have extensive experience in

the real estate industry and the corresponding operational risks.

Financial Risks There are numerous financial risks associated with the management of any business. Like any

other exposure to loss, certain financial risks are insurable and certain financial risks are

uninsurable. Unlike business and operational risks, where the line of insurable vs. uninsurable is

clear, the insurability of financial risks are a "moving target".

Traditional financial risks are classified as those risks associated with the financing for and

financial management of a business. Including:

• Interest rate risk

• Foreign currency risk

• Credit risk (from customers)

• Credit risk (to suppliers)

Non-traditional financial risks are classified as those risks not associated with the financing of a

business but, rather, those risks that have a direct financial impact on the business and are not

otherwise classified as business or operational risks. Including:

• Risks from shareholder litigation

• Risks from third party (non-product related) litigation

• Risks associated with political instability (confiscation, contract disruption, war)

• Risks from regulators and other governmental agencies

• Risks associated with mergers/acquisitions/divestitures

USI Southwest has devised unique risk transfer and risk sharing alternatives for clients with

exposures in these areas.

Geographic Reach

USI Southwest is licensed in all 50 states. We have clients in all of them. We work in key foreign

countries and we do not cede control of your account to a "correspondent firm".

Transparency

We are your partner. We act like one. We disclose our compensation. We disclose our insurance

company relationships. We certify all of our proposals for accuracy and disclosure. Is there any

other way for a partner to act?

Resources

Most small brokers/agents have limited resources. Most large brokers save resources for their

Fortune 500 clients. What about the rest of you? USI Southwest has developed a comprehensive

set of specialized resources. We will do whatever it takes to bring the best resources to bear for

our clients — regardless of the economic impact to us.

Customer Service

Some things never go out of style; like having an Account Executive that actually acts like an

Account Executive and not a concierge. Our Account Executives service their clients. They do not

redirect your phone calls to the appropriate department. They ARE the appropriate department.

When you need outside, specialized resources, our Account Executives coordinate them and

remain your single point of contact. They know your claims history. They know your safety issues.

They know your short-term needs and long-term dreams. Service like that is always in style.

Select Client List Select Client List

Upon Request

The USI Advantage

We match great people with a great process. You get strong, consistent results.

Process Most brokers have inferior processes or no process at all. USI Southwest has

developed a patented process that is:

• Individually Tailored to meet your needs

• Measurable so we know if we are performing

• Accountable to you

• Aligned with your goals and objectives

• Proactive, not reactive

People Small brokers/agents have limited resources. Large brokers save resources for their

Fortune 500 clients. USI Southwest has developed a comprehensive set of specialized

resources and expertise to meet the needs of the upper middle market.

• Industry Specific Risk Management

• Executive Protection

• Environmental Risk Mitigation

• Advanced Claims Advocacy

• Loss Control

• Health/Welfare

Real Estate Portfolio Management Property coverage for complex and high-value asset portfolios requires significant market

knowledge and structuring capability. USI uses our Risk Management principles to properly

assess the risk profile of such asset driven accounts, with the intent to provide each client with

the information necessary to make a decision about their level of risk retention, risk funding

methodology, and allocation strategy.

This process includes actuarial based analysis of historical property losses, payments under

deductible and retention limits, and assignment of loss values to each property in the portfolio. By

understanding prior outcomes, we can then allocate premium and loss costs for proper billing and

budgeting. In some cases, the client may wish to take a high

retention under a master policy, fund the

retention, and charge out the premium to each

property based on a risk allocation model. In

such a case, the premium is driven down by

increasing retention to a level actuarially out of

the money for non-catastrophic losses. The self-

funding of the retention is then spread across the

portfolio in an equitable fashion.

USI drives this process by completing the historical analysis, and placing the coverage in markets

that understand such structures. In some cases, foreign markets and third-party wholesale

brokers participate by assisting us in covering the worldwide market to the benefit of our clients.

Understanding the current difficulties of wind exposure coverage in first tier counties along the

Gulf and Atlantic coasts is an important part of structuring retentions. USI leverages the non-

coastal portions of the portfolio in the marketplace to improve the overall pricing profile of the

program.

In some circumstances property owners hire third-party management firms to operate and

manage their properties. In such cases, the management firm can allocate costs for insurance

and losses under a contractual agreement. Third-party loss and premium data can be

incorporated into USI’s loss analysis in such a way to determine if allocations are representative

of actual experience of the property being charged. It can be benchmarked to further assure cost

controls under contractual arrangements.

Construction Practice

The USI Southwest Construction team has the intellectual capital and market access to assist

general contractors, construction professionals, project financiers and developers of every size to

create strategic risk management solutions.

We anticipate trends and issues in the construction industry and develop strategies for our clients

to improve risk profiles, lower cost and add profit through customized risk management and

financing programs.

The USI team is a true partner and works with you to create strategic risk management

solutions in the following areas:

• Construction All Risk

• Workers Compensation

• Employers Liability

• Third Party Liability

• Advanced Loss of Profits

• Surety

• Contractor Default Insurance

• Claims Services and Advocacy

• Loss Control

• Environmental Risk Mitigation

• Enterprise Risk Management

The USI Construction Practice takes a broad-based approach to the assessment and effective

management of our construction partner’s comprehensive financial risk profile. We use our

knowledge and experience to develop a clear understanding of our clients' needs,

thereby assisting in the effective analysis, control and transfer of risk.

The USI Risk Management Division provides services to clients in the middle and upper middle

market segments, which is traditionally underserved by multinational brokers with similar skill

sets. Our clients have the need for risk management related service, support and analysis, but

typically have a small risk management staff, if any. Our philosophy is to partner with our clients

to become an extension of the risk management department by performing the tasks necessary

for internal support, including providing reporting information suitable for board level review.

The risk analysis is strategic as well as technical. Strategic analysis is a joint effort with our clients

to determine the current risk profile of the company, the economic impact of that profile, and the

proper risk finance methodology. In some cases, we are present at the formation of a new risk

management department, and can assist in the structure of the program from the outset

Technical analysis is an ongoing service designed to

provide risk specific, actuarial, and claims data in the

time and format most useful for the client. These can

be bundled or unbundled services including

Environmental Risk Analysis, Loss Control, Actuarial

Based Analysis and Reporting, Claims Advocacy,

and Program Design and Placement supported by

our Service Model.

We are not simply selling products; we are

providing capital-based and information-based

solutions.

Our capacity to provide such solutions is based in the

understanding that insurance is just another form of

capital. It is fungible and by its nature is often the

most efficient financial solution available, as proven

by its commoditized nature. We think with our clients

in terms beyond commoditized product sales, and

instead, take the view of a risk manager, using

insurance as one available tool. This allows us to

give our clients a broader view of available options.

Risk Management Philosophy

In 2006 USI was chosen as the partnering retail broker by NASDAQ to support their wholly

owned Directors and Officers Insurance operation in the Southwest. This exclusive relationship

significantly expands USI’s D&O information resources and placement capability. In alignment

with our Risk Management philosophy, we take a consultative rather than a transactional view of

D&O insurance. Our expanded team consists of over 70 industry professionals dedicated to

professional lines of coverage, including: Directors and Officers Liability, Employment Practices

Liability, Fiduciary Liability/Crime, Errors & Omissions, and Mergers & Acquisitions.

Directors & Officers Coverage

We jointly consult and place D&O

coverage for over 350 public companies

and over a thousand private companies

in a variety of industries – from microcap

to Fortune 500.

We use NASDAQ’s proprietary D&O

database with multiple years of data to

benchmark client accounts.

Benchmarking is based upon Securities

Litigation Trends, Projected Settlement

Analysis, Pricing, and Peer Purchasing

Trends. The unique resources available

to our clients through this relationship are

unmatched in the industry.

Major carriers use us for new product definition. We have routine inquiries and referrals from

major law firms throughout the country. We provide our clients with high-level policy summaries

and comparisons. Service standards and timelines are part of the placement and ongoing

account service methodology to ensure management of the process to each client’s standards.

Environmental Risk Mitigation

Single Source Environmental Risk Management Providing an array of environmental risk

management solutions:

• Environmental Risk Profiles

• Environmental Exposure Analysis

• Risk Mitigation Structuring

• Environmental Law Profiles

• Environmental Loss Modeling

• Environmental Insurance

Program Evaluation

• Insurance Policy Form Analysis

• Environmental Insurance Program

Marketing

• Remediation Cost Caps for Developers

• Lender Liability Protection

• Web Based Interactive

Environmental Risk Management

Programs for Clients

• Education and Training Programs

Strategic Resources. Specialized Skills. Specific Solutions.

The Power of Professional Relationships Selected from the ranks of environmental

underwriters, attorneys, marketers, educators and

environmental risk managers, this superior

resource group offers a breadth of specialized

knowledge and technical skills –and the ability to

deliver innovative solutions to meet your business

objectives.

ERMG uses as its network platform the online

Environmental Knowledge Delivery System

(www.environmentalriskmanager.com). This

relationship makes available the benefits of our

licensing agreement with the International Institute

Environmental Risk Management (“I2ERM”) in

conjunction with Texas State University, allowing

USI to obtain for our clients the latest information,

knowledge, and solutions for environmental risks.

Decision-makers benefit from direct access to a

national network of seasoned professionals who

provide the most accurate, up-to-date information,

linking the various disciplines of environmental risk

management.

The USI Environmental Risk Mitigation Group

capability cuts across industries. ERMG provides

strategic information and specific solutions to

environmental problems and opportunities utilizing

our unique environmental resources.

Each risk management program includes elements of self-insurance, risk transfer, risk avoidance

and risk reduction. Our objective is to assist clients in the identification of exposures to loss and

determine the most economical means of dealing with each risk. The outcome is a

comprehensive plan that maximizes positive economic impact and minimizes catastrophic

exposure to the balance sheet and current year cash flow.

Program Design & Placement

A crucial part of program development is

identifying and quantifying expected losses and

pass-through loss costs then structuring a plan

to address those known losses. Our Risk

Management Division helps clients quantify

those losses by use of actuarial principles and

the latest catastrophe modeling software.

Identification of burning layers in the context of

each client’s risk appetite will combine to

determine the most economical structure by

In addition to plan structure, an understanding of the insurance marketplace and having

relationships with those carriers capable of providing coverage are necessary. USI has access to

and works with financially stable domestic and international markets to ensure the ability to place

any structure we jointly conceive with our clients.

Non-traditional risks need to be analyzed and

mitigated, as well. We have specific resource

capabilities to resolve domestic and international

non-standard risks. We advise and place

alternative risk products, risk finance options,

contingent risks and weather derivatives. These

tools can be used in concert with traditional

retention and insurance models to mitigate

differences in conditions or risk aggregation

problems.

Catastrophe Loss Analysis

Catastrophic Modeling

Catastrophes can strike at any time and in many forms,

from hurricanes to earthquakes to terrorism. When we

see the effects of a Hurricane Katrina or the Indonesian

earthquake and tsunami of 2004, we are reminded not

only of the personal tragedy and cost in human lives,

but also the incredible financial risk to which each of

our client companies is exposed. To prepare for and

minimize the impact of a catastrophe on a company’s

assets, a comprehensive risk management strategy

must be developed.

The foundation of this plan must be built upon the accurate quantification of physical values

exposed paired with the likelihood and extent of the catastrophic event. USI provides the tools to

develop a sound catastrophic risk management program.

Natural catastrophe models are a complex

system of algorithms that incorporate the

fundamental physical characteristics of

catastrophic events and expresses them

mathematically. These characteristics are then

applied to a geographical distribution of

exposures. In addition to loss probability, the

characteristics of a portfolio’s physical assets,

such as age, construction, and zip code, must

also be considered when formulating and

evaluating ultimate financial risk. USI provides

this analysis so that clients can make informed

decisions on limits, retention levels and

whether to retain, mitigate with loss control or

contractually transfer the risk through an

insurance product.

•Estimate consistent and reliable loss

costs for all locations.

•Develop data to more effectively

negotiate property insurance terms and

conditions.

•Purchasing appropriate limits.

•Demonstrate sound risk management

practices.

Loss Estimates from Modeling assist with the following: •Manage areas of high exposure to

catastrophic loss.

Owner-controlled insurance programs (OCIPs), also called wrap-up insurance, are insurance

programs designed for large construction projects. Under such plans, the project owner procures

certain insurance coverages for all tiers of contractors and sub-contractors performing jobsite

operations. This program replaces the traditional approach where owners require contractors to

provide proof of Workers Compensation, Liability and Property insurance. Under an OCIP, the

owner assumes the insurance burden by defining the insurance limits, establishing and

supporting OCIP administration, establishing the risk sharing profile of the program, assuming the

responsibility for safe workplace operations to include the work of all contractors, and purchasing

the insurance

Owner Controlled Insurance

Increased Popularity of OCIPs The use of OCIPs is expanding from several

factors:

• The increase in the number of large

capital improvement projects

undertaken to repair the nation’s

deteriorating infrastructure. • The booming economy fueled by the

growth and expansion of high-tech

businesses. • The implementation of less stringent

insurance regulations.

• A highly competitive construction

insurance market.

OCIPs generally produce lower insurance

costs to the owner compared to the

conventional approach. This is driven by

increased buying power by pooling coverage,

reduced construction cost by eliminating overhead and mark-up in contractor bid amounts,

elimination of inter-insurance company litigation, elimination of duplicate coverage, fewer

accidents due to central oversight and workplace safety methods, reduced administrative costs

compared to collection and auditing of contractor policies, and potential cash-flow benefits by

master financing of the project premium.

Private Equity Practice

USI is redefining the role of the insurance broker in private equity transactions. By developing

long-term strategic relationships with private equity firms and their various partners we can

consistently improve the efficiency, structure and investment returns on private equity

transactions. As a privately held company owned by a significant private equity firm we have the experience, flexibility and the speed to react more creatively to deal-specific hurdles and the special needs of private equity companies.

Our combination of strong experience in

diverse industries and our responsiveness

results in meticulous due diligence,

creative and cost-effective insurance

solutions, and the development of unique

product and financing alternatives.

The USI Advantage We match great people with a great process, so you get consistently strong results.

People - Small brokers/agents have

limited resources. Large brokers save

resources for their Fortune 200 clients.

USI Southwest has developed a

comprehensive set of specialized

resources and expertise to meet the

needs of the upper middle market. Risk Management, Executive Protection, Environmental Risk Mitigation, Advanced Claims Advocacy and Health/Welfare.

Process - Most brokers have inferior

processes or no process at all. USI

Southwest has developed a patented

process that is individually tailored to

meet your needs, is measurable so we

know if we are performing, is

accountable to you, is aligned with your

goals and objectives and is proactive,

not reactive.

A Dallas-based private equity firm

reduced employee benefit costs

for two of its portfolio companies

by more than two million dollars

in annual fixed expenses. Utilizing

USI’s Benefit Portfolio Solution

resulted in a larger multiple on

EBITDA, dramatically increasing

the firm’s capital gain at liquidity.

USI has contract and commercial surety specialists within our construction practice dedicated to

the creation and management of programs specifically designed for the construction industry.

Surety bonding has been used in the construction industry for more than 100 years. Most

contractors are required at some time to provide a bond to guarantee performance. Frequently

bonds are the key to a construction project and the inability to become bonded may lose a

contractor work.

Surety Specialization

Ability to secure credit can be

adversely affected by changes in

the worldwide financial markets

and bank lines of credit may be

particularly vulnerable. A surety

facility gives a contractor an

advantage in overcoming such

uncertainties.

Contractors need a reliable bonding facility at a competitive cost. Although bonds can be

provided by either banks or insurance companies, a bond obtained from a bank may impact upon

a contractor's borrowing facilities since banks tend to consider bonds as a financial liability and

reduce the contractor's credit facility accordingly. Commercial surety bonds provided by an

insurance company offer a dynamic financial management tool often providing off-balance-sheet

credit on terms and conditions more favorable than other financial instruments.

An alternative to subcontractor bonding is contractor default insurance (CDI). CDI indemnifies the

insured for losses incurred as the direct result of a subcontractor or supplier default. It also

provides coverage for losses that are the indirect result of a default such as liquidated damages,

acceleration of other subcontracts or extended overhead. CDI delegates control of default

remedy to the insured. Thus empowered, general contractors can act more quickly to address

potential defaults and mitigate the impact if they do occur.

Service Standards

InServ Service Standards

• Quarterly TPA/Claims

reviews

• 180-day stewardship meeting

• Risk manager submission

approval

• Policy delivery within 60-days

of binding

• 24-hour endorsement

request and certificate

issuance

• 120 day renewal lead times

InServ is a service platform that allows each service

team to track the activities needed in the servicing,

marketing and management of an account. Most

large brokerage firms have defined service

standards, however, it is incumbent on the account

manager to track and adhere to agreed

performance standards. Given the service slippage

that can occur in such an environment, USI has

developed automated support to our servicing

platform to track service requirements. Over time

we expected to continually increase the level of

automated support we now enjoy.

The Inserv model is implemented via our account

management system. A timeline is created with

each client that identifies tasks that require action

on specific dates throughout the policy year. A

graphic timeline is provided to the client to illustrate

the agreed service plan. As the account data is

subsequently entered into our account management

system, the pertinent dates in the timeline are

diaried so that automated notices are generated to

ensure timely response to the agreed actions. Each

team member is required to create such an activity

support plan with automated diary entries so that we

can initiate the required activity at the right time.

Accounts are internally audited three months after

the effective date for compliance to these service

standards.

International

International Coverages • Foreign Casualty • Foreign Property • Kidnap & Ransom • Employee Benefits • Political Risk • International Transit & Cargo • Stock Throughput • Product Recall and Expense • Foreign Products Liability • Currency Conversion • Work Comp/Social Security

The world is smaller today than ever. In fact, many USI

clients are multinational corporations, with multiple

foreign locations and workers, transacting business with

the entire world. Some are manufacturing their products

overseas for distribution here in the US while others are

also selling their products to a vast international

marketplace. Never has a comprehensive global risk

management expertise and philosophy been more

necessary. At USI, we have the experience, the

network, and the markets to implement the international

risk management philosophy of our clients. Our people

have structured international programs for some of the

largest corporations in the country and they bring that

expertise to each client’s account. USI can place a

simple trip travel policy or structure a global loss

sensitive program that will minimize a client’s cost of risk

while maximizing their use of foreign currency.

Understanding various legal systems, insurance laws and languages can be a daunting prospect

when implementing a global risk management program. As members of the Worldwide Broker

Network, USI has access to the technical, legal and professional resources of over 8,500

insurance professionals in more than 75 countries. Empowered with this resource, USI helps our

clients overcome country-specific insurance policy and claims issues. In addition, USI has direct

access to all of the international markets and then, through the WBN, we have access to the local

markets that we must access to provide the necessary admitted coverage.

USI recognizes the value of claims handling and claims information to the present and future

viability of a client’s account. There are prevailing industry problems with each aspect of claims

management that we individually target, with a goal to improve the overall claims handling

process, claims costs, settlement procedures, and data collection and reporting. When each of

these operating segments is not properly controlled and managed, the result can be costly in a

variety of ways.

USI partners with our clients in an oversight, process management and data collection role. In

this role we enhance the existing services provided by TPAs and insurers, augment the

usefulness of claims data with specialized reporting, and provide direct professional guidance and

oversight on claims management.

This includes tracking specific large claims in concert with the TPA efforts. It also includes taking

measure of the methods and practices used by your TPA and making advisory recommendations

to improve the process, reduce costs, control costs, eliminate process bottlenecks, and

streamline the operating method as necessary.

Claims Advocacy & Data Services

The raw information is transferred to RiskEnvision, USI’s

internal automated data collection system. The system

provides for consistent aggregation of claims data. Once

transferred, the data becomes uniform, eliminating the

problems of varying reporting formats from different

insurers, incomplete data sets, unsuitability to various

sorting options, and tight limitations on report generation

capabilities.

By further benchmarking this information, third-party operator efficiency can be documented

against peers and industry standards. Within the resulting framework, Loss Control standards can

be created, and cost management steps can be initiated.

Risk Control Services

USI Risk Control Services assists clients by

supplementing or providing a range of Loss

Control services for development &

implementation of Risk Management strategies.

Our in-house loss control professionals utilize

loss and experience data to enhance safety and

improve work environment risk profiles

This is accomplished by developing a forensic

understanding of each client’s operational profile,

related exposures for loss, prevailing corporate

culture, client specific appetite for risk, and risk

management driven objectives. From this

information, USI develops a Risk Control plan

tailored to each client, and then assists in

operational implementation and oversight until

the objectives are met.

Risk Control Services •Reduce Employee Injury Rates

and Related Risk Costs

• Reduce Fleet, Property & General

Liability Cost of Risk

• Asset Protection Program

• Coordination of Insurance Carrier

Safety Services

• OSHA Benchmarking

• OSHA Compliance Assistance

• Employee or Management

Training

• Accident Investigation

A national property management and

real estate developer, was able to

reduce losses by more than 30% in

year over year losses after

implementing USI’s recommended

risk control plan. USI’s Risk Control

representatives attributed success of

the plan to program development,

follow-through and continued

oversight by USI’s Risk Control

representative.

Risk Management Services Technical Services The USI Risk Management Division uses actuarial principles to provide services to our clients in

need of technical information to support risk management decisions. These services are provided

automatically to clients when we act as broker and place their corresponding coverage. Services

can also be unbundled and provided on a contract basis. Our RMD services are provided by

personnel in our Houston regional office.

Loss triangles and reserve analyses are created

to provide the client with reasonable expectations

of future claims costs on past losses. Similarly,

loss projections frame expectations for future

claim experience. The information can be used

for program design and placement, for corporate

budgeting purposes, and for determining LOC/

security needs for casualty lines of coverage.

Benchmarking Client data can be compared to peer data sets

via USI’s national subscription database source.

The resulting comparatives provide insight into

peer coverage limits, premium costs, and

retention limits.

Cl i Ad d D t

Loss Forecasting

Collection, Interpretation and Analysis of Loss Data In concert with our claims support function, USI

can import loss data from a variety of disparate

sources (TPAs, insurance company databases,

etc) and collate it into a single system. The data

is then parsed for analysis and interpretation.

1.00 0.99 1.00 1.01 1.05 1.13 1.26 1.27 2.82 XCumulative LDF

1.00 0.99 1.01 1.01 1.04 1.08 1.11 1.01 2.22 X

Avg. Incremental LDF

985,075 985,075 995,026 985,174 975,420 937,903 868,429 782,369 774,622 348,929 2005/6

0.58

528,264 528,264 533,600 528,317 523,086 502,967 465,711 419,559 415,405 711,110 04/05

0.60 1.28

262,258 262,258 264,907 262,284 259,687 249,699 231,203 208,291 348,372 272,529 03/04

0.91 0.98 2.90

645,489 645,489 652,009 645,553 639,161 614,578 569,054 625,891 640,253 220,584 02/03

1.23 0.98 1.43 2.55

346,221 346,221 349,719 346,256 342,828 329,642 268,974 274,442 191,516 75,000 01/02

1.14 1.02 1.37 0.80 3.67

302,925 302,925 305,985 302,956 299,956 262,832 256,752 187,422 235,390 64,085 00/01

1.00 1.00 0.82 1.13 1.16 2.88

540,318 540,318 545,776 540,372 540,372 540,372 657,150 581,892 503,201 174,541 99/00

1.01 1.00 1.00 0.75 1.37 1.08 1.25

263,351 263,351 266,011 263,161 263,161 263,161 353,066 257,767 238,347 191,240 98/99

1.00 1.00 1.00 1.07 0.87 1.02 1.05 2.17

215,242 215,242 215,241 215,241 215,241 201,992 231,022 227,371 216,965 100,000 97/98

1.00 0.98 0.46 1.06 1.00 1.81 1.00 1.00 2.68

231,233 231,233 236,420 515,199 486,303 485,706 268,245 268,245 268,245 100,000 96/97

118 months106

Months94 Months82 Months70 Months58 Months46 Months34 Months22 Months10 Months

Policy Inception (Oldest

to Current)

Losses

As of MARCH 31, 2006

INCURRED LOSS TRIANGULATION

WORKERS COMPENSATION

1.00 0.99 1.00 1.01 1.05 1.13 1.26 1.27 2.82 XCumulative LDF

1.00 0.99 1.01 1.01 1.04 1.08 1.11 1.01 2.22 X

Avg. Incremental LDF

985,075 985,075 995,026 985,174 975,420 937,903 868,429 782,369 774,622 348,929 2005/6

0.58

528,264 528,264 533,600 528,317 523,086 502,967 465,711 419,559 415,405 711,110 04/05

0.60 1.28

262,258 262,258 264,907 262,284 259,687 249,699 231,203 208,291 348,372 272,529 03/04

0.91 0.98 2.90

645,489 645,489 652,009 645,553 639,161 614,578 569,054 625,891 640,253 220,584 02/03

1.23 0.98 1.43 2.55

346,221 346,221 349,719 346,256 342,828 329,642 268,974 274,442 191,516 75,000 01/02

1.14 1.02 1.37 0.80 3.67

302,925 302,925 305,985 302,956 299,956 262,832 256,752 187,422 235,390 64,085 00/01

1.00 1.00 0.82 1.13 1.16 2.88

540,318 540,318 545,776 540,372 540,372 540,372 657,150 581,892 503,201 174,541 99/00

1.01 1.00 1.00 0.75 1.37 1.08 1.25

263,351 263,351 266,011 263,161 263,161 263,161 353,066 257,767 238,347 191,240 98/99

1.00 1.00 1.00 1.07 0.87 1.02 1.05 2.17

215,242 215,242 215,241 215,241 215,241 201,992 231,022 227,371 216,965 100,000 97/98

1.00 0.98 0.46 1.06 1.00 1.81 1.00 1.00 2.68

231,233 231,233 236,420 515,199 486,303 485,706 268,245 268,245 268,245 100,000 96/97

118 months106

Months94 Months82 Months70 Months58 Months46 Months34 Months22 Months10 Months

Policy Inception (Oldest

to Current)

Losses

As of MARCH 31, 2006

INCURRED LOSS TRIANGULATION

WORKERS COMPENSATION

Careful strategic planning, ongoing evaluation and our unique service platform are the main

drivers that assure a comprehensive and competitive employee benefit program. We approach

this process by defining your objectives and developing an organized action plan to achieve those

objectives. Based on information gathered from both the client and the carrier we provide a

complete analysis of the client's existing plans and contractual arrangements; as well as,

demographic analysis, historical claims and reserve analysis. These analyses allow us to

effectively advise you regarding plan design, funding options and administrative support.

Health / Welfare

We establish a baseline by reviewing cost

containment and wellness strategies,

evaluating provider networks for

applicability and access, and by reviewing

the executive benefit programs.

USI Compliance Department

• Non-Discretionary Employee

Eligibility Classes

• Sick Leave and Re-Hire Provisions

• Wellness Guidelines within ERISA

• Medicare Part D

• Contribution Modeling

• SPD Evaluations

Our ERISA and compliance attorneys

regularly meet with our clients regarding new

developments and issues related to Welfare

plans. They guide our clients through

intricate and complex risks associated with:

• COBRA, HIPAA and FMLA

• HSA / FSA

Plan design alternatives that could positively impact claim cost and/or administration expense are

identified and evaluated. Various stop loss and pooling level options are studied based on the

client’s risk tolerance. We know that efficient implementation and effective employee

communication is critical and our proven process insures a successful role out and enrollment.

Our USI Service Timeline insures that all deliverables are identified and addressed during the

program year.

Employee Benefit Communication

Workplace Benefits Communication / Data Cleansing

USI Workplace Benefits is a wholly owned

subsidiary of USI. USI Workplace Benefits is

the leading benefits enrollment company in

the country, providing services to more

employees than any other of its type. This

unique service is a one-on-one automated

benefits enrollment service to public and

private companies across the country.

It is typically not possible for the human

resources department of a company to have

one-on-one contact with each employee to

discuss benefits. This is especially true if

employees are spread across the country.

Regardless of the employee count and

location, during the benefits enrollment

period, a USI representative will personally

talk to each and every employee, guiding

them through the benefits election process.

The steps include the following:

• A USI representative works with your

human resources department to

download your benefits data into the

Benefits Communication system.

• During the annual enrollment period,

USI representatives meet with each

and every employee personally or by

telephone to guide them through the

benefits selection process.

• A dependent audit is performed at

the enrollment point to cleanse the

enrollment of any non-qualifying

participants

• This can be done on a no-cost basis.

USI Workplace offers additional

voluntary benefits to employees at

enrollment. The income from the

voluntary benefits pays for the

communication and data cleansing.

Having a union workforce is not an issue with

implementing this enrollment product. In fact,

unions typically embrace the process. Like

the human resources department, the union

rarely has a vehicle through which they can

have one-on-one contact with its members.

We have enrolled companies with both union

and non-union employees, and used the

enrollment to convey union information to its

members.

Alternative Risk Solutions In some circumstances standard insurance coverage can not address the risks a company faces.

Similarly, traditional capital sources are typically not available to fund or offset non-standard risks.

Clients find themselves retaining financial and operating risks they’d prefer to transfer. Alternative

risk finance solutions are creative ways to either transfer such risks, or, to retain them in a way

that minimizes the financial downside.

Completed Projects • Enhanced over $1 billion in securities

for Petrobras • Enhanced the first government backed

securitization for the country of Belize • Enhanced the first mortgage

securitization for the country of Ukraine • Eliminated risk elements for a $55

million funding for offshore Pemex construction

• Sourcing funding and insurance for an existing client for a $100 million pipeline supply project

USI develops innovative solutions that help clients mitigate complex or difficult-to-address risks

by combining insurance, financial and capital market strategies. Risks that create capital

inefficiencies are targeted on a domestic and international scale.

Our alternative risk experts have solved problems for mid-cap to large-cap corporations around

the world. Our role varies from advisory, to structuring, from consulting to providing capital

through our partnering relationships. The answers are not product driven, but capital driven, and

they manifest themselves in a variety of ways – insurance policies, derivatives, senior or

mezzanine capital, project finance and self-funded facilities designed to smooth the volatility of a

risk over time. We begin creating solutions where the traditional markets end.

Weather Call Options This coverage is structured as a derivative instead of an insurance indemnity policy on an annual

cumulative or weekly basis for risks of rain, snow and/or wind at selected locations. Proof of loss

is not required, simply proof of event, which allows you to estimate extra-expense and revenue

shortfalls correlated to weather events, and recover the loss on a call option basis, creating a

fixed cost cap on the risk.

Weather Derivatives

For example you determine that snowfall or

freezing temperatures can cause disruptions

or delays resulting in loss of cash flow or

trigger additional expenses such as

liquidated damages, the aggregate effect of

which you want to cap in your budgeting

process. You can enter into an option

agreement that would include a traditional

insurance styled actuarial approach.

We would determine the 25–year average weekly snowfall at the locations in question during the

months desired. Let’s assume that number is 8-inches at each location. A retention would be

added – let’s use 2 additional inches per location per week. We would determine the amount of

potential losses/expenses to be incurred under the scenario described; let’s assume its $500,000

per week. An option contract would be written and an option fee charged. If, then, at any time

during the designated period, more than 10-inches of snow fell at a designated location, the call

would be exercised and the counterparty would pay $500,000. There would also likely be an

aggregate cap in the option contract.

Since there is no insurance involved, there is no proof of loss. This is event driven. If the event

happens, the option is exercises. This is easy to do with weather since there is significant data

available from weather stations everywhere. In your case, it’s even easier since the weather

station is usually at the airport.

Team Chart

USI Southwest

CORPORATE RISK SERVICES PRACTICE TEAM LEADER / COORDINATION

Property Specialist

Program Design Placement

Engineering Specialist

COPE Primary

Secondary Characteristics

Account Executive

Service Coordination

Catastrophe Modeling Specialist

PML Analysis Values Exposed

Business Impact

Specialist BI Analysis

Management Liability

D&O Specialist

Senior Account Manager Account

Maintenance

Claims Manager

Claim Coordination

Claims Advocacy

Complex Claims

Property Intermediary

Placement

Environmental Specialist USI ERMG

Account Manager Technical Support

Risk Management Data Analysis Risk Finance

Loss Prevention

USI Loss Control

Surety Specialist

Program Design Placement

For additional information on the USI Southwest Corporate Risk Services Practice, please contact: Perry Smith

Shawn Heiser, CIC, ERM Business Development - Environmental Risk Specialist USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3103 (Cell) 228.383.5946 shawn.heiser@usi.biz

RE Practice Director - Senior Vice President USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75230 (Office) 214.443.3155 (Cell) 214.957.1575 perry.smith@usi.biz

Jill Webster, CPCU, ARM, CIC Account Executive USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3103(Fax) 214.443.3900 jill.webster@usi.biz

Elizabeth Murphy Business DevelopmentUSI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3112 (Fax) 214.443.3900 elizabeth.murphy@usi.biz

Rusty Compton Senior Vice President – Group Benefits USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75230 (Office) 214.443.3110 rusty.compton@usi.biz

Steve Campo Practice Leader - Management Professional Services USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3168 steven.campo@usi.biz

Linda Hoover, CPCU, CIC, SCLA Risk Management/Claims Advocacy USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3196 linda.hoover@usi.biz

Kris Flores Carrier Marketing Coordinator USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3112 kris.flores@usi.biz

Lynn Owen, CIC Regional Account Executive - MPS USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443.3114 lynn.owne@usi.biz

Joella Heath Claims Representative USI Southwest 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 (Office) 214.443. 3150 joella.heath@usi.biz

USI Holdings Corporation is a leading distributor of insurance and financial products and services to businesses throughout the United States. Founded in 1994, USI has grown – organically and through acquisitions – to become, according to Business Insurance, the ninth largest insurance broker in the United States. USI is located in 19 states and is headquartered in Briarcliff Manor, New York. For more information regarding our value-added insurance products and services, visit our Web site at www.usi.biz.

USI Southwest Real Estate Practice

1445 Ross Avenue, STE 4200

Dallas, TX 75202