Willis Latin American Energy Conference October 2012

OIL – An Introduction

Barry Brewer VP Marketing

2012

• Who is OIL? • Membership • Underwriting highlights • Policy Coverages • Limits / Deductibles • 8 Business Sectors • Limit Structures • Atlantic Named Windstorm

(ANWS) • Rating & Premium Plan • OIL vs. Commercial Market

Topics

2

3 2012

• OIL is an Energy Industry Mutual Insurance Company headquartered in Hamilton, Bermuda

• Formed by 16 major energy companies in 1972 after two incidents in the late 60’s that resulted in inadequate coverage / pricing

• Today, OIL is a world leader in global energy insurance

• 54 Shareholders / Policyholders - medium to large public / private world-class energy companies headquartered around the world

• 46% of membership has been with OIL for over 20 years

Who is OIL? World’s Largest Energy Mutual

4 2012

• $300 million broad and stable “cornerstone” capacity

• Over $2 trillion in assets insured globally for 54 members

• $6 billion in assets

• $3.0 billion in shareholder’s equity

• Over $11 billion in claims paid over 40 years

• S&P A- rating (stable outlook)

• Expense ratio = approx. 3-6 %

• Not dependent upon reinsurance

Who is OIL? World’s Largest Energy Mutual –by the numbers

5 2012

Current OIL Members – September 1, 2012

Apache Corporation Arkema BASF SE BG Group plc BHP Billiton Petroleum (Americas) Inc. Buckeye Partners, L.P. Canadian Natural Resources Ltd Canadian Oil Sands Limited CEPSA Chevron Corporation Chevron Phillips Chemical Company LLC CITGO Petroleum Corporation ConocoPhillips DONG Energy A/S Drummond Company Inc. DTE Energy Company EDF Group El Paso Energy Transfer Partners, L.P. ENI S.p.a. Galp Energia S.A. Hess Corporation Hovensa LLC Husky Energy Inc. LOOP LLC. Lyondell Chemical Company Marathon Oil Company

Marathon Petroleum Corporation MOL Hungarian Oil and Gas Company Murphy Oil Corporation Nexen Inc. Noble Energy, Inc. Nova Chemicals Corporation Occidental Petroleum Corporation OMV Aktiengesellschaft Paramount Resources Phillips 66 Company Puerto Rico Electric Power Authority Repsol YPF, S.A. Royal Vopak N.V. Santos Ltd. Sempra Energy Sinclair Companies (The) Statoil ASA Suncor Energy Inc. Sunoco, Inc. Talisman Energy Inc. Tesoro Petroleum Corporation TOTAL Valero Energy Corporation Westlake Chemical Corporation Williams Companies, Inc. (The) Woodside Petroleum Limited. Yara International ASA

54 Shareholders 46% members more than 20 years

6 2012

OIL Membership by Headquarter Location

Globally diversified membership with an increasing interest from non-US companies.

7 2012

• At least 50% of either Gross Assets or Annual Gross Revenues derived from “Energy Operations”

• A minimum of $1 billion of Gross Assets

• An investment grade credit rating of at least “BBB-” (S&P) or “Baa3” (Moody’s)

Membership Criteria

Quantitative: Energy Companies that have:

8 2012

Net Incurred Losses: 1972-2011

By Industry

1972-2011 (39 yrs) Aggregate Value = $11.8Bn (untrended)

As at December 31, 2011

9 2012

Net Incurred Losses Since 1972*

By Geographic Region of Physical Loss

As at December 31, 2011 Expressed in billions of U.S. dollars * untrended

10 2012

Risks Insured vs. Excluded

11 2012

Automatic coverage for: • Worldwide Coverage for an Energy Company and its

Consolidated Subsidiaries / Affiliates

• A member’s interest in a JV or other non-consolidated affiliate (if interest equates to less than 1% of Gross Assets)*

• Coverage for non-owned assets where a member has a contractual obligation to repair / replace

What’s Covered?

12 2012

Limits Offered Largest Single Block of Capacity for Global Energy Companies*

* Roughly 85% of the members elect the $300M limit. * OIL’s $300M limit is a per occurrence limit. No one event can be more than $300M. * OIL’s Aggregation Limit is $900M (non-windstorm risks) and $750M for windstorms

within the ANWS zone

13 2012

Deductible Options - 8 Business Sectors(2008-2012)

Minimum OIL Deductible is $10M

14 2012

Limit Allocation Options – 8 Business Sectors (Non-Windstorm)

15 2012

Limits Offered Minimum OIL Limit Purchase 60% Coverage from OIL

* OIL also allows either a 10%, 20%, 30% or 40% ‘internal quota share’ via Flat, Retro or a combination

16 2012

Limits Offered “Primary”

17 2012

Limits Offered “Excess”

18 2012

Limits Offered External Quota Share

US $600M

19 2012

Limits Offered Ventilated Limits

$50M Limit

$250M Limit

20 2012

Limits Offered Wraparound

21 2012

Windstorm Regions Atlantic Named Windstorm (ANWS) Zone

22 2012

Windstorm Limits - Atlantic Named Windstorm (ANWS)

23 2012

• Windstorm losses up to an annual aggregate retention of $300M are mutualized among all members in the Standard Pool.

• Windstorm losses above the $300M retention are mutualized only among windstorm members in two new pools (onshore & offshore).

• No losses flow through the Flat Pool.

Allocation of Windstorm Losses

Multiple events are added together at year’s end prior to the allocation to the WS Pools’ Annual Aggregate Retention and Excess Pools

24 2012

• Formula based (no price negotiation)

• Operates as a 5 year post loss funding facility designed to recoup losses over a 5 year period (20% a year)

• All losses of the Group are mutualized by all members based on their pool % which is fixed annually

• Zero sum mechanism (losses will equal premiums over time). Not for profit

Rating & Premium Plan Principles

25 2012

Repayment Schedule for Losses Incurred 2007-2011

The 8 business sector premiums + windstorm premium = Total Annual Premium Contribution

*Roughly 80% of member’s next year premium is “Locked down” as loss history and allocation already determined

26 2012

• Applies sector and deductible weightings.

• Gross Assets are adjusted for operational risk (sector weighting) and coverage profile (limit/deductible weighting) to generate Weighted Gross Assets which is used to determine pool % and calculate individual premiums.

8 Business Sector (Non-Windstorm) Pricing

8-Business Sectors are Defined as:

* Original 5 sectors

27 2012

Annual Premium Calculator Example

Premium Calculator Example - 8 Business Sector

28 2012

• Membership is exclusive to energy companies

• Members are all shareholders / policyholders and have vested interests

• “Mutualized” sharing of losses

• Easy annual renewal.

• Premiums are formula and performance based i.e. no underwriting

• One policy form for all members per the OIL Shareholders’ Agreement

• OIL uses gross assets from audited balance sheets while the market uses insured values

OIL vs. Commercial Market

OIL Features

29 2012

Provides hedge against a frequently volatile commercial insurance market

One of the broadest policy forms currently available

Stability (capacity and terms & conditions)

Low expense ratio

Shareholder input: – influence product capability/evolution and

developments

Generates long-term benefits for shareholders

Networking opportunities

OIL vs. Commercial Market

OIL Advantages

2012

Thank You

30