Poli%cal Risk and Global Terrorism: Protec%ng Global Assets in an Ever- Changing Environment (SESSION CODE: )

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2 Poli%cal Risk and Global Terrorism: Protec%ng Global Assets in an Ever- Changing Environment (SESSION CODE: ) Speakers: John Lavelle, Head of Poli%cal Risk and Credit Risk North America, Willis Ben Mar%n, Execu%ve Director, Willis Geoff Harrold, Insurance Director, Gavilon LLC

3 Learning Objec-ves At the end of this session, you will: Have a firm understanding of the perils covered by poli-cal risk insurance Acquire the skills to structure a func-onal poli-cal risk program for your mul-na-onal company Compare and contrast coverage op-ons in a poli-cal risk program

4 The Current Environment Unprecedented and widespread Poli-cal Risk issues. For example: Argen-na Brazil slowdown China slowdown Ebola ISIS Libya Oil price Russia & Ukraine Yemen

5 In the News Jihadism in Tunisia, Terror at the Bardo : The Economist, March 21, 2015 Gunmen strike the only democracy to emerge from the Arab Spring Nearly a million protest Brazil's president, economy, corrupgon: Reuters, March 15, 2015 Yemen; Descent into War: The Economist, March 24, 2014 Isis launches assault on pro- Assad forces in western Syria: The guardian March 25, 2015

6 In the News Brazil s Slumping Economy and Bribery Scandal Eat Away at Dilma Rousseff s Popularity: NY Times, March 20, 2015 Ukraine officials arrested, dismissed; stage set for possible poligcal unrest: CTV News, March 25,2015 Amid PoliGcal Chaos, Bangladesh Fears a Rise in Militancy: Wall Street Journal, March 23, 2015 Ultra- nagonalist Ukrainian bazalion gears up for more fighgng: Reuters, March 25, 2015 Polish general: Russia is trying to wage hybrid warfare in our country: Business Insider, March 25, 2015

7 Protests, demonstra%ons or riots reported in the global media: June 2005 Source: hlp://johnbeieler.org/protest_mapping/

8 Protests, demonstra%ons or riots reported in the global media: June 2007 Source: hlp://johnbeieler.org/protest_mapping/

9 Protests, demonstra%ons or riots reported in the global media: June 2009 Source: hlp://johnbeieler.org/protest_mapping/

10 Protests, demonstra%ons or riots reported in the global media: June 2011 Source: hlp://johnbeieler.org/protest_mapping/

11 Protests, demonstra%ons or riots reported in the global media: June 2013 Source: hlp://johnbeieler.org/protest_mapping/

12 Why companies purchase PRI To fill gaps in coverage on P&C programs Protect emerging market assets and cash flow Enterprise Risk Management Advantage

13 The Products Poli-cal & Credit Risks Contracts Assets / Investments Contract Frustra-on Confisca-on Physical Damage

14 The Products Expropria-on protec%on against acts (or series of acts) of confisca%on, expropria%on, na%onalisa%on or other ac%ons by a host government that deprive the company of its fundamental rights to its assets. Selec%ve discrimina%on, forced dives%ture and losses arising from breach of contract by the host government can also be covered. Poli-cal Violence protec%on against the damage or destruc%on of assets caused by events of war, revolu%on, insurrec%on, strikes, riots, civil commo%on, terrorism and sabotage. Forced abandonment caused by PV can also be covered, as well as Business Interrup%on Currency Inconver-bility & Non- Transfer protec%on against the inability to convert local proceeds to hard currency and repatriate the currency.

15 The Products Expropria-on 90 s e.g. Yemen, Kuwait, Yugoslavia, Indonesia 00 s e.g. India, Argen%na, Venezuela, Nigeria 10 s e.g. Argen%na, Libya, Ukraine Poli-cal Violence e.g. Ukraine, Thailand, Kenya Currency Inconver-bility & Non- Transfer e.g. Venezuela, Argen%na

16 The Product Spectrum Poli-cal Risk + Trade Credit Insurance Product Spectrum Terrorism Insurance Spectrum Supply Chain Disrup%on Piracy, Kidnap and Ransom

17 Asset/Investment Type Emerging market subsidiaries (new acquisi%ons and exis%ng investments) Equipment leases / lease purchase agreement Investment agreement Independent power project Construc%on project Joint venture agreement Concession agreement Physical assets

18 Benchmarking BENCHMARKING: WHAT ARE OTHERS DOING? TYPE OF COMPANY LIMIT SCOPE OF COVERAGE TERRITORY(IES) Large Chemical Co $1.3b Expro, PV, CI Global Large Food Co. $500m Expro, PV, CI Global Specialty Chemical Co. $200m Expro, PV, BI Jordan Construction Co. $50m CF, WC Saudi Arabia DoD Contractor $500m CF, WC Saudi Arabia DoD Contractor $50m CF UAE Mfr. Polymer Products $60m Expro, PV, CI, BI Argentina, Brazil, China USAID Contractor $12m PV Global Electronics Mfr. $10m Expro, PV, BI Global

19 The PRI Market

20 The PRI Market Comprises some 50 Companies and Lloyd s Syndicates Principally based in London, Bermuda, New York and Singapore Most Insurers have credit ra-ngs ranging from AA+ to A- (S&P) Annual premium volume es-mated at USD 1.5bn to USD 2 bn Capacity is a func-on of insurer risk appe-te and level of commitment on the obligor and/or country concerned Coverage period is also a factor Rates generally range form 0.3% to 3.00% per annum, depending on country risk of poreolio insured Countries where insurers are currently not open or very selec-ve: OFAC Countries (Iran, Cuba, North Korea), Syria, Iraq, Afghanistan, Russia, Ukraine, Venezuela, Argen-na

21 The PRI Market Current market: New entrants 9 new insurer since no%onal per risk USD 1.32BN 2015 no%onal per risk CEN 2.2BN Con%nuing excess liquidity and availability of cost effec%ve reinsurance However: Global issues Increased claims Future trends: Consolida%on Increased use of Analy%cs

22 The PRI Market AIG Ace Beazley Chaucer HCC FCIA Ironshore Starr Talbot Zurich Lloyd s of London ANV Ark Ascot Aspen Catlin Hardy Hiscox Kiln Liberty Markeiorm Novae Pembroke QBE and others

23 PRI Claims Analysis BY REGION 14% 18% 29% BY INDUSTRY 1.5% 2% 2% 4% 8% 0.5% 5% 34% America's Asia Africa Europe / CIS MiddleEast Bank Trader Finance (Non-Bank) Chemical / Pharmaceutical 82% Engineering / Construction Defence Other (Total USD 1 Billion)

24 Underwri-ng Considera-ons Host country Quality and experience of the insured Nature of the investment/asset Security Legal considera%ons Commercial involvement of the host government Local profile Host government incen%ves Benefits to the host country Structure and reten%on

25 Informa-on required Asset/Investment type Country poriolio Values Reten%on Tenor JV s Coverage required Experience Exis%ng coverages

26 THANK YOU FOR YOUR TIME! Q & A Session