Property/Casualty Insurance Financial & Hurricane Update

Transcription

1 Property/Casualty Insurance Financial & Hurricane Update Insurance Information Institute April 25, 2006 Robert P. Hartwig, Ph.D., CPCU, Senior Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY Tel: (212) Fax: (212)

2 Presentation Outline P/C Profit Overview Wall Street Perspective The Six Key Issues Impacting P/C Profitability Underwriting Pricing Investments Expenses Leverage (Capacity) P/C Operating Environment: Tort Focus Catastrophe Loss Management Commercial & Personal Lines: A Quick Overview Flood Insurance Penetration Rates Q & A

3 P/C PROFIT OVERVIEW 2006 Outlook is Good

4 Highlights: Property/Casualty, 2005 vs Growth rate lowest since late 1990s Item Net Written Prem , ,089 Change +0.4% Loss & LAE Investment Income Rebound? Net UW Gain (Loss) Net Inv. Income 311,395 (5,928) 49, ,948 4,263 39, % N/A +23.7% Net Income (a.t.) 43,013 38, % Surplus* 427, , % Combined Ratio* pts. Source: ISO, Insurance Information Institute *Comparison is with year-end 2004 value.

5 P/C Net Income After Taxes ($ Millions) $50,000 $40,000 $30,000 $20,000 $10,000 $0 $14, ROE = -1.2% 2002 ROE = 2.2% 2003 ROE = 8.9% 2004 ROE = 9.4% 2005 ROAS** = 10.5% $5,840 $19,316 $10,870 $24,404 $20, Net Income only now exceeding levels of mid-1990s $36,819 $30,773 $21,865 $20,559 $3,046 $30,029 $43,013 $38,501 -$10,000 -$6, *ROE figures are GAAP; **Return on avg. surplus. ROAS = 9.8% after adj. for one-time special dividend paid by the investment subsidiary of one company. Sources: A.M. Best, ISO, Insurance Information Inst.

6 Strength of Recent Hard Markets by NWP Growth* 25% 20% 15% (post-katrina) period will resemble (post-andrew) 10% 5% 0% -5% -10% 2005: biggest real drop in premium since early 1980s E 2006F 2007F 2008F 2009F 2010F Note: Shaded areas denote hard market periods. Source: A.M. Best, Insurance Information Institute * figures are III forecasts/estimates growth of 0.4% equates to 1.8% after adjustment for a special one-time transaction between one company and its foreign parent.

7 Advertising Expenditures by P/C Insurance Industry, $2.2 $2.1 $2.0 $1.9 $1.8 $1.7 $1.736 $1.737 $1.803 $ Billions Ad spending by P/C insurers is at a record high, signaling increased competition $1.708 $1.882 $2.111 $1.6 $ Source: Insurance Information Institute from consolidated P/C Annual Statement data.

8 ROE: P/C vs. All Industries F* 20% 2005:H1 P/C ROAS = 15.3% 2006 Estimate = 13% 15% 10% 5% 0% -5% 2005 P/C ROAS = 10.5% reflecting record catastrophe losses US P/C Insurers All US Industries 04 05H1 05E 06E *GAAP ROEs except 2005 P/C figure = return on average surplus figure falls to 9.8% after adjustment for special dividend paid by investment subsidiary of 1 company. 2006E figure is III estimate. Source: Insurance Information Institute; Fortune for all industry figures.

9 ROE: P/C vs. All Industries % 2004/5 ROEs excl. hurricanes 15% 10% Sept. 11 5% 0% -5% Hugo Andrew Northridge Lowest CAT losses in 15 years Katrina, Rita, Wilma 4 Hurricanes US P/C Insurers All US Industries P/C excl. Hurricanes Source: Insurance Information Institute; Fortune

10 RETURN ON EQUITY (Fortune): Stock & Mutual vs. All Companies* 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% 13.4% 12% 10% 14.6% 11% 8% Stock Mutual All Companies* Stock insurer ROEs consistently above mutuals 10.4% 10.0% 6% -2% 7% 2% 13% 12.6% 7% 14% 13.9% 9% 14.9% % 10% The gap between stock and mutual profitability has been narrowing *Fortune 1,000 group. Source: Fortune Magazine, Insurance Information Institute.

11 RNW for Major P/C Lines, Average 25% 20% 21.4% 10-Year returns for some major p/c lines surprisingly good, but HO is a major laggard 15% 16.5% 15.7% 10% 8.5% 7.9% 7.7% 5% 5.9% 5.5% 5.4% 4.6% 3.4% 0% -5% -2.5% Inland Marine All Other Fire PP Auto WC All Lines Comm Auto CMP Med Mal Other Liab Home Allied Source: NAIC; Insurance Information Institute

12 WALL STREET: MAINTAINING THE CONFIDENCE OF WALL STREET IS CRITICAL FOR MANY INSURERS

13 P/C Insurers Stocks Up in 2005, Brokers Up Too, Reinsurers Down 3.00% Total 2005 Returns P/C insurer stocks outperforming the market despite hurricanes S&P 500 Brokers up on tight market hopes 17.14% 22.09% Life/Health All Insurers -0.52% 9.40% 9.31% 13.29% Reinsurers lagging on record CAT losses Brokers Multiline P/C Reinsurers -5% 0% 5% 10% 15% 20% 25% Source: SNL Securities, Standard & Poor s, Insurance Information Institute

14 Change in YTD Stock Performance by Sector Pre- & Post-Katrina/Rita/Wilma 15% 10% 5% P/C Reinsurers Brokers 4.2% 4.0% 4.5% 3.8% Katrina: Aug % P/C & reinsurer stocks hurt but now fully recovered. Brokers rose on expectation of tighter conditions and demand for broker services; closure of Spitzer issues. 2.5% 1.9% 3.3% 2.1% 2.7% 3.6% 3.9% 4.8% 2.6% 3.4% 3.2% 2.2% 2.9% 2.8% 4.9% 5.0% 8.7% 7.0% 9.3% 13.3% 0% -5% -10% -4.0% -5.5% 5- Aug -3.5% -6.4% 12- Aug -2.7% -4.8% 19- Aug -4.1% -5.5% 26- Aug -0.6% -5.3% 2- Sep -4.5% 9- Sep Rita comes ashore Sept % 16- Sep -5.8% 23- Sep -6.0% 30- Sep Wilma landfall Oct % 7- Oct -5.3% 14- Oct -5.6% 21- Oct -5.6% 28- Oct -1.3% 04- Nov -0.5% 31- Dec Source: SNL Securities; Insurance Information Institute

15 Insurance Stocks Off to a Slow Start in 2006 Total YTD Returns Through April 21, % 4.74% S&P 500 Life/Health -2.08% All Insurers 4.50% Brokers -3.52% -0.88% 2.00% Multiline P/C Reinsurers -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% Source: SNL Securities, Standard & Poor s, Insurance Information Institute

16 Issue #1 UNDERWRITING Surprisingly Strong in 2005, Stage is Set for a Good 2006

17 P/C Industry Combined Ratio figure reflects heavy use of reinsurance which lowered net losses, but still a substantial deterioration from first half Expectation is for an underwriting profit in H F III Forecast* Sources: A.M. Best; ISO, III. *III forecast for 2006

18 Personal Lines Combined Ratio, E A very strong 2006 is expected in personal lines assuming normal catastrophe loss activity E 06F 98.4 Source: A.M. Best; Insurance Information Institute forecast from Fitch Ratings as of 12/7/

19 Commercial Lines Combined Ratio, E* results dependent on a return to normal catastrophe loss levels Outside CATaffected lines, commercial insurance is doing fairly well. Caution is required in underwriting longtail commercial lines E 06F Source: A.M. Best; Insurance Information Institute *Fitch estimate for Actual 1H05 combined ratio all lines was 92.7.

20 Impact of Reserve Changes on Combined Ratio Reserve Development ($B) $25 $20 $15 $10 $5 $0 0.1 PY Reserve Development 6.5 $ $10.8 $ $ $9.9 Combined Ratio Points Reserve adequacy is improving substantially 1.9 $ $ $ E 2006E 2007E Combined Ratio Points Source: A.M. Best, Lehman Brothers for years 2005E-2007F

21 2004 Prior Year Reserve Development by Line ($ Millions) $2,118 $1,729 $1,109 $850 $241 $148 $27 ($27) ($103) ($617) ($799) ($1,156) ($1,686) ($1,779) $3,513 $6,320 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 ($1,000) ($2,000) ($3,000) Reserve Strengthening Reserve Releases Longer-tail casualty coverages have been the source of most reserve problems in recent years Other Liability Reinsurance Work. Comp Prod. Liab. Comml. MP Fidelity/Surety Comml. Auto Med Mal International Finl. Guaranty Special Liab. Other Special Prop. Homeowners PP Auto Auto PD Source: A.M. Best, Lehman Brothers.

22 Underwriting Gain (Loss) $ Billions $5 $0 ($5) ($10) ($15) ($20) ($25) ($30) ($35) ($40) ($45) ($50) ($55) Insurers sustained a $5.9 billion underwriting loss in Before Katrina, p/c insurers were on track for only the second underwriting profit in 27 years; U/W profit in 2006 is likely Source: A.M. Best, Insurance Information Institute

23 Combined Ratio: Reinsurance vs. P/C Industry Reinsurance All Lines Combined Ratio Sept /5 Hurricanes Hurricane Andrew Source: A.M. Best, ISO, Reinsurance Association of America, Insurance Information Institute

24 A 100 Combined Ratio Isn t What it Used to Be: 95 is Where It s At 110 Combined Ratio ROE* 18% Combined Ratio % 14.3% Combined ratios today must be below 95 to generate Fortune 500 ROEs 9.4% % 15.3% 16% % % 10.5% 10% 8% Retrun on Equity* Actual * 2005 figure is return on average statutory surplus. Source: Insurance Information Institute from A.M. Best and ISO data :H %

25 UNDERWRITING AFFECTS FINANCIAL STRENGTH Is There Cause for Concern?

26 P/C Company Insolvency Rates, 1993 to % Insurer insolvencies are increasing 12-yr industry failure rate: 0.71% Failure rating for B+ or better rating: 0.49%* Failure rate for D through B rating: 1.29%* 12-yr Failure Rate 1.02% 1.03% 1.33% = 0.71% 0.79% 0.85% 0.58% 0.60% % 0.21% 0.28% 0.23% E 2004 Source: A.M. Best; Insurance Information Institute *

27 Ratings Agencies Tightening Requirements for CATs 2006 SRQ CAT Model Reqs.* All Property Exposure Auto Physical Damage Reinsurance Assumed Pools & Assessments All Flood Exposure WC Losses from Quake Fire Following Storm Surge Demand Surge Secondary Uncertainty Best currently estimates PML for 100-yr. wind & 250-yr. quake to determine capital adequacy ALSO A.M. Best will perform additional stress-tested riskadjusted capital analysis for a second event in order to determine the potential financial condition of an entity post a severe event. IMPLICATION: Some insurers may be required to carry more capital to maintain the same rating. *SRQ = Supplemental Rating Questionnaire Source: A.M. Best Review & Preview, January 2006.

28 Historical Ratings Distribution, US P/C Insurers, 2000 vs C++/C+ 1.9% B/B- 6.9% C/C- 0.6% A++/A+ D 0.2% E/F 2.3% A++/A+ 11.5% Vulnerable* 12.1% shrinkage A++/A+ 9.2% B++/B+ 28.3% B++/B+ 26.4% Ratings agencies increasing emphasis on multiple events require more capital A/A- 48.4% A/A- 52.3% Source: A.M. Best: Rating Downgrades Slowed but Outpaced Upgrades for Fourth Consecutive Year, Special Report, November 8, 2004 for 2000; 2006 Review & Preview for 2005 distribution. *Ratings B and lower.

29 CATASTROPHE LOSS MANAGEMENT Failure to Adequately Manage this Risk Has Been Devastating

30 Percentage of California Homeowners with Earthquake Insurance, 1994E % 30% 25% 30.0% 31.4% The vast majority of California homeowners forego earthquake coverage & play Russian Roulette with their most valuable asset. 20% 15% 19.5% 17.4% 16.8% 15.7%15.8% 14.6% 15.6% 13.8% 10% 5% 0% 94E Source: California Department of Insurance; Insurance Information Institute for 1994 figure.

31 Number of Tornados & Associated Deaths, p Number of Tornados 1,900 1,700 1,500 1,300 1, There appears to be an upward trend in the number of tornados, though not deaths. Detection Increase? , , ,297 1,173 1, ,234 1,173 1, ,424 1, ,071 1, , ,819 1, Tornado Deaths E Source: III from National Weather Service data. Number of Tornados Tornado Deaths

32 U.S. Insured Catastrophe Losses ($ Billions)* $120 $100 $80 $60 $40 $20 $0 $7.5 $ $ $ $5.5 $ $8.3 $ $ Billions 2005 was by far the worst year ever for insured catastrophe losses in the US, but the worst has yet to come. $ $ $8.3 $ $ $100 Billion CAT year is coming soon $5.9 $ $ $57.7 $ :Q1 *Excludes $4B-$6b offshore energy losses from Hurricanes Katrina & Rita. Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01. Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B. Source: Property Claims Service/ISO; Insurance Information Institute $ ??

33 Global Number of Catastrophic Events, The number of natural and man-made catastrophes has been increasing on a global scale for 20 years Record 248 manmade CATs & record 149 natural CATs in Natural catastrophes Man-made disasters Man-made disasters: without road disasters. Source: Swiss Re, sigma No. 1/2005 and 2/2006.

34 Insured Property Catastrophe Losses as % Net Premiums Earned, E 16% 14% 12% 10% 8% 6% 4% 2% US Worldwide US average: US CAT losses were a record 13.8% of net premiums earned in 2005 and were 4.2 times the average of 3.3% 0% E *Insurance Information Institute figure of 13.8% for 2005 based estimated 2005 DPE of $417.7B and insured CAT losses of $57.7B. Sources: ISO, A.M. Best, Swiss Re Economic Research & Consulting; Insurance Information Institute.

35 Global Insured CAT Losses, (Property and Business Interruption) $80 Billion USD, at 2004 prices $70 $60 $50 $40 $30 $20 $10 There has been a huge increase in the insured value of global CAT losses in recent years Natural catastrophes Man-made disasters Record $78 billion in insured natural CAT losses in 2005, compared to $5B in man-made disasters $ Source: Swiss Re, sigma No. 1/2005 & 2/2006.

36 *Figure for 2000s is extrapolated based on data for (6 major storms: Charley, Ivan, Jeanne (2004) & Katrina, Rita, Wilma (2005)). Source: Tillinghast from National Hurricane Center: Number of Major (Category 3, 4, 5) Hurricanes Striking the US by Decade 1930s mid-1960s: Mid-1990s 2030s? Period of Intense Tropical Cyclone Activity New Period of Intense Tropical Cyclone Activity Tropical cyclone activity in the mid-1990s entered the active phase of the multi-decadal signal that could last into the 2030s Already as many major storms in as in all of the 1990s 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s

37 Sources: ISO/PCS; Insurance Information Institute. Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) $45 $40 $35 $30 Seven of the 10 most expensive hurricanes in US history occurred in the 14 months from Aug Oct. 2005: $40.0 $ Billions $25 $20 $15 $10 $5 Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne $3.5 $3.8 $4.8 $5.0 $6.6 $7.4 $7.7 $9.4 $21.6 $0 Georges (1998) Jeanne (2004) Frances (2004) Rita (2005) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Andrew (1992) Katrina (2005)

38 Insured Loss & Claim Count for Major Storms of 2005* Insured Loss Claims Insured Loss ($ Billions) $ $ $ $ $ $ $ $ $5.000 $0.000 Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3.3 million claims 104 $ $5.0 1,025 $9.4 1,752 $38.1 2,000 1,800 1,600 1,400 1,200 1, Claims (thousands) Dennis Rita Wilma Katrina Size of Industry Loss ($ Billions) *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of February 8, 2006 for Dennis, Rita, Katrina and March 27, 2006 for Wilma; Insurance Information

39 Inflation-Adjusted U.S. Insured Catastrophe Losses By Cause of Loss, ¹ Earthquakes 4 8.4% Winter Storms 9.7% Wind/Hail/Flood 5 3.4% Civil Disorders 0.5% Fire 6 2.9% Water Damage 0.2% Utility Disruption 0.1% Terrorism 9.7% All Tropical Cyclones % Tornadoes % Insured disaster losses totaled $221.3 billion from (in 2004 dollars). After 2005 season, tropical cyclones will account for about 45% of the total. 1 Catastrophes are all events causing direct insured losses to property of $25 million or more in 2004 dollars. Catastrophe threshold changed from $5 million to $25 million beginning in Adjusted for inflation by the III. 2 Excludes snow. 3 Includes hurricanes and tropical storms. 4 Includes other geologic events such as volcanic eruptions and other earth movement. 5 Does not include flood damage covered by the federally administered National Flood Insurance Program. 6 Includes wildland fires. Source: Insurance Information Institute estimates based on ISO data.

40 Total Value of Insured Coastal Exposure (2004, $ Billions) Florida New York Texas Massachusetts New Jersey Connecticut Louisiana S. Carolina Virginia Maine North Carolina Alabama Georgia Delaware New Hampshire Mississippi Rhode Island Maryland $740.0 $662.4 $505.8 $404.9 $209.3 $148.8 $129.7 $117.2 $105.3 $75.9 $73.0 $46.4 $45.6 $44.7 $43.8 $12.1 $1,937.3 $1,901.6 Source: AIR Worldwide $0 $500 $1,000 $1,500 $2,000 $2,500

41 Value of Insured Residential Coastal Exposure (2004, $ Billions) Florida New York Massachusetts Texas New Jersey Connecticut Louisiana S. Carolina Maine Virginia North Carolina Alabama Georgia Delaware Rhode Island New Mississippi Maryland $88.0 $65.1 $64.5 $60.0 $60.0 $36.5 $29.7 $26.6 $25.9 $24.8 $20.9 $5.4 $306.6 $302.2 $247.4 $205.5 $512.1 $942.5 Source: AIR $0 $200 $400 $600 $800 $1,000

42 Insured Coastal Exposure as a % of Statewide Insured Exposure (2004, $ Billions) Florida Connecticut New York Maine Massachusetts Louisiana New Jersey Delaware Rhode Island S. Carolina Texas NH Mississippi Alabama Virginia NC Georgia Maryland Source: AIR Worldwide 13.5% 12.0% 11.4% 8.9% 5.9% 1.4% 37.9% 33.6% 33.2% 28.0% 25.6% 25.6% 23.3% 63.1% 60.9% 57.9% 54.2% 79.3% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

43 The 2006 Hurricane Season: Preview to Disaster?

44 Outlook for 2006 Hurricane Season Average* F Named Storms Named Storm Days Hurricanes Hurricane Days Intense Hurricanes Intense Hurricane Days Net Tropical Cyclone Activity 100% 275% 195% *Average over the period Source: Dr. William Gray, Colorado State University, April 4, 2006.

45 Probability of Major Hurricane Landfall (CAT 3, 4, 5) in 2006 Entire US Coast Average* 52% 2006F 81% US East Coast Including Florida Peninsula 31% 64% Gulf Coast from FL Panhandle to Brownsville, TX 30% 47% ALSO Above-Average Major Hurricane Landfall Risk in Caribbean for 2006 *Average over past century. Source: Dr. William Gray, Colorado State University, April 4, 2006.

46 Hurricanes Katrina, Rita & Wilma: Their Place in History

47 Hurricane Katrina Insured Loss Distribution by State ($ Millions)* Florida, $543.0, 1.4% Alabama, $1,102, 2.9% Mississippi, $12,105, 31.8% Total Insured Losses = $ Billion Tennessee, $59.0, 0.2% Georgia, $27.0, 0.1% Louisiana accounted for 64% of the insured losses paid and 56% of the claims filed Louisiana, $24,275, 63.7% *As of February 8, 2006 Source: PCS division of ISO.

48 Hurricane Katrina Claim Count Distribution by State* Florida, 115,000, 6.6% Alabama, 124,000, 7.1% Tennessee, 15,000, 0.9% Georgia, 7,800, 0.4% Louisiana, 975,000, 55.7% Mississippi, 515,000, 29.4% Total # Claims = 1,751,800 *As of February 8, 2006 Source: PCS division of ISO. Louisiana accounted for 64%of insured losses paid and 56% of claims filed

49 Hurricane Katrina Loss Distribution by Line ($ Billions)* Total insured losses are estimated at $38.1 billion from million claims. Excludes $2- $3B in offshore energy losses Commercial Property & BI, $18,278.0, 48% Vehicle, $2,139.0, 6% Homeowners, $17,694.0, 46% *As of February 8, 2006 Source: PCS division of ISO.

50 Hurricane Katrina Insured Loss and Claim Distribution by State* State Losses ($Mill) # Claims % Losses % Claims LA $ 24, , % 55.7% MS $ 12, , % 29.4% AL $ 1, , % 7.1% FL $ , % 6.6% TN $ , % 0.9% GA $ , % 0.4% Totals $ 38, ,751, % 100.0% *As of February 8, Source: PCS division of ISO.

51 Hurricane Rita Insured Loss Distribution by State ($ Millions)* Tennessee, $10.0, 0.2% Arkansas, $13.7, 0.3% Florida, $23.0, 0.5% Alabama, $13.0, 0.3% Mississippi, $34.0, 0.7% Texas, $1,970.0, 39.6% Total Insured Losses = $ Billion *As of February 8, 2006 Source: PCS division of ISO. Louisiana, $2,912.5, 58.5% Louisiana accounted for 59% of the insured losses, Texas 40%. Total claims = 381,000. Excludes offshore energy losses of $2-3B

52 Hurricane Rita Claim Count Distribution by State* Arkansas, 5,500, 1.4% Florida, 6,000, 1.6% Mississippi, 7,000, 1.8% Texas, 169,000, 44.4% Total # Claims = 381,000 Alabama, 5,000, 1.3% Tennessee, 3,500, 0.9% Louisiana, 185,000, 48.6% Louisiana accounted for 48.6% of the insured losses, Texas 44.4%. Excludes offshore energy losses of $2-3B *As of February 8, 2006 Source: PCS division of ISO.

53 Hurricane Rita Loss Distribution, by Line ($ Millions)* Total insured losses are estimated at $5.0 billion (excl. offshore energy of $2-$3B) from 381,000 claims. *As of February 8, 2006 Source: PCS division of ISO. Commercial Property & BI, $1,846.2, 37% Homeowners, $2,944.0, 59% Vehicles, $186.0, 4%

54 Hurricane Rita Insured Loss and Claim Distribution by State* State Losses ($Mill) # Claims % Losses % Claims LA $ 2, , % 48.6% TX $ 1, , % 44.4% MS $ , % 1.8% FL $ , % 1.6% AR $ , % 1.4% AL $ , % 1.3% TN $ , % 0.9% Totals $ 4, , % 100.0% *As of February 8, Source: PCS division of ISO.

55 Hurricane Wilma Loss Distribution by Line ($ Millions)* Commercial Property & BI, $2,000, 21% Total insured losses are estimated at $9.35 billion from million claims Vehicle, $750, 8% Homeowners, $6,600, 71% *As of March 27, All losses are in FL. Source: PCS division of ISO.

56 Hurricane Wilma Claim Count Distribution by Line ($ Millions)* Total insured losses are estimated at $9.35 billion from million claims Homeowners, 680,000, 66% Commercial Property & BI, 80,000, 8% Vehicle, 265,000, 26% *As of March 27, All losses are in FL. Source: PCS division of ISO.

57 Government Aid After Major Disasters (Billions)* $ Billions $120 $100 $80 $60 $40 $104.4 Within 3 weeks of Katrina s LA landfall, the federal government had authorized $75B in aid more than all the federal aid for the 9/11 terrorist attacks, 2004 s 4 hurricanes and Hurricane Andrew combined! $29B more was authorized in Dec At least $80B more is sought. $43.9 Hurricane Katrina aid will dwarf aid following all other disasters. Congress may authorize $150-$200 billion ultimately (about $400,000 for each of the 500,000 displaced families). Is the incentive to buy insurance and insure to value diminished? $20 $17.7 $15.5 $15.0 $0 Hurricane Katrina (2005) Sept. 11 Terrorist Attack (2001) Hurricane Andrew (1992) Northridge Earthquake (1994) Hurricanes Charley, Frances, Ivan & Jeanne (2004) *In 2005 dollars. Source: United States Senate Budget Committee, Insurance Information Institute as of 12/31/05.

58 TRIA EXTENSION The Burden Grows

59 Insurance Industry Retention Under TRIA ($ Billions) $ Billions $35 $30 $25 $20 $15 $10 $5 Individual company retentions rise to 17.5% in 2006, 20% in 2007 Above the retention, federal govt. pays 90% in 2006, 85% in 2007 $10.0 $12.5 $15.0 $25.0 Extension $27.5 Congress & Administration want TRIA dead $0 Year 1 (2003) Year 2 (2004) Year 3 (2005) Year 4 (2006) Year 5 (2007) Source: Insurance Information Institute

60 TRIA Extension: Major Features Term: 2-Year Extension Sunsets December 31, 2007 Extension for 3 rd year possible if progress made toward long-term solution Trigger Increased: Up from $5MM now to $50MM in 2006 and $100MM in 2007 Lines Dropped Commercial Auto, Prof. Liability, Surety, Burglary & Theft, FMP Deductibles Increase for Individual Companies: 15% Now 17.5% in % in 2007 for all lines Retentions Increase for Industry Aggregate: $15B Now $25B in 2006 $27.5B in 2007 Co-Pays Increase for Amount Above Industry Aggregate 10% Now 10% in % in 2007 Federal Recoupment Remains conditional Study to Develop Long-Term Solutions Must produce report to Congress by September 30 Nuclear, Biological, Chemical & Radiological Risk Maintains exclusion

61 Source: Marsh, Inc.; Insurance Information Institute Terrorism Coverage Take-Up Rate Rising Terrorism take-up rate for non-wc risk rose through 2003, 2004 and % 46.2% 44.0% 48.0% 55.0% 23.5% 26.0% 32.7% TAKE UP RATE FOR WC COMP TERROR COVERAGE IS 100%!! 2003:II 2003:III 2003:IV 2004:I 2004:II 2004:III 2004:IV 2005 August

62 Terrorism Coverage: Take-Up Rates by Industry Real estate Financial Institutions Health care Hospitality Tech/Telecom Education Media Utility Public Entity Transportation Manufacturing Retail Construction Energy Food & beverage 72.5% 60.2% 30.2% 71.0% 26.8% 65.3% 66.3% 31.0% 60.1% 65.1% 31.5% 48.4% 63.3% 22.1% 42.5% 53.7% 58.1% 21.6% 57.9% 35.3% 58.3% 54.3% 41.7% 27.1% 53.4% 25.9% 41.5% 47.8% 29.5% 40.5% 41.2% 37.8% 18.2% 38.6% 48.0% 20.0% 37.5% 23.1% 12.2% 36.4% 35.5% 40.5% 28.6% 39.0% 34.7% 2005* If TRIA sunsets at the end of 2007, additional reinsurance capacity will be badly needed (now estimated at just $4-$6 billion) 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: Marsh, Inc. *As of August 2005.

63 Overview of Plans for a National Catastrophe Insurance Plan

64 NAIC s Comprehensive National Catastrophe Plan Proposes Layered Approach to Risk Layer 1: Maximize resources of private insurance & reinsurance industry Includes All Perils Residential Policy Encourage Mitigation Create Meaningful, Forward-Looking Reserves Layer 2: Establishes system of state catastrophe funds (like FHCF) Layer 3: Federal Catastrophe Reinsurance Mechanism Source: Insurance Information Institute

65 Comprehensive National Catastrophe Plan Schematic 1:500 Event National Catastrophe Contract Program 1:50 Event State Regional Catastrophe Fund State Attachment Personal Disaster Account Private Insurance Source: NAIC, Natural Catastrophe Risk: Creating a Comprehensive National Plan, Dec. 1, 2005; Insurance Information. Inst.

66 REINSURANCE Catastrophes, Consolidation & New Competitors

67 Global Number of Catastrophic Events, The number of natural and man-made catastrophes has been increasing on a global scale for 20 years Record 248 manmade CATs & record 149 natural CATs in Natural catastrophes Man-made disasters Man-made disasters: without road disasters. Source: Swiss Re, sigma No. 1/2005 and 2/2006.

68 Distribution of Katrina Losses by Market ($Billions) Market Insurers Reinsurers Capital Markets TOTAL Percentage 47% - 53% 52% - 44% 1% - 3% 100% Amount $ $28.9 $ $24.0 $0.4 - $1.6 $ $54.6 Source: Hurricane Katrina: Analysis of the Impact on the Insurance Industry, Tillinghast, October 2005.

69 FY2005 Loss as a Percentage of First Half 2005 Shareholder Equity* IPC PartnerRe RenaissanceRe CLASS OF 1993 Arch Aspen AWAC Axis Endurance Max Re Montpelier Platinum CLASS OF 2001 Ace PXRE XL CLASS OF White Mountains Quanta TOTAL 13% 10% 9% 15% 22% 22% 19% 32% 31% 32% 26% 32% 30% 21% 24% 36% 31% 49% Many smaller reinsurers lost 30%+ of their equity (surplus) as a result of record CAT losses in % 106% -10% 10% 30% 50% 70% 90% 110% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

70 US Reinsurers: Change in Policyholder Surplus ($ Billions) $75 $70 Reinsurer PHS fell 20% from Capacity today similar to Same story globally. $73.0 $68.0 $ Billions $65 $60 $55 $60.9 $58.9 $57.9 $64.8 $50 $45 $40 $46.8 $ E Source: A.M. Best; Insurance Information Institute Analysts predict a modest decline in reinsurer PHS

71 US Reinsurer Combined Ratio vs. Median Rating, E* US Reinsurer Combined Ratio A A A A A Reinsurer Combined Ratio Rating-Large (PHS>$250M) E *Combined ratio is for all US reinsurers. Rating is for large reinsurers (policyholder surplus exceeding $250 million). The median rating for small reinsurers (PHS<$250M) was A- throughout the period. Source: A.M. Best: Rating Downgrades Slowed but Outpaced Upgrades for Fourth Consecutive Year, Special Report, November 8, 2004 and 2006 Review & Preview. A A Are ratings related to performance? A++ A+ A A- B++ B+ B

72 Reinsurance Prices Surged in 2006 Following Record CATs in % US cat reinsurance price index: 1994 = % 20% 10% 16% 21% 11% 25% % 2% 50-10% -20% -5% -4% -4% -6% -9% -8% -11% '00 '01 '02 '03 '04 05E 06F 25 0 rate changes [left] index level [right] Sources: Swiss Re, Cat Market Research; Insurance Information Institute estimate for 2006.

73 Changes in the 2006 Reinsurance Markets Property CAT reins. rates up 20% - 30% nationally Property CAT coverage in hurricane exposed areas up 100%-300% Aggregate reinsurer exposure is down 20-30% Cedants retaining more risk, often by % or more (higher attachment pts.) Increased demand for Excess of Loss cover XoL is potentially more volatile for reinsurers Some supply issues as a few small players enter run-off Marine/Energy reinsurance most challenging Start-ups becoming more active Sources: Morgan Stanley, Lehman Brothers

74 Long-Term Issues for Reinsurers Managing Record Global CAT Losses Underwriting/Pricing Discipline of Primary Insurers Competition & Low Barriers to Entry Alternative Risk Transfer & Securitization Consolidation Reinsurance Collectibles Collateralization Debate/Feud Global Glut of Capital Persistently Low Long-Term Interest Rates Political Risk in Developing/Emerging Markets

75 Issue #2 PRICING Can Discipline be Maintained?

76 Average Expenditures on Homeowners Insurance** $800 $750 $700 $650 $600 $550 $500 $450 $400 Countrywide home insurance expenditures are expected to rise at least 4% in 2006 $418 $440 $455 $481 $488 $508 $536 $593 $668 $693 $711$ * 05* 06* *Insurance Information Institute Estimates/Forecasts **Excludes cost of flood and earthquake coverage. Source: NAIC, Insurance Information Institute Homeowners in CAT zones will see much larger increases

77 Average Expenditures on Auto Insurance $900 $850 $800 Countrywide auto insurance expenditures are expected to rise 0.5% in 2006 $777 $821 $844 $863 $867 $750 $700 $650 $600 $723 $705 $703 $691 $685 $689 $668 $651 Will the big guys stay disciplined? So far, so good. Tiering adopted to avoid adverse selection * 05* 06* *Insurance Information Institute Estimates/Forecasts Source: NAIC, Insurance Information Institute

78 Commercial Premium Rate Changes Are Sharply Lower -1% -2% -2% -3% -5% -6% -5% -4% -4% -6% -6% -5% -6% 7% 7% 5% 4% 4% 2% 2% 2% 1% 0% 14% 11% 13%16% 12% 12% 10% 12% 11% 9% 9% 9% 18% 18% 17% 16% 19% 22% 28% 31% 31% 28% 30%32% 22% 33% 28% 29% 30%32% 35% 30% 27% 25% 28% 30% 25% 20% 15% 10% 5% 0% -5% -10% The magnitude of rate decreases is leveling off, but no reversal is evident post- Katrina/Rita/Wilma Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Source: MarketScout.com

79 Average Commercial Rate Change, All Lines, (1Q:2004 1Q:2006) 0% -2% -4% -0.1% -3.2% Magnitude of rate decreases has diminished greatly since mid % -6% -8% -5.9% -7.0% -8.2% -4.6% -10% -9.4% -9.7% -12% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 Source: Council of Insurance Agents & Brokers; Insurance Information Institute

80 Average Commercial Rate Change by Account Size Commercial accounts trended downward from early 2004 to mid-2005 but are now that trend is shrinking post-katrina Source: Council of Insurance Agents & Brokers

81 Average Commercial Rate Change by Line Commercial accounts trended downward from early 2004 to mid-2005 but now trend is shrinking post- Katrina & Property is up. Source: Council of Insurance Agents & Brokers

82 Percent of Commercial Accounts Renewing w/positive Rate Changes, 1 st Qtr % 50% 40% Commercial Property Business Interruption 54% 50% Largest increases for Commercial Property & Business Interruption are in the Southeast, smallest in Midwest 30% 20% 26% 26% 23% 23% 20% 16% 15% 15% 10% 0% Southeast Northeast Pacific NW Southwest Midwest Source: Council of Insurance Agents and Brokers

83 Percent of Commercial Property Accounts Renewing Negative, 1 st Qtr % 100% 80% 60% 40% 20% 0% 40% 61% 65% 89% 90% 75% 89% 91% 77% 100% 89% 94% Midwest Northwest Southwest 95% 91% 94% 91% 88% 91% 79% 86% 81% Little evidence suggesting that insurers fleeing CATs are leading to a non-hurricane state softening 63% 53% 40% 80% 47% 48% 04Q1 04Q2 04Q3 04Q4 05Q1 05Q2 05Q3 05Q4 06Q1 Source:; Insurance Information Institute from Council of Insurance Agents and Broker data.

84 Average Rate Increase/Decrease by Industry Class 15% 10% 5% 0% 5% 10% September 2005 March % 0% 3% Largest increases are in the energy sector 0% 2% -5% -10% -3% -1% -2% -4% -8% -5% -6% Energy Contracting Public Entity Transport. Habitational Service Manufacturing Source: MarketScout.com

85 Reinsurance Prices Surged in 2006 Following Record CATs in % 30% 20% 10% In hurricane-prone areas, property CAT reinsurance prices are up %+ US cat reinsurance price index: 1994 = % 21% 11% 25% % 2% 50-10% -5% -11% -9% -8% -4% -4% -6% 25-20% '00 '01 '02 '03 '04 05E 06F 0 rate changes [left] Sources: Swiss Re, Cat Market Research; Insurance Information Institute estimate for index level [right]

86 Issue #3 INVESTMENTS Does Investment Performance Affect Discipline?

87 Property/Casualty Insurance Industry Investment Gain* $60 $50 $42.8 $47.2 $52.3 $57.9 $ Billions $56.9 $51.9 $44.4 $45.3 $48.9 $59.2 $40 $35.4 $36.0 $30 $20 $10 $0 Investment gains are rising but are only now comparable to gains seen in the late 1990s ** *Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. **2005 figure includes special one-time dividend of $3.2B. Source: Insurance Services Office; Insurance Information Institute.

88 Issue #4 EXPENSES Will Expense Ratio Rise as Premium Growth Slows?

89 *Ratio of expenses incurred to net premiums written figures are III estimates. Source: A.M. Best; Insurance Information Institute Personal Lines Underwriting Expense Ratio,* E 32% 30% 28% 26% 24% 30.8% 31.1% 30.6% 29.8% 30.3% Can the downward trend in PPA and HO expenses ratios be sustained as premium growth slows? 30.8% 30.6% 29.4% 24.3% 24.4% 23.5% 28.5% 23.4% Auto 28.5% Home 28.4% 28.4% 23.4% 22% 21.8% 22.0% 21.8% 22.7% 23.6% 23.2% 23.3% 20% E

90 Issue #5 LEVERAGE Can the Industry Efficiently Employ Its Increasing Capital?

91 U.S. Policyholder Surplus: * $ Billions $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 Capacity TODAY is $427.1B, 9.2% above year-end 2004, 47% above its 2002 trough and 22% above its mid-1999 peak. Sufficient capacity exists to pay all hurricane claims. Foreign reinsurance and residual market mechanisms absorbed $27-$32B (57%-67%) of 2005 CAT losses of $57.7B Surplus is a measure of underwriting capacity. It is analogous to Owners Equity or Net Worth in non-insurance organizations * Source: A.M. Best, ISO, Insurance Information Institute *As of 12/31/05.

92 Announced Insurer Capital Raising* ($ Millions, as of December 1, 2005) $ Millions $3,500 $3,000 $2,500 $2,000 $1,500 $1,500 As of Dec. 1, 19 insurers announced plans to raise $10.35 billion in new capital. Twelve start-ups plan to raise as much as $8.75 billion more for a total of $19.1 billion. Actual total higher as Lloyd s syndicates have added capacity for $3,200 $1,000 $500 $0 $38 $400 $450$600 $710 $300 $100$140 $600 *Existing (re) insurers. Announced amounts may differ from sums actually raised. Sources: Morgan Stanley, Lehman Brothers, Company Reports; Insurance Information Institute. $129 $297 $620 $490 $124 $202 $150 $299 Ace Ltd. Argonaut Aspen Axis Endurance Everest Re Fairfax Finl. Glacier Re HCC Insurance IPC Hldgs Kiln PLC Max Re Montpelier Re Navigators Odyssey Re Partner Re Platinum PXRE XL Capital

93 Announced Capital Raising by Insurance Start-Ups ($ Millions, as of April 15, 2006) $ Millions $1,600 $1,400 $1,200 $1,000 $800 $600 $1,500 $1,000$1,000$1,000$1,000$1,000 As of April 15, 14 startups plan to raise as much as $9.75 billion. $750 $500 $500 $500 $500 $400 $200 $220 $180 $100 $0 Harbor Point* Amlin Bermuda Flagstone Re Validus Holdings Lancashire Re** Augsburg Re Ariel Re Hiscox Bermuda New Castle Re Arrow Capital XL/Highfields Greenlight Re Omega Specialty Ascendent Re *Chubb, Trident are funding Harbor Point. Announced amounts may differ from sums actually raised. **Stated amount is $750 million to $1 billion. ***XL Capital/Hedge Fund venture. Arrow Capital formed by Goldman Sachs. Sources: Morgan Stanley, Company Reports; Insurance Information Institute.

94 COMMERCIAL INSURANCE BETTER FOR NOW

95 Commercial Multi-Peril Combined (Liability vs. Non-Liability Portion) 140 CMP-Liability CMP-Non-Liability CMP- has improved recently Liab. Combined 1995 to 2004 = Non-Liab. Combined = Sources: A.M. Best; III 83.2

96 Products Liability Combined Ratio 400 Average Combined 1995 to 2004 = Products Liability has improved dramatically, but remains very much a problem Sources: A.M. Best; III

97 Commercial Auto Liability & PD Combined Ratios Sources: A.M. Best; III Commercial Auto has improved dramatically Average Combined: Liability = PD =

98 Other Liability Combined Ratio Average Combined 1995 to 2004 = Other Liability remains a problematic catch all category Sources: A.M. Best; III

99 Medical Malpractice Combined Ratio Average Combined 1995 to 2004 = Med Mal is off life support but is still in critical condition Sources: A.M. Best; III

100 AUTO & HOME: A SUCCESSFUL SHIFT TO THE UNDERWRITING CULTURE?

101 Private Passenger Auto Combined Ratio PPA is the profit juggernaut of the p/c insurance industry today Average Combined 1993 to 2004= Many auto insurers have shown significant improvements in underwriting performance since mid F Sources: A.M. Best; III

102 Private Passenger Auto: Incurred Loss Ratios*, :Q4 110% 100% Collision Comprehensive Liability (BI & PD) Loss ratios for all major coverages trending down; Comp is CAT impacted 90% 80% 70% 60% 50% 05:Q4 99:Q1 99:Q2 99:Q3 99:Q4 00:Q1 00:Q2 00:Q3 00:Q4 01:Q1 01:Q2 01:Q3 01:Q4 02:Q1 02:Q2 02:Q3 02:Q4 03:Q1 03:Q2 03:Q3 03:Q4 04:Q1 04:Q2 04:Q3 04:Q4 05:Q1 05:Q2 05:Q3 Source: ISO Fast Track; Insurance Information Institute. *Direct basis

103 Source: Insurance Information Institute calculations based ISO Fast Track and US BLS data. Pure Premium Spread: Personal Auto PD Liability, :Q4 10% 8% 6% 4% 2% 0% Auto Insurance Component of CPI Margin necessary to maintain PPA profitability Personal Auto-PD Pure Premium Inversion of pure premium spread is a warning sign -2% -4% 2000 PPA Combined= PPA Combined=94 00:Q1 00:Q2 00:Q3 00:Q4 01:Q1 01:Q2 01:Q3 01:Q4 02:Q1 02:Q2 02:Q3 02:Q4 03:Q1 03:Q2 03:Q3 03:Q4 04:Q1 04:Q2 04:Q3 04:Q4 05:Q1 05:Q2 05:Q3 05:Q4

104 Bodily Injury: Severity Trends Now Offset Declining Claim Freq. 6% 4% Medical inflation a powerful cost driver 4.7% 3.0% Frequency 3.6% 3.8% Severity 3.4% 2.8% 2% 0% -2% -4% -6% -2.2% -0.3% -5.3% -4.0% -3.4% -0.9% -2.6% -5.4% * *Four quarters ending 2005:Q4. Source: ISO Fast Track data.

105 PD Liability: Frequency Trend Swamps Rising Claim Severity 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% 0.8% Frequency 4.3% -1.5% *Four quarters ending 2005:Q4. Source: ISO Fast Track data. Severity 6.2% 0.3% 3.9% -1.8% 3.3% Fewer accidents, but more damage when they occur: Higher Deductibles? 2.8% 0.5% -2.6% -2.4% -2.3% 2.4% *

106 PIP: Frequency Trend Now Offsets Rising Claim Severity 20% 15% Frequency Severity 16.1% Fraud caused problems from % 5% 0% -5% -10% -1.6% 6.3% 1.1% *Four quarters ending 2005:Q4. Source: ISO Fast Track data. -1.1% 3.2% 0.0% 6.5% Is No-Fault living on borrowed time? -0.6% -3.9% -7.2% 0.5% -5.4% 4.9% *

107 Collision: Frequency Trend Swamps Rising Claim Severity 8% 6.8% Frequency Severity 6% 4% 2% 2.6% 4.1% 3.0% 1.9% 3.7% 3.7% 1.6% 3.9% 0% -2% -4% -6% -0.4% -1.8% -3.8% -4.6% -5.1% * *Four quarters ending 2005:Q4. Source: ISO Fast Track data.

108 Comprehensive: Favorable Frequency and Severity Trends 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 8.9% Frequency Severity 7.0% 3.3% 3.3% -1.7% -2.6% -2.1% -2.1% -2.7% -4.7% -4.1% -5.6% -7.0% -8.2% * *Four quarters ending 2005:Q4. Source: ISO Fast Track data.

109 Homeowners

110 Homeowners Insurance Combined Ratio Average 1990 to 2005E= 114 Insurers have paid out an average of $1.14 in losses for every dollar earned in premiums over the past 16 years E Sources: A.M. Best; III

111 Insurance-to-Value in HO is a National Problem, Improved Recently 80% 70% 60% 50% 73% Less than ITV means homeowners insurers left $8 billion on the table in 2003* 64% 61% 59% 40% 30% 20% 35% *According MS/B. Source: Marshall & Swift/Boeckh 27% 25% Proportion of Home Undervalued 22% Average Undervaluation

112 Flood Statistics

113 Property Damage from Hurricane Katrina Flood & Storm Surge ($ Millions)* MS Storm Surge Loss, $4,400, 10.0% AL Storm Surge Loss, $793, 1.8% FL Storm Surge Loss, $32, 0.1% Hurricane Katrina caused $44 billion in flood and storm surge damage, most of it uninsured, 88.1% of it in Louisiana LA Storm Surge Loss, $16,200, 36.8% New Orleans Flood Loss, $22,600, 51.3% *Value of property damage by flood and storm surge whether or not insured. Source: AIR Worldwide, September 29, 2005.

114 Flood Insurance Penetration Rates: Top 25 Counties/Parishes in US* JEFFERSON/LA WALTON/FL BROWARD/FL COLLIER/FL LEE/FL GALVESTON/TX GLYNN/GA ST. BERNARD/LA MIAMI-DADE/FL ORLEANS/LA CARTERET/NC ST. CHARLES/LA ST. JOHNS/FL CHARLOTTE/FL ST. TAMMANY/LA HORRY/SC INDIAN RIVER/FL BAY/FL BRUNSWICK/NC NASSAU/FL BERKELEY/SC PINELLAS/FL BRAZORIA/TX CHATHAM/GA TERREBONNE/LA Highest flood insurance penetration rates are in LA and FL, but most are underinsured 56.2% 51.6% 49.6% 48.0% 46.3% 44.4% 42.8% 42.8% 42.0% 41.9% 40.1% 84.0% 81.5% 80.0% 78.7% 77.1% 74.1% 69.6% 68.4% 68.1% 66.7% 65.9% 65.5% 62.4% 59.0% No counties in the Northeast are represented in Top 25 0% 20% 40% 60% 80% 100% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

115 Flood Insurance Penetration Rates: Counties/Parishes Ranked 26-50* BALDWIN/AL SARASOTA/FL PALM BEACH/FL CHARLESTON/SC MANATEE/FL MARTIN/FL ATLANTIC/NJ LAFOURCHE/LA OKALOOSA/FL GEORGETOWN/SC FLAGLER/FL MAUI/HI LIVINGSTON/LA BREVARD/FL SUSSEX/DE VOLUSIA/FL ST. LUCIE/FL JEFFERSON/TX HAMPTON CITY/VA OCEAN/NJ HARRIS/TX PASCO/FL BOSSIER/LA NEW HANOVER/NC BRONX/NY Mid-Atlantic/Northeast Counties are underrepresented 27.6% 27.0% 26.8% 26.4% 26.1% 25.4% 25.3% 25.2% 23.4% 23.3% 22.1% 21.7% 39.8% 39.7% 39.2% 39.1% 38.7% 37.2% 36.5% 36.2% 34.2% 33.0% 32.1% 30.6% 28.3% People along the eastern seaboard have not gotten the message 0% 10% 20% 30% 40% 50% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data.

116 Flood Insurance Penetration Rates: Counties/Parishes Ranked 51-75* CAMERON/TX FORT BEND/TX SANTA ROSA/MS HARRISON/MS JACKSON/MS NORFOLK CITY/VA HILLSBOROUGH/FL LAFAYETTE/LA EAST BATON ROUGE/LA VIRGINIA BEACH ESCAMBIA/FL HONOLULU/HI SACRAMENTO/CA CALCASIEU/LA MONTGOMERY/TX CITRUS/FL MERCED/CA CHESAPEAKE, OSCEOLA/FL HUDSON/NJ DUVAL/FL BARNSTABLE/MA MARIN/CA TULARE/CA MONMOUTH/NJ 11.7% 11.6% 11.3% 10.2% 9.3% 9.1% 8.5% 16.7% 16.3% 15.8% 15.6% 15.4% 14.5% 14.0% 13.3% 12.9% 12.6% 21.6% 20.9% 20.1% 19.1% 18.3% 17.8% 17.7% 17.5% 0% 5% 10% 15% 20% 25% *As of 12/31/05. Source: New Orleans Times-Picayune, 3/19/06, from NFIP and US Census Bureau data. MS coastal counties rank abysmally low Barnstable is only county in all of New England among Top 75

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