BEST S RATING REPORT. Navigators Specialty Insurance Company

BEST S RATING REPORT New York, New York, United States 10119-0002 AMB #: 001825 NAIC #: 42307 FEIN #: 13-3138390 Phone: 203-905-6090 Fax: 203-658-1821 Website: www.navg.com New York, New York, United States 10119-0002 AMB #: 010761 NAIC #: 36056 FEIN#: 13-3536448 Phone: 203-905-6090 Fax: 203-658-1821 Website: www.navg.com a a Financial Strength Rating A M BEST A Excellent Page 1 of 27 Printed September 10, 2018

Report Release Date: Rating Effective Date: September 5, 2018 August 14, 2018 Disclosure Information: View A.M. Best s Rating Disclosure Form Analytical Contacts A.M. Best Rating Services, Inc. Jonathan Harris, CFA, FRM, CPCU Jacqalene Lentz, CPA Senior Financial Analyst Director Jonathan.Harris@ambest.com Jacqalene.Lentz@ambest.com +1(908) 439-2200 Ext. 5771 +1(908) 439-2200 Ext. 5762 Ultimate Parent: 058430 - The Navigators Group, Inc. A.M. Best Rating Unit: 018081 - Navigators Insurance Group Best's Credit Ratings: Rating Effective Date: August 14, 2018 Best's Financial Strength Rating: A Outlook: Positive Action: Affirmed Best's Issuer Credit Rating: a+ Outlook: Positive Action: Affirmed Five Year Credit Rating History: Best's Financial Strength Ratings Best's Issuer Credit Ratings Date Rating Outlook Action Rating Outlook Action 08/14/2018 A Positive Affirmed a+ Positive Affirmed 08/11/2017 A Positive Affirmed a+ Positive Affirmed 07/21/2016 A Stable Affirmed a+ Stable Affirmed 06/03/2015 A Stable Affirmed a+ Stable Affirmed 06/04/2014 A Stable Affirmed a+ Stable Affirmed Rating Rationale: The following text is derived from Best's Credit Report on Navigators Insurance Group (AMB# 018081: Balance Sheet Strength: Strongest Navigators Insurance Group maintains the strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which benefits from a high quality investment portfolio and strong reinsurance protection. Solid liquidity ratios that compare favorably to the averages for the commercial casualty composite. Page 2 of 27 Printed September 10, 2018

The Group benefits from the financial flexibility of its parent, The Navigators Group, Inc., which has modest financial leverage and the ability to access the public debt and equity markets if needed. Operating Performance: Adequate Consistently profitable operating performance, although the five-year average return on revenue and return on equity measures lag the averages for the commercial casualty composite by four and approximately two points, respectively. Five-year average underwriting performance, as measured by the combined ratio, compares favorably to the composite average by almost five points. Net investment income is solid and has grown steadily in each of the last five years, supported by a high quality investment portfolio. Business Profile: Favorable The Group is well established in the specialty lines of business that it writes. Multi-channel distribution platform utilizes global, national and regional brokers as well as wholesalers. Well-experienced management team that takes a conservative approach to running the business. Enterprise Risk Management: Appropriate The Group operates under a formal Enterprise Risk Management (ERM) framework that is appropriate for its risk profile. The risk appetite, tolerances and limits are clearly articulated and regularly monitored. The Group utilizes a stochastic capital model that is fully integrated into ERM and is used for attribution analysis of VaR, What-If analyses, and stress testing. Outlook The positive outlooks reflect the Group's improved underwriting and operating performance in recent years coupled with the maintenance of the strongest level of risk-adjusted capitalization as measured by BCAR. Rating Drivers Positive rating action could occur if there were a sustained favorable trend in operating results relative to industry peers while maintaining strong risk-adjusted capitalization. Negative rating actions could occur if there were a sustained deterioration in underwriting and operating results over a period of several years, an occurrence of a sudden large or catastrophic loss event that materially hinders risk-adjusted capitalization, or if there were any material deviation from the company's submitted financial projections. Financial Data Notes: Time Period: Annual - 2017 Status: A.M. Best Quality Cross Checked Data as of: 07/19/2018 Page 3 of 27 Printed September 10, 2018

Key Financial Indicators: Key Financial Indicators (000) 2017 2016 2015 2014 2013 Premiums Written Direct 609,243 558,520 502,628 512,674 522,095 Net 944,297 844,987 757,117 752,773 680,008 Pre-tax Operating Income ($000) 68,377 103,631 75,838 88,843 60,803 Net Income 76,443 80,698 58,683 72,411 56,605 Total Admitted Assets 3,084,482 2,808,119 2,568,520 2,454,030 2,215,013 Policyholders' Surplus 1,056,560 1,026,819 950,266 893,946 804,073 Key Financial Indicators - A.M. Best Ratios (%) 2017 2016 2015 2014 2013 Profitability Combined Ratio 97.8 93.4 95.8 92.5 95.4 Investment Yield 2.9 2.8 2.6 2.6 2.4 Pre-Tax Return on Revenue 7.9 13.0 10.5 12.6 9.5 Leverage Non-Affiliated Investment Leverage 11.0 20.5 13.0 14.2 18.0 Net Premiums Written to Policyholders' Surplus 0.9 0.8 0.8 0.8 0.8 Net Leverage 2.8 2.5 2.5 2.6 2.6 Liquidity Overall Liquidity 153.4 158.6 159.9 158.8 158.6 Operating Cash-Flow 132.1 128.1 127.2 128.9 115.3 (*) Within several financial tables of this report, this company is compared against the Commercial Casualty Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. Credit Analysis: Balance Sheet Strength: Strongest Page 4 of 27 Printed September 10, 2018

Capitalization: Capital Generation Analysis 2017 2016 2015 2014 2013 Pre-tax Operating Income ($000) 68,377 103,631 75,838 88,843 60,803 Realized Capital Gains ($000) 29,100 7,883 6,397 8,927 13,738 Income Taxes ($000) 21,035 30,816 23,553 25,360 17,936 Unrealized Capital Gains ($000) -3,616 2,089-2,450 5,676 8,647 Net Contributed Capital ($000) -19,000-5,000...... 50,000 Other Changes ($000) -24,085-1,234 87 11,787 5,940 Change in Policyholders' Surplus 29,741 76,553 56,320 89,873 121,192 ($000) Change in Policyholders' Surplus (%) 2.9 8.1 6.3 11.2 17.7 Liquidity Analysis (%) Company Industry Composite 2017 2016 2015 2014 2013 2017 2016 2015 2014 2013 Quick Liquidity 25.0 24.8 24.8 23.7 30.2 20.9 20.9 21.5 23.8 23.9 Current Liquidity 130.7 135.1 135.6 128.8 127.6 103.6 103.6 104.3 108.2 108.8 Overall Liquidity 153.4 158.6 159.9 158.8 158.6 144.9 145.5 146.1 148.1 148.1 Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US Asset Liability Management Investments: Bond Portfolio - 2017 Bonds Distribution by Maturity (%) Years Years Average 0-1 1-5 5-10 10-20 20+ Maturity Government 2.4 6.4 0.6 0.2... 2.9 Government Agencies and Municipal Bonds 3.5 14.3 16.8 6.7 3.9 8.1 Industrial and Misc. 6.4 19.7 11.2 1.1 0.1 4.3 Hybrid Securities... 2.2 3.3 0.1 1.1 8.9 Total 12.3 42.5 31.9 8.1 5.1 6.2 Page 5 of 27 Printed September 10, 2018

Asset Liability Management Investments: (Continued...) Bond Distribution by Issuer Type 2017 2016 2015 2014 2013 Bonds ($000) 2,338,005 1,969,415 1,779,093 1,726,741 1,505,614 US Government (%) 8.5 3.7 4.9 8.2 12.4 Foreign Government (%) 1.1 1.3 1.2 1.3 0.9 Foreign-All Other (%) 5.3 6.4 6.9 6.6 10.1 State/Special Revenue-US (%) 45.2 46.4 45.8 47.0 45.9 Industrial and Misc-US (%) 39.9 42.1 41.3 36.9 30.7 2017 Bond Distribution By Issuer Type 39.9% 8.5% 1.1% 5.3% US Government (%) Foreign Government (%) Foreign-All Other (%) State/Special Revenue-US (%) Industrial and Misc-US (%) 45.2% Reserve Adequacy: Loss and Allocated Loss Adjustment Expense Reserve Development Calendar Year: 2017 2016 2015 2014 2013 Original Loss Reserves ($000) 1,160,013 1,081,401 996,245 927,766 841,062 Developed Reserves Thru Latest Year End ($000) 1,160,013 1,053,286 997,937 940,503 885,936 Development to Original (%)... -2.6 0.2 1.4 5.3 Development to Policyholder Surplus (%)... -2.7 0.2 1.4 5.6 Developed Reserves to Net Premiums Earned (%) 134.7 132.0 138.1 133.5 138.6 Unpaid Reserves @ Latest Year End ($000) 1,160,013 731,506 461,335 296,327 198,419 Unpaid Reserves to Developed Reserves (%) 100.0 69.4 46.2 31.5 22.4 Page 6 of 27 Printed September 10, 2018

Reserve Adequacy: (Continued...) Accident Year: 2017 2016 2015 2014 2013 Original Loss Reserves ($000) 428,507 405,464 391,967 353,231 300,509 Developed Reserves Thru Latest Year End ($000) 428,507 354,288 322,752 274,941 283,257 Development to Original (%)... -12.6-17.7-22.2-5.7 Unpaid Reserves @ Latest Year End ($000) 428,507 270,171 165,008 97,908 52,277 Accident Year Loss Ratio (%) 64.3 57.2 59.7 57.3 63.0 Accident Year Combined Ratio (%) 94.7 90.1 93.1 88.2 93.5 Source: Bestlink - Schedule P (Loss Reserves) - P/C, US Operating Performance: Adequate Financial Performance Summary (000) 2017 2016 2015 2014 2013 Pre-tax Operating Income 68,377 103,631 75,838 88,843 60,803 Net Income 76,443 80,698 58,683 72,411 56,605 A.M. Best Ratios (%) Company Industry Composite 2017 2016 2015 2014 2013 2017 2016 2015 2014 2013 Operating Ratio 89.0 85.0 87.8 85.0 88.4 89.4 88.1 85.2 84.3 81.5 Realized Return on Invested Assets 4.0 3.1 2.9 3.1 3.2 3.9 4.4 4.2 4.3 6.5 Pre-Tax Return on Revenue 7.9 13.0 10.5 12.6 9.5 10.1 12.1 14.6 15.3 18.6 Return on Surplus 7.0 8.4 6.1 9.2 8.8 8.2 8.1 6.6 12.0 13.3 Loss & LAE Ratio 67.3 60.5 62.4 61.7 65.0 72.6 71.2 68.2 68.2 66.8 Expense Ratio 30.4 32.9 33.4 30.9 30.5 29.9 30.3 30.7 29.6 30.6 Combined Ratio 97.8 93.4 95.8 92.5 95.4 102.8 101.8 99.1 98.1 97.7 Net Investment Yield 2.9 2.8 2.6 2.6 2.4 3.6 3.8 3.8 3.8 4.4 Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US Page 7 of 27 Printed September 10, 2018

Combined Ratio (%) 100 95.4 92.5 95.8 93.4 97.8 80 60 65.0 61.7 62.4 60.5 67.3 40 30.5 30.9 33.4 32.9 30.4 20 0 2013 2014 2015 2016 2017 - Combined Ratio - Loss & LAE Ratio - Expense Ratio 2017 Pure Loss Ratio by Product Line (%) 100 80 60 40 20 23.5 17.2 53.5 76.2 49.8 21.5 82.6 37.2 95.9 0 Oth Liab Occur Oth Liab CM Ocean Marine Group A & H Comm'l Auto Liab Surety Reins-Property Inland Marine All Other Business Profile: Favorable The following text is derived from Best's Credit Report on Navigators Insurance Group (AMB# 018081): Navigators Insurance Group (Navigators), through its lead operating unit,, specializes in underwriting marine and energy, specialty lines and professional liability business. underwrites Page 8 of 27 Printed September 10, 2018

property/casualty business on a non-admitted basis for those types of risks requiring greater flexibility in rating or policy terms and conditions. The group's multi-channel distribution platform utilizes global, national and regional brokers as well as wholesalers. Navigators has a long-standing reputation for expertise in the marine and energy sector, which includes property and excess liability coverages for marine-related business, offshore energy risks, related transportation and cargo exposures as well as a modest amount of business written in other facets of the marine and energy field. Specialty operations have underwritten general liability coverages for small general and artisan contractors since 1995, mostly in California, and represent a "post-montrose" book of business with tight terms and conditions in place to limit or avoid significant construction defect claims. Coverages are generally written on a non-admitted basis and have included construction wrap-up products since 2005. Challenging economic conditions in recent years have driven a reduction in the size of this book. Excess casualty risks are diversified among a large number of industry groups. The remaining portion of the specialty gross premiums includes primary casualty and commercial middle market accounts. The group also enters specialty niche lines, which management believes can produce profitable underwriting results. The group also writes professional director and officer coverages for a variety of market niches, including lawyers, architects and a variety of public and private companies. This coverage is largely offered to small and mid-size companies as opposed to Fortune 1000 companies. The group restructured its D&O program by introducing a credit scoring function into its underwriting process. Beginning in 2011, this program was quota-shared with other insuring participants. In 2010, the group began reinsuring both accident and health coverages as well as multi-peril crop insurance. Latin America property reinsurance was added in 2011, professional liability reinsurance in 2012, and an international property reinsurance treaty in 2014. In recent years, the group has also opened a number of regional offices (e.g., Pittsburgh and Philadelphia) to market its existing products. Leverage Analysis Company Industry Composite A.M. Best Ratios (%) 2017 2016 2015 2014 2013 2017 2016 2015 2014 2013 Net Premiums Written to Policyholders' Surplus 0.9 0.8 0.8 0.8 0.8 0.7 0.7 0.7 0.7 0.7 Industry Composite: Commercial Casualty Composite - Bestlink - Best's Statement File - P/C, US 2017 Top Product Lines of Business (Net Premiums Written) 1.1% 3.6% 3.3% 4.8% 8.5% 6.7% 47.2% Oth Liab Occur Oth Liab CM Ocean Marine Group A & H Comm'l Auto Liab Surety Reins-Property Inland Marine All Other 11.3% 13.6% Page 9 of 27 Printed September 10, 2018

2017 By-Line Business Product Line Direct Premiums Written Reinsurance Premiums Assumed Reinsurance Premiums Ceded Net Premiums Written ($000) (%) ($000) (%) ($000) (%) ($000) (%) Business Retention (%) Oth Liab Occur 240,991 39.6 334,160 53.5 129,880 44.8 445,271 47.2 77.4 Oth Liab CM 108,488 17.8 51,348 8.2 31,586 10.9 128,251 13.6 80.2 Ocean Marine 161,509 26.5 23,555 3.8 78,791 27.2 106,273 11.3 57.4 Group A & H...... 80,605 12.9...... 80,605 8.5 100.0 Comm'l Auto Liab 51,582 8.5...... 6,288 2.2 45,294 4.8 87.8 Surety 10,647 1.7 25,343 4.1 1,912 0.7 34,077 3.6 94.7 Reins-Property...... 34,107 5.5 3,256 1.1 30,851 3.3 90.5 Inland Marine 17,672 2.9 361 0.1 7,872 2.7 10,161 1.1 56.3 All Other 18,354 3.0 75,606 12.1 30,446 10.5 63,513 6.7 67.6 Total 609,243 100.0 625,086 100.0 290,032 100.0 944,297 100.0 76.5 Geographical Breakdown By Direct Premium Writings 2017 2016 2015 2014 2013 New York 145,971 123,177 125,834 102,884 93,054 California 47,642 49,449 47,217 51,227 57,650 Aggregate Alien 45,280 55,679 32,794 73,207 83,253 Texas 42,065 38,606 35,818 36,976 39,518 New Jersey 35,490 28,302 22,915 16,965 14,385 Florida 27,408 21,121 12,311 14,292 14,146 Illinois 26,304 22,704 17,275 13,677 13,587 Washington 22,971 27,261 28,513 26,851 27,033 Pennsylvania 20,075 18,555 16,109 15,310 13,352 Ohio 13,714 11,989 10,341 11,213 9,557 All Other 182,322 161,675 153,502 150,072 156,560 Total 609,243 558,520 502,628 512,674 522,095 Page 10 of 27 Printed September 10, 2018

Financial Statements: Balance Sheet: Balance Sheet: Admitted Assets 2017 ($000) 2016 ($000) 2017 (%) 2016 (%) Bonds 2,338,005 1,969,415 75.8 70.1 Preferred Stock 211,409 211,846 6.9 7.5 Common Stock 32,518 144,535 1.1 5.1 Cash and Short-term Invest 49,642 62,322 1.6 2.2 Real Estate, Investment............ Derivatives............ Other Non-Affil Inv Asset 32 25...... Investments in Affiliates 141,978 139,017 4.6 5.0 Real Estate, Offices 889 1,012...... Total Invested Assets 2,774,473 2,528,172 89.9 90.0 Premium Balances 167,397 127,454 5.4 4.5 Accrued Interest 15,287 13,620 0.5 0.5 All Other Assets 127,325 138,873 4.1 4.9 Total Assets 3,084,482 2,808,119 100.0 100.0 Liabilities & Surplus 2017 ($000) 2016 ($000) 2017 (%) 2016 (%) Loss and LAE Reserves 1,296,840 1,158,242 42.0 41.2 Unearned Premiums 579,816 496,638 18.8 17.7 Derivatives............ Conditional Reserve Funds 17,626 10,339 0.6 0.4 All Other Liabilities 133,641 116,082 4.3 4.1 Total Liabilities 2,027,922 1,781,300 65.7 63.4 Surplus notes............ Capital and Assigned Surplus 416,122 416,122 13.5 14.8 Unassigned Surplus 640,438 610,697 20.8 21.7 Total Policyholders' Surplus 1,056,560 1,026,819 34.3 36.6 Total Liabilities and Surplus 3,084,482 2,808,119 100.0 100.0 Page 11 of 27 Printed September 10, 2018

Summary of Operations and Operating Cash Flow: Summary of Operations (000) Statement of Income 2017 Net Operating Cash Flow 2017 Premiums earned 861,119 Premiums collected 919,243 Losses incurred 326,670 Benefit & loss-related pmts 347,901 LAE incurred 253,124 Undwr expenses incurred 287,412 LAE & undwr expenses paid 387,049 Other expenses incurred... Other income / expense... Dividends to policyholders... Dividends to policyholders... Net underwriting income -6,088 Underwriting cash flow 184,292 Net transfer... Net investment income 75,444 Investment income 84,954 Other income/expense -980 Other income/expense -980 Pre-tax operating income 68,377 Pre-tax cash operations 268,267 Realized capital gains 29,100 Income taxes incurred 21,035 Income taxes pd (recov) 24,275 Net income 76,443 Net oper cash flow 243,992 Page 12 of 27 Printed September 10, 2018

Report Revision Date: September 5, 2018 Company Attributes: Industry: Business Type: Entity Type: Organization Type: Business Status: Marketing Type: Financial Size: Insurance Property/Casualty Operating Company Stock In Business - Actively Underwriting Independent Agency XII ($1 Billion to $1.25 Billion) Company History: Date Incorporated: 07/16/1981 Date Commenced: 1983 Domicile: United States: New York The company was incorporated under the laws of New York on July 16, 1981. Active underwriting operations began on March 10, 1983. At December 31, 2017, paid-in capital of $416.1 million consisted of 100 shares of common stock at a par value of $50,000 per share and $411.1 million of contributed surplus. All authorized shares are outstanding. Company Operations: Licensed Territory: (Current since 03/12/2009).The company is licensed in the District of Columbia, Puerto Rico and all states. It also operates on a surplus lines or non-admitted basis in U.S. Virgin Islands. This company is also licensed in the United Kingdom. 2017 Rank Top 5 Lines of Business by NPW 1 Oth Liab Occur 47.2% 2 Oth Liab CM 13.6% 3 Ocean Marine 11.3% 4 Group A & H 8.5% 5 Comm'l Auto Liab 4.8% 2017 Rank Top 5 Geographic Distribution by DPW 1 United States: NY 24.0% 2 United States: CA 7.8% 3 Aggregate Alien 7.4% 4 United States: TX 6.9% 5 United States: NJ 5.8% Company Management: Last significant update on 05/11/2018 The Navigators Group, Inc., the ultimate Parent company of & Navigators Specialty Insurance Company, is a publicly owned holding company which trades on the NASDAQ stock exchange under the symbol NAVG. Approximately 20% of the stock is owned by Terence N. Deeks and family. The affairs of the company are under the direction of Navigators Management Company, Inc., which is reimbursed for its expenses. Terence N. Deeks served as chairman of the board of The Navigators Group, Inc., from its roots in 1974 until May 2013, when Mr. Deeks retired from the chairman role. Mr. Deeks continues to serve as a director. Robert V. Mendelsohn was appointed Chairman of the Board upon Mr. Deeks retirement. Mr. Mendelsohn has served on the Board since 2010 and has extensive insurance industry Page 13 of 27 Printed September 10, 2018

Company Management: (Continued...) experience. He formerly served as Chief Executive of Royal & Sun Alliance Insurance Group, plc in London and as Chief Executive Officer of Royal Insurance Group, Inc., President and Chief Operating Officer of W.R. Berkley Corp. and Chairman of the American Insurance Association. Stanley A. Galanski serves as President and CEO of The Navigators Group, Inc. and as President, CEO and Chairman of. Mr. Galanski has been active in the insurance industry since 1980. Officers Chairman, President and CEO: Stanley A. Galanski EVP and CFO: Ciro M. DeFalco SVP and Chief Underwriting Officer: H. Clay Bassett, Jr. SVP and Chief Risk Officer: Diane L. Coogan-Pushner SVP and Chief Administrative Officer: R. Scott Eisdorfer SVP, Secretary and General Counsel: Emily B. Miner SVP and Chief Actuary: Mark A. Yunque SVP and Controller: Carole V. Kirk (Finance) Vice President and Treasurer: Ellen K. Dion (Finance) Vice President: Marina S. Barg (Claims) Vice President: Glen M. Bronstein (Claims) Vice President: Joann L. DeBlasis (Underwriting - Reinsurance) Vice President: George R. Iacono (Finance, Operations) Vice President: Paul C. Kluga (Reinsurance) Vice President: Sherry J. Little (Regulatory Compliance) Vice President: Michael J. McKenna (Underwriting) Vice President: Paul T. McNamara (Claims) Vice President: Daniel P. Reale (IT) Vice President: William C. Redington, Jr. (Underwriting - Reinsurance) Vice President: Jeff L. Saunders (Underwriting) Vice President: Ivan F. Vega Neathery (Underwriting - Reinsurance) Vice President: Daniel R. Westcott (Underwriting - Reinsurance) Directors H. Clay Bassett, Jr. Michael J. Casella Ciro M. DeFalco R. Scott Eisdorfer Stanley A. Galanski (Chairman) Noel Higgitt Christopher A. Johnson Russell J. Johnson Denise M. Lowsley Michael J. McKenna Emily B. Miner Gregory D. Olson Jeff L. Saunders Vincent C. Tizzio Mark A. Yunque Page 14 of 27 Printed September 10, 2018

Regulatory: (Continued...) Auditor: KPMG, LLP An examination of the financial condition was made as of December 31, 2014, by the insurance department of New York. The 2017 annual independent audit of the company was conducted by KPMG, LLP. The annual statement of actuarial opinion is provided by Carl X. Ashenbrenner, FCAS, MAAA, Milliman. Page 15 of 27 Printed September 10, 2018

Report Release Date: Rating Effective Date: September 5, 2018 August 14, 2018 Disclosure Information: View A.M. Best s Rating Disclosure Form Analytical Contacts A.M. Best Rating Services, Inc. Jonathan Harris, CFA, FRM, CPCU Jacqalene Lentz, CPA Senior Financial Analyst Director Jonathan.Harris@ambest.com Jacqalene.Lentz@ambest.com +1(908) 439-2200 Ext. 5771 +1(908) 439-2200 Ext. 5762 Ultimate Parent: 058430 - The Navigators Group, Inc. A.M. Best Rating Unit: 018081 - Navigators Insurance Group Best's Credit Ratings: Rating Effective Date: August 14, 2018 Best's Financial Strength Rating: A Outlook: Positive Action: Affirmed Best's Issuer Credit Rating: a+ Outlook: Positive Action: Affirmed Five Year Credit Rating History: Best's Financial Strength Ratings Best's Issuer Credit Ratings Date Rating Outlook Action Rating Outlook Action 08/14/2018 A Positive Affirmed a+ Positive Affirmed 08/11/2017 A Positive Affirmed a+ Positive Affirmed 07/21/2016 A Stable Affirmed a+ Stable Affirmed 06/03/2015 A Stable Affirmed a+ Stable Affirmed 06/04/2014 A Stable Affirmed a+ Stable Affirmed Rating Rationale: The company's rating reflects its reinsurance agreement with (AMB# 001825) as a member of the Navigators Insurance Group (AMB# 018081). The following text is derived from Best's Credit Report on Navigators Insurance Group (AMB# 018081: Balance Sheet Strength: Strongest Navigators Insurance Group maintains the strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), which benefits from a high quality investment portfolio and strong reinsurance protection. Page 16 of 27 Printed September 10, 2018

Solid liquidity ratios that compare favorably to the averages for the commercial casualty composite. The Group benefits from the financial flexibility of its parent, The Navigators Group, Inc., which has modest financial leverage and the ability to access the public debt and equity markets if needed. Operating Performance: Adequate Consistently profitable operating performance, although the five-year average return on revenue and return on equity measures lag the averages for the commercial casualty composite by four and approximately two points, respectively. Five-year average underwriting performance, as measured by the combined ratio, compares favorably to the composite average by almost five points. Net investment income is solid and has grown steadily in each of the last five years, supported by a high quality investment portfolio. Business Profile: Favorable The Group is well established in the specialty lines of business that it writes. Multi-channel distribution platform utilizes global, national and regional brokers as well as wholesalers. Well-experienced management team that takes a conservative approach to running the business. Enterprise Risk Management: Appropriate The Group operates under a formal Enterprise Risk Management (ERM) framework that is appropriate for its risk profile. The risk appetite, tolerances and limits are clearly articulated and regularly monitored. The Group utilizes a stochastic capital model that is fully integrated into ERM and is used for attribution analysis of VaR, What-If analyses, and stress testing. Outlook The positive outlooks reflect the Group's improved underwriting and operating performance in recent years coupled with the maintenance of the strongest level of risk-adjusted capitalization as measured by BCAR. Rating Drivers Positive rating action could occur if there were a sustained favorable trend in operating results relative to industry peers while maintaining strong risk-adjusted capitalization. Negative rating actions could occur if there were a sustained deterioration in underwriting and operating results over a period of several years, an occurrence of a sudden large or catastrophic loss event that materially hinders risk-adjusted capitalization, or if there were any material deviation from the company's submitted financial projections. Financial Data Notes: Time Period: Annual - 2017 Status: A.M. Best Quality Cross Checked Data as of: 07/19/2018 Page 17 of 27 Printed September 10, 2018

Key Financial Indicators: Key Financial Indicators (000) 2017 2016 2015 2014 2013 Premiums Written Direct 411,390 383,427 357,343 316,194 254,619 Pre-tax Operating Income ($000) 3,967 3,929 4,011 3,953 4,153 Net Income 2,902 3,037 3,051 3,266 2,819 Total Admitted Assets 178,642 169,410 165,666 160,676 155,360 Policyholders' Surplus 141,978 139,017 136,036 132,969 129,702 Key Financial Indicators - A.M. Best Ratios (%) 2017 2016 2015 2014 2013 Profitability Investment Yield 2.8 2.9 3.0 3.0 3.2 Leverage Non-Affiliated Investment Leverage 2.6 1.9......... Net Leverage 0.3 0.2 0.2 0.2 0.2 Liquidity Overall Liquidity 487.2 557.4 559.1 579.9 605.5 Operating Cash-Flow 470.2 340.6 305.7 352.3 183.4 (*) Within several financial tables of this report, this company is compared against the Surplus Lines Composite. (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. Credit Analysis: Balance Sheet Strength: Strongest Page 18 of 27 Printed September 10, 2018

Capitalization: Capital Generation Analysis 2017 2016 2015 2014 2013 Pre-tax Operating Income ($000) 3,967 3,929 4,011 3,953 4,153 Realized Capital Gains ($000) 38 264 196 697 115 Income Taxes ($000) 1,103 1,155 1,156 1,384 1,449 Unrealized Capital Gains ($000) 22-28...... 1 Other Changes ($000) 37-28 16... -4 Change in Policyholders' Surplus 2,961 2,981 3,067 3,267 2,817 ($000) Change in Policyholders' Surplus (%) 2.1 2.2 2.3 2.5 2.2 Liquidity Analysis (%) Company Industry Composite 2017 2016 2015 2014 2013 2017 2016 2015 2014 2013 Quick Liquidity 999.9 999.9 999.9 999.9 711.9 89.7 85.2 85.1 87.1 78.2 Current Liquidity 390.4 461.4 463.2 485.0 516.9 166.4 165.2 166.6 172.6 167.0 Overall Liquidity 487.2 557.4 559.1 579.9 605.5 212.7 208.3 210.3 213.5 206.2 Industry Composite: Surplus Lines Composite - Bestlink - Best's Statement File - P/C, US Asset Liability Management Investments: Bond Portfolio - 2017 Bonds Distribution by Maturity (%) Years Years Average 0-1 1-5 5-10 10-20 20+ Maturity Government 5.6 3.0 1.5 2.2... 4.6 Government Agencies and Municipal Bonds 1.4 4.1 23.1 4.1 3.5 9.3 Industrial and Misc. 6.5 29.0 13.8 2.1... 4.4 Total 13.5 36.1 38.4 8.4 3.5 6.2 Bond Distribution by Issuer Type 2017 2016 2015 2014 2013 Bonds ($000) 139,363 131,440 134,634 130,975 128,677 US Government (%) 12.3 12.2 7.7 14.6 19.9 Foreign Government (%)............... Foreign-All Other (%) 2.7 2.9 2.8 3.7 10.0 State/Special Revenue-US (%) 36.2 29.8 28.6 21.2 19.5 Industrial and Misc-US (%) 48.8 55.1 60.9 60.5 50.7 Page 19 of 27 Printed September 10, 2018

Asset Liability Management Investments: (Continued...) 2017 Bond Distribution By Issuer Type 48.8% 12.3% 2.7% US Government (%) Foreign-All Other (%) State/Special Revenue-US (%) Industrial and Misc-US (%) 36.2% Operating Performance: Adequate Financial Performance Summary (000) 2017 2016 2015 2014 2013 Pre-tax Operating Income 3,967 3,929 4,011 3,953 4,153 Net Income 2,902 3,037 3,051 3,266 2,819 A.M. Best Ratios (%) Company Industry Composite 2017 2016 2015 2014 2013 2017 2016 2015 2014 2013 Realized Return on Invested Assets 2.9 3.1 3.1 3.5 3.3 3.1 5.0 3.5 5.4 6.7 Return on Surplus 2.1 2.2 2.3 2.5 2.2 11.8 7.1 5.3 11.8 14.8 Net Investment Yield 2.8 2.9 3.0 3.0 3.2 2.3 2.8 3.1 2.8 5.1 Industry Composite: Surplus Lines Composite - Bestlink - Best's Statement File - P/C, US Business Profile: Favorable The following text is derived from Best's Credit Report on Navigators Insurance Group (AMB# 018081): Page 20 of 27 Printed September 10, 2018

Navigators Insurance Group (Navigators), through its lead operating unit,, specializes in underwriting marine and energy, specialty lines and professional liability business. underwrites property/casualty business on a non-admitted basis for those types of risks requiring greater flexibility in rating or policy terms and conditions. The group's multi-channel distribution platform utilizes global, national and regional brokers as well as wholesalers. Navigators has a long-standing reputation for expertise in the marine and energy sector, which includes property and excess liability coverages for marine-related business, offshore energy risks, related transportation and cargo exposures as well as a modest amount of business written in other facets of the marine and energy field. Specialty operations have underwritten general liability coverages for small general and artisan contractors since 1995, mostly in California, and represent a "post-montrose" book of business with tight terms and conditions in place to limit or avoid significant construction defect claims. Coverages are generally written on a non-admitted basis and have included construction wrap-up products since 2005. Challenging economic conditions in recent years have driven a reduction in the size of this book. Excess casualty risks are diversified among a large number of industry groups. The remaining portion of the specialty gross premiums includes primary casualty and commercial middle market accounts. The group also enters specialty niche lines, which management believes can produce profitable underwriting results. The group also writes professional director and officer coverages for a variety of market niches, including lawyers, architects and a variety of public and private companies. This coverage is largely offered to small and mid-size companies as opposed to Fortune 1000 companies. The group restructured its D&O program by introducing a credit scoring function into its underwriting process. Beginning in 2011, this program was quota-shared with other insuring participants. In 2010, the group began reinsuring both accident and health coverages as well as multi-peril crop insurance. Latin America property reinsurance was added in 2011, professional liability reinsurance in 2012, and an international property reinsurance treaty in 2014. In recent years, the group has also opened a number of regional offices (e.g., Pittsburgh and Philadelphia) to market its existing products. 2017 By-Line Business Direct Reinsurance Reinsurance Net Premiums Premiums Premiums Premiums Written Assumed Ceded Written Business Retention Product Line ($000) (%) ($000) (%) ($000) (%) ($000) (%) (%) Com'l MultiPeril 32,184 7.8...... 32,184 7.8......... Oth Liab Occur 334,160 81.2...... 334,160 81.2......... Oth Liab CM 41,662 10.1...... 41,662 10.1......... All Other 3,385 0.8...... 3,385 0.8......... Total 411,390 100.0...... 411,390 100.0......... Page 21 of 27 Printed September 10, 2018

Geographical Breakdown By Direct Premium Writings 2017 2016 2015 2014 2013 California 102,240 97,184 98,556 82,708 74,139 Texas 47,588 46,206 38,625 34,682 24,206 Florida 27,954 18,865 20,015 13,996 12,078 Illinois 23,777 19,220 19,248 20,774 17,274 New Jersey 19,723 21,904 19,061 16,379 8,808 Washington 15,732 14,375 13,778 9,919 6,104 Pennsylvania 13,158 14,708 14,216 11,031 8,750 Colorado 10,629 7,692 7,210 8,199 7,096 Georgia 10,623 10,666 9,716 7,205 5,166 Minnesota 8,958 7,903 5,579 4,779 4,029 All Other 131,008 124,703 111,339 106,521 86,969 Total 411,390 383,427 357,343 316,194 254,619 Page 22 of 27 Printed September 10, 2018

Financial Statements: Balance Sheet: Balance Sheet: Admitted Assets 2017 ($000) 2016 ($000) 2017 (%) 2016 (%) Bonds 139,363 131,440 78.0 77.6 Preferred Stock............ Common Stock............ Cash and Short-term Invest 2,798 7,990 1.6 4.7 Real Estate, Investment............ Derivatives............ Other Non-Affil Inv Asset 2......... Investments in Affiliates............ Real Estate, Offices............ Total Invested Assets 142,162 139,430 79.6 82.3 Premium Balances 35,282 29,177 19.8 17.2 Accrued Interest 975 803 0.5 0.5 All Other Assets 223 1 0.1... Total Assets 178,642 169,410 100.0 100.0 Liabilities & Surplus 2017 ($000) 2016 ($000) 2017 (%) 2016 (%) Loss and LAE Reserves............ Unearned Premiums............ Derivatives............ Conditional Reserve Funds............ All Other Liabilities 36,664 30,393 20.5 17.9 Total Liabilities 36,664 30,393 20.5 17.9 Surplus notes............ Capital and Assigned Surplus 91,000 91,000 50.9 53.7 Unassigned Surplus 50,978 48,017 28.5 28.3 Total Policyholders' Surplus 141,978 139,017 79.5 82.1 Total Liabilities and Surplus 178,642 169,410 100.0 100.0 Page 23 of 27 Printed September 10, 2018

Summary of Operations and Operating Cash Flow: Summary of Operations (000) Statement of Income 2017 Net Operating Cash Flow 2017 Premiums earned... Premiums collected... Losses incurred... Benefit & loss-related pmts... LAE incurred... Undwr expenses incurred... LAE & undwr expenses paid... Other expenses incurred... Other income / expense... Dividends to policyholders... Dividends to policyholders... Net underwriting income... Underwriting cash flow... Net transfer... Net investment income 3,967 Investment income 4,379 Other income/expense... Other income/expense... Pre-tax operating income 3,967 Pre-tax cash operations 4,379 Realized capital gains 38 Income taxes incurred 1,103 Income taxes pd (recov) 931 Net income 2,902 Net oper cash flow 3,448 Page 24 of 27 Printed September 10, 2018

Report Revision Date: September 5, 2018 Company Attributes: Industry: Business Type: Entity Type: Organization Type: Business Status: Marketing Type: Financial Size: Insurance Property/Casualty Operating Company Stock In Business - Actively Underwriting Independent Agency XII ($1 Billion to $1.25 Billion) Company History: Date Incorporated: 12/01/1988 Date Commenced: 1989 Domicile: United States: New York The company was incorporated under the laws of New York on December 1, 1988 as Pilot Insurance Company and began business on October 17, 1989. Active underwriting operations commenced in 1990 and, effective January 23, 1990, the company was renamed NIC Insurance Company. The current name was adopted on January 4, 2007. At December 31, 2016, paid-in capital of $91.0 million consisted of 250 shares of common stock at $20,000 par and $86.0 million of contributed surplus. All authorized shares are outstanding. Company Operations: Licensed Territory: (Current since 02/27/2008).The company is licensed in New York. It also operates on a surplus lines or nonadmitted basis in the District of Columbia, AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, HI, ID, IL, IN, IA, KS, KY, LA, ME, MD, MA, MI, MN, MS, MO, MT, NE, NV, NH, NJ, NM, NC, ND, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VT, VA, WA, WV, WI and WY. 2017 Rank Top 5 Lines of Business by NPW 2017 Rank Top 5 Geographic Distribution by DPW 1 United States: CA 24.9% 2 United States: TX 11.6% 3 United States: FL 6.8% 4 United States: IL 5.8% 5 United States: NJ 4.8% Company Management: Last significant update on 07/03/2018 All outstanding capital stock of is owned by, which in turn is owned by The Navigators Group, Inc., the ultimate Parent company of and Navigators Specialty Insurance Company, a publicly owned holding company which trades on the NASDAQ stock exchange under the symbol NAVG. Approximately 20% of the stock is owned by Terence N. Deeks and family. Page 25 of 27 Printed September 10, 2018

Company Management: (Continued...) The affairs of the company are under the direction of Navigators Management Company, Inc., which is reimbursed for its expenses. Terence N. Deeks served as chairman of the board of The Navigators Group, Inc., from its roots in 1974 until May 2013, when Mr. Deeks retired from the Chairman role. Mr. Deeks continues to serve as a director. Robert V. Mendelsohn was appointed Chairman of the Board upon Mr. Deeks retirement. Mr. Mendelsohn has served on the Board since 2010 and has extensive insurance industry experience. He formerly served as Chief Executive of Royal & Sun Alliance Insurance Group, plc in London and as Chief Executive Officer of Royal Insurance Group, Inc., President and Chief Operating Officer of W.R. Berkley Corp. and Chairman of the American Insurance Association. Stanley A. Galanski serves as President and CEO of The Navigators Group, Inc. and as President, CEO and Chairman of. Mr. Galanski has been active in the insurance industry since 1980. Officers CEO: Stanley A. Galanski President and COO: Vincent C. Tizzio EVP and CFO: Ciro M. DeFalco SVP and Chief Underwriting Officer: H. Clay Bassett, Jr. SVP and Chief Risk Officer: Diane L. Coogan-Pushner SVP and Chief Administrative Officer: R. Scott Eisdorfer SVP, Secretary and General Counsel: Emily B. Miner SVP and Chief Officer: Mark A. Yunque (Actuarial) SVP and Controller: Carole V. Kirk (Group, Finance) Vice President and Treasurer: Ellen K. Dion (Finance) Vice President: Marina S. Barg (Claims) Vice President: Glen M. Bronstein (Claims) Vice President: George R. Iacono (Finance, Operations) Vice President: Paul C. Kluga (Reinsurance) Vice President: Sherry J. Little (Regulatory Compliance) Vice President: Michael J. McKenna (Underwriting) Vice President: Paul T. McNamrara (Claims) Vice President: Daniel P. Reale (IT) Vice President: Jeff L. Saunders (Underwriting) Vice President: Daniel R. Westcott (Underwriting - Reinsurance) Directors H. Clay Bassett, Jr. Michael J. Casella Ciro M. DeFalco R. Scott Eisdorfer Stanley A. Galanski (Chairman) Noel Higgitt Christopher A. Johnson Russell J. Johnson Denise M. Lowsley Michael J. McKenna Emily B. Miner Gregory D. Olson Jeff L. Saunders Vincent C. Tizzio Mark A. Yunque Page 26 of 27 Printed September 10, 2018

Regulatory: Auditor: KPMG, LLP An examination of the financial condition was made as of December 31, 2014, by the insurance department of New York. The 2017 annual independent audit of the company was conducted by KPMG, LLP. The annual statement of actuarial opinion is provided by Carl X. Ashenbrenner, FCAS, MAAA, Milliman. A Best's Financial Strength Rating opinion addresses the relative ability of an insurer to meet its ongoing insurance obligations. The ratings are not assigned to specific insurance policies or contracts and do not address any other risk, including, but not limited to, an insurer's claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. A Financial Strength Rating is not a recommendation to purchase, hold or terminate any insurance policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. A Best's Issue/Issuer Credit Rating is an opinion regarding the relative future credit risk of an entity, a credit commitment or a debt or debt-like security. Credit risk is the risk that an entity may not meet its contractual, financial obligations as they come due. These credit ratings do not address any other risk, including but not limited to liquidity risk, market value risk or price volatility of rated securities. The rating is not a recommendation to buy, sell or hold any securities, insurance policies, contracts or any other financial obligations, nor does it address the suitability of any particular financial obligation for a specific purpose or purchaser. In arriving at a rating decision, A.M. Best relies on third-party audited financial data and/or other information provided to it. While this information is believed to be reliable, A.M. Best does not independently verify the accuracy or reliability of the information. Any and all ratings, opinions and information contained herein are provided "as is," without any express or implied warranty. Visit http:///ratings/notice.asp for additional information or http:///terms.html for details on the Terms of Use. For current rating visit /ratings Best s Credit Rating Methodology Disclaimer Best s Credit Rating Guide Copyright 2018 A.M. Best Company, Inc. and/or its affiliates. All rights reserved. No portion of this content may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of A.M. Best. While the content was obtained from sources believed to be reliable, its accuracy is not guaranteed. For additional details, refer to our Terms of Use available at A.M. Best website: /terms. Page 27 of 27 Printed September 10, 2018