Catastrophe Risk Tolerance Study Public Disclosures by Sector Year End 2018 Prepared by Aon Plc Reinsurance Solutions Contents Section 1 Overview and Key Findings Section 2 Analysis of Disclosure Data Section 3 Risk Tolerance Metrics Disclosure Section 4 Risk Tolerance Summary Aon | Reinsurance Solutions 1 Section 1: Overview and Key Findings Aon | Reinsurance Solutions 2 2018 Catastrophe Losses; 4th Highest since 2000 . 2018 catastrophe losses were the fourth-highest since 2000 on an inflation-adjusted basis. Global insured losses in 2018 were USD85 billion, 47 percent higher than the 2000-2017 average of USD56 billion . Tropical cyclone accounted for USD29 billion in industry payouts (down from USD94 billion in 2017) . US wildfire accounted for USD17 billion, with the Camp Fire alone producing more than USD11 billion in loss 160 140 120 100 80 USDB (2018) USDB 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Drought Earthquake EU windstorm Flooding Other Severe weather Tropical cyclone Wildfire Winter weather Source: Aon’s Analytics Division in Reinsurance Solutions For further information on catastrophe losses, read Impact Forecasting’s Weather, Climate & Catastrophe Insights: 2018 Annual Report Aon | Reinsurance Solutions 3 2018 Top 10 Global Economic Loss Events Date(s) Event Location Deaths Economic Loss (USDB) Insured Loss (USDB) October 10-12 Hurricane Michael United States 32 17.0 10.0 September 13- 18 Hurricane Florence United States 33 15.0 5.3 November Camp Fire United States 53 15.0 12.0 September 4-5 Typhoon Jebi Japan 17 13.0 8.5 July 2-8 Flooding Japan 246 10.0 2.7 Spring & Summer Drought Central & Northern Europe N/A 9.0 0.3 September 10-18 Typhoon Mangkhut Oceania, East Asia 161 6.0 1.3 July — September Flooding China 89 5.8 0.4 November Woolsey Fire United States 3 5.8 4.5 August 16-19 Tropical Storm Rumbia China 53 5.4 0.3 All Other Events 123.0 45.0 Totals 225¹ 90¹˒² Source: Impact Forecasting’s Weather, Climate & Catastrophe Insights: 2018 Annual Report ¹Subject to change as loss estimates are further developed ²Includes losses sustained by private insurers and government-sponsored programs Aon | Reinsurance Solutions 4 Catastrophe Risk Tolerance Study Overview 100% Disclosure Composition: 20% 12% . 89 Different Reinsurers/Insurers 75% 19% 15% 14% 13% 6% 50% 70% 69% 69% 68% 69% 73% 75% Percentage reporting peaked in the year 2012, 25% trend has since declined due to M&A activities by 0% companies which previously had PML disclosures 2012 2013 2014 2015 2016 2017 2018 Primary Source Secondary Source 81% of the industry disclosed some type of information relating to catastrophe risk tolerance, which is lower than that of the year-end 2017 disclosure. The percentage of "primary" source disclosures increased slightly to 75%. Data Sources 2017 2018 2017 2018 Primary 67 67 73% 75% 10K Reports 39 40 42% 45% Annual Reports 24 25 26% 28% Investor / Analyst Presentations 4 2 4% 2% Secondary 11 5 12% 6% A.M. Best Reports 11 5 12% 6% S&P Reports 0 0 0% 0% Not Disclosed 14 17 15% 19% Totals 92 89 100% 100% Note: The following companies were part of the 2017 study but are not included in the 2018 study due to an M&A activity – AmTrust Financial Services, Inc., Infinity Property and Casualty Corporation, Validus Holdings, Ltd and XL Group Plc. The population excludes sectors such as Medical Professional Liability, Life & Health, Financial / Mortgage Guaranty and Title companies Aon | Reinsurance Solutions 5 Key Findings of Catastrophe Risk Tolerance Study . Approximately 81% of companies disclosed risk tolerance or related information, of which half of the disclosures were through PML figures (Net): Disclosed as Disclosed as Undetermined/ Disclosure Type Percentage Count Target Actual Not Disclosed PML Figure (Net) 42% 14 23 0 37 As Part of Reinsurance Discussion 29% 2 24 0 26 Other Disclosure Type 10% 1 4 4 9 Undetermined / Not Disclosed 19% 0 0 17 17 Totals 100% 17 51 21 89 . Disclosures varied by sector. More than 50% of the disclosures made by Commercial Lines and Reinsurance companies were through net PML, while reinsurance structure was the most common form of disclosure for Personal Lines and Specialty Lines. Aon’s post-Katrina risk tolerance study indicates that a catastrophe event can range from 3 – 6% of equity for primary companies and 12 -19% of equity for reinsurers before impacting stock price by more than 10% – The average 100yr PML risk tolerance disclosure for primary and reinsurance companies is in- line with Aon’s post-Katrina study and falls in line with 2017 HIM results . Majority of companies with “Very Strong" and "Strong” S&P ERM ratings disclose net PML as their risk tolerance measures, where as companies with no ERM are more inclined towards Reinsurance Structure. Aon | Reinsurance Solutions 6 Event Studies: Katrina and Harvey, Irma & Maria (HIM) . Typical CRO / CFO risk tolerance questions – What proportion of one year’s earnings can be lost in a single event without an adverse stock price reaction? – What proportion of GAAP equity? . Post-event share price decline best predicted by reported Katrina losses alone, rather than Katrina, Rita and Wilma losses combined – Indicates a greater sensitivity to a single large loss than an aggregation of events . Reinsurers / Insurers losing less than 10% of shareholder value had Katrina losses in the following ranges, which are consistent with recent PML public disclosures Katrina - Cat Loss as % of* HIM - Cat Loss as % of* Prospective Prospective Sector Equity Equity Consensus Earnings Consensus Earnings Primary Insurers 3% to 6% 21% to 34% 3% to 6% 24% to 44% Reinsurers 12% to 19% 107% to 110% 7.5% to 10% 64% to 81% Harvey, Irma & Maria (HIM) Observations: . Six primary insurers had more than a 10% drop in stock price, all of which had more than a 6% hit to equity from HIM – 21 publicly traded insurers traded down more than 10% at some point – For primary insurers with less than 10% drop in shareholder value, there is an average total cat loss to equity of 3% . Five reinsurers had a loss of more than 10% to shareholder value, with is an average total cat loss to equity of 10% – 11 reinsurers traded down more than 10% at some point – Reinsurers that did not lose more than 10% of shareholder value had an average total cat loss to equity of 6% * Shown on a net post-tax basis Aon | Reinsurance Solutions 7 Catastrophe Risk Tolerance Disclosure Trend Analysis Sample Composite PML Target Ranges Post Tax Detail Post Tax Net PML as a Percent of Equity: Insurers 1 in 100 Yr 1 in 250 Yr Count Median Max Count Median Max 2018 13 7% 22% 16 10% 32% 2017 15 7% 19% 17 11% 23% 2016 18 6% 23% 17 9% 26% Post Tax Net PML as a Percent of Equity: Reinsurers 1 in 100 Yr 1 in 250 Yr Count Median Max Count Median Max 2018 4 8% 15% 7 13% 21% 2017 6 8% 15% 9 12% 21% 2016 5 10% 18% 7 13% 25% Note: The composite for 2018 consists approximately 29 companies across all sectors where definitive (100YR or 250YR) PML targets or actuals were disclosed. There were 33 companies in the 2017 composite, 32 companies in the 2016 composite, and 30 companies in the 2015 composite. Where companies reported an actual instead of a target we assumed the actual was their target. Due to a limited dataset, results should be used for informational purposes only. An assumed effective 21% tax rate for insurers and 15% for reinsurers was used by Aon as needed for level setting since some firms disclosed pre-tax and others post-tax. *The PMLs analyzed include those specified as all peril and all regions as well as specific peril by specific region Aon | Reinsurance Solutions 8 Companies disclosing 100-yr, 200-yr and 250-yr net PML . PML disclosures are varied by sector to sector. Majority of the Specialty Lines, Commercial lines and Reinsurance companies disclosed 250-yr net PML numbers, whereas, Personal lines disclosed mostly 100-yr net PML numbers. Personal Commercial 35% 14% 32% 13% 12% 12% 30% 12% 10% 10% 25% 10% 22% 20% 20% 8% 7% 6% 15% 6% 5% 5% 4% 3% 10% 7% 3% 7% 7% 2% 2% 2% 5% 2% 1% 1% 0% 0% AV/ LN FNHC HCI IAG AU KINS SAFT ALL UVE AIG CB CINF DLG LN FFH SIGI TLX HIG TRV 1:100 Post-Tax PML/SHE 1:200 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE 1:100 Post-Tax PML/SHE 1:200 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE Specialty Reinsurance 25% 22% 25% 20% 21% 21% 20% 20% 17% 17% 15% 17% 16% 15% 15% 13% 15% 13% 10% 10% 10% 10% 9% 8% 8% 7% 8% 6% 5% 4% 5% 2% 2% 2.9% 3% 1% 0% 0% Y AHL AXS GLRE HNRI:GR MHLD MUV2:GY PRE SCR.PA SREN AFG ACGL BEZ LN HSX LN LRE LN NAVG RLI PLMR 1:100 Post-Tax PML/SHE 1:200 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE 1:100 Post-Tax PML/SHE 1:200 Post-Tax PML/SHE 1:250 Post-Tax PML/SHE Note: Assumed pre-tax PMLs for companies that do not disclose tax information Aon | Reinsurance Solutions 9 Section 2: Analysis of Disclosure Data Aon | Reinsurance Solutions 10 Catastrophe Risk Tolerance Disclosure Distribution by Sector . Disclosures varied by sector, with Commercial Lines and Reinsurance companies using net PML most often, while reinsurance structure was the most common form of disclosure for Personal Lines and Specialty Lines Commercial Lines Sector Personal Lines Sector 11% 11% 7% 33% 28% 50% 11% 48% Specialty Lines Sector Reinsurance Sector 20% 31% 31% 13% 67% 38% Aon | Reinsurance Solutions 11 Risk Metrics Disclosures Actual vs.