BLENDED STRUCTURE Industry Construction

(1)

BLENDED STRUCTURE Industry Construction

Motivation A homebuilder is required to have evidence of insurance. Market deterioration as a result of a highly litigious environment prompted the homebuilder to seek alternatives.

Structure A blended structure combining client funding and risk transfer

Term Five years

Coverage(s) Claims made and reported General Liability including Products-Completed Operations (i.e., construction defects)

Limit $5 million per occurrence; $5 million aggregate per year; $10 million aggregate for the policy term Retention $500,000 Notional Exp. Balance $6.075 million Potential Benefits

• Provides policy form modeled after standard ISO General Liability policy as requested by homebuilder

• Offers multi-year solution that allows company to insulate itself from vagaries of insurance market cycle

(2)

CUSTOMIZED RISK TRANSFER Industry Entertainment

Motivation A company planned to finance its purchase of the revenue rights with respect to certain intellectual property. The company sought to attract investors and financing entities by evidencing insurance protection on the revenue expected to be generated from the assets in order to strengthen the company’s tax position on the entire purchase of the rights. A significant amount of data about the revenue risk was available from independent third parties. The company was willing to retain a significant portion of the risk.

Structure A customized risk transfer solution providing insurance protection on the revenue expected to be generated from the intellectual property assets

Term Five years

Coverage(s) Miscellaneous Financial Loss for certain specified revenue shortfall at the end of a five year period

Limit $30 million in the aggregate

Retention SIR for revenue shortfalls below a pre-agreed upon total revenue result

Potential Benefits

Enables the company to attract investors and lenders to participate in the transaction

(3)

BLENDED STRUCTURE Industry Healthcare

Motivation A health maintenance organization (HMO) wanted a multi-year solution and potential benefits from positive loss experience while reducing frictional costs.

Term Three years

Coverage(s) Claims made and reported Managed Care Errors &Omissions (E&O)

Limit • $40 million per claim and annual aggregate

• Aggregate of $55 million for all claims within the policy period

• Reinstatement option provides additional $25 million in aggregate limits subject to a $15 million limit per claim

Retention $3 million per claim

Notional Exp. Balance

$25 million

Potential Benefits

• Provides multi-year coverage

• Enables the HMO to satisfy its certificate of insurance requirement • Allows the HMO to benefit from favorable loss experience

(4)

BLENDED STRUCTURE Industry Manufacturing

Motivation A multinational manufacturing company had been retaining network security and privacy risks. However, the increased frequency, severity, and sophistication of security breaches in the market coupled with a need to disclose how they address cyber risks including relevant coverage, prompted the company to seek a cost-effective insurance solution.

Structure • A blended structure combining indemnity and risk transfer covering failure of the insured’s network security, failure to protect personally identifiable information, violation of any statute regarding failure to protect private information, and leased computers

• Event Management insurance provides first party coverage for costs to retain public relations

services to assist in managing and mitigating a covered privacy or network security incident, including costs associated with notifying consumers of a release of private information, providing credit-monitoring or other remediation services, and losses to information assets

Term One year

Coverage(s) Security & Privacy liability insurance

Limit $100 million per occurrence and in the aggregate

Retention • SIR of $10 million per occurrence

• First $50 million of loss excess the SIR is supported by an indemnification agreement

Potential Benefits

• Provides evidence of insurance with the convenience of a single policy

• Cost-effective solution since significant risk is retained by the company

• Minimal collateral required to support indemnification due to strong credit rating

• Ability to address SEC guidance regarding disclosure of cyber security risks

(5)

Motivation A global manufacturing company needed primary and excess product liability coverage but found limited capacity and exceedingly high retentions and premiums in the traditional insurance market. The company was also required to provide evidence of insurance.

Structure • A blended structure combining client funding and risk transfer

• Layer A has an initial deposit premium of $5 million with additional premium of up to $10 million for aggregate Layer A losses excess of $5 million in the aggregate

• Layer B (excess risk transfer layer) is $20 million per claim and $20 million policy aggregate

Term One year

Coverage(s) Claims made and reported product liability

Limit $30 million per occurrence and $35 million aggregate

Retention • $10,000 per claim until paid losses exceed $15 million, then $1 million per claimant • Company also retains $10 million in aggregate losses excess of $5 million

$5 million

Potential Benefits

• Enables the company to provide evidence of insurance

• Allows the company to benefit from favorable loss experience on the primary layer • Provides protection against catastrophic losses

(6)

Motivation A U.S. manufacturer sought coverage for products recall to satisfy the requirements of its trading counterparties. The price available in the traditional market was not acceptable to the manufacturer.

Term Three years

Coverage(s) Product Recall, Coverages A (expenses) and B (liability damages)

Limit $10 million per occurrence and $20 million in the aggregate

Retention $1 million per occurrence

• Function of the deposit premiums (including additional deposits) less loss payments plus interest credited

• $6 million

Potential Benefits

• Meets coverage requirements for difficult to insure layers and products • Offers efficient blend of self-funding and risk transfer

• Provides significant return of premium if losses are low • Offers stable pricing over multiple years

• Allows the insured to benefit from favorable loss experience

(7)

BLENDED STRUCTURE Industry Construction

Motivation A contractor was asked to provide assurances that funds it received for future use

towards capital repairs on a Private Public Partnership (PPP) construction project would be available over the 25 year contract. Initial requests suggested purchasing a surety bond for the full amount or holding the funds in trust, both of which would have tied up large amounts of capital.

Structure • A blended structure combining client funding (up to net present value of exposures) and risk transfer (timing exposure)

• Designed to ensure that sufficient funds would be available to support capital repairs arising during the contract period resulting from events outside the contractor’s control.

Term 25 years

Limit $30 million per occurrence and in the aggregate

$17 million

Potential Benefits

• Improves the contractor’s capital costs, as the premium would be substantially less than the collateral required under a surety bond or trust

• Provides long-term comfort to the public entity that funds for future capital repairs would be available

(8)

American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.

Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter:

@AIGinsurance| LinkedIn: www.linkedin.com/company/aig

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds. Insurance coverage is account specific and is governed by actual policy language. This presentation does not constitute an offer to sell any of the insurance coverage or other products or services described herein. We do not provide legal, credit, tax, accounting or other professional advice, and you and your advisors should perform your own independent review with respect to such matters as they relate to your particular circumstances and reach your own independent conclusions regarding the benefits and risks of any proposed transaction or business relationship.