OIL

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Aons 11th Energy Insurance Training Seminar

• OIL
• 1 Coverage and Blending with Market Programmes
• Balint Pinter Mike Parry

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OIL Oil Insurance Limited

• OIL insures physical damage to property, well
  control and 3rd party pollution liability
• 52 member companies (as at July 2011)
• One of the broadest policy forms currently
  available
• OILs policyholders are also shareholders, who
  have energy operations.
• The Company commenced operations on January 1,
  1971 with 16 shareholders
• at a time when the Commercial Market Ceased to
  Provideadequate coverages and big enough limits
• Low-cost provider as rates based on pure loss
  cost
• Critical mass to achieve spread of risk and
  financial strength/stability.
• Provides hedge against a frequently volatile
  commercial insurance market
• Generates long-term benefits for shareholders
• Unique loss recovery mechanism

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OIL Advantages and Disadvantages

• Advantages
• Mutual owned by its members
• Global cover in all terrritories - no OFAC
  problems
• Profit not main driving force e.g. lower cost of
  capital
• Dividends may be returned to policyholders
  directly or as rate subsidies
• Ability to provided non standard covers e.g.
  pollution, terrorism
• No sub-limits for Natural Catastrophe
  (Earthquake)
• No differential for members with a bad loss
  record
• Disadvantages
• No differential for members with a good loss
  record
• Long term pool share obligation including
  exposure to GOM Wind
• Cost of withdrawal dependent on historic pool
  performance
• Total Withdrawal premium system

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OIL - Risks Insured vs. Excluded
Risks Insured

• Physical Damage
• Replacement Cost Value
• Actual Cash Value

Well control, including restoration and redrilling

• Pollution Liability
• Non gradual (sudden acc.)
• 40/120 days

Terrorism
Construction
Cargo
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OILs Mutual Structure

• Basic structure similar to any other
  corporations
• Shareholders, Board of Directors, Executive
  Committee, Officers Staff
• Major differences
• Shareholders are the customers (Insureds)
• Directors are elected from shareholder body
• Investment companies directed by a separate
  board, which includes senior financial officers
  from major shareholder companies.
• No underwriting per se - each policyholder
  treated equitably.
• All shareholders pay same rate.
• One standard policy form for all shareholders.

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Historical Hurricane Losses
Claims Advised Claims Filed Gross For Interest Net to OIL Net to OIL Scaled
Andrew (1992) 3 3 127M 108M 108M
Lili (2002) 7 6 147M 96M 96M
Ivan (2004) 10 8 815M 585M 585M
Katrina (2005) 25 18 4,822M 2,165M 1,000M
Rita (2005) 27 20 2,877M 1,491M 1,000M
Ike (2008) 12 11 1,925M 895M 750M
Total 84 66 10,713M 5,340M 3,539M
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Hurricanes - Past Payout Patterns
Years Hurricane Andrew (1992) Hurricane Lili (2002) Hurricane Ivan (2004) Hurricane Katrina (2005) Hurricane Rita (2005)
lt 1 Year 18 0 9 5 2
lt 2 Years 79 81 78 42 20
lt 3 Years 100 97 79 56 35
gt 3 Years 100 99 90 69 52
Total 108M 96M 585M 1,000M 1,000M
Members 3 6 8 18 20
  
Payments Scaled for Aggregation Limit
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How do I join OIL? - Eligibility Criteria

• Energy Company must have at least 50 of either
  (1) Gross Assets or (2) Annual Gross Revenues
  derived from Energy Operations¹.
• A minimum of 1 Billion of Gross Assets (PPE and
  book value of Inventories).
• A minimum credit rating of either BBB- (SP) or
  Baa3 (Moodys).
• Companies without external credit ratings can
  obtain a shadow rating or will be subject to
  financial analysis by OIL staff and may be
  required to post acceptable security.
• 1) As defined in the OIL Shareholders Agreement.

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Eligibility Criteria (Contd)

• Acceptable 10-year loss history.
• Business operations that represent an appropriate
  spread of risk and fit within a mutual
  framework.
• Demonstrated track record of maintaining
  world-class health, environment and safety
  standards.
• All applications must be approved by OIL
  Management.
• Members whose credit rating falls below
  established minimum criteria must post security.

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OIL Members as at July 2011
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OIL Membership byHeadquarter Location
Number of Shareholders _at_ 01 July 11 52
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Membership Count by Industry Segment
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Programme option - Limit Structures
100 coverage from OIL
Retro or Flat Premium - 100MM Limit
Standard Premium - 150MM Limit

Policyholder Deductible
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Limit Structures
60 coverage from OIL
Standard Premium - 150MM Limit
Self Insured or Coml Mkt Placement

Policyholder Deductible
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Limit Structures
250MM Part of 750MM
Retro or Flat Premium - 100MM Limit
Standard Premium - 150MM Limit
Commercial or Self Insured - 500MM Limit

Policyholder Deductible
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Net Incurred Losses since 1972 by Geographic
Region of Physical Loss
  
Expressed in millions of U.S. dollars untrended
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OIL Historical Losses since 1972by Industry
Sector
  
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Unmodified Gross Assets by Business Sector
Total Unmodified Gross Assets _at_ 01-Jan 2011
gt2BN
Other 3
Pharmaceutical assets represent .01
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Weighted Gross Assets by Business Sector
WGA by Industry Segment
WGA by Industry Segment
Total WGA 1,082B
Total WGA 1,308B
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Aons 11th Energy Insurance Training Seminar

• OIL
• QUESTIONS ?