DISCUSSION ONLY-NOT FOR DISTRIBUTION 1

“Emerging Risks for the Risk Manager”

Presentation at the:

State Risk and Insurance Management Association Conference 2011

Lance J. Ewing ARM, CRM, ERMP

Vice President – Chartis

DISCLAIMER

Certain statements provided herein are based solely on the opinions of American International Group, Inc. and are being provided for general information purposes only. Any opinions provided on economic trends should not be relied upon for investment decisions and are solely the opinion of American International Group, Inc. Certain information may be based on information received from sources American International Group, Inc. considers reliable; American International Group, Inc. does not represent that such information is accurate or complete. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein are valid only as of the date of this document and are subject to change. American International Group, Inc. is not soliciting or recommending any action based on any information in this document.

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What are “Emerging Risks for the Risk Manager”?

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Emerging risks are developing or changing risks which are difficult to quantify but may have a major impact to the public entity.

Identifying an emerging risk is critical to the long term success and financial viability of any State or governmental entity.

Working with brokers and insurance carriers, risk managers can be better informed of emerging risks.

Emerging Risks: 5 Common Traits

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High degree of uncertainty

Difficult to quantify and predict residual fallout

Are human, economic, natural or combination

Limited industry position or plan in place

Governmental involvement or lack can have an affect

Emerging Risks: Trending Now

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Risk Managers Sample Awareness List:

Fracking Nanotechnology Regulation and policy changes Environmental Terrorist acts Data compromise Cyber attack Natural disaster…subsequent domino affect Natural resources shortage Reputation risk US/Global recession

Emerging Risks:

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Emerging Risks:

Natural catastrophe risk models may have limited applications to:

Tsunamis

Volcanoes

Tornadoes

Wildfires

CAT Models are a major component for predictability but no model is perfect…Underwriting is still key.

Emerging Risks: Response

An effective “emerging risk” approach requires five risk management cornerstones:

Identification Categorization/Prioritization Quantification Qualification Mitigation

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But the approach requires a high degree of qualitative judgment from a variety of subject matter experts (internal and external) to prepare your organization.

Emerging Risks for Risk Managers

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Chartis is a world leading property-casualty and general insurance organization serving more than 40 million clients in over 160 countries and jurisdictions. With a 90-year history, one of the industry most extensive ranges of products and services, deep claims expertise and excellent financial strength, Chartis enables its commercial and personal insurance clients alike to manage virtually any risk with confidence.

Chartis is the marketing name for the worldwide property-casualty and general insurance operations of Chartis Inc. For additional information, please visit our website at www.chartisinsurance.com.

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THANK YOU!