State of The Casualty Market

SARIMS PresentationNovember 4, 2010

Derek Robinson, BCOMM, CRM

Vice President, Regional Marketing Managerderek.robinson@aon.ca403-267-7813

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State of the Primary Casualty Market

Insured's with good credit ratings, effective risk management programs and favorable loss experience are averaging flat to -5% rate reductions

In general, retentions have not retreated, however with the soft market coupled with an excellent loss record, clients should constantly review options for decreased loss retention levels

General Liability– Rates on risks with good loss experience are decreasing but significant exposure

decreases may reduce the ability to further cut rate.

Financial responsibility (fronting)– Very competitive particularly in competitive bidding situations

Workers’ Compensation (US)– Expect to see rate decreases ranging from flat to -5% as a result of competition and

favorable statutory changes

Risk transfer rates above client loss retentions for WC, GL and Auto continue to decrease through the third quarter

3

Casualty Lines Average Year Over Year Rate Change (through 9/30/10)

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10

% R

ate

Ch

ang

e

Workers Compensation General Liability Auto Liability

State of the Primary Casualty Market

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State of the Umbrella/Excess Market

Pricing Beginning in 2009, rate reductions between -5% to -10% were replaced with

rate reductions in the range of -2% to -4% remaining in that range through the 3rd quarter of 2010.

– Markets have historically been aggressive to close out the 4th quarter on new business growth

Excess capacity carriers are strictly adhering to minimum premiums

Overall lead and excess layer pricing continues to be competitive but is certainly stabilizing

In 2011, most Insured's will see further premium reductions either due to reduced exposures or rate reductions

5

State of the Umbrella/Excess Market

Capacity Excess capacity has grown significantly in 2008/2009/2010 Currently, there is approximately $2 billion of total available capacity

0

20

40

60

80

100

120

Mill

ion

s

Insurance Carriers

2008/2009/2010 New/Addt'l Umbrella/Excess Capacity

New Capacity

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State of the Umbrella/Excess Market

Umbrella/Excess Liability Average Year Over Year Rate Change (through 9/30/10)

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10

% R

ate

Ch

an

ge

Lead Total Program

Global Risk Insight Platform (GRIP)

To further illustrate the discussion with fact based review, I have included some screen shots from Aon’s Proprietary GRIP system

– It provides real-time trade information broken down by line, industry and geography.

GRIP Slides

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State of the Casualty Market ─ Summary

Category Rest of 2010 Comment

Pricing

Soft market conditions expected to continue with flat-to-low single digit rate decreases for low-to-medium hazard Insured's; increases will be pursued by carriers for more difficult classes where limited competition exists

LimitsMost Insured's expected to maintain excess casualty limits purchased

Deductibles/Retentions

Most Insured's expected to maintain deductibles/retentions

CoverageReasonable coverage enhancements expected to be available; underwriter scrutiny around emerging risks will continue

CapacityNo significant increase in capacity (currently at record levels)

State of The Casualty Market

SARIMS PresentationNovember 4, 2010

Derek Robinson, BCOMM, CRM

Vice President, Regional Marketing Managerderek.robinson@aon.ca403-267-7813