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19th Annual Risk Managers Information Meeting Overview

The 19th Annual Risk Managers Information Meeting took place from February 27 to March 1, 2005, at The Westin Innisbrook Golf Resort in Tarpon Springs, Florida. This event highlighted the underwriting overview of 2004, focusing on new member additions and premium earnings exceeding $213 million. The presentation included significant details on membership retention, successful product offerings, and insights into liability trends in the energy and insurance sectors. Key statistics related to the industry's performance and claims processing were discussed, emphasizing the evolving landscape for risk management.

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19th Annual Risk Managers Information Meeting Overview

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  1. ENERGY INSURANCE MUTUAL 19th ANNUALRISK MANAGERSINFORMATION MEETING The Westin Innisbrook Golf Resort Tarpon Springs, Florida February 27 - March 1, 2005

  2. Jill Dominguez Vice President - Underwriting

  3. 2004 UNDERWRITING OVERVIEW

  4. 2004IN REVIEW NEW MEMBERS 8 MEMBERS AS OF 12/31/2004 172 GROSS PREMIUM EARNED $213,843,000

  5. 2004 COMPAREDTO 2003

  6. WRITTEN/EARNED PREMIUM

  7. WRITTEN/EARNED PREMIUM

  8. NEW MEMBERS IN 2004 Toronto Hydro Corporation 01/01/2004 Alabama Electric Cooperative, Inc. 04/01/2004 Massachusetts Water Resources Authority 06/28/2004 National Energy & Gas Transmission, Inc. 08/01/2004 Complete Energy Holdings, LLC 08/23/2004 Anadarko Petroleum Corporation 09/12/2004 Wolf Creek Nuclear Operating Corp. 12/10/2004 Texas Genco LLC 12/15/2004

  9. TOTAL MEMBERSHIP

  10. RETENTION 2004 98.82% 2003 96.05% 2002 99.42% 2001 99.40%

  11. EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE AMOUNT OF CAPACITY GENERAL LIABILITY • Capacity $100M as of 01/01/04 • Availability Depends on Risk D&O/GENERAL PARTNER • Capacity $50M as of 01/01/04 • $10M to $50M Available Depending on Risk EXCESS FIDUCIARY LIABILITY • $25M Available Depending on Risk Property • Primary and Excess Quota Share • Capacity $15M

  12. EIM MEMBERSHIP MIX

  13. 2004 CASUALTYPOLICY FORMS All Forms Have Been Updated to Include: • EIM’s Change of Address • 10 Day Notice of Cancellation for Nonpay • One Year Discovery Period Wording NO CHANGES TO COVERAGE

  14. UPDATE BY LINE OF BUSINESS

  15. EXCESS GENERAL LIABILITY

  16. EXCESS GENERAL LIABILITY OVERVIEW • $90,301,000 Gross Premium Earned (2004) • $71,530, 000 Gross Premium Earned (2003) • 171 EGL Policyholders • $73M Average Limit • $38M Average Attachment Point

  17. EXCESS GENERAL LIABILITY OVERVIEW BEHIND THE NUMBERS • Eight New Members • Three Members Placed Under Parent • Pricing Adjustments • Additional Premium for Additional Limits • Additional Premium for Coverage Enhancements, e.g. EPLI, WC

  18. EXCESSGENERAL LIABILITY EXCESS FORM CAN ALSO INCLUDE: • Excess EPLI (53% of Membership) • Excess Workers Comp. (20% of Membership) • Excess Professional Liability* (12% of Membership) $65M Max Sublimit • Drop Down Over Specific Aggregates in Underlying Policy (61% of Membership) • * Usually ISOs/RTOs

  19. EXCESS DIRECTORS AND OFFICERS LIABILITY

  20. EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW 102 EDO Policies $43M Average Limit $46M Average Attachment Point $89,069,000 Gross Premium Earned (2004) $64,284,000 Gross Premium Earned (2003)

  21. SOME GOOD NEWS IN 2004 Top Three Industries with LARGEST Numbers of Securities Class Action Lawsuits*: • Food and Beverage • Agricultural and Pharmaceutical • Technology and Communication Top Three Industries with LEAST Exposure: • Industrial • Basic Materials • UTILITIES *Source: PLUS 2005 D&O Symposium, Cornerstone Research and Stanford Law School

  22. D&OISSUES AND TRENDS POSITIVES Utilities going “back to basics” seeing positive results. UTILITIES’ CLAIM SUSCEPTIBILITY*FREQUENCY 2003 31% 2003 1.04 2004 30% 2004 .85 EIM CLAIMS FILED: 2000 10 2003 24 2001 17 2004 22 2002 37 *Ten year period Source: Tillinghast

  23. S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER) Outlook still predominantly negative but declined dramatically in 2004. Average Rating - Mid-BBB (48%) *Source: Standard & Poor’s Research - “US Utility Downside Rating Actions Moderated Significantly in 2004”

  24. NOW FOR SOME BAD NEWS • More Institutional Investors Suing • Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”? • Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.* *Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen

  25. D&O ISSUES AND TRENDS STILL A LOT OF UNCERTAINTY TRENDS • Merger/acquisition activity picking up • Three mergers involving six members announced • According to Tillinghast’s 2004 D&O liability survey, six percent of D&O shareholder claims allegations are from merger/acquisitions • EIM’s experience: $16,250,000 paid in merger/acquisition activity related claims

  26. D&O ISSUES AND TRENDS ISSUES SECTION 404 COMPLIANCE • Unclear what implications are from regulatory enforcement or private action perspective EFFECT OF SETTLEMENTS • Still in pipeline - D&O claims estimated at $10B to settle minimum; probably $25B total • EIM $256M in case reserves as of 12/31/04 • At the same time, more capacity, lower rates in market • Competition on difficult D&O renewals! Source: “The Buyers Perception of D&O Realities and Latest Trends” - Towers Perrin-Tillinghast

  27. D&OISSUES AND TRENDS TREND? Capacity In Market Rebounding* Total Capacity In Market: (Expressed in billions of dollars) 1999 $1.55 2000 $1.575 2001 $1.55 2002 $1.5 2003 $1.35 2004 $1.5 *Tillinghast 2004 D&O Survey Report

  28. D&OISSUES AND TRENDS Viable Utility Capacity $325M - $500M Source: Research by McGriff, Seibels and Williams

  29. EXCESS FIDUCIARY LIABILITY

  30. EXCESSFIDUCIARY LIABILITY • Maximum Limit of Liability Offered to Members: $25M • Member Must Have at Least $35M in Underlying Limits • 43 Members (25%) Purchase Excess Fiduciary Liability

  31. EXCESSFIDUCIARY LIABILITY • $6.9M Written Premium • $23M Average Limit • $38M Average Attachment Point • $5.75M Claims Paid in 2004

  32. PROPERTY

  33. PROPERTY Participation in Members’ Property Programs 12/31/2002 25 12/31/2003 40 12/31/2004 53 We are currently involved with 75 Programs.

  34. PROPERTY EIM $ 3,202,440 EIM and NEIL $29,129,409 NEIL FRONTS $ 3,321,764

  35. PROPERTY OPEN CLAIMS ACTIVITY 2001 1 2002 4 2003 9 2004 18 LOSS RATIO 2001 1% 2002 19% 2003 23% 2004 24%

  36. 2004 HURRICANE SEASON EIM LOSSES $600,000

  37. PROPERTY Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.

  38. COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF: Account is a quality-engineered and maintained risk • Deductibles meet minimum guidelines for equipment at risk and coverage requested • Rates contemplate the exposures presented by the risk, claims experience, and coverage form

  39. CAPACITY AND SUBLIMITS Capacity Provided on a Quota Share Basis Only Maximum Capacity is $15M Earthquake, Flood, and Wind Exposures Will Be Monitored Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles Earthquake and Flood Must Be Written with Annual Aggregates

  40. TERRORISMPOSITION

  41. TERRORISMPOSITION UPDATE ON TRIA MODELING • Currently evaluating EIM book to determine exposure • EIM may provide limits equal to policy limit, a sublimit, or decline to write

  42. INSURANCE ADVISORY COMMITTEE

  43. HOW ARE WE DOING?2004 RISK MANAGER SURVEY EIM follows reasonable, prudent, and sound underwriting practices: 98% Agree/Strongly Agree

  44. HOW ARE WE DOING?2004 RISK MANAGER SURVEY EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength: 94% Agree/Strongly Agree

  45. HOW ARE WE DOING?2004 RISK MANAGER SURVEY Overall, EIM meets my expectations in level of service: 100% Agree/Strongly Agree

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