AGA RISK MANAGEMENT COMMITTEE Business Interruption Due to

AGA RISK MANAGEMENT COMMITTEE Business Interruption Due to Fires, Storms, and Other Extreme Conditions Presented by: Kurt Tentinger, Managing Director Jim Meyer, Managing Director Aon Risk Solutions - Global Energy & Power Monday, July 29, 2013

Contents Ø Time Element Coverage Terms Ø Business Interruption Considerations Ø 2013 Market Conditions Ø 2013 Market Capacity – Property and Business Interruption Ø Aon Overview Ø Aon’s Global Energy and Power Practice Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 2

Time Element Coverage Terms Ø Coverage • Business Interruption Loss from owned operations. Covering fixed expense and loss of profit. Includes loss of income from loss production or inability to render services, loss of rental income, or loss from other sources of income. • Contingent Business Interruption Loss from non owned operations such as a key supplier or materials or services used in your production or key receiver of your products or services. • Service Interruption Loss resulting from an interruption of supply of Electricity, Gas, Water, Telephone, Satellite or other services. • Extra Expenses incurred to continue normal business activities. • Contingent Extra Expense EE Loss from non owned operations (key supplier or receiver). • Pilot Relight Coverage Ø Coverage Trigger • Direct Physical Loss or Damage to Insured Property caused by and Insured Peril during the Policy Period Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 3

Time Element Coverage Terms (Cont. ) Ø Typical Retention • 30 - 60 days waiting Period Ø Valuation • Actual Loss Sustained Business Interruption typically excludes loss of margin from completed stock. Use a “Selling Price Clause” to secure coverage as part of the Property Damage adjustment. Ø Period of Coverage • The period of time, commencing at the time of the loss, that is required, with the “exercise of due diligence and dispatch”, to rebuild, repair or replace the damage property Ø Expenses To Reduce Loss • Insured must use all reasonable means to restore property and get back into operations as soon as possible. This includes: • Use of other owned or temporary locations • Use of available stock • Other means of mitigating the claim Expenses incurred to reduce or mitigate the claim are covered as long as they do not exceed the amount which would have been paid out if the cost had not been incurred. Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 4

Time Element Coverage Terms (Cont. ) Ø Extended Period of Indemnity • Covers the period of time, following the restoration period, which is necessary to restore the operation to level preceding the loss. – Sales – Production – Contract Sales Ø Coverage Forms • There are numerous Business Interruption forms available in the International market. Following are examples: – – – Gross Earnings Mercantile – covers loss sales Gross Earnings Manufacturing – covers sales value of product Gross Profits – includes an extended period of indemnity Valued B. I. Forms – stipulated limits per day, per week, per month Turnover Forms Leasehold Interest, rental value, other Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 5

Business Interruption Considerations Ø Avoid “Coinsurance” or “Contribution” restrictions Ø Include Ordinary Payroll if needed (can write in increments of 30 days) Ø Understand how “Depreciation” or “Depletion” allowances could impact your cash flow. Both can be covered as fixed expenses. Ø Identify and Evaluate – • Worst case loss and probable case loss scenarios include analysis of peak periods of activity (peak season) and required time for the restorations of operations • Interdependencies with and impact to other owned facilities • Key equipment and other bottleneck exposures • Contingent Exposures (to fixed facilities or transportation means) • Service Interruption Exposures • Contractual Obligations • Reconstruction/Restoration Periods • Contingency Planning and other Risk Reductions techniques • Redundancies • Unique Accounting Techniques that transfer or delay income or expenses Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 6

2013 Market Conditions Ø Most Insurers had profitable results in 2012 and in the 1 st half of 2013 Ø Market capacity levels remain at high levels (by historical standards) Ø Significant new capital (from institutional investors) is being drawn into the Reinsurance Market causing reinsurance costs to decline Ø Underwriters continue underwrite for profit versus investment return but are not willing to give up market share Ø Insurers will push for flat or slight increases in rate but expect rates to be flat or declining for clean accounts Ø Retention levels will remain stable with the exception of N. E. CAT exposures. Ø Contingent Business Interruption, flood and other exposures under continued scrutiny. Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 7

2013 Market Capacity Property and Business Interruption Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 8

Aon Overview Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 9

Aon Overview Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 10

Aon’s Global Energy and Power Practice Ø Global headquarters in Houston & London • 120 dedicated professionals in Houston and a similar number in our London office • Globally 300+ professionals Ø Leverage in the Market • Largest producer of energy industry premium to key insurance markets • Houston office placing in excess of $1 billion in premium Ø Why Clients Select Aon • Industry Knowledge • Claims Assistance and Management • Market Knowledge • Market Leverage • Global Reach Aon Risk Solutions | Aon Energy & Power AGA Risk Management Committee | July 29, 2013 11