FULLY FUNDED STRUCTURE

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1 Construction Defect Industry Construction Motivation A general contractor of single family homes is required to provide evidence of insurance. Market deterioration as a result of a highly litigious environment prompted the contractor to seek alternatives to traditional insurance. The contractor also sought a multi-year solution. Structure A fully funded structure to provide proof of insurance Term Three years Coverage(s) Claims made and reported General Liability, including Products-Completed Operations (i.e., construction defects). Limit $1 million per occurrence and $2 million in the aggregate, inclusive of all defense costs Retention $100,000 Notional Exp. Function of the deposit premium less loss payments plus interest credited Balance Deposit premium of $2 million Models policy form after standard ISO General Liability Policy Offers a multi-year solution which allows the contractor to insulate itself from vagaries of current insurance market cycle Allows the contractor to benefit from favorable loss experience

2 Facilitating an M&A Transaction Industry Transportation Motivation A company was purchasing a transportation company with three divisions auto, bus, and taxi. The buyer estimated the transportation company s exposure to auto liability to be much higher than the seller did. Rather than reducing the sale price, the seller sought an insurance solution that would address the exposures that concerned the buyers. Structure A fully funded structure to provide an excess auto liability policy insuring all claims incurred but not paid during the retrospective term which are excess of the retention and within the per occurrence and policy aggregate limits Deposit premium of $10 million is due by the seller upon policy inception Term For claims incurred during a prior seven year period Coverage(s) Retrospective Excess Auto Liability Limit Retention $100,000 Notional Exp. $10 million Balance $2 million per occurrence and $10 million policy aggregate Addresses buyer s concerns by providing evidence of insurance against the risk Eliminates having to drop the sale price to satisfy the buyer s concerns Provides the potential for buyer to benefit from favorable loss experience

3 Facilitating the Closing of a Captive Industry Facilities Servicing Motivation A large company owned a captive that reinsured over 50 general liability policies fronted by various AIG insurance companies domiciled in several European countries. The company sought to close this captive in a fairly short time frame and needed to transfer the captive s liabilities from 2008 to 2010 back to AIG. Structure Fully funded loss buyout of general liabilities Term Definitive buyout with an option to free up the experience account balance after three years and annually thereafter in the case of favorable loss development Coverage(s) General Liability Limit 15 million Notional Exp. 9 million initially with additional funding as needed to cover losses up to the limit Balance Facilitates closing the captive within desired time frame Enables the company to benefit from favorable loss experience Reduces insured s administrative cost

4 Employee Coverage RENT-A-CAPTIVE Industry Financial Services Motivation A group of non-profit credit unions sought to achieve long term significant and sustainable healthcare savings while providing better benefits and improved employee health. The group was looking to partially self-fund a medical plan that also provides cost transparency. Structure A rent-a-captive solution placed within AIG s sponsored captive and managed by AIG s captive management group, whereby the limits of liability are structured as follows: Layer 1 individual claims covered by client retentions, up to $25,000 Layer 2 individual claims in excess of retentions, covered by cell, up to $175,000 Layer 3 individual claims in excess of layer 2, covered by AIG Term Annual Coverage(s) Medical stop-loss Limit Retention $25,000 Layer 2 $175,000 per individual; Layer 3 unlimited Improves employee benefits and decreases co-pays and deductibles while keeping health insurance cost increases manageable Allows for the opportunity to benefit from positive loss experience Provides claims and financial data transparency, which allows the client to customize plan designs and wellness programs to maximize quality and minimize costs Premiums not used to pay claims may be returned to the participants

5 Fronting for Multinational Property Coverage CAPTIVE Industry Motivation Structure Term Technology A Mexico-based multinational company with operations in 18 Latin American countries required property coverage for all risks related to fixed properties and information technology equipment. Captive was established to provide reinsurance coverage, whereby: Coverage is obtained through the local offices of AIG Coverage is fronted by AIG, which is a licensed reinsurer in each jurisdiction AIG reinsures a portion of the property coverage to the captive insurance company Captive retains risk on a quota share basis in the first layer of loss coverage Annual Coverage(s) Global Property Limit Retention $50 million Deductibles vary by country Provides policy form meeting all of company s coverage requirements in a single policy Offers multi-year solution which allows company to insulate itself from vagaries of insurance market cycle Allows the company to benefit from favorable loss experience Premiums not used to pay claims may be returned to the participants as dividend

6 General Liability Industry Manufacturing Motivation A manufacturing company wanted to present proof of insurance to distributors and retailers of its products. Traditional coverage had significantly increased in price for renewal and would only be available with exclusions unattractive to the company. Structure A fully funded structure to provide proof of insurance: A notional experience balance was established; it would be increased by interest credited and annual deposit premiums paid, and reduced by the amount of losses paid At policy end, any residual balance would be returned to the company Term Five years Coverage(s) Claims made and reported General Liability and Product-Completed Operations Liability Insurance Limit Retention Policy covers losses in excess of retention with limits of $5 million per claim and $5 million in the aggregate $100,000 each and every claim Notional Exp. Function of the deposit premium less loss payments plus interest credited Balance $5 million Provides multi-year coverage Enables the company to satisfy its certificate of insurance requirement Allows the company to benefit from favorable loss experience

7 Long-Term Care Exposure Industry Healthcare Motivation Market conditions and company losses resulted in primary professional liability exposures being difficult to place in the traditional insurance market. Structure Term Coverage(s) A fully funded structure whereby the long-term healthcare provider self-insures the primary layer in order to facilitate the purchase of excess risk transfer insurance and meet its regulatory requirement to provide evidence of insurance. Three years Claims made and reported General Liability and Professional Liability Limit $1 million per claim excess of retention $3 million per facility aggregate $4 million policy period aggregate limit Retention $100,000 Notional Exp. Balance Function of the deposit premium less loss payments plus interest credited $4 million Enables the company to satisfy certificate of insurance requirements Provides policy form meeting all of company s coverage requirements Offers multi-year solution which allows company to insulate itself from vagaries of insurance market cycle Establishes the primary insured program as a base for building excess coverage Allows the company to benefit from favorable loss experience

8 Professional Liability Industry Healthcare Motivation A continuing care retirement community had to demonstrate financial responsibility via professional liability insurance in order to meet licensing requirements. Traditional insurance was not economically attractive. Structure Fully funded structure Term One year, annually renewable Coverage(s) Claims made and reported Professional Liability and General Liability Limit $1 million per claim $3 million in the aggregate, inclusive of allocated loss adjustment expenses Retention $500,000 per claim, inclusive of allocated loss adjustment expense Notional Exp. Function of the deposit premium less loss payments plus interest credited Balance Deposit premium of $3 million Allows the company to satisfy its financial responsibility requirement Is more cost-efficient than traditional insurance structure Provides flexibility to add coverage and/or capacity, as well as to terminate the program each year Allows the company to benefit from favorable loss experience

9 Structured Solution Convertible to Captive Industry Industrial Services Motivation A company was facing a 400% increase in its General Liability self-insured retention (SIR) at renewal, as a result of $10 million in aggregate losses excess of its $1 million SIR over the last 3 years. Due to improved risk management strategies, they believed recent loss trends would end. Structure Term A fully funded structure to insure the increased SIR: Deposit premium of $10 million, paid in three annual installments Premium and policy aggregate limit may increase by up to $5 million if incurred losses exceed $10 million loss trigger At policy end, any residual balance would be returned to the company Three years Coverage(s) General Liability Limit $3 million per occurrence $10 million policy term aggregate, with a $5 million optional reinstatement of aggregate limit Retention $1 million per occurrence Notional Exp. Balance Function of the deposit premium less loss payments plus interest credited $10 million Positive balance returned to the company can be used as capital to form captive Company can revert back to conventional insurance at program end, if circumstances change Full limits in place at policy inception with insurer assuming credit risk Provides structure for increased aggregate limits, along with multi-year price/capacity stability Premium payments structured to reflect historical and prospective loss experience

10 Disclosure AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds. Insurance coverage is account specific and is governed by actual policy language. This presentation does not constitute an offer to sell any of the insurance coverage or other products or services described herein. We do not provide legal, credit, tax, accounting or other professional advice, and you and your advisors should perform your own independent review with respect to such matters as they relate to your particular circumstances and reach your own independent conclusions regarding the benefits and risks of any proposed transaction or business relationship. American International Group, Inc. All rights reserved. American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. Additional information about AIG can be found at YouTube: LinkedIn: C031615