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American Risk and Insurance Association Annual Meeting Jay Fishman Chairman & Chief Executive Officer The Travelers

American Risk and Insurance Association Annual Meeting Jay Fishman Chairman & Chief Executive Officer The Travelers Companies, Inc. August 6, 2007. Coastal Development. New Condo Construction in South Miami Beach, 2007 – 2009: Number of new developments: 15

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American Risk and Insurance Association Annual Meeting Jay Fishman Chairman & Chief Executive Officer The Travelers

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  1. American Risk and Insurance Association Annual Meeting Jay Fishman Chairman & Chief Executive Officer The Travelers Companies, Inc. August 6, 2007

  2. Coastal Development • New Condo Construction in South Miami Beach, 2007 – 2009: • Number of new developments: 15 • Number of individual units: 2,111 • Average price of the cheapest unit: $940,333 • Average price of the most expensive unit: $6,460,000 • Aggregate property value: $6 billion+ • 55% of U.S. population lives within 50 miles of the coast Source: Insurance Information Institute from www.miamicondolifestyle.com accessed April 5, 2007.

  3. Hurricane Andrew • Largest hurricane before Andrew was Hurricane Hugo, with $6.8 billion of insured losses in 1989 (in 2006 $) • Andrew: • Over $22 billion of insured losses (in 2006 $) • 700,000 homeowners claims • 107,380 homes damaged; 28,066 destroyed • 82,000 businesses destroyed or damaged • A dozen insurers became insolvent Source: Insurance Information Institute, “The Lessons of Hurricane Andrew: Is Florida Really Ready?”, June 11, 2002; Insurance Information Institute.

  4. East Coast Wind Dilemma • Unpredictable Regulation • Perception of Industry • Affordability • Inadequate Focus on Solvency

  5. East Coast Hurricane Program Private, Market-Based Insurance Concept • Creation of East Coast Wind Zone • Federal Regulation of Wind Underwriting and Pricing to Provide for Stable Regulatory Environment • Continued State Regulation for Certain Matters • Consistent and Predictable Model

  6. East Coast Hurricane Program Private, Market-Based Insurance Concept • Federal Regulation of Wind Underwriting and Pricing to Provide for Stable Regulatory Environment • Rates • Actuarially sound (‘risk-based’) • Provides for “refund” of excess profits and “recoupment” of excess losses over time • Accounting Policy • Formulaic reserves required • No change in related tax treatment – deductible for book purposes at accrual, but continued deductibility for tax purposes at payment

  7. East Coast Hurricane Program Private, Market-Based Insurance Concept • Continued State Regulation for Certain Matters • Form • Residual market regulation • Safety net – market of last resort • Pass through of costs to other policy holders

  8. East Coast Hurricane Program Private, Market-Based Insurance Concept • Policy to provide for affordability • Temporary credit for some, 100% offset by temporary increase for others • Mitigation of losses to manage premium levels • Federal economic incentives for states tied to enforcement of Federal building standards • Mitigation further incentivized by actuarial rate-setting process • Appropriate risk management and capitalization

  9. American Risk and Insurance Association Annual Meeting Jay Fishman Chairman & Chief Executive Officer The Travelers Companies, Inc. August 6, 2007

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