The OIL Group of Companies

1. The OIL Group of Companies www.oil.bm www.ocil.bm “Tools for Risk Transfer” Presentation to University of Houston April 7, 2011

2. The Evolution of Energy Mutuals TOPS 1993-99 sEnergy 2002-2011 OIL 1972 Traditional Insurance Market AEGIS 1975 OCIL 1986 EIM 1986 NEIL 1980 2

3. Insurance Crisis # 1 Why was OIL Formed in 1971? • Inability of petroleum companies to purchase all-risk property damage coverage at realistic rates and capacity. • Incident – 1967 Explosion and Fire at Cities Service Oil Co. refinery in Lake Charles , Louisiana. • Unwillingness of the commercial insurance industry to sell third party pollution liability to petroleum companies at any price. • Incident – 1969 Union Oil Co. oil spill in Santa Barbara Channel, California. • Realization on the part of 16 oil companies that the combined capital & surplus of the petroleum industry greatly exceeded that of the insurance industry.

4. Insurance Crisis # 2 (1985-86) • Oil Casualty Insurance, Ltd. (OCIL) • Energy industry-owned company insuring • Excess General Liability • D&O Liability (now discontinued) • Formed in 1986 by 14 interested members of OIL. • Lack of D&O capacity was key driver in OCIL’s formation. • Today – 67 Shareholders headquartered around the world with total gross assets in excess of $2.1 Trillion.

5. …and again in 1993 • TOPS (Total Loss Only Platform Structures) • Petroleum industry-owned company providing high-level Excess Property Damage coverage for large production structures located in the North Sea. • Established in response to commercial insurance market’s overpricing of coverage specifically related to such structures. • Formed in 1993 by 16 petroleum companies headquartered in Europe and North America. • No losses in entire history of operations. • Liquidated in 1999 when rational pricing returned to the commercial market.

6. …and once again in 2002! sEnergy Insurance Limited (sEnergy) • Energy industry-owned company providing • Business Interruption • Property Damage (excess of OIL) • Lack of affordable, long-term and stable commercial market capacity was key driver in sEnergy’s formation. • Formed in 2002 by 12 energy companies. • sEnergy operated with an “OIL-like” Rating & Premium Plan. • Closed down in 2011.

7. OIL INSURANCE LIMITED A Case Study….

8. The OIL Group of Companies • Two energy industry mutual insurance companies: • Headquartered in Hamilton, Bermuda • Established when commercial market: • Ceased to provide adequate coverages/limits. • Priced high risk energy operations at unacceptable levels. • The two companies have combined membership of 88. Shareholders/Policyholders who are world-class energy companies headquartered around the world. • Over $2.2 Trillion in Gross Assets Insured globally.

9. Why Mutualize? • Industry ownership ensures fair treatment of Policyholders. • Being a mutual or member owned provide ‘hedge’ against a frequently volatile commercial insurance market. • Shareholders maintain active control of the coverages available to them. • Highly cost-effective catastrophe insurance facility. • Generates long-term benefits for Policyholders.

10. Why “Bermuda”? • Bermuda is one of the three largest insurance markets in the world (London and New York being the others.) • More than 1,600 international insurers and 1,200 captive insurers are registered in Bermuda. • Favorable tax/regulatory/legal environment. • Highly developed markets in all lines of insurance coverage. • Sophisticated on-Island business infrastructure.

11. The OIL Group of Companies “Mutual/Member Owned” Structure • Basic structure similar to any other corporations:- Shareholders, Board of Directors, Board Committees, Officers & Staff. • Major differences: Shareholders are the Customers (Insureds.) Directors are elected from the Shareholder Body. • The Investment companies are directed by a separate Board of Directors, which includes senior financial officers from major Shareholder companies. • In case of OIL, no “Underwriting” per se - each Policyholder treated equitably; premiums are formula-based—”Post lost funding”.

12. Corporate Governance SHAREHOLDERS (Annual Meeting) Approves Shareholders Agenda Elects Board Annually BOARD OF DIRECTORS (3 Meetings) Elects Executive Committee Approves Board Agenda SHAREHOLDER INITIATIVES EXECUTIVE COMMITTEE (Meetings as required) Administers OMSL Prepares Recommendations OMSL MANAGEMENT STAFF INITIATIVES EXTERNAL INITIATIVES (Brokers, Consultants, Etc.) 12 SHAREHOLDER/POLICYHOLDER INITIATIVES

13. The OIL Group of Companies Operational Structure Oil Management Services Ltd. OIL (49 Members) OCIL (67 Members) Oil Casualty Investment Corp. Ltd. (OCICL) Oil Investment Corp. Ltd. (OICL) sEnergy Asset Barbados Ltd. Excess General Liability Assumed Treaty Reinsurance (new) Property Damage Well Control, Pollution

14. OIL: An Alternative Insurance Solution • Today, OIL continues to be a very real and attractive option to many insurance buyers in the energy industry. • OIL’s $250 Million limit is one of the largest net line capacity insurers currently available to the energy industry. • OIL does not buy reinsurance so it is not subject to annual changes in conditions or restrictions on terms offered – in this way full terrorism coverage continued to be offered after September 11th. • Any rate increase in OIL is due to increased losses by the membership - not internal or external pressures - and hence is transparent.

15. OIL’s Policyholders/Shareholders Historical Membership Count OIL Shareholders by Headquarter Location

16. Who are OIL’s 49 Members? • Big Companies, such as: • ConocoPhillips • TOTAL • Chevron • Small Companies, such as: • Tesoro Petroleum LOOP LLC • Murphy Oil Lyondell Chemical • Electric Utility/Power Generation Companies, such as: • Electricity de France (EDF), DTE Energy • Other members of varying sizes and business focus • within the broadly-based Energy Industry

17. OIL: Risks Insured • Physical damage to first party property. • Well Control, including Restoration and Redrilling. • Third party Pollution Liability. • Limits = $250 million per occurrence, no annual aggregate. • Single Event Limit = $750 Million. • Deductibles = $10 Million minimum, increasing in $5 million increments.

18. OIL Rating & Premium Plan • Formula basis – no traditional “underwriting.” • Premiums paid by Policyholders is a function of their Gross Assets. • Gross Assets = Gross value (historic cost) of property, plant & equipment before deprecation, depletion, and amortization, plus inventories, materials, and supplies. • Gross Assets are then adjusted for operational risk and coverage profile (i.e., sector and deductible weightings) = Weighted Gross Assets.

19. Sector Weighting • Policyholders’ Gross Assets are adjusted to recognize differences in operational risk between Business Sectors: • Offshore E&P -- Pharmaceuticals • Onshore E&P -- Mining • Pipelines -- Other • Electric Utilities --ANWS-Offshore • ANWS-Onshore • Refining & Marketing/Chemicals • Weighted Gross Assets are used to calculate individual Policyholders premiums.

20. OIL “Underwriting” Gross Assets by Business Sector Sector Weighting Factors Weighted Gross Assets = X Gross Assets Offshore E&P = $ 30B Pipelines = $ 10B Total $ 40B Sector Weight Factors Offshore E&P = 1.50 Pipelines = 0.25 Weighted Gross Assets Offshore E&P = $ 45.0B Pipelines = $ 2.5B Total $47.5B Weighted Gross Assets $47.5B Premium Rate Annual Premium = X

21. OIL’s History: 38 Years 1972 16 $160 Thousand $160 Thousand $48 Billion 12/31/2010 54 $3.2 Billion $5.9 Billion $2.2 Trillion Membership Shareholders’ Equity Assets Gross Assets Insured Inception To Date: Net Premiums Earned Net Losses & Loss Expense * Investment Income ** Dividends Paid *** Preference Shares Operating, Financing & Other Costs * Includes IBNR/IBNE ** Net of Interest Expense *** Excluding Preference Share dividends paid • +$11.9 Billion • - $12.0 Billion • +$ 4.5 Billion • - $ .8 Billion • +$ .5 Billion • $ .9 Billion • $ 3.2 Billion

22. 2010 Underwriting Highlights as at December 31, 2010

23. Consolidated Balance Sheet Oil Insurance Limited

24. Consolidated Balance Sheet

25. Consolidated Income Statement

26. The OIL Group: Efficiency & Control Why we are different from the Commercial Market… Commercial Market ~30-40% Expense Ratio PREMIUM Insured (Buyer) LOSS PAYMENT PREMIUM “OIL Group” ~ 5% Expense Ratio Member • LOSS PAYMENT • OWNERSHIP • CONTROL • RETURN ON • CAPITAL

27. Investment Management

28. OIL Financial Management • Membership comprised of the leading global energy companies. • Certainty of loss recovery from membership. • Strong financial ratings = A- (stable watch -S&P.) • Access to capital markets to enhance capital structures. • Catastrophic insurer, above working layer losses. Investment portfolios are structured with less need for liquidity which allows for greater diversification by major asset classes and potential return.

29. Current Asset Allocation as at December 31, 2010 Global Fixed Income Fund of Hedge Funds Global Equity CashIncome (Pref) Short Duration Fixed

30. Portfolio Returns by Asset Class Period ended December 31, 2010

31. Investment Portfolio Returns as at December 31, 2009

32. What about OCIL:

33. The Evolution of Energy Mutuals TOPS 1993-99 sEnergy 2002 (in runoff) OIL 1972 Traditional Insurance Market OCIL 1986 AEGIS 1975 EIM 1986 NEIL 1980

34. OCIL’s Historical Mission and Value Proposition • OCIL = historically significant • Founded at a time when capacity was scarce • Hedge against commercial market “knee-Jerk” reactions, irrational underwriting and erraticpricing • Owned and controlled by Shareholders • OCIL’s original mission • To provide its policyholders with Directors & Officers Liability coverage on policy forms that were comparable to or broader than coverage available in the commercial market • To offer substantial limits at reasonable prices, which are reliable over the long-term in lines (Excess General Liability and D&O) that are often volatile or restrictive by commercialmarkets • To maintain capacity, pay claims that arise, and ensure fair treatment ofmembers

35. Major Differences: OCIL vs. OIL

36. Financial Ratings OIL Financial Strength A- A2 OCIL Financial Strength BBB+ A-(new) Standard & Poor’s Moody’s A.M.Best

37. Consolidated Balance Sheet

38. Consolidated Balance Sheet

39. Consolidated Balance Sheet

40. Consolidated Income Statement

41. OCICL Asset Allocation as at November 30, 2010

42. Portfolio Returns By Asset Class Fiscal Year Ended November 30, 2010

43. Investment Portfolio Returns Fiscal Year Ended November 30, 2010

44. Cat Bond Definition • Cat Bond is short for Catastrophe Bond: • A corporate bond with special language that requires the bondholders to forgive or defer some or all payments of interest or principal if actual Catastrophe losses surpass a specified amount, or trigger. • Cat Bonds were originally developed by insurance companies in the early to mid 1990’s who were looking for additional capacity to reinsure natural Catastrophes, ie: earthquakes, wind storms, hurricanes. • Historically, Cat bonds have provided risk securitization for purely Catastrophic events – Avalon Re, Ltd. was the FIRST (and probably last) company to issue a Casualty Catastrophe Bond. • Now closed and repaid less claims payments.

45. Current Events:Natural Catastrophes

46. Historical Hurricane “Tracks” Impacting OIL Ivan $581M 121-132mph Gustav 109-115mph Ike $750M 104-109mph Rita $1,000M 121-138mph Katrina $1,000M 127-161mph

47. Historical Hurricane Losses as at December 31, 2010

48. Hurricanes - Past Payout PatternsAs of December 31, 2010 *Payments Scaled for Aggregation Limit

49. Net Incurred Losses since 1972* by Geographic Region of Physical Loss As at December 31, 2010 Expressed in millions of U.S. dollars * untrended

50. Net Incurred Lossesby Industry 1972-2010 (38 yrs) Aggregate Value = $11.3Bn (untrended)