STRIMA, Madison, WI September 23, 2015

Are you ready for the changes in Aviation Insurance Coverage?

Julian Davies – SVP Willis Aerospace

Carson Lyons – VP AIG Aerospace

Now may be a good time to re-evaluate your Aviation

Exposures

3

Who we are?

Julian Davies Willis Aerospace – Americas Senior Vice President Base: Los Angeles, California

Carson Lyons AIG Aerospace Services Vice President Base: Atlanta, Georgia

4

Exposure Evolution: Manned vs Unmanned?

5

Insured Customer

Aviation Insurance Carriers (US)

6

Main Classes of Coverage

Manned Aircraft Hull and/or Liability

Aviation General Liability/Airport Liability

Non-owned Aircraft Liability

Unmanned Aircraft Hull and/or Liability

7

Manned Aircraft Hull & Liability

Basic coverage elements

Aircraft Hull Physical Damage

Aircraft Spare Parts & Equipment

Aircraft Liability

Medical Expenses

Premises Liability

Non-owned or replacement aircraft extension

Pilot Warranties / Geographical Limitations

Coverage Options

8

General/Airport Liability

Basic Coverage elements:

Third Party Bodily Injury or Property Damage

– Airside exposures Ground Handling/Refuelling/Construction Liability/ATC – Non-airside exposures Buildings/Terminals (Shops/Restaurants/Parking lots)

9

Non-owned Aircraft Liability

Basic Coverage elements

Non-owned aircraft Liability

Why, When, What & Who

Coverage Extensions

10

Aircraft Insurance Risks

11

Airport Insurance Risks

12

Market Forces – How it impacts you?

UAV Exposures and Coverages for State Government Entities 2015 STRIMA Educational Conference

September 23, 2015 Madison, WI

Carson Lyons, VP-GPLM, General Aviation

AIG Aerospace

14

Disclaimer

Certain statements provided herein are based solely on the opinions of AIG and are being provided for general information purposes only. Any opinions provided on economic trends should not be relied upon for investment decisions and are solely the opinion of AIG.

Certain information may be based on information received from sources AIG considers reliable; AIG does not represent that such information is accurate or complete. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein are valid only as of the date of this document and are subject to change. AIG is not soliciting or recommending any action based on any information in this document.

15

Table of Contents/Agenda

Who needs to have insurance? Nobody and Everybody!

Regulations (333 Exemptions/COAs) and insurance

General UAV operational exposures & coverages

BUYing UAV Insurance: What is the process to get it in place?

Questions?

Who Needs Insurance? Nobody and Everbody?

18

Who Needs Insurance?

Unlike auto insurance – UAV insurance ISN’T compulsory (at least for now).

No requirement for insurance included within the FAA’s NPRM.

Commercial UAS Modernization Act introduced to U.S. Senate on 12 May would require liability insurance, but may or may not move ahead.

Nobody

Exposures DO exist for every UAS operator.

Already have seen customers of UAV operators requiring “proof of insurance.”

Your first/next accident could lead to a lawsuit.

Everybody

Nobody and Everybody!

Regulations (333 Exemptions/CoAs) and Insurance

20

Regulations and Insurance

FAA Approval Options: 333 Exemptions and COAs – Most State owned UAVs will be considered “Public Aircraft” – COAs applicable to most State UAV operations (https://www.faa.gov/uas/public_operations/)

There is a wide ranging insurance industry response to 333 Exemptions and CoAs.

Insurance is available for nearly any UAS operator in the market – 333/CoA holder or not.

Wide number of carriers involved, some with aviation experience, others without.

Policies differ in wording and how illegal operations may, or may not, be addressed.

Beyond FAA operational authority, insurance carriers often develop their own standards for what acceptable risks are. Frequently, these may exceed FAA minimums.

Insurance and UAS industries are really still getting to know each other in many respects.

333 Exemptions & COAs

General UAS Operational Exposures & Coverages

“The first step in the risk management process is to acknowledge the reality of risk.” - Charles Tremper

23

Liability

TRADITIONAL AVIATION EXPOSURES

Bodily injury and property damage

Consequential losses

Catastrophic loss potential

Non-owned use of unmanned aircraft

Personal Injury

NON-TRADITIONAL AVIATION EXPOSURES

Errors & Omissions/Professional Liability

Cyber

Exposures

24

Privacy

Unreasonable searches/surveillance

Trespassing

Invasion of privacy – Intrusion upon seclusion – Publication of private facts

Stalking and harassment

Business privacy

February 2015 Presidential Memorandum released from White House – Established Executive Branch multi-stakeholder process to establish best practices for commercial use of UAS

Most UAV-related legislative efforts nationally are tied to restricting UAV use by government agencies.

Eight states have adopted some legislation in 2015, another 15 have legislation pending, while Eight enacted laws in 2013 or 2014 (as of 8/14/15).

45 states have considered more than 150 drone-related bills just this year according to the National Conference of State Legislatures.

California SB 142 – passed by CA Legislature on Aug. 28, vetoed by Gov. Brown on Sept. 9

Exposures

25

Physical Damage

Aircraft

Payload

Ground control equipment

Spare parts

Exposures

26

War

Unmanned aircraft can face war risks – Malicious attack – Hi-jacking – Spoofing – Sabotage

Very different exposure potential than what we are used to as aviation underwriters

Coverage can be considered, but only on a case by case basis, and may not be available from all carriers.

Exposures

BUYing UAV Insurance What is the process for getting coverage in place?

28

BUYing UAV Insurance

Broker – They work for you and strive to find the best coverage options available by accessing multiple

insurance markets on your behalf.

Underwriter – Works for the insurance company itself and reviews information provided by the broker to

determine coverage availability and policy pricing.

You and the State Departments and Universities you Serve – The information you provide to your broker, and the relationship you develop with him or her (and

in some cases even your underwriter) can be the key to a successful placement. No one knows your State’s operations better than you/they.

– Ask about UAV operations and pass along that information.

The Three Key Players

29

Underwriting Considerations

Almost all aviation underwriting stems from four basic points of risk analysis. – Operator experience – Make and model information – Purpose of Use – Location of Operations

Values and limits required – Aircraft – Payload – Ground Equipment

Operational procedures/risk mitigation items

Training

UAV underwriting is based on traditional aircraft underwriting foundation

Questions?

The data contained in this presentation are for general informational purposes only. The advice of a professional insurance broker and counsel should always be obtained before purchasing any insurance product or service. The information contained herein has been compiled from sources believed to be reliable. No warranty, guarantee, or representation, either expressed or implied, is made as to the correctness or sufficiency of any representation contained herein.

© American International Group, Inc. All rights reserved

American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries.. 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 www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIG_LatestNews | LinkedIn: http://www.linkedin.com/company/aig

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 www.aig.com. 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.