Sixteen and Stronger Than Ever

1
Kevin Matthews AIG Environmental Director of
Governmental Relations Washington, DC
202-861-8674 or kevin.matthews_at_aig.com
2
General Overview

• Who is AIG Environmental?
• What Policies are used for Brownfields
• How are other States using Environmental
  Insurance
• Federal Funds to assist in the redevelopment of
  Brownfields
• Applicability to other State Cleanup Programs

3
AIG Environmental

• AIG Environmental has been providing
  environmental insurance, claims management, and
  environmental loss control services for 20 years
• AIG Environmental is the largest environmental
  insurer and the leader in product innovation
• AIG Environmental - Regional offices are staffed
  by professionals with backgrounds in
  environmental law, engineering and other
  technical disciplines

4
The Financial Strength of AIG

• 9 on 2003 Fortune 500 ranking of all U.S.
  corporations
• 25 on the 2003Fortune listing of the top 500
  companies in the world
• Common stock has a valuation of around 200
  billion
• AIG is a leading international insurance and
  financial organization with assets of over 550
  billion and a AAA rating

5
AIG Environmental Services

• Fully Staffed Regional Office in 13 Regional
  Offices.
• The Southeast is served by our Atlanta office
• Dedicated Engineers
• Emergency Response - PIER II

6
AIG Environmental Solutions

• Environmental Insurance can facilitate
• Acquisition of contaminated property
• Sale of contaminated property
• Satisfaction of regulatory requirements for
  financial responsibility
• Transfer of environmental liability for past,
  ongoing or future operations
• Capping of costs to remediate site(s)

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Brownfield Insurance Policies

• Secured Creditor
• Pollution Legal Liability
• Cleanup Cost Cap

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Secured Creditor

• Insurers the Balance of the Loan
• Triggered when borrower defaults and there is an
  environmental condition on the property
• Pays off the Balance of the Loan
• Price based on lending institutions lending
  criteria
• We will insure loans from governmental entities
  subject to review of lending criteria

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Cleanup Cost Cap (CCC)

• Cleanup Cost Cap provides cost overrun
  protection.
• Cleanup Cost Cap manages the economic risk when
  environmental remediation projects exceed the
  expected costs.
• By capping the cost of cleanup, CCC ensures that
  unexpected costs are not assumed by the property
  owner, investor or other interested party.

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Cleanup Cost Cap Program
Cost Overrun Coverage
Limit of Liability
Buffer Layer
Self-Insured Retention
Expected Cost
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Cleanup Cost Cap Program
Remedial Plan
Known Contamination
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Cleanup Cost Cap Program
Actual Contamination
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Cleanup Cost Cap Program
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Pollution Legal Liability (PLL) Select

• PLL Select provides environmental coverage for
• On and off-site pollution conditions for both
  unknown pre-existing and new contamination
• Third party bodily injury, property damage
• First party Business Interruption Diminution
  in value due to pollution conditions
• Defense Coverage and
• Cleanup costs from pollution conditions arising
  from pollution releases from
• transported cargo
• non-owned disposal site liability

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PLL Select

• PLL Select can be written in conjunction with
  Cleanup Cost Cap or as a separate policy to cover
  liabilities outside the area of the remedial
  action plan . . .

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Known And Unknown Outside RAP
Unknown
Site Boundaries
Cleanup Cost Cap
Known
Pollution Legal Liability Select
Unknown
Known But Not Actionable
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SPECIALIZED GOVRNMENTAL ENVIRONMENTAL INSURANCE
PROGRAMS

• MASS BRAC
• Wisconsin Groundwater
• California FAIR
• Others

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MASS BRAC

• Massachusetts Brownfield Redevelopment Access to
  Capital
• Created by legislation in 1999 with a 15 million
  fund
• Run by MASS Business - a state agency
• Pre-Negotiated Policies and Rates
• AIG Environmental is selected carrier new 3
  year contract

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MASS BRAC (Cont.)

• Offers SC, PLL, and CCC
• State provides a 50 Subsidy on all premiums
  issued through program (Now lowered to 25 or
  25,000 due to overall state budget issues)
• Tremendously Successful
• 1999 - 4 Sites
• 2000 - 36 Sites
• 2001 - 40 Sites
• 2002 - 79 Sites

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MASS BRAC (Cont.)

• Cost to State in 4 years
• 3,950,000
• Cleanup Leveraged by programs
• 75,000,000
• Funds Leveraged - Over 1 Billion
• (680M in loans 490M in investments)
• Jobs Created in Commonwealth
• 11,500

21
Wisconsin

• State purchased PLL Select from AIG Environmental
• Coverage for known contamination only where the
  source has been removed
• Allows for full release of liability for
  developer, protects State against unanticipated
  cost of cleanup

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Wisconsin How it works

• State has non-degradation groundwater policy
• Coverage begins when developer purchases property
  with remaining Contamination after the source is
  removed
• Monitor for One-year
• If Contamination does not worsen after one year,
  Developer pays a fee to state (Ranges from 5,000
  to 10,000) and is released from liability for GW
  Cleanup
• State uses fee to attach that site to its
  policy
• If Cleanup needed of GW, State files a claim
  against its PLL for cleanup this way States
  budget is protected

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California FAIR

• Cal EPA to implement in 2003
• AIG Environmental selected as Carrier
• Law allows the State to pay
• 50 of EI premium for SC, CCC, PLL
• Up to 80 SIR of CCC

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OTHERS

• Maryland
• Ohio
• New York
• Pennsylvania
• City of Philadelphia
• Nassau County, NY
• Others in study phase

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Federal Funds for Subsidy

• HUD CDBG/BEDI
• US EPA GRANTS
• New Brownfield Law
• 1.5M State Program development grants
• Up to 200m in Grants for FY 2003
• Non-profit entities can apply
• Can use funds to purchase EI
• Can use for petroleum sites
• EDA GRANTS

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APPLICABILITY TO OTHER CLEANUPS

• SUPERFUND
• EPP for PRPs
• Fixed Price Contracting
• RCRA
• Cleanup
• Financial Assurance
• UST

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Kevin Matthews AIG Environmental Director of
Governmental Relations Washington, DC
202-861-8674 or kevin.matthews_at_aig.com