2019 Risk Managers Information MeetingFebruary 25, 2019
Policyholders’ Surplus (Pre-Distribution)
$1.2B
Distribution$75M
Net Combined Ratio
78.2%
Total Investment Return(1.04)%
2018 Highlights
Changing Currents
10-Year Surplus Growth
$1.135B at 12/31/18
5 Year Surplus Growth – 28% 10 Year Surplus Growth – 143%
Total Assets = $2.1B
Surplus planned to slowly decline over next 3-5 years
$0
$200
$400
$600
$800
$1,000
$1,200
2018201720162015201420132012201120102009
Changing Currents
Income Contribution (pre-tax) (in $ millions)
Surplus Contribution
326
804
(193)
(25)
Last 10 Years
Net UW Contribution Investment ReturnsAnnual Distribution Supplemental Distribution
Since 2009, 19% of surplus growth has been returned to the membership in cash distributions
Changing Currents
34
46
34
(5)
31
(17)
160
65
29
96
(50)
(40)
(25)
(20)
(20)
(25)
(100) (50) - 50 100 150 200 250
2018
2017
2016
2015
2014Net UW Contribution
Investment Returns
Annual Distribution
Supplemental Distribution
Loss Reserves – Carried vs. Indicated (in $ thousands, where applicable)
EIM Carried Reserves - $431M5.1% above Central Estimate
Low -$342M
Central -$411M
High -$478M
Actuarial Range
Reserve Adequacy
Changing Currents
-1.04%
3.73%
3.97%
4.23%
5.30%
6.70%
-0.91%
3.62%
3.72%
4.11%
4.81%
6.15%
One Year
Two Years
Three Years
Five Years
Seven Years
Ten Years
Benchmark ReturnAnnualized Total Return
Changing Currents
Investment Performance
Strategic Investment AllocationTotal Investment Portfolio = $1.7B
25% 25% 25% 25% 25%
35% 40% 45% 50% 52%
25% 20% 15% 10% 8%
15% 15% 15% 15% 15%
2019 2020 2021 2022 2023
Target Allocation Changes Ahead
Equities Taxable Bonds Tax-Exempt Bonds Alternatives
Changing Currents
2018 IAC Survey ResultsEIM Capitalization
14%
86%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Adquately capitalizedOver-capitalized
Changing Currents
$966M
$169M
$0
$200
$400
$600
$800
$1,000
$1,200
TVaR = $250M
“A” Minimum
$716M
Risk Capacity – ability to withstand a 1/200 entity-wide TVaR and maintain an “A” rating by AM Best
Available Surplus
Changing Currents
Capital Adequacy
$18 $20 $20 $20 $25 $40
$50 $50 $50 $60 $60
$25 $25 $25
$25 $25
$- $10 $20 $30 $40 $50 $60 $70 $80 $90
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022Annual Distribution Supplemental Distribution Anticipated Supplemental
DistributionsWhere have we been and where are we going?(in millions)
Changing Currents
Policyholders’ SurplusGlidepath (in $ millions)
Changing Currents
1,135 1,134 1,132 1,123 1,113
50 50 50 60 60 25 25 25 25 25
168% 158% 155% 148% 141%
0%
25%
50%
75%
100%
125%
150%
175%
200%
200
400
600
800
1,000
1,200
2018 2019 2020 2021 2022
Surplus Annual Distribution Supplemental Distribution Risk Capacity
“A” Rating by AM Best since 1993
10 Year Combined Ratio (including distributions) = 89%
10 Year Expense Ratio – 9%
10 Year Investment Return = 6.7%
10 Year Return on Surplus = 7.3%
Gross Claims Paid Over 10 Years = $1.5B
Well Positioned to Meet the Challenges of Changing Currents
Changing Currents
Overview of 2017 Policy Limits
Underwriting – Capacity and Attachment Points
Current Capacity Minimum Attachment
General Liability $ 100,000,000 $ 25,000,000
D&O / General Partners 50,000,000 35,000,000
Fiduciary 25,000,000 35,000,000
Property 35,000,000 Excess of underlying deductibles
Cyber 5,000,000 25,000,000 or Excess of underlying deductibles
EIM can provide additional general liability capacity based upon member needs and risk profile
Changing Currents
2018 IAC Survey ResultsShould EIM Offer Higher Limits or Lower Attachment Points?
41%61%
59%39%
0%10%20%30%40%50%60%70%80%90%
100%
Higher Limits Lower Attachment Points
YesNo
Changing Currents
2018 IAC Survey ResultsShould EIM Offer Additional Lines of Business?
81%
19%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
YesNo
Additional lines suggested:
• Crime• Statutory Workers’ Comp• T&D• D&O Side A
Changing Currents
2018 IAC Survey ResultsInterest Level if EIM/AEGIS/NEIL/OCIL Could Offer Capacity Excess of $135M
9%
42%
49%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Very InterestedSomewhat InterestedNot Interested
Changing Currents
Additional Limits – Meeting Member Needs in 2018
Changing Currents
$125M in additional capacity deployed to EIM Members
Total Capacity Participants Total New Capacity
$115M NEIL $15M
$130M EIM/EIS/NEIL $30M
$125M EIM/NEIL $25M
$140M EIM/NEIL $40M
$115M EIM $15M
18
• Retention rate has never fallen below 95%• 76% of membership has been with EIM at least 10 years • Majority of members operate as Electric, Gas or Combined Facilities
Underwriting – Member Retention Rates
25%
35%
45%
55%
65%
75%
85%
95%
2007 -2008 2009 - 2010 2011 - 2012 2013 2014 2015 2016 2017 2018
Changing Currents
19
Total member count at 12/31/18 = 153
Underwriting – Membership Mix
61
41
21
7
86
432
4931 - Electric & Other Services - 39%
4939 - Combination Utilities NOC - 27%
4932 - Gas & Other - 14%
4911 - Electric Service (ISO/RTO) - 5%
1382 - Exploration and Production - 5%
4941 - Water/Distribution - 4%
4923 - Natural Gas Transmission - 3%
Changing Currents
Underwriting – New Member Business
NEW MEMBERS: STP Nuclear Operating Company American States Water Company PUD No. 1 of Snohomish County Ameren Corporation GenOn Energy, Inc. GenOn Mid-Atlantic Equitrans Midstream Omaha Public Power District
Changing Currents
Underwriting – New Submission Activity
Total New Business premium written (all lines) = $7,429,342
Changing Currents
Submissions by Line of Business (since 1/1/18)
0
2
4
6
8
10
12
14
GL D&O/Fiduciary Property Cyber
8
1
7 7
6
1
6 6
Not WrittenWritten
Gross Written Premium (in millions)
2018 Gross Written Premium = $222M
Changing Currents
$0
$50
$100
$150
$200
2014 2015 2016 2017 2018
1 2 2 34 4 4 4 3
25 23 23 20 2334 33 28 25 25
144 153163
175 166
Cyber Fiduciary Property D&O GL
Cyber
Wildfire (California and beyond)
Climate Change
Renewables/Battery Storage/Distributed Generation
Emerging Issues
Changing Currents
ENERGY SCHOOL
Week of October 29, 2018 at Florida State University
Changing Currents
Changing Currents
2018 IAC Survey ResultsEnergy Insurance Services
5%13%
33%
33%
31%
42%
19% 25%
0%
25%
50%
75%
100%
Considered risk management solutionsinvolving EIS
Offers an important value-added service toEIM members
Strongly AgreeAgreeNeutralDisagreeStrongly Disagree
Changing Currents
2018 Captive of the Year
First Cyber Policy
Cat Bond – Reinsurance
Record breaking premium
MARS – Multi-line Agg. Ret. Stop-loss
$0
$100
$200
$300
$400
2015 2016 2017 2018
Written PremiumsIn millions
NET CEDED
$7.3B in Limits
63 Policies
15 MBPs
Changing Currents
2018 Review
2019 Looking Forward
• Medical Stop Loss • Retiree Medical (MBP 15)• Risk Data Modeling• New MBPs • Reinsurance Markets
– Wildfire– Pollution– Aggregate Stop-loss– Pandemic
Changing Currents
2019 Program Advisory Committee Meetings and Conference
November 4, 2019 to November 7, 2019
The Sanctuary at Kiawah Island, SC
Changing Currents
Category 1Highly improbable that claim will impact EIM Requires only periodic review to ensure claim is not
adversely developing
Category 2 Requires a monitoring expense reserve and specific
actions
Category 3Meets the accepted requirements for setting specific loss
reserve (expense and indemnity)
Claim Categories
Changing Currents
2017 Cat 1 Cat 2 Cat 3 Total
General Liability 541 15 12 568D&O / GP 58 5 0 63Fiduciary 2 0 0 2Property 15 5 79 99Total 616 25 91 732
2018 Cat 1 Cat 2 Cat 3 TotalGeneral Liability 519 18 11 548D&O / GP 61 6 0 67Fiduciary 2 0 0 2Property 15 8 64 87Total 597 32 75 704
Open Claims
Changing Currents
GL Payments Total $1.38B Inception to Date
Gross Payments by Type (in $ millions)
460.3
378.4
326.3
100.0 86.3
23.0 1.1 0.4 0.3 Explosion
Wildfires
Pollution
Flooding
Electric Contact
Wrongful Termination
Bodily Injury - Thirdparty
Failure to Supply
Auto Accident
Changing Currents
D&O/Fiduciary Payments Total $749M Inception to Date
Gross Payments by Type (in $ millions)
245.0
162.5 112.0
108.6
63.8 42.6
14.6 Securities Violations
Accounting Irregularities
Manipulative Trading/False Reporting
Corporate & Other Mismanagement
Mergers & Acquisitions
Fiduciary
Nuclear Plant Construction
Changing Currents
Property Payments Total $325M Inception to Date
Gross Payments by Type (in $ millions)
187.0 63.1
34.2
32.1
3.5 3.0 1.6
Machinery & Equipment
Hurricane
Property - Other
Flood
Wind
Fire
Explosion
Changing Currents
Total Payments Total $2.45B Inception to Date
Gross Payments by Type (in $ millions)
1,376 749
325
General Liability
D&O/Fiduciary
Property
Changing Currents
Changing Currents
2019 and beyond: Claims meetings with members starting the second half of 2019 to discuss
EIM claims administration and field any questions about claims topics.These meetings should help identify emerging issues and ensure a collaborative and successful claims administrative process.
Claims Department UpdatesStaffing: Two new staff positions since mid-2015 Claims Attorney, Melissa Puglia Claims Associate, Betsy Santana
These changes allowed EIM to transition many claim activities to in-house management.Panel Counsel: RFP during 2017 followed by full implementation of a panel counsel system in 2018These changes provide greater flexibility for regional and LOB expertise and have significantly reduced claims-related legal expenses.
3.1 3.0
1.9
1.5
1.1
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2014 2015 2016 2017 2018
Past Five Years Counsel Fees – Liability Claims(in millions)
Changing Currents
Continuing to see Explosions, Wildfire and Sudden Polluting Events as the major claims in the EIM layer
Recent cases of single fatality/injury plaintiffs with large settlements or verdicts
Defense costs on major cases significantly impacting underlying coverage, particularly on D&O claims
"Tagalong" D&O claims for catastrophic events that historically impacted GL only
Changing Currents
Waves of Continuity vs. Changing Tides
Casualty NEIL reinsures 80% of $20M excess of $30M on D&O with NEIL with no
aggregate limit Until 2018, OCIL reinsured EIM in various quota share capacities excess
of $75M on GL NEIL and OCIL participate on EIM’s XOL reinsurance programProperty and Cyber EIM has fronted for NEIL on property-related coverages since 2001 NEIL provides reinsurance on EIM’s property book EIM fronts for $25M of NEIL Cyber on an excess and quota-share basis
Reinsurance - Mutual Partners
Mutual Retained Profits (Past 10 Years) = $142M
Shared Focus
Losses = $247M
Premiums = $389M
Changing Currents
$87M Aggregate D&O Limit
(max $29M each loss)
$240M Aggregate GL Limit
(max $80M each loss)
$5M Per Loss, Per Policy Retention
$80M GL AAD $58M D&O AAD
Coverage Notes:
Aggregate Contract Limit: $327M
GL Aggregate: $240M xs $80M
D&O Aggregate: $87M xs $58M• Inuring: NEIL placement (80% of
$20M xs $30M Per Policy)
Reinsurance – 2019 Casualty Program
EIM retains $15M excess of $85M each and every loss
Changing Currents
Ceded Premium Trend – Casualty Excess of Loss ($ in millions)
Liability Reinsurance Spend(in millions)
$165.0 $170.0 $172.0 $173.0 $173.0
$34.0 $37.1 $40.2 $42.0 $45.4
$0
$40
$80
$120
$160
$200
2015 2016 2017 2018 2019
Net Writtenpremium
Ceded writtenpremium
21.8%20.6% 24.3%
Represents % of ceded to written subject premium
26.2%23.4%
Changing Currents
Reinsurance Leverage
63.6%59.8%
47.1%
54.0%
45.5%
30.0%32.9%
2012 2013 2014 2015 2016 2017 2018
EIM has become less reliant on commercial reinsurance
Changing Currents
ERM
Asset
Insurance
Strategic
Operations
Changing Currents
Enterprise Risk ManagementRisk Monitoring
No data breach/cyber attacks to date
External reviews TSC Advantage Enterprise Security Assessment and Penetration Testing Top 16% of clients examined Strategic feedback
Johnson Lambert Disaster Recovery Strategy Review SOC 1 Type II Report
Cyber Security
Changing Currents
Changing Currents
Underwriting Expanded GL limits Additional Cyber capacity Three-year policy term 2018 IAC Survey
Financial Increased annual distribution Reallocated investment portfolio Reduced EIM counsel fees Maintained existing reinsurance structure
Operations Shored up cyber security (internal) Updated disaster recovery plan Created EIM counsel panel Expanded ERM metrics
Adapting to Changing Currents
2016 2017 2018 2019
Original Plan
Actual Original Plan
Actual Original Plan
Revised Plan
Surplus $1028M $1037M $1169M $1062M $1135M $1088M $1134M
Net Loss Ratio 68% 90% 59% 90% 72% 90% 90%
Net Expense Ratio 7% 9% 8% 8% 6% 8% 8%
Net Premium Earned $140M $140M $144M $144M $156M $149M $152M
Investment Total Return 5% 4% 9% 4% (1)% 4% 4%
3-Yr Surplus Growth (pre-distribution)
21% 12% 28% 12% 27% 12% 12%
Risk Capacity 135% 100% 188% 100% 168% 100% 150%
Stability for the Future
Changing Currents
2019 Risk Managers Information MeetingFebruary 25, 2019