6.0% - 7.0% p.a.* CUBA. Sovereign Credit Risk Pricing Range. 0.8%-1.25% p.a. COLOMBIA CUBA. Page 6

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1 RISK OUTLOOK CREDIT, POLITICAL AND SECURITY RISKS JANUARY 2018 CUBA 6.0% - 7.0% p.a.* Sovereign Credit Risk Pricing Range ** Sovereign Credit Risk Pricing Range MEXICO VENEZUELA BRAZIL 0.5%-0.7% p.a. COLOMBIA 0.6%-1.2% p.a. 0.8%-1.25% p.a. Sovereign Credit Risk Pricing Range Sovereign Credit Risk Pricing Range Sovereign Credit Risk Pricing Range COLOMBIA Colombia s legislative and presidential elections will likely see new political movements perform better than traditional parties. BRAZIL The outcome of Brazil s 2018 legislative and presidential elections remains unpredictable, given the discrediting of major parties. CUBA President Raúl Castro s successor will be appointed in 2018, marking the first time in almost 60 years that Cuba s president will not be from the Castro family. ALSO IN THIS ISSUE Election Roundup 2 Mexico 8 Venezuela 10 Claims Data 12 Our Expertise 12 Page 3 Page 5 Page 6 Introduction In this special edition of Risk Outlook we look ahead to Latin America s 2018 election season. A number of Latin America s major economies will be holding presidential and legislative elections in the coming year, including Brazil, Mexico and Colombia. In addition to elections, Cuba will appoint Raúl Castro s replacement, and regime change is a growing possibility in Venezuela. The election calendar is not only busy, but will also mark a shifting political environment in many countries. Across Latin America, established political players have been tainted by corruption scandals, and approval ratings are low across the board. Anti-establishment candidates are performing well across Latin America, and 2018 may mark the reversal of a move toward a businessfriendly, centrist form of government. As a result, this edition of Risk Outlook provides a detailed, forward-looking assessment of developments within the security, trading and investment environments for Brazil, Mexico, Colombia, Cuba and Venezuela, all of which will experience dynamic political conditions in The relationship-driven, consultative approach within the Credit, Political and Security (CPS) Risks Practice helps us quantify, prioritize and minimize our clients political risk, security and trade credit exposures. N.B In addition to the sovereign credit risk pricing ranges shown above, this Risk Outlook contains pricing information on confiscation, expropriation, nationalization and deprivation (CEND), full political violence and terrorism and sabotage political violence insurance. The various costs for contractors, investors and lenders are available for a three- to five- -year tenor for the countries covered in this month s Risk Outlook. * There are a very limited number of markets that support deals due to US sanctions and on-going economic difficulties. **Currently, there is no cover available in the market for Venezuelan risks due to the on-going political and economic situation in the country.

2 ELECTION ROUNDUP ADDITIONAL ELECTIONS IN LATIN AMERICA IN CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 JLT World Risk Review Ratings Costa Rica Election Dates: 4 February 2018 Legislative and Presidential; 1 April 2018 Second-Round Presidential In recent years, traditional political parties in Costa Rica have declined in popularity, and most voters are not affiliated with a party. This makes a second-round runoff likely. Antonio Álvarez of the Partido Liberación Nacional (PLN) is expected to secure the most votes in the first round, with the ruling Partido Acción Ciudadana (PAC) or Partido Unidad Social Cristiana likely to secure second place. However, the PLN may struggle in a run-off, given its unpopularity with much of the electorate. Regardless of the election result, the incoming president will face widespread public mistrust in the wake of the cementazo corruption scandal, in which a number of legislators, directors of stateowned Banco de Costa Rica and members of the judiciary were arrested following accusations of embezzlement. Paraguay Election Dates: 22 April 2018 Legislative and Presidential Paraguay s upcoming elections will be contested by the ruling Partido Colorado (PC) and an opposition alliance formed between the Frente Guasú and the Partido Liberal Radical Auténtico (PLRA). The election will be colored by outgoing President Horacio Cartes policies. His failed attempts in 2017 to extend term limits, which resulted in violent protests and the burning of Congress, have created divisions within the PC. Cartes has also sought to enhance foreign investment to plug Paraguay s public infrastructure gap. This has been controversial with many Paraguayans opposed to privatization. January 2018 Country Economic Risk War & Civil War Terrorism Strikes, Riots & Civil Commotion COLOMBIA BRAZIL CUBA MEXICO The monthly Risk Outlook is supported by JLT s proprietary country risk rating tool, World Risk Review (WRR), which provides risk ratings across 9 insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithmbased modelling system incorporating over 200 international indices. COLOMBIA Rating Outlook: Terrorism; Sovereign Credit Risk; Legal & Regulatory Risk The economy will remain a key concern for voters in Colombia in 2018, as it faces a number of headwinds, including suppressed oil prices and infrastructure project delays. BRAZIL Rating Outlook: Sovereign Credit Risk; Legal & Regulatory Risk Election-related uncertainty will weigh on Brazil s economic performance in 2018, as investors will likely be deterred by any developments which suggest a victory for a non-centrist candidate Currency Inconvertibility & Transfer Risk VENEZUELA Low Risk High Risk CUBA Legal & Regulatory Risk Sovereign Credit Risk Expropriation Contractual Agreement Repudiation 1 10 Rating Outlook: Country Economic Risk; Contractual Agreement Repudiation Cuba s National Assembly will choose President Raúl Castro s successor in 2018, with the handover of power expected to occur in April MEXICO Rating Outlook: Country Economic Risk; Contractual Agreement Repudiation Anti-establishment sentiment will drive support for leftist candidate Andrés Manuel López Obrador in the 2018 presidential election. VENEZUELA Rating Outlook: Sovereign Credit Risk; Expropriation; Legal & Regulatory Risk Venezuela is unlikely to avoid a hard default in 2018, if the government does not implement the economic reforms necessary to restore economic stability. Creditor action could spur regime change if hard currency sources dry up.

3 Risk Outlook 3 Colombia Election dates: 11 March 2018 Legislative; 27 May 2018 First Round Presidential; 17 June 2018 Second Round Presidential Colombia s legislative and presidential elections will likely see new political movements perform better than traditional parties, as voters become frustrated with corruption scandals and economic weaknesses. The peace agreement signed with the Fuerzas Armadas Revolucionarias de Colombia (FARC) is not likely to be fully implemented as a result of upcoming elections. Security Environment It is increasingly unlikely that the peace agreement signed by the current government and the Fuerzas Armadas Revolucionarias de Colombia (FARC) in November 2016 will be fully implemented. A fast-track mechanism for passing associated legislation expired on 30 November 2017, making it unlikely that remaining reforms will be implemented before elections in H Last minute legislation was approved by the Senate on 30 November 2017 to establish transitional will generate uncertainty over future when the agreement was signed. legislative and executive support, given A return to open conflict is unlikely; that Santos is constitutionally prevented however, dissident FARC members will from seeking a further term in office. pose extortion risks, particularly in Guaviare While the agreement is protected by and Cauca departments. Possible targets a court ruling which stipulates that the for extortion include oil exploration sites, next three governments must abide by agribusinesses or construction sites. its terms, a number of parties running In November 2017, armed FARC in the 2018 election season would likely dissidents seized three buses in Cauca in stall implementation by delaying votes an attempt to extort the bus company. or limiting funding. Such parties include former president Álvaro Uribe s Centro Democrático or Germán Vargas Lleras s Cambio Radical coalition. Trading Environment The economy will remain a key concern for voters in Colombia in 2018, as it faces justice courts. However, political Uncertainty over full implementation of a number of headwinds. Suppressed and rural reform key tenets of the the peace deal is fuelling dissidence oil prices have limited investment in peace agreement are outstanding. among FARC fighters. As many as 1,700 the sector, contributing to a forecast The inability of Juan Manuel Santos members have reportedly abandoned contraction in crude production of government to fully implement the deal the peace process, up from around % in The growth outlook is Continued on page 4

4 4 CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 also constrained by delays to major investors, due to his proposed economic for corruption charges. In September infrastructure projects. Both the $1.8 policies. The former vice-president is 2017, Supreme Court judge Francisco billion Ruta del Sol 2 highway project promising to reduce taxes on company Ricaurte was arrested on suspicion of and $1.3 billion Magdalena River profits and eliminate sales tax on capital corruption. Similarly, in June 2017, the Navigability project were cancelled in goods, in an effort to spur investment former director of Colombia s anti- 2017, in the wake of the Odebrecht and growth. While such measures will be corruption unit was arrested for bribing corruption scandal. risk positive for investors, his proposal judges. Corruption scandals will drive to make Colombia s 2012 fiscal rule support for new political movements in more flexible could threaten Colombia s the 2018 elections, such as Coalición Vargas Lleras is likely to sovereign credit rating, if it means that Colombia, as opposed to Colombia s be the favored presidential debt levels escalate. In its current form traditional parties. Despite high-level candidate for foreign the rule promotes fiscal sustainability by corruption scandals, foreign investors requiring that the structural fiscal deficit should be able to have contracts falls to 1.0% by enforced fairly, although the process investors, due to his proposed economic policies. can be lengthy. As a result, many Investment Environment companies will include recourse to international arbitration in contracts. Moreover, only eight of 32 projects While Vargas Lleras will capitalize on under the 4G highway concession his economic credentials in 2018, See full pricing outlook for Colombia program had secured funding by August the center-left Coalición Colombia on page As a result, real GDP growth is will push its anti-corruption agenda. forecast at 2.6% y-o-y in Colombia s judiciary has been under Vargas Lleras is likely to be the favored presidential candidate for foreign Editorial credit: Jess Kraft / Shutterstock.com scrutiny throughout 2017, following accusations that politicians bribed judges to secure lenient sentences RATING OUTLOOK Terrorism; Sovereign Credit Risk; Legal & Regulatory Risk

5 Risk Outlook 5 Editorial credit: CP DC Press / Shutterstock.com Brazil Election Dates: 7 October 2018 Legislative and Presidential; 28 October 2018 Second-Round Presidential Election The outcome of Brazil s 2018 legislative and presidential elections remains unpredictable, given the discrediting of major parties and emergence of candidates from outside the political establishment. This uncertainty will weigh on Brazil s growth outlook for 2018, as investors remain concerned over the possibility of a return to populist economic policies. Security Environment Politicians from Brazil s major parties have been discredited in recent years by a series of corruption investigations. This will drive support for non-establishment figures in 2018 s legislative and presidential elections. For example, unorthodox former army officer Jair Bolsonaro has emerged as a presidential contender, with polls suggesting that he would reach a second round run-off. Bolsonaro s campaign has benefitted from rising violent crime levels in urban centers, given his strong position on law and order. He has proposed relaxing gun laws to tackle crime and enhancing rewards for police who stop criminals. In Rio de Janeiro 71,146 robberies were reported in January-July 2017, a 2.2% increase on the same period in Foreign nationals present in Brazil will also be exposed to these risks, as violent crime is increasingly occurring in tourist areas. Politicians from Brazil s major parties have been discredited in recent years by a series of corruption investigations. For example, over the last two years there has been a 128% increase in the number of robberies in the Copacabana beach area. Robberies may occur in conjunction with opportunistic express kidnaps. Individuals are most likely to be targeted in express kidnappings when they are in affluent neighborhoods, or close to ATMs and banks. Trading Environment Election-related uncertainty will weigh on Brazil s economic performance in Investors will likely be deterred by any developments which suggest a victory for a non-centrist candidate. Current President Michel Temer has implemented fiscal consolidation measures to narrow the budget deficit and lower inflation rates. A return to populist economic measures would limit this broad trend, and weigh on Brazil s emerging Continued on page 6

6 6 CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 economic recovery. Brazil is expected to However, any further delays will profit, weighing on the profitability of the end its recession in 2017, with real GDP make it unlikely that pension reform sector for international mining firms. The growth forecast at 0.4%. This nascent is passed before elections in October world s largest iron ore producer, Vale, recovery is being driven by the stabilizing Along with policy uncertainty in stated that the move would weigh on its labor market and rebounding retail sales. the face of elections, this will elevate competitiveness and ability to operate Robust export performance will also be concerns over Brazil s sovereign high-cost mines. an economic bright spot. Real exports credentials. Gross general government grew by 2.5% y-o-y in Q2 2017, a result debt is forecast to reach 76.9% of GDP of strong iron ore output and agricultural in 2018, from 69.9% in production. While investors are reassured by Temer s pro-business agenda, his reduced political capital will also weigh on the sovereign credit position in the near term. Temer has proposed pension reforms to raise the retirement age and reduce pension payments. However, divisions within the ruling coalition have led to watered down proposals and significant Investment Environment On 28 November 2017, the Brazilian Senate approved two presidential decrees, proposed by Temer, which outlined regulatory reform of the mining sector. The approved legislation will allow for the creation of a mining regulatory agency in order to speed up permit processes. Temer had hoped that increased mining royalties would be mitigated by a third proposal to amend and streamline the existing mining code. However, this decree was not approved, meaning that further reforms will not occur until the election of a new government in October This will generate significant uncertainty over the future regulatory status of the Brazilian mining sector, limiting investor confidence in the sector. See full pricing outlook for Brazil on delays in Congress. In December 2017, However, the second piece of legislation Temer agreed to delay a lower house will increase royalties on mining activities. page 11. vote on reform until 18 December 2017, This includes an increase in iron ore RATING OUTLOOK to facilitate further negotiations with royalties to 3.5% from 2.0% and gold Sovereign Credit Risk; Legal & legislators. If approved, reforms will then royalties from 1.5% to 2.0%. Royalties Regulatory Risk be voted on in the Senate in February will also be levied on revenue and not Editorial credit: A.PAES / Shutterstock.com

7 Risk Outlook 7 Editorial credit: hurricanehank / Shutterstock.com Cuba Election dates: TBC President expected to be elected by National Assembly in April 2018 President Raúl Castro s successor will be appointed in 2018, marking the first time in almost 60 years that Cuba s president will not be from the Castro family. The incoming president, likely to be VicePresident Miguel Díaz-Canel, will inherit a challenging foreign policy environment, as US President Donald Trump rolls back engagement with Cuba. This may also weigh on the economy, as revenues from US tourism decline. Security Environment Cuba s National Assembly will choose President Raúl Castro s successor power is likely to be peaceful and will government in Venezuela is unlikely to not elevate security risks for foreign maintain close links with communist investors in Cuba. Cuba, increasing the country s isolation from the international community. in 2018, with the handover of power The incoming president will face a more expected to occur in April challenging foreign policy environment. The successor is likely to be Vice In the US, the Trump administration President Miguel Díaz-Canel, has worked to roll back the Obama- If appointed president, Díaz-Canel will marking a transition away from the era rapprochement with Cuba. In inherit an economic reform agenda country s revolutionary guard and November 2017, Trump prohibited which aims to grow the private sector, the Castro family. Díaz-Canel will Americans from conducting business reduce the size of the state, and unify lack the revolutionary legitimacy of with 180 Cuban entities and firms. the dual exchange rate. If implemented his predecessor and may struggle Despite this, a violent interstate conflict such reforms have the potential to return to maintain party unity and reform between the two countries is unlikely Cuba s economy to growth, following an progress. Moreover, Castro will in the medium-term outlook. Close estimated contraction of 0.3% in remain head of the Partido Comunista relations with Venezuela are also likely However, doubts have been raised over de Cuba and this may limit the to come under pressure in 2018, as Díaz-Canel s commitment to reforms. In new president s influence on policy regime change in the country becomes a leaked August 2017 video, the vice- formation. However, the handover of increasingly likely. Any replacement president reportedly criticized support Trading Environment Continued on page 8

8 8 CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 for the private sector and reengagement with the US, suggesting that he will not adopt a more moderate policy position than Castro. In November 2017, Spain s Minister of Commerce stated that the Cuban government owed around $46.5 million to Spanish firms. The economy is likely to face a number of headwinds in 2017, regardless of reform progress. President Trump s decision to restrict American travel to Cuba from November 2017 may lead to a decline in the numbers of American tourists visiting Cuba. This will likely have a knock-on effect on investment in Cuba s tourism sector. For example, as of 15 November 2017, four US airlines had announced that they plan to end flights to Cuba. Damage caused by Hurricane Irma in August- September 2017 will also weigh on the economy. A quarter of the country s 4- and 5-star hotels were damaged in the hurricane, along with 40% of sugar mills. This will have a significant impact on export earnings, with sugar accounting for 16% of total exports in As a result, hard currency will remain scarce in Investment Environment The business environment in Cuba will remain challenging following the leadership transition. Reforms to boost the private sector, if implemented by Díaz-Canel, will occur only slowly, meaning that foreign investors will face elevated risks for the foreseeable future. Cuba does not have an independent judiciary, making the enforcement of contracts challenging. Non-payment risks are also elevated in government contracts. In November 2017, Spain s Minister of Commerce stated that the Cuban government owed around $46.5 million to Spanish firms operating in the country, leading Spain s export-credit agency, CESCE, to temporarily close down its Cuban credit line. Similarly, the government can cancel or modify contracts at will, and compensation is not guaranteed. There is also an elevated risk of expropriation, despite domestic laws which theoretically protect foreignowned assets from seizure. However, most foreign companies operating in Cuba maintain good relations with the government, and this offers a degree of protection from contract alterations and expropriation. See full pricing outlook for Cuba on page 11. RATING OUTLOOK Country Economic Risk; Contractual Agreement Repudiation Mexico Election dates: 1 July 2018 Legislative and Presidential Mexico will elect a new president in July 2018, as incumbent Enrique Peña Nieto is constitutionally barred from seeking a second term. Anti-establishment sentiment will drive support for anti-establishment candidates, such as Andrés Manuel López Obrador (AMLO), who is leading in most polls. NAFTA renegotiation will remain a principal risk to Mexico s economic outlook, while businesses will continue to face a weak security environment. Security Environment Anti-establishment sentiment will drive support for leftist candidate Andrés Manuel López Obrador (AMLO) in the 2018 presidential election. AMLO s party, Movimiento Regeneración Nacional, led polls in November 2017, with 23% of voter intentions. He will also benefit from the high number of independents running for president, which may mean that a 30% share of the vote would secure the presidency. In 2012 s presidential election, AMLO gained a 31.6% vote share. Despite this, the ruling Partido Revolucionario Institucional (PRI) will remain a player in the election. The party benefits from an effective electoral machine and performed well in gubernatorial elections in June Regardless of the election result, the security environment facing businesses is likely to remain weak in the 12 month outlook. Drug cartels have increasingly turned to express kidnapping and extortion as a source of revenue. There was a 9.5% increase in kidnappings in the first three quarters of 2017, compared to the same period in 2016, and a 14.8% increase in extortion cases over the same period. The highest risk regions are currently Veracruz, Tamaulipas, Estado de Mexico and Guerrero states. Businesses that operate in Mexico will require substantial security measures to ensure the safety of people and assets. Trading Environment A fifth round of North American Free Trade Agreement (NAFTA) renegotiations between Mexico, Canada and the United Continued on page 9

9 Risk Outlook 9 States ended on 21 November 2017 since 2013 and in 2017 is expected sector reform has opened up Mexico s with little progress made toward reaching to record its first primary surplus since upstream and downstream sectors to a deal. A number of issues raised by the The 2018 budget sets out a private investment, introducing profit- US, such as government procurement targeted public sector borrowing sharing and production-sharing contracts rules and the creation of a sunset clause requirement of 2.5% of GDP, down from for foreign companies. A second round for NAFTA, have not been resolved. With an estimated 2.9% in However, of reforms in 2014 further improved the a further round of talks scheduled for a rapid uptick in spending as part of a transparency of bid processes. January 2018, it is now unlikely that an more populist government agenda could agreement will be reached by the Q1 reverse this trend and elevate sovereign 2018 deadline. If no deal is reached, credit risks in the longer term outlook. NAFTA will remain in place in its current withdraw from the agreement. US- An AMLO presidency would Mexico trade would reverse to World likely slow the implementation could impose a variety of measures to of further reforms and could limit bilateral trade. Estimates suggest elevate contract alteration in that US withdrawal from NAFTA could lead to 951,000 job losses in Mexico, the energy sector. An AMLO presidency would mark a shift away from the broadly pro-business reforms introduced by outgoing president Enrique Peña Nieto. He has pledged significant spending on free education and rural development. Mexico has made good progress on fiscal consolidation elevate contract alteration in the energy of the status of all oil contracts awarded under the current government and a delay to PEMEX s involvement in future farmout agreements. He has also announced plans to enhance scrutiny of private sector companies operating in the energy sector. Obrador s strong anti-corruption agenda would mean that such policies weighing on the real GDP growth forecast of 2.1% in implementation of further reforms and could sector. Obrador has proposed a review form, although the US would likely Trade Organization tariffs, and the US An AMLO presidency would likely slow the bring an elevated risk of contract alteration Investment Environment In November 2017, AMLO unveiled a if evidence of illegality in the awarding of hydrocarbon contracts is uncovered. proposed national development plan for See full pricing outlook for Mexico on This includes proposals for page 11. public consultations on the continuation of energy sector reforms. Introduced by Peña Nieto in December 2013, energy RATING OUTLOOK Country Economic Risk; Contractual Agreement Repudiation

10 10 CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 Editorial credit: Marcos Salgado / Shutterstock.com Venezuela Election dates: December 2018 Legislative and Presidential The Venezuelan government is likely to hold elections in 2018 as scheduled, given opposition weaknesses. However, elections are unlikely to be free and fair. Venezuela s economic collapse will continue without government action on reform, making a hard default likely in A hard default could precipitate regime change. Security Environment The intensity of anti-government street protests has weakened in recent months, alleviating pressure on the military to withdraw its support for President Nicolás Maduro s government. Protest risks were most elevated between April and July 2017, when hundreds of thousands of individuals participated in daily protests. During incidents, the police used tear gas, water cannons and guns, while participants threw Molotov cocktails. At least 125 people are believed to have died during the protests, and there was significant disruption to cargo movements and business operations. However, the frequency and intensity of protests declined after the government successfully formed a new national constituent assembly in August The poor showing of the opposition Mesa de la Unidad Democrática (MUD) coalition in October 2017 s gubernatorial elections further weakened opposition momentum. Internal divisions within the MUD will lessen the likelihood of a sustained and organized protest movement in However, impromptu anti-government protests cannot be ruled out. Protest risks were most elevated between April and July 2017, when hundreds of thousands of individuals participated in daily protests. Any protests are likely to be concentrated in urban areas, and will bring significantly elevated death and injury risks for bystanders. The ruling Partido Socialista Unido de Venezuela (PSUV) is likely to hold presidential and legislative elections, which are due by December Maduro s December 2017 decision to ban the principal opposition parties from participating may mean that elections are held early in October Trading Environment On 13 November 2017, Fitch, Moody s and S&P all indicated that Venezuela was in technical default after the expiration of a 30-day grace period on $200 million in bond interest payments. The government met with creditors in Caracas and announced that it would continue to service its debt, without offering any plan to restructure its debt. Venezuela s creditors have reportedly begun to organize unofficially. A group, including BlackRock, Allianz and Goldman Sachs, were reported to have met with attorneys in late November 2017, although official action is unlikely to occur as long as Venezuela meets its other payment obligations. Continued on page 11

11 Risk Outlook 11 However, Venezuela is unlikely to avoid a hard default in 2018, if the government does not implement the economic reforms necessary to restore economic stability. Venezuela faces $9 billion of sovereign and quasisovereign bond payments in 2018, with a significant portion of this concentrated in H A hard default would likely spur coordinated action by creditors, which could include the seizure of oil shipments. This would remove the Venezuelan government s final source of hard currency, limiting payments to the military. In this scenario, the military may rescind its support for PSUV, spurring regime change and the introduction of a transitional government. However, this would be unlikely to occur before early Investment Environment Foreign firms operating in Venezuela will continue to face a challenging operating environment in the 12 month outlook. Maduro is likely to escalate nationalist rhetoric ahead of a presidential election in 2018, elevating the already high risk of expropriation and contract alterations. The lack of legal certainty for investors has been exacerbated by the creation of a national constituent assembly in August 2017, which will rewrite the constitution and establish a new legal and regulatory framework. Contract enforcement will continue to be challenging, as the Supreme Court routinely favors the government over investors. The expropriation of assets has occurred regularly in Venezuela in recent decades, with an estimated 1,284 companies experiencing expropriation between 2002 and Affected companies have been concentrated in the construction, retail, manufacturing and hydrocarbons sectors. Companies that suspend operations due to payment delays or the challenging economic environment will be at particular risk of expropriation. In July 2016, the Venezuelan government seized an industrial plant belonging to Kimberly-Clark after it announced plans to end operations in Venezuela. See full pricing outlook for Venezuela below. RATING OUTLOOK Sovereign Credit Risk; Expropriation; Legal & Regulatory Risk 2018 Election Timeline Latin America 4 February 2018 Costa Rica: Legislative & Presidential Elections April 2018 Cuba: New president to be appointed 11 April 2018 Paraguay: Legislative & Presidential Elections 17 June 2018 Colombia: Second Round Presidential Election 7 October 2018 Brazil: Legislative & Presidential Elections December 2018 Venezuela: Presidential Election due by December FEB MAR 11 March 2018 Colombia: Legislative Election APR APR 1 April 2018 Costa Rica: Second Round Presidential Election MAY 27 May 2018 Colombia: First Round Presidential Election JUL 1 July 2018 Mexico: Legislative & Presidential Elections OCT APR JUN OCT DEC 28 October 2018 Brazil: Second Round Presidential Election Pricing Outlook COUNTRY CEND RISK PRICING RANGE SOVEREIGN CREDIT RISK PRICING RANGE FULL POLITICAL VIOLENCE TERRORISM & SABOTAGE ONLY Colombia 1.0% - 1.5% p.a. 0.6% - 1.2% p.a. 0.05% p.a. 0.04% p.a. Brazil 0.5% % p.a. 0.8% % p.a. 0.03% p.a % p.a. Cuba 3.75% - 6.0% p.a. * 6.0% - 7.0% p.a.** 0.06% p.a. 0.04% p.a. Mexico 0.5% % p.a. 0.5% - 0.7% p.a. 0.04% p.a % p.a. Venezuela Currently, there is no cover available in the market for Venezuelan risks due to the on-going political and economic situation in the country. 0.5% p.a. 0.1% p.a. * There is limited appetite for these risks due to sanctions and country risks. New enquiries will be sensitive to capacity constraints; pricing will be dependent on deal specifics. ** There are a very limited number of markets that support deals due to US sanctions and on-going economic difficulties.

12 ABOUT JLT JLT Specialty USA is the U.S. platform of the leading specialty business advisory firm, Jardine Lloyd Thompson Group. Our experts have deep industry and product experience serving leading U.S. and global firms. Our key to client success is our freedom to be creative, collaborative, and analytical while challenging conventions, redefining problems, creating new insights, and exploring new options to deliver solutions for each client s unique business and risks. JLT is one of the world s leading providers of insurance, reinsurance, and employee benefits related advice, brokerage and associated services. We are specialists. Our deep expertise and entrepreneurial culture give us the insights, creative freedom and tenacity to go beyond the routine and deliver better results for our clients. At JLT, clients come first. JLT owns offices in 40 territories and has more than 10,000 colleagues. Supported by the JLT International Network, we service clients in over 135 countries. 12 CREDIT, POLITICAL AND SECURITY RISKS Risk Outlook January 2018 CLAIMS DATA Claims management is central to the value that we seek to add at JLT, and foremost in our minds when we work for any client. Claims are not an afterthought; they drive our placing process. We have a diversified client base by sector and geography. All of our political risk insurance claims have been either paid in full, settled in agreement with the client, or withdrawn by the client. Please see below for historic claims data for the countries covered by this report: LOCATION INDUSTRY SECTOR YEAR SUMMARY OF CIRCUMSTANCES Brazil Trading 2016 Non-payment of sums due Brazil Trading 2015 Non-payment of funds due in respect of sugar deliveries Brazil Commodity Trading 2014 Loss due to non-delivery of sugar Brazil Commodity Trading 2015 Non-honouring of collateral agreement Brazil Commodity Trading 2009 Credit protracted default Brazil Commodity Trading 2009 Credit insolvency Venezuela Oil & Gas 2013 CEN Expropriation Venezuela Commodity Trading 2010 Contract frustration: Non-payment Mexico Trading 2014 Delays in payments from PDVSA Mexico Oil & Gas 2014 Potential cancellation of insured's drilling contracts. CONTACTS Mexico Oil & Gas 2014 Drilling sites access blocked MATTHEW STRONG Partner Credit, Political, & Security Risk Matthew_Strong@jltgroup.com CORINA MONAGHAN Senior Vice President Credit, Political, & Security Risk Corina.Monaghan@jltus.com JLT Specialty USA 225 West Wacker Drive 5th Floor Chicago, IL USA January 2018 # USA JLT CREDIT, POLITICAL & SECURITY RISK EXPERTISE Organizations with international operations are exposed to counterparty and country risks in the course of their daily trade and investment. The diversity of JLT s client base reflects the fact that all balance sheets can benefit from the leverage and protection given by structured use of credit and political risk insurance. We have been a leader in political risk insurance since the advent of the market in the early 1980s. We enjoy strong relationships with all insurers in this sector. At any one time we manage upwards of $60 billion of insurance capacity and we have had extensive success in collecting claims on our clients behalf. The insurance contracts we arrange relate to a wide variety of transactions brought about by our diverse client base and we also offer a range of risk consulting services.