Captive ReinsuranceJonathan Gale – Underwriting Director, Catlin Bermuda

Catlin Group Financial Highlights

2003 2004

GWP $1.198bn $1.433bn

PHS $639m $971m

Combined Ratio 86% 89.4%

Best’s Rating ‘A’ (Excellent) with Stable Outlook

•Trading on 3 platforms•31 Classes of Business•76% Insurance, 24% Reinsurance•67% Short Tail, 33% Long Tail•312 Employees worldwide

Catlin Bermuda at a Glance

2003 2004

GWP $258m $442m

PHS $590m $893m

Combined Ratio 72% 82%

• Best’s Rating ‘A’ (Excellent) with Stable Outlook

• 4 Principle Classes of Business

- Property treaty reinsurance

- Casualty treaty reinsurance and insurance

- Structured risk insurance and reinsurance

- Political Risk and Terrorism Insurance

• 32 staff including 7 underwriters and 2 actuaries

Target Cedant and Classes

• Mono Line/ Mono State (with variations on a theme)

• Quality data and track record but we do look at start up companies

• Targeting small to mid-size companies/ mutuals/ RRGs /captives • Classes:• Medical malpractice

– Physicians – multi and single specialty/ Hospitals• Auto liability• General Casualty• Nursing homes – not for profit and non publicly traded for profits• Dentists• Ancillary Healthcare e.g. Chiropractors/ Psychologists/ Nurses• Etc.

Written on an excess of loss basis structured over 3 years on a cancelable basis ( 2 way)

Casualty Reinsurance – Pricing Approach

• Collaborative effort between actuaries and underwriters focusing on quantitative and qualitative

• Modeled loss distributions per account – we quantify the downside (as well as the upside) of each transaction

• Risk adjusted – Pricing Matrix looks at relative riskiness between treaty type; attachment point and state

• Strength of Underlying rates and management’s historic attitude to pricing

• Quality of Company – Management/ Board/ Historic trading attitude to reinsurance

• Quality of data and transparency

• Quality of advisors i.e. Outside actuaries and Reinsurance Brokers

Casualty Reinsurance - Products

• Risk excess of loss

– Swing Plan or Flat rated – Look for alignment of interests

– Maximum recoverable

– Multi year commitment with annual cancellation either way

• Excess Cession– Provides increased limit capacity per risk

Casualty Reinsurance - Products

• Clash– Flat rated with limited reinstatements– Protects against an accumulation of retentions from one event– Includes bad faith cover

• Structured Risk – Risk Transfer only – Retention management programmes – Focused on hard to place casualty e.g. Medical Malpractice;

Petrochemical; Trucking liability– $25m capacity per transaction

Medical Malpractice Portfolio

2005 MedMal Prem by Entity Insured

Captives6%

Mutuals29%

RRG20%

Stock-Private16%

Stock-Traded29%

2005 MedMal by Type of Insured

Hospitals10%

Nursing Homes

5%

Physicians & Hospitals

19%

Chiros/Osteos2%

Non Standard Physicans

4%

Physicians/Surgeons60%

Catlin Bermuda Contact Details

Catlin Insurance Company Ltd

Cumberland House 6th Floor

1 Victoria St

Hamilton

Bermuda

Tel : 1 441 296 0060 Fax : 1 441 296 6016

Jonathan Gale Underwriting Director 1 441 278 1654

Nick Pascall Casualty Underwriter 1 441 278 1655

Carol Paiva Casualty Underwriter 1 441 278 1656

Mark van Zanden Structured Risk 1 441 278 1685

Misha Novakovic Structured Risk 1 441 278 1671

Captive ReinsuranceLouis Gariépy – VP Underwriting & Actuary, ACE Financial Solutions International

Current StatusNon-Traditional Market

NYAG / SEC / Others

Revision of Accounting Standards and their Application

Demand

What is Non-Traditional?

Solution Catastrophic or Frequency

Exclusions or Sublimits

Replace or Enhance

Relationship Multi-year

Profit Sharing Mechanism

Efficient Limit

Cost

Types of Products

Prospective Structured Multi-Year Property Cover

Basket Aggregate

Umbrella Cover

Aggregate Stop Loss

Finite Quota Share

Retention Cover

Retrospective Loss Portfolio Transfer

Adverse Development Cover

ProspectiveMotivation for Buying Non-Traditional

Traditional market: too expensive or no capacity

Stable pricing over multiple years / reduce cost uncertainties

Group multiple exposures into one program

Share in favorable claims experience

Traditional market imposes increased retention

Difficult coverages

Position traditional risk transfer in a true catastrophic position

Allows captive to assume additional risks over time

ProspectiveCharacteristics

Multi-year guaranteed capacity at pre-agreed pricing

Risk and profit sharing mechanisms

Net cost (substantially less than traditional cover) if low losses

Ability to include difficult exposures / reduce excluded items

Ability to cancel at anniversary date

Flexibility (change mid-term)

Aggregate limits covering multiple lines of business

Efficient amount of limit purchased

Immediate credit for good Risk Management

RetrospectiveMotivation for Buying Non-Traditional

M&A activity

Market Share increased

Release Security

New Domicile

Perception of company by financial markets

More Strategic Underwriting

Reserving difficulties

Cancellation of treaties

ACE Financial Solutions InternationalContact Details

ACE Global Headquarters17 Woodbourne AvenueHamilton, HM 08Bermuda

Telephone: (441) 295-5200

Simon Burton – President (441) 299-9258

Kathleen Reardon – Vice-President (441) 298-9553

Louis Gariépy – Vice-President (441) 298-9435

Heejae Cho – Assistant Vice-President (441) 298-9415

Susan Marra – Assistant Vice-President (441) 298-9501