RESULTS & Q2 PROBING - PwC · 2007 ratings, while Bermuda’s pres-ence will be enhanced by AXA Re’s decision to transfer its book of busi-ness to Bermuda-based Paris Re. Overall,

ALL QUIET ON THE WEATHER FRONT…in the first half of the year, at least — and Bermuda’s reinsurers reaped theirjust rewards (page 12) while the Bermuda market continued its rise beyondmere significance to the long-term possibility of dominance (page 1). The view,by the way, is of Achilles Bay, only a few short miles from where we all work

PROBINGTHE D&OMARKET

ALL THERESULTS &ANALYSIS

COMING INFROM THECOLD…

11

2

BERMUDAINSURANCEQUARTERLY© 2006 Bermuda Media in association with

O c t o b e r 2 0 0 6

Q2BIQ16

17518F_BIQ_v5_Oct06.QXP 10/2/06 1:19 PM Page OFCA

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OPPORTUNITY IN THE EXTREME.

17518F_BIQ_v5_Oct06.QXP 10/2/06 1:20 PM Page OFCB

BERMUDA INSURANCEQUARTERLY

EditorCharles Barclay

Art DirectorPaul Shapiro

Contributing EditorChris Gibbons

Director of MarketingLissa Fisher

PublisherIan Coles

Published by Bermuda Media, Suite310, The International Centre, 26Bermudiana Road, Hamilton HM 11,Bermuda. Postal address: PO Box HM2032, Hamilton HM HX, Bermuda. Tel:292-7279 Fax: 295-3189 Email:[email protected]. Web: bermudamedia.bm.Printed in Canada.

Published four times a year In associa-tion with PricewaterhouseCoopers.

Cover image courtesy of Getty Images

BIQ “We have a broad geo-graphic and product reachand we take a balancedapproach to our business,capitalising on opportuni-ties when they make eco-nomic sense and walkingaway from business whenit does not. For sixmonths, our annualised ROE was 18%, whichreflects an efficient use of capital.”

— Evan Greenberg, President & CEO of ACE Limited, on a record second-quarter

income of $573 million

“Pricing in our core mar-kets continued to firm andwe saw ample opportuni-ty, particularly in the US,to deploy our capital atattractive expected ret-urns. Our combined ratiowas 72.9%, which includ-ed $19 million of netadverse development for the 2005 hurricanes.”

— Anthony Taylor, Chairman & CEO ofMontpelier Re

“The severe capacityshortage facing many ofour US clients once againprovided us an opportuni-ty to demonstrate indus-try leadership. Withinweeks … we participatedin the formation of twonew fully-collateralisedjoint ventures, Starbound Re and Tim Re. Thiscapacity was utilised where it was most needed.”

— RenaissanceRe CEO Neill Currie

“[Following] a successful IPO, a $500 million seniornotes offering and record second-quarter operatingresults, [we have] additional financial strength,flexibility and a platform to build on in terms ofcreating value for our clients and shareholders.”

— AWAC President & CEO Scott Carmilani

“Generally, we are seeing strong pricing in capac-ity-restricted areas such as US wind and energy …consequently, PartnerRe saw growth in overallpremium volume in the second quarter, driven bya combination of increased pricing and new busi-ness in those lines.”

— PartnerRe President & CEO Patrick Thiele

Bermuda’s reinsurance business isbooming, according to a recentreport by A M Best.The ratings

agency’s annual global reinsurancestudy shows that 14 of the world’sbiggest reinsurance companies —around 40% — are headquarteredon the island with several othershaving Bermuda operations.

And that figure will increase asthe report only includes companies’gross premiums written in 2005,ruling out the “class of 2005” post-Katrina start-ups. In the study, Bestreports that Bermuda carried agreater share of the cost of 2005’sinsured losses than did the US orEuropean markets — about $11billion of the insured property loss-es compared with an estimated $7.1billion losses for US reinsurers.

Best adds that, despite the loss-es, the Bermuda market remained

strong: “In response to the lostcapital and the expectation of highreturns from a hardening market,approximately $18 billion in newcapital flowed into the Bermudamarket, mostly in common andpreferred equity. Approximately $8billion was invested in nine start-up companies and sidecars to formthe ‘class of 2005’. The rest wentinto existing reinsurers.”

But Best warns: “The marketremains susceptible to competitionas investor expectations run high.Should the currently perceivedmarket opportunity not hold forproperty catastrophe reinsurance,the new capital that flowed intothe market may seek alternativeinvestment strategies.

“While property rate increasesattained on January 1, 2006renewals were favourable, they

were narrowly focused and limitedto those covers affected by recentlosses — property catastrophe andmarine reinsurance, primarily.”

The report lists the top fiveglobal reinsurers as Munich Re,Swiss Re Group, BerkshireHathaway Group, Hannover Reand Lloyd’s of London.

Swiss Re’s acquisition of GEInsurance Solutions in June 2006 willlikely push Swiss Re to the top of the2007 ratings, while Bermuda’s pres-ence will be enhanced by AXA Re’sdecision to transfer its book of busi-ness to Bermuda-based Paris Re.

Overall, Best reports a drop in

aggregate gross premium for the35 companies listed from $172 bil-lion in 2005 to $158 billion in2006, largely due to currencytranslation issues. Net of last year’sdollar gains, the previous year’saggregate gross premiums wouldhave been $160 billion.

Best also notes growth in secu-ritisations and cat bonds, the for-mation of sidecars (around 66% ofwhich are Bermuda-owned), andchanges in methodology as the keymarket developments in 2005,along with the change of directionof the European market to abroader base.

BRIEFING

THE QUOTES OF THE QUARTER

Kudos tinged with caution

[ 1 ]

AS BERMUDA’S ELEVATED POSITION IN REINSURANCE IS CONFIRMED

V o l u m e 2 , N u m b e r 3O c t o b e r 2 0 0 6

“ You know what I think, folks? Improving technology isn’t important.Increased profits aren’t important. What’s important is to be warm,

decent human beings.”

17518F_BIQ_v5_Oct06.QXP 10/2/06 1:23 PM Page 1

NEWS REVIEW

Hiscox has become the latestinsurer to abandon London forBermuda, citing the UK’s hefty

30% corporation tax and over-reg-ulation as the main reasons.Chairman Robert Hiscox said hisfirm would finalise the move bythe end of the year.

“It should increase the earningsand add to our international sta-tus,” Mr Hiscox added. The plan isthat Hiscox plc will delist from theFTSE 250, to be replaced by acompany called New Hiscox

B e r m u d a .Shareholderswill receivee q u i v a l e n t

shares in the new company.Catlin is the only other Lloyd’s

insurer with a Bermudian domicile,established in 2002, but AmlinGroup set up a business on theisland in November 2005, thenOmega Underwriting last February.

Meanwhile, there has been a

“strong start” to Hiscox’s existingoperations in Bermuda, whichopened last year, as well asHiscox USA, which began inMarch. Hiscox Bermuda is ontrack to underwrite its target of$325 million this year whileHiscox USA has increased itsforecast premium volume to $25million from $15 million.

Lloyd’s underwriter Wellington is to sell its remaining stake in Bermuda-based reinsurer Aspen Holdings, fuelling speculation that it is planning toset up its own Bermuda operation. Wellington made the announcementafter its first-half profit fell 66% on a weaker dollar and accounting adjust-ments. That included a £5.5 million ($10.4 million) loss on its 5.4% stakein Aspen compared with a £21.5 million profit in 2005. Wellington sold 1.9million Aspen shares in the first half of the year. CEO Preben Prebensensaid it was too early to talk about setting up in Bermuda. “If we get to thatin our strategy we’ll take it to the shareholders,” he added.

Wellington retreatsfrom Aspen Holdings

Hedge your hurricane bets

Sidecars rally

TIRED OF LONDON’S SHACKLES ANDRELISHING BERMUDA’S BENEFITS

[ 2 ]

Hello, Hiscox! The trend towards sidecarsshows no sign of abating with

two more companies joining the15 special-purpose risk-spreadingvehicles set up in Bermuda overthe past nine months.

Concord Re has been formedwith an initial capitalisation up to$750 million to provide back-upcoverage for Boston-based AIGsubsidiary, Lexington Insurance.Concord will assume a pro-ratashare of the gross written premi-ums and losses for the first $10million of limits per policy, peroccurrence — or the first $5 mil-lion of limits per policy, peroccurrence for lines classified asconstruction services — for poli-cies underwritten by Lexington’sproperty division.

Exposures from programbusiness, terrorism, personallines, and boiler and machinerywill be excluded under the rein-

surance agreement, which willcover contracts between July15, 2006 and January 15, 2008.

Meanwhile, Hiscox said itsLloyd’s of London multi-lineHiscox Syndicate 33 is in talksto enter a quota-share reinsur-ance agreement through anothernewly formed sidecar — to “takeadvantage of expected under-writing conditions”. If the trans-action proceeds, added Hiscox,“investors will capitalise a newlyestablished Bermuda reinsurerwhich would enter into a quota-share reinsurance arrangementwith Syndicate 33 in respect ofits 2007 and possibly the 2008Lloyd’s years of account”.

The treaty is likely to be for afixed share of Hiscox Syndicate33’s own reinsurance account,though the final business mixhad not been decided at ourpresstime. Robert Hiscox: Bermuda-bound

“Gentlemen … our corporate profits.”

Online financial futuresexchange HedgeStreet.comhas launched hurricanedamage futures that willallow investors to place betson the amount of propertydamage that hurricanes maycause in the US.

The contracts, covering

individual storms as well asthe entire 2006 US hurri-cane season, are indexed todamage estimates producedby the Insurance ServicesOffice.

“These products aredesigned to enable youraverage person to hedge

out risks in their existingportfolios but we think theultimate audience is thereinsurance community,which clearly needs a betterway to be able to transferthese types of risks,” saidRussell Andersson ofHedgeStreet.

American International Group plans to sell its 21%holding in its Bermuda-based reinsurance sub-sidiary, IPC. Citigroup is serving as bookrunner forthe offering, and Morgan Stanley is joint lead man-ager. IPC sells reinsurance to cover losses stem-ming from catastrophes. Founded in 1993, IPChas clients in North America, Europe, the Far Eastand Australia. It has been publicly held since 1996.

AIG sells IPC shares



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[ 5 ]

NEWS REVIEW

WIND OF CHANGE

After suffering eight hurricanes in the past twoyears that caused a record $36 billion ininsured losses, it’s no surprise there’s a crisis

in property insurance in south Florida.Policyholders are facing double-digit premiumincreases but reinsurers say it is unfair to blamethe problem on them.

Florida State Insurance CommissionerKevin McCarty recently told Floridians in amedia column: “Higher insurance costs are —for the most part — due to the ris-ing cost of reinsurance … Globalreinsurers have paid billions of dol-lars to settle claims over the past twoyears, about $30 billion in 2005alone, and have dramatically raisedthe prices charged in Florida. Evenworse, they have limited coverage inour state to an amount which doesnot provide enough to insure ourpresent and expanding exposure.”

Mr McCarty admitted: “I cannotcontrol what your company ischarged for reinsurance. Lack ofglobal reinsurance, in a nutshell, isthe principal reason we cannotattract adequate capital to our mar-ket and is definitely the biggest costdriver.”

But reinsurers feel the real issuefacing the industry is a lack of insur-ers properly capitalised or financial-ly secure enough to buy reinsurance.

“There is no shortage of capaci-ty,” one reinsurance executive said,noting the influx of capital followingcatastrophes such as Katrina and9/11 — from which the industrywithstood record claims. Re-insurance prices are higher, headded, “because we learned thatthese hurricanes are more devastat-ing than we ever imagined.” As aresult, reinsurers are understand-ably wary of writing business inFlorida and those willing to pro-vide coverage have raised their ratesup to 100%.

A state committee is currentlyinvestigating ways to ease the crisiswith suggestions ranging from anational catastrophe fund to tougherbuilding codes. But officials believethe immediate problem is attractingreinsurers back to the state.

State Senator Steven Geller told

a recent Miami Herald roundtable on the ques-tion: “If you are an American reinsurer, youonly have to post a certain amount of collater-al. [The requirement is much higher for] for-eign reinsurers. That’s dramatically reducingthe capacity of reinsurance available in thiscountry. That’s one concrete step we have towork on immediately.”

David Foy, Chief of Staff at Florida’s Officeof Insurance Regulation, agrees: “We need to

have a fair playing field so we can bring morecapacity to the marketplace. We’ve had indica-tions from Bermuda insurers and London rein-surers that, if collateral requirements changed,they’d be willing to do more business in Floridaand in the United States.”

The National Association of InsuranceCommissioners is planning to scrap the “fullcollateral” requirements on non-US reinsurersin favour of a ratings-based system.

TALENT EXPANDS POSSIBILITIES

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[ 6 ]

NEWS REVIEW

Embattled Bermuda reinsurerPXRE continued its slidetowards run-off after reporting

Q2 net income of $2.1 million,down $41.4 million from Q22005. Some 82% of PXRE’s 2006business cancelled or did notrenew following ratings down-grades resulting from last year’shurricanes. Meanwhile, Fitchannounced it was keeping thecompany on ratings watch, citing

continued uncertainty about futureviability.

Jeffrey Radke, PXRE Group’sPresident & CEO, said he expect-ed the percentage of cancellationsand non-renewals to increase whilePXRE’s board continued to studyits options. But if no alternativewas in shareholders’ best interests,PXRE’s reinsurance businessmight go into run-off and anorderly winding up of PXRE’s

operations would eventually start.PXRE had already begun to

take steps to facilitate a run-off,including the negotiation of com-mutations. “During the secondquarter, our exited lines reservesdecreased by approximately 46%,primarily due to commutations,” hesaid. “We have also begun discus-sions with a number of our largestcedents to negotiate commutationsof our 2005 hurricane reserves.”

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Scottishsell-offanticipatedEurope’s big reinsurers are

rumoured to be circlingthe ailing global life reinsur-ance specialist Scottish ReGroup. Several industry pub-lications have speculatedthat the Bermuda-basedgroup — or parts of it —could be sold to Swiss Re,Munich Re or Hannover Re.All would likely be interestedin its US life reinsurancebusiness, which is seen asoffering substantial growth.

Scottish Re, which alsohas offices in Charlotte,North Carolina, Dublin,Cayman and England —though not in Scotland —has struggled since a seriesof ratings downgrades.

Paul Goldean, ScottishRe’s interim CEO, said: “Thedowngrades are in responseto Scottish Re’s disclosure inits recent second-quarter2006 Form 10-Q filing, whichindicated that the company’sshort-term liquidity and col-lateral sources are tight andthat the company is in activediscussions regarding capitaland liquidity alternatives.

“Shareholders should beaware that all of ScottishRe’s regulated entities arecapitalised in excess of theirrequired minimum. ScottishRe’s underlying business issound, as both S&P andMoody’s noted, and thecompany’s mortality experi-ence remains in line withexpectations.”

Fitch has affirmed the A insur-er financial strength ratings ofMax Re and its Dublin-basedsubsidiaries, Max Re Europeand Max Insurance Europe.Fitch has also affirmed the A- issuer default rating ofMax Re Capital, theBermuda-based holdingcompany of Max Re. Therating outlook is stable. Theaffirmations follow the con-clusion of Max Re’s recentrestatement to the SEC.

Waiting to expire?

Max thumbs up


[ 7 ]

NEWS REVIEW

Quanta culpaT

he troubled Bermuda insurerand reinsurer Quanta CapitalHoldings has admitted in an

SEC filing that its internal financialreporting controls are “not effective”.Quanta, which has been exploringstrategic alternatives for its businesssince it lost its critical A rating inMarch, is now in the process of run-ning off most of its specialty linesinsurance and reinsurance.

In the filing, Quanta said itlacked adequately trained personnelin its US accounting function; didnot maintain effective controls overthe accuracy and completeness ofcertain spreadsheets used in itsfinancial reporting process; andlacked effective controls over thecompletion and reconciliation andanalyses of gross and ceded premi-ums, losses, other expenses and therelated balance sheet accounts forQuanta’s US processed transactions.

The filing also revealed thatPricewaterhouseCoopers hadresigned as its independent regis-tered public accounting firm onAugust 15. PwC confirmed in aletter to the SEC that Quanta’sstatements were accurate but didnot comment on the reasons for itsresignation. It has been replaced byRaleigh, North Carolina-basedJohnson Lambert.

Quanta posted a net loss of$60.1 million for the first half of2006 compared with a profit of$7.9 million in the same periodlast year. It also recentlyannounced that it is to pay formerCOO Michael Murphy $2 mil-lion. This is the latest in a line ofsignificant severance packages paidout as executives depart the com-pany, which has posted losses in allbut two quarters since beingformed in 2003.

“In order to remain competitive in today’s marketplace, Bentham, I’mafraid we’re going to have to replace you with a sleazeball.”

Peter Johnson has beenappointed President & CEO ofQuanta Capital Holdings.Previously, Mr Johnson washead of Home Insurance duringits run-off, the largest in the his-tory of North American insur-ance. He succeeds interim CEORobert Lippincott, who will con-

tinue as Quanta’s DeputyChairman. Quanta said it madethe switch to support the futureunderwriting operations ofLloyds Syndicate 4000 whilepursuing an orderly self-man-aged run-off of Quanta’sremaining insurance and rein-surance businesses.

Run-off expert takes control


[ 8 ]

NEWS REVIEW

The Blackberry has been dubbed“Crackberry” for the slavishaddiction such devices can

induce in employees for checkingtheir messages anytime anywhere.But that 24/7 connectivity couldcost companies dear in the long run.

According to a Rutgers Uni-versity School of Business study,employers who encourage non-stop work connections via technol-ogy may face liability for encour-aging addiction among their staff.

“There are costs attached toexcessive work due to technology,”Insurance Journal quotes from theRutgers report. “Information andcommunication technology (ICT)addiction has been treated by poli-cymakers as a kind of elephant inthe room — everyone sees it, butno one wants to acknowledge itdirectly. Owing to vested interestsof the employers and the ICTindustry, signs of possible addic-tion — excess use of ICT and

related stress illnesses — are oftenignored.

“If an employer manipulates anindividual’s propensity towardworkaholism or technology addic-tion for the employer’s benefit,the legal perspective shifts. Whenprofessional advancement (oreven survival) seems to depend on24/7 connectivity, it becomesincreasingly difficult to distin-guish between choice and manip-ulation.”

A new line in liability?

Flagstone dealFlagstone Re has signed an agree-ment with White Mountains sub-sidiary Sirius International Ins-urance to underwrite aviation rein-surance. Mario Montelatici of theSirius Zurich office will under-write excess of loss aviation rein-surance business on behalf ofFlagstone with immediate effect.This was announced just days afterFlagstone reported that it hadraised $136 million through a pri-vate sale of bonds.

OCTOBER 11–13International ReinsuranceCongressFairmont Hamilton Princess,Bermuda www.tinyurl.com/s4rrw

OCTOBER 29–NOVEMBER 2American Society for HealthcareRisk ManagementSan Diegowww.ashrm.org

NOVEMBER 2Goldman Sachs AssetManagement’s AnnualConference for BermudaReinsurersFairmont Hamilton Princess,[email protected]

NOVEMBER 5–9Property Casualty Insurers’Association of America Seattle, Washingtonwww.pciaa.net

NOVEMBER 13–16World Captive & AlternativeRisk Financing ForumFairmont Scottsdale Princess,Arizonawww.captive.com/CaptiveForum

NOVEMBER 13–16National Workers’Compensation & DisabilityConferenceMandalay Bay Resort, Las Vegaswww.wcconference.com

To include your event, [email protected], with “BIQCalendar” in the subject line.

WHAT’S ON



[ 10 ]

Folksamerica fears easedNEWS REVIEW

AM Best has removed WhiteMountains-owned Folksamer-ica Re from under-review status

and affirmed its financial strengthrating of A– and its issuer creditrating of a–. This follows Best’sreview of Folksamerica Re’s overallrisk management, including anevaluation of the company’sBermuda-based sidecar reinsurers,Olympus and Helicon.

The ratings were placed under

review in June following WhiteMountains’ announcement thatFolksamerica Re had increased itsgross loss estimates for hurricanesKatrina, Rita and Wilma by $203million, net of reinstatement pre-miums, and that White Mountainswould reimburse Olympus for upto $137 million of the related loss-es ceded to Olympus underFolksamerica Re’s quota-sharereinsurance treaty with Olympus.

The reimbursement maintainedOlympus’s viability as the cessionfrom Folksamerica Re to Olympuswould have eroded the bulk ofOlympus’ capital. But it raisedconcern over Folksamerica Re’srisk management controls andOlympus’s and Helicon’s currentcapacity for the business ceded toeach vehicle.

As a result, Best initiated amore detailed study of each sidecar

to assess the future potential for“over the top risk” (tail risk) backto Folksamerica Re in certain lossscenarios using updated third-party software models with near-term view.

Cayman steps upCayman is planning to muscle inon Bermuda’s share of the reinsur-ance market. Cayman is alreadythe biggest hedge fund domicileand the third largest captive insur-ance market — after Bermuda andthe US — and now it wants to beefup its insurance laws. Among thechanges being considered are sepa-rate laws for commercial reinsur-ers, at present indistinguishableunder Cayman law. According toreports, commercial reinsurers andinsurers would be charged around$55,000 in annual licence fees, onpar with Bermuda.

Fitch on when to ditchReinsurers’ biggest challenge overthe next 12 to 24 months is manag-ing the property/casualty cycle,according to rating agency Fitch.In a report titled ReinsuranceReview & Outlook: CycleManagement — A Bumpy RideAhead, Fitch said that while operat-ing and capital trends will general-ly support reinsurers’ current rat-ings, they “will be challenged toidentify when lines of business areno longer technically profitable andtherefore need to be exited or de-emphasised, a skill that has provento be elusive for many in the past”.

AWAC now in ChicagoBermuda-based Allied WorldAssurance Company Holdings(AWAC) has opened a branchoffice in Chicago through its sub-sidiary, Newmarket UnderwritersInsurance Company. The office,which specialises in general property,buffer liability, excess casualty andprofessional liability including D&O,will help satisfy a growing demand fordirect insurance within the region,according to AWAC, which also hasbranches in Boston, Dublin, London,New York and San Francisco.


[ 11 ]

Investorssmellsuccess

ANALYSIS

Bermuda reinsurance companies don’t need shark oil— the island’s traditional barometer — to remindthem that the final months of hurricane season can

be the costliest. Since 1851, 160 of the 279 hurricanesto hit the US coast came in September, October andNovember. And some 60% of recorded Category 3storms have hit after September 1.

If the shark oil goes cloudy, so will reinsurers’ bal-ance sheets. In the first half of 2006, few catastrophelosses as well as a shortage of capacity drove prices up,and a steady stream of investmentincome meant most companiesenjoyed record profits.

No wonder Benfield’s IndustryAnalysis & Research Teamlabelled its first-half review of theBermuda market Making Hay. Forwhile the sun was shining, thegroup of 17 major Bermuda rein-surers tracked by Benfield postedcombined profits of $4.5 billiondespite a desperate six months forembattled PXRE and Quanta.

Benfield said modest catas-trophe losses contained the aver-age combined ratio at 89.2% —little changed from the 89.3% forthe first six months of 2005 —while reserve strengthening ofmore than $600 million for hur-ricanes Katrina, Rita and Wilmawas more than offset by releasesfrom reserves for other classes of business.

The review added: “Balance sheets were restored totheir pre-Katrina levels to stand at $51 billion, butcapacity was tight as the market sought, and in someinstances struggled, to provide cover for the US, and inparticular Florida, mid-year renewals.

“The patience of reinsurers that held back capacity inJanuary 2006 was rewarded with much higher prices for

marine, energy and US peak zone catastrophe risks.”The acute shortage of capacity led to several new

sidecars — “the must-have designer accessory of theseason” — being formed and many CEOs expect thehard market to persist well into 2007, according toBenfield. “Average annualised return on equity was18.6% compared with 17.3% for the same period in2005. Shareholders will be hoping that 2006 proves tobe third time lucky.”

Benfield reported that catastrophe-orientatedunderwriters recorded the highestgrowth rates in the first half of2006, RenaissanceRe posting animpressive 31% rise in gross premi-ums written with its two new jointventures, Starbound Re andTimicuan Re, accounting for 10%of that growth. IPC posted a 22%rise in GPW, largely thanks to $23million of new business, whileincreased property catastrophe andmarine business accounted formuch of the 20% increase at Arch.Of the 2005 start-ups, onlyLancashire reported interim results,which included $316 million GPWfor its first six months of trading.

Benfield said the market out-look was “positive” — subject, ofcourse, to any nasty late hurricanes.

“Higher rating agency capitalcharges, changes to the vendor cat

models and retrenchment of retrocession capacity haveall reduced the supply of reinsurance,” it reported.“Consequently, the prognosis is now for a sustainedand continued hard market into 2007 [whose] effectswould start to spill into the international marketdespite the absence of serious catastrophe losses to dateand the influx of new capital via new reinsurers, side-cars and cat bonds.”

So far, so goodREINSURERS PROSPER AND PRAY FOR HURRICANES TO KEEP STEERING CLEAR

Good news for Bermuda’sreinsurers: hurricane

forecasters at Colorado StateUniversity now predict this season’s hurricane activity isunlikely to reach record levels.

Their September forecastprojected 13 named Atlanticand Gulf Coast storms, with fiveof them deemed to grow intohurricanes — down from theirAugust forecast of 15 namedstorms with seven developinginto hurricanes.

That could also be goodnews for investors. According tothe Wall Street Journal: “Boldinvestors might be smart to betthat fears of another recordstorm season are exaggerated.The stocks of many reinsurersare trading at skimpy multiplesof their projected profits. SomeWall Street bargain hunters sniffan opportunity because thestocks are priced as if lastyear’s record storm season isthe new norm.”

Shares of reinsurers aredown more than 4% on averagethis year, according toMorningstar.

‘While the sunwas shining,17major Bermuda

reinsurers postedcombined profits

of $4.5 billiondespite a

desperate sixmonths for

embattled PXREand Quanta’


[ 12 ]

Q2 ANALYSIS / PRICEWATERHOUSECOOPERSOPERATING RATIOS

INSURANCE RATINGS

QUARTERLY LOSS RATIOSQ2 2006 Q2 2005 Q2 2004

ACE 61.6% 64.4% 63.2%Arch 58.0% 60.0% 60.4%Aspen 52.2% 49.6% 42.6%AWAC 58.9% 67.5% 65.2%Axis 54.8% 51.7% 53.0%Endurance 66.3% 52.3% 47.8%Everest Re 60.9% 63.2% 67.3%IPC 13.3% 28.1% 6.2%Max Re 72.2% 71.9% 78.7%Montpelier 43.2% 35.9% 20.7%PartnerRe 61.4% 60.7% 64.9%Platinum 55.6% 55.8% 60.9%Renaissance Re 48.1% 32.1% 35.1%White Mtn 80.1% 60.4% 62.5%XL Capital 62.0% 72.0% 73.7%

QUARTERLY EXPENSE RATIOSQ2 2006 Q2 2005 Q2 2004


QUARTERLY COMBINED RATIOSQ2 2006 Q2 2005 Q2 2004


A M BEST RATING S&P RATINGJune 30, 2006 Sept 1, 2006 June 30, 2006 Sept 1, 2006

ACE A+ A + A+ A+Arch A – A – A – A–Aspen A – A – A AAWAC A A NR NRAxis A A A AEndurance A – A – A – A –Everest Re A+ A + AA– AA–IPC A A A AMax Re A – A – NR NRMontpelier A – A – A – A –PartnerRe A+ A + AA– AA–Platinum A A NR NRRenaissance Re A A A+ A+White Mtn NR3 NR3 A– A –XL Capital A+ A + A+ A+

Notes: NR3 — Not rated by A M Best NR — Not rated by S&P

Renewals● Dramatically increased pricingin property cover for wind-exposedregions but rates in other marketsare more competitive as reinsurerstry to diversify exposures.● Renewals have shown a trendtowards conversion of quota sharecover into excess of loss/straight-forward catastrophe cover.● Renewals have also shown anincrease in the use of industry losswarranty (ILW) contracts, whichlink the cedant’s coverage to theoverall industry losses for a partic-ular event.● A combination of sidecars andcat bonds successfully introducednew capacity to the market to tryto meet the demand in peak zones.

Earnings● Many of the companies’ earn-ings exceeded their estimatesdespite premium numbers beingflat or even down on prior years.● A large fall in premium incomeat XL was due to a $1.8 billion lifetransaction in the 2005 period.

● Combined ratios were all below100% for the quarter except forWhite Mountains, which sawdeterioration in its losses forKRW. White Mountains cedes alarge part of this business toOlympus Re.● Other companies with increasesin KRW estimates generally hadoffsetting favourable prior yeardevelopment in other lines.● Once again, in the run-up tothe expected high activity of thehurricane season in the third quar-ter, Q2 had low catastrophe losses.● Although interest rates are low,net income has been bolstered byoverall higher net investment incomefor the group, resulting from a build-up in invested assets. However, inorder to meet return on equity(ROE) targets going forward, under-writing results will be under pressure.

Ratings● No rating actions in the quarter.● Both A M Best and S&P main-tain a negative outlook for thereinsurance market in general.

Calm before the expected storms

Q2 2006 Q2 2005 Q2 2004

ACE 4,583 4,213 4,042Arch 1,136 941 816Aspen 522 549 380AWAC 518 442 483Axis 995 767 629Endurance 451 403 351Everest Re 910 1,109 1,085IPC 120 87 73Max Re 284 245 184Montpelier 296 276 210PartnerRe 818 767 842Platinum 330 429 331Renaissance Re 743 443 327White Mtn 1,094 1,097 1,300XL Capital 2,296 3,966 3,219

Q2 2006 Q2 2005 Q2 2004

ACE 2,906 2,921 2,782Arch 797 740 723Aspen 429 395 327AWAC 306 332 333Axis 679 624 486Endurance 407 438 396Everest Re 893 1,093 1,004IPC 101 87 78Max Re 199 192 172Montpelier 151 227 194PartnerRe 859 880 955Platinum 337 431 311Renaissance Re 431 339 349White Mtn 954 943 997XL Capital 1,985 3,713 2,858

GROSS PREMIUMS WRITTEN $M

NET PREMIUMS EARNED $M


[ 13 ]

Net income attributable to common shareholders ($m) Fully diluted earnings per share ($)Q2 2006 Q2 2005 Q2 2004 Q2 2006 Q2 2005 Q2 2004

ACE 573 467 423 1.72 1.58 1.41Arch 138 126 104 1.81 1.69 1.42Aspen 102 84 81 1.01 1.16 1.13AWAC 102 72 69 2.02 1.41 1.35Axis 223 173 141 1.37 1.13 0.84Endurance 60 110 115 0.85 1.67 1.69Everest Re 220 194 264 3.38 3.40 4.64IPC 104 64 74 1.50 1.32 1.53Max Re 17 23 13 0.27 0.47 0.26Montpelier 58 109 107 0.63 1.62 1.57PartnerRe 69 151 115 1.20 2.72 2.12Platinum 79 68 50 1.24 1.39 1.01Renaissance Re 130 172 121 1.81 2.39 1.62White Mtn 116 147 169 10.72 13.64 16.45XL Capital 377 136 364 2.10 0.97 2.62

Net income attributable to common shareholders ($m) Fully diluted earnings per share ($)2006 2005 2004 2006 2005 2004

ACE 1,062 904 871 3.18 2.98 2.98Arch 267 242 192 3.52 3.26 2.69Aspen 164 154 166 1.61 2.13 2.31AWAC 200 136 159 3.96 2.68 3.09Axis 419 955 308 2.56 1.84 1.84Endurance 163 206 216 2.29 3.11 3.16Everest Re 389 361 390 5.96 6.33 6.86IPC 163 108 148 2.36 2.23 3.06Max Re 90 61 56 1.42 1.22 1.13Montpelier 97 183 216 1.07 2.73 3.16PartnerRe 254 254 256 4.40 4.56 4.71Platinum 154 141 105 2.40 2.88 2.12Renaissance Re 309 216 290 4.31 3.00 4.05White Mtn 212 323 264 19.61 29.94 25.93XL Capital 836 579 836 4.64 4.14 5.88

Q2 2006 Q2 2005 Q2 2004

BOOK VALUE MARKET VALUE BOOK VALUE MARKET VALUE BOOK VALUE MARKET VALUE

ACE 38.31 50.59 36.45 44.85 32.50 42.28Arch 40.79 59.35 70.99 45.05 60.73 39.88Aspen 22.62 23.29 23.19 27.56 21.01 23.23AWAC 31.20 n/a 35.03 n/a 41.40 n/aAxis 25.49 28.61 22.51 28.30 19.95 28.00Endurance 29.30 32.00 33.16 37.82 27.93 34.80Everest Re 67.47 86.57 72.37 93.00 59.98 80.36IPC 27.34 24.66 35.97 39.62 34.53 36.93Max Re 20.39 21.84 22.23 22.90 18.06 19.48Montpelier 11.64 17.29 23.10 34.58 28.34 34.95PartnerRe 56.51 64.05 63.72 64.42 50.55 56.73Platinum 27.52 27.98 29.32 31.82 26.29 30.34Renaissance Re 35.36 48.46 39.99 49.24 40.20 53.95White Mtn 358.47 487.00 379.78 630.90 326.22 510.00XL Capital 47.38 61.30 59.63 74.42 51.14 75.46

Book value is calculated as shareholders’ equity divided by shares outstanding at June 30.

Q2 2006 Q2 2005 Q2 2004

ACE 12,466 10,499 9,216Arch 3,016 2,503 2,038Aspen 2,154 1,608 1,454AWAC 1,565 1,757 2,077Axis 3,819 3,167 3,043Endurance 1,937 1,987 1,731Everest Re 4,379 4,082 3,365IPC 1,741 1,743 1,671Max Re 1,212 1,025 826Montpelier 1,256 1,463 1,764PartnerRe 3,210 3,482 2,714Platinum 1,639 1,273 1,138Renaissance Re 2,539 2,823 2,801White Mtn 3,864 4,092 3,513XL Capital 8,547 8,372 7,077

COMPARISON OF BOOK VALUE & MARKET VALUE PER SHARE ($)

CUMULATIVE YTD EARNINGS DATA

QUARTERLY EARNINGS DATA

SHAREHOLDERS’ EQUITY ($M)


As a global reinsurance centre,Bermuda naturally attractssome of the industry’s most tal-

ented people. But Bermuda-basedcompanies shouldn’t underesti-mate the talent on their owndoorstep.

Colum Lovett, who moved toBermuda six months ago as

Executive Recruitment Consultantfor bermudaREcruit, a specialistinsurance and reinsurance person-nel agency, has been “pleasantlysurprised by the quality of the localtalent pool” in Bermuda. And withtighter immigration rules and theever-increasing cost of relocatingto the island, he believes there’s

more emphasis than before on find-ing suitably qualified Bermudians.

“That’s why we spend a lot oftime identifying Bermudian talentboth here and overseas,” he said.“We work closely with organisa-tions like the Bermuda Foundationfor Insurance Studies, who arefocused on attracting Bermudiansinto the industry.

“Obviously, there are key areaswhere there is a lack of talent butthat’s a global shortage, not just aBermuda one. Catastrophe model-ling, not surprisingly, is one areathat’s in growth mode, along with… risk management. Since I’vebeen here we’ve filled quite a fewsenior positions from CEO down-wards and we have placed predom-inantly Bermudian candidates inthem. There is a lot of competitionfor that talent.”

Mr Lovett has more than 20years’ experience in internationalinsurance, having started out atLloyd’s, gaining underwritingknowledge in the insurance andreinsurance sectors of the non-marine market as well as the rein-surance side of the marine and avi-ation markets. He switched torecruitment a decade ago.

Post-Katrina, the Bermudamarket has seen something of amerry-go-round with several keyexecutives changing companiesamid rumours of poaching. MrLovett says while that’s not some-thing bermudaREcruit encour-ages, it is inevitable. “We strivehard to advise [companies] whatthe going rate is for individuals tomake sure they are looking aftertheir staff.”

WORKFORCE

AND, INCREASINGLY, FINDING THEM RIGHT HERE. COLUM LOVETT ON LOCAL TALENT

[ 14 ]

Office Accommodation113311 FFrroonntt SSttrreeeett

Located at the eastern end of Front Street, this prestigious new 65,000 sq. ft.

office development by F&E Holdings Ltd, will be completed and available for

occupancy in mid 2007.

131 Front Street will provide state of the art office accommodation in a

building whose design and specification will make it a ‘stand-out’ amongst its

peers.

Ideally situated at the ‘gateway’ to the city, 131 Front Street will provide

Class A office accommodation on a site benefiting from frontages on Reid

Street and Front Street. With six floors above Front Street, this building will

provide panoramic views of the City and Hamilton Harbour.

Primarily designed to provide quality office accommodation, some retail

space is available at the Front Street entrance and a gymnasium/health club will

be located in the basement. In recognition of anticipated client requirements, parking for cars and motorcycles is

provided with access to the parking floor directly off Reid Street.

The design incorporates a central atrium to permit the unrestricted passage of natural light from a transparent

cupola on the roof of the sixth floor all the way to the ground floor on Front Street.

State of the art building systems have been specified including a generator capable of providing more than suffi-

cient emergency power for the entire building in the event of a power outage. A card access system will also be

provided to restrict access to each of the floors or designated areas as necessary.

For further information and details of available floor area and lease rates please contact:Zane DeSilva at 236-3011 (bus) or 505-3011 (cell) or Dave Woodward at 236-3011 or 534-9489 (cell).

WWiinnddwwaarrdd PPllaacceeThis prestigious new waterfront office development by Broadway Holdings

will be available for occupation by tenants in May 2007.

Construction has already commenced on this prime office development which

will provide over 20,000 sq.ft. of office accommodation on four floors. The

design of this state of the art building affords panoramic views of Hamilton

Harbour from all floors.

The building also benefits from:

� state of the art building management systems

� a full floor of parking for cars and motorcycles

� an emergency generator capable of providing full redundancy for the entirebuilding in the event of a power outage

� a card access and security system

� 80 ft. of dock and water frontage.

Windward Place is likely to be one of the last waterfront office developments in Hamilton and consequently it’s

design and specification has reflected this unique situation.

Windward Place will provide prospective tenants with first class office accommodation in a beautiful waterfront

setting and consequently demand for this development is expected to be high.

Hunting for the very best

‘There is a lot of competitionbetween firmsfor these people’s skills’


IN DEPTH

With more than 950 companies,Bermuda is comfortably theworld’s leading captive domi-

cile. But that doesn’t mean there’sany room for complacency, accord-ing to Phil Barnes, President of theBermuda Insurance ManagementAssociation.

BIMA recently organised itssecond Bermuda CaptiveConference at the FairmontSouthampton, and Mr Barnesthinks the fact that it was attendedby some 400 current and prospec-tive captive owners, CFOs and riskmanagers means the conference issuccessfully achieving one of itsmain goals: to ensure Bermudaretains its edge in an increasinglycompetitive marketplace.

“I think the conference demon-strates Bermuda’s commitment tothe captive concept,” said Barnes,who is Managing Director of AonInsurance Managers (Bermuda).“Despite all the publicity aboutother captive domiciles and thetrend for onshore captives in the USfor ‘patriotic’ reasons, there is still alot of interest in Bermuda from bothexisting and prospective owners.

“We’re still the largest captivedomicile in the world by a long waybut what has levelled off is theannual number of incorporations. Ifyou look at the global corporationsthat are likely to form captives,there’s a limited number each yearand, as there is more choice, wehave to compete with more of thosedomiciles. In terms of keeping our‘competitive edge’, we need to beout there promoting the island.”

The world’s leading captivedomiciles — Bermuda, the CaymanIslands, Vermont, the British VirginIslands, Guernsey, Barbados,Luxembourg, Dublin, Turks &Caicos, and Isle of Man — grew byless than 4% in 2005, according to asurvey by Advisen, published inReactions earlier this year.

Meanwhile,Vermont leadsa growing num-ber of US jur-isdictions — in-cluding SouthCarolina, Nev-ada, Arizonaand the Districtof Columbia

— which offer strong competitionfor offshore domiciles, especiallynow that the US Government hasreduced tax advantages for off-shore captives. In 2005, USonshore captives totalled 1,098compared with Bermuda’s 987,which was down from 1,000 in

2004 but still 250 ahead of closestrival Cayman.

However, the Bermuda figuredoesn’t reflect the growing numberof protected cell captives.According to a 2003 BIMA sur-vey, there were 83 protected cellcompanies which contained a fur-ther 6,200 cells.

And Bermuda remains the bestcaptive domicile in which to dobusiness, according to Reactions,which gave it top marks in a May

2006 survey for regulation, accessi-bility, cost efficiency, and protectedcell legislation.

“We’re the oldest, most estab-lished domicile and we have verysolid but flexible regulation,” notedMr Barnes. “Bermuda has a num-ber of advantages over other cap-tive domiciles, but perhaps themost compelling is the depth ofexperience available from the serv-ice providers to the captive industryin Bermuda. We’ve got expertiseand an infrastructure that is secondto none in terms of accounting,actuarial, legal, insurance man-agers, auditing and so on.”

But he said it was increasingly

important for Bermuda captives tooffer more value and innovativerisk alternatives.

“We’re counter-cyclical to thetraditional insurance markets inthat when there’s a hard market inthe traditional markets, the use ofcaptives has historically gone up.When you get events like 9/11 orthe hurricanes of 2005, there ismore interest from companies tocover those losses and an obviousvehicle to do that is a captive.

“But while we’re a reactiveindustry, people are also using cap-tives in ways they weren’t before: forexample, to reinsure employee ben-efits risk in the US. While Bermudaitself doesn’t have that ability, a cap-tive is a way of doing that by estab-lishing a branch in the US.

“We need to add value to thecaptive in existence and encouragebetter use of capital by the parentorganisation and reduce the cost offinancing risk.”

The recent conference saw theofficial launch of the BermudaCaptive Owners’ Association, amove designed to give captiveowners and other stakeholders asay in the direction of the industry.Mr Barnes expects that, onceestablished, the association willhave input on regulation andfuture conference agendas.

“While BIMA will have somerepresentatives on the board, we willstep aside once the framework is inplace and the captive owners them-selves will manage their association.”

One of its early roles will be tokeep a keen eye on plans for morestringent local and internationalcontrols for the insurance industry.Explained Mr Barnes: “As an off-shore and reinsurance territory,Bermuda naturally comes undergreater scrutiny from bodies likethe IMF. There is concern in ourindustry that new Class Four regu-lations will be too drastic and heavyhanded. Captives simply don’t needthe same amount of regulation asan ACE or an XL. We need to stayon top of the situation and makesure captives are not so over-regu-lated that we lose our competitiveedge against other domiciles.”

To view PowerPoint presentationsby Bermuda Captive Conference2006 speakers, go to: www.bermudacaptive.bm/2006-conference/speakerspresentations.asp

WE STILL LEAD THEWORLD BUT PHIL

BARNES ISN’T TAKINGIT FOR GRANTED

Holding Bermuda’scaptive audience

By ChrisGibbons

‘Survey gave Bermuda top marksfor regulation, accessibility, cost efficiency, and protected cell legislation’

‘Captives simply don’t need the same amount of regulation as anACE or an XL’

‘Our captive owners will have input on regulation’

[ 15 ]

POINTS TO PONDER:


For those who follow premium rates fordirectors’ and officers’ liability insurance,it’s been a wild ride in the past several

years.Evaluating D&O rates requires dividing

the product into three categories: privatecompany; small cap (typically less than $3billion); and large cap. This article will focussolely on the large cap category.

Numerous factors impact D&O pricing.Over the past five years, several industry-wide issues have contributed to the cost of aninsurer’s capital when transferring risk,including: fallout in the oil and gas, telecom-munications and airline industries; well-pub-licised fraud-related scandals (Enron,WorldCom etc); and increased settlementvalues. While many have chronicled thecomplex relationship among these factors,the biggest driver shifting the overall market,in this author’s opinion, is one of the simplesteconomic formulas: supply versus demand.That’s not to say individual risk selectiondoesn’t matter, but it doesn’t move markets.

During 2002 and 2003, there was a virtu-al D&O “perfect storm”. A number of fac-tors combined to form a market with littlesupply and high demand: the convergence ofmega-losses associated with the impact ofclaims such as Enron and others on carriers’balance sheets, boards of directors requiringhigher limits of liability, and reinsurers’ lossexperience deteriorating from the deep-dis-counted, three-year policy phenomenon ofthe late 1990s. The resulting premiumincreases were hardly a surprise.

Those increases enticed a flood of capaci-ty into the market. By 2004/2005, the higher

[ 16 ]

CyclicalAWAC’S DAVID BELLSHARES HISTHOUGHTS ON WHATMOVES THE MARKET

Trott & Duncan20 Brunswick Street, Hamilton

PO Box HM 2094Hamilton HM HX

Telephone: (441) 295-7444Facsimile: (441) 295-6600

Email: trott&[email protected]: www.td.bm

Contact: Kim N. Wilson, JPTrott & Duncan provides a comprehensiverange of legal services. The firm blends aninnovative approach to the practice of lawwith over 150 years of combined legalknowledge and experience. The firm’s clientbase spans Bermuda, Europe, the UnitedStates, the United Kingdom, the West Indiesand Canada.

77 Front StreetHamilton HM 12,

Bermuda

Tel: 1(441) 296-5627Fax: 1(441) 296-1749Email: [email protected]

Contact: Dawn M. Zuill - PresidentMarkus A. Defilla- Managing Director

Laura E. Jackson - Recruitment Advisor

BES LIMITED is a leading provider ofpermanent and temporary recruitmentservices to Bermuda’s Business Sector.

Specializing in a broad range of indus-tries including the insurance and reinsur-ance business arena, BES provides inno-vative and flexible recruitment servicesincluding comprehensive employmentand relocation assistance to new start-upcompanies. All services are tailored tomeet the individual business needs ofeach client.

www.bermudaemployment.com

LYNDA MILLIGAN-WHYTE& ASSOCIATES

A full service internationalbusiness law firm

P.O. Box HM 1913Hamilton, Bermuda HM HX

Tel: 441-295-1302Fax: 441-295-8555

Email: [email protected]

Lynda Milligan-Whyte & Associates isa full service international business lawfirm with attorneys who have over 20years of experience in practicing cor-porate/commercial law in Bermudaand internationally particularly in com-pany and trust formation, insuranceregistration, mutual fund regulation,civil litigation/insolvency matters andcorporate governance/governmentcompliance areas.

The law firm was founded by LyndaMilligan- Whyte, J.P., the former U.B.P.Government Leader in the BermudaSenate.

BARRISTERS & ATTORNEYS

1 This data is part of an AWAC internal study oflarge cap D&O rates. Following our entry into themarket in 2002, we tracked rate information onentire programs from primary to excess, regardless ofwhether we ultimately bound the account. AWACdoes not insure almost 50% of the companies in thestudy, so this is an objective look at the broader mar-ket. More than 2,000 programs comprise the datareviewed.2 This section of the study includes only those pro-grams where both the expiring and renewing infor-mation was available.


rates attracted both new carriersand more aggressive appetitesamong existing writers. This addi-tional supply pressured rates down,even as settlement values went upand coverage provided by under-writers broadened. Our graph1

shows the rate per million of limitby attachment point on large capD&O during those years.

So far, 2006 hasn’t broken thetrend of premium decreases,although they have moderatedconsiderably. The numbers2 to yourright show the first two quarters ofthis year, suggesting a near flat rateenvironment heading into August.

Whether you think D&O ratesare too high or too low (bothcamps have plenty of followers),what can’t be denied are the factorsthat move the market. Most signif-icantly, a new round of corporatescandals would devastate certainbarely-recovered D&O portfolios,and a major wave of insurer con-solidations (resulting in reducedsupply) would surely drive premi-ums higher. Likewise, the absenceof severe industry losses, the con-tinued creation of diversity-seek-ing property CAT carriers, or asustained drop in securities classaction claims (see the StanfordLaw School 2006 Mid-YearSecurities Class-Action FilingsReport), is likely to maintain adownward pressure on rates.

While individual carriers cando little to impact the broadermovement of market premiumrates, whether or not those insurersrealise a return for their sharehold-ers along the way is another story.Individual risk selection may notmove markets, but it clearly deter-mines profitability.

David Bell is Global ProfessionalLines Manager for Allied WorldAssurance Company. Before joiningAWAC, he worked with ChubbInsurance, based in Tampa, where hemanaged its regional professionallines operations as well as handlinglegislative affairs for Chubb in theState of Florida. Mr Bell has a BA infinance from the University ofMontana.

INSIGHT

[ 17 ]

nature of D&O premiums

Promoting the best of race relations, race awareness, workforce representation and fair and equal access to opportunity.

Are you a part of the CURE? www.cure.bm

Bermuda’s surveyed workforce has over 27,000 employees, closely representing the country’s racial population. Black people represent about 55%. White people represent 34%. Yet, Black people hold only 27% of those senior and executive level jobs.

Help us to promote equality of opportunity in the workforce. Mentor and Train. Personally challenge discrimina-tion. Advocate for members of all of Bermuda’s racial community to be fairly represented in the workforce.

Premium per Million Limits

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0 25 50 75 100 125 150 200

Attachment Point (grouped and in millions)

Rat

e pe

r Mill

ion

2003

2004

2005

2006 PREMIUMS UP TO AUGUST

Attachment Q1 2006 Q2 2006

0 –4.1% –1.2%

25,000,000 –4.7% –1.3%

50,000,000 –4.1% –2.3%

100,000,000 –5.4% –1.0%

Grand total –4.5% –1.4%0 25 50 75 100 125 150 200

Attachment point (grouped and in millions)

2003

2004

2005

70,000

60,000

50,000

40,000

30,000

20,000

10,000

PREMIUM PER MILLION LIMITS

Rat

e pe

r m

illion

Info

rmat

ion

cour

tesy

of R

icha

rd H

all,

AW

AC


[ 18 ]

NEW PRODUCTS

With directors and officersof multinational corpora-tions facing growing and

unique exposures in manycountries, the ACE Group haslaunched the first programoffering global D&O cover-age.

The Bermuda-based com-pany says its AdvantageGlobal Protection product willprovide “a matrix of admittedand non-admitted policiesaround the world to protectmultinational companies fromexposures to management andprofessional liability inci-dents”.

Recent developments such

as the European Union’s strin-gent proposals on corporategovernance, a change in UKlaw that would allow minorityshareholders to bring an actionon behalf of the companyagainst a director, and changesin Ontario’s securities laws per-mitting investors to sue direc-tors and officers for misrepre-sentations without the need toprove reliance on the misrepre-sentations, suggested to ACEthat there is a growing marketfor the coverage.

ACE has a physical pres-ence in more than 55 countrieswith the authority to transactbusiness in more than 140.

D&O coveragegoes global

BERMUDA’S FINEST EMPLOYMENT PROFESSIONALS – ALL UNDER ONE ROOF

Bermuda long-dis-tance telecoms

provider TeleBermudaInternational is poisedto beef up its offeringsto the financial servicessector after securingan exclusive distribu-tion agreement with St Louis-based globalIT utility companySAVVIS.

The deal, whichalso involves TBI’s sister company,TeleCayman, willenable both to exclu-sively offer SAVVIS’sprivate global financialnetwork services tolocal companies. TBIsaid the agreement willcomplement its exist-ing voice, private lines,dedicated Internet,DSL and hosted busi-ness continuity prod-ucts and services as

well as allow it todevelop and marketproducts and servicestargeted at the insur-ance and reinsurance,banking and finance,and hedge fundsindustries.

The combinedsolution will alsoenable thousands ofcustomers alreadyconnected to SAVVIS’sFinancial Extranet toaccess Bermudianand Caymanian finan-cial markets to submita variety of trade-relat-ed messages, includ-ing indications of inter-est, order routing, andtrade executions, andto carry out otherFinancial InformationeXchange (FIX) andnon-FIX transactions.

SAVVIS said itsextranet provides

application connectivityto all major exchangesand market data feeds,and the ability to con-nect to over 4,700financial communityend-points. It covers45 countries andincludes 25 data cen-tres in the UnitedStates, Europe andAsia with more than21,000 fully-managednetwork end points.

Gregory Swan,TBI’s EVP & COO,pointed out: “ Anyinstitution connectedto TeleBermuda willnow be able toaccess one of theworld’s leading globalfinancial networksthrough a single man-aged connection,eliminating the need tomanage multipleproviders.”

TBI adds SAVVIS option


“It is no surprise that people shifttheir business down to Bermuda.”— Dennis Mahoney, Chairman &

CEO of AON UK, speaking at LesRendez-Vous de Monte Carlo about

Lloyd’s of London losing business becauseof its failure to grasp modern technology

“Although some regard Bermudaas a competitor jurisdiction toIreland, in reality it is complemen-tary, as evidenced by the number ofglobal corporations that have cho-sen Dublin as their base forEuropean operations. Such com-panies include XL, AXIS, ACEand AWAC on the property andcasualty side and Scottish Re andNorthstar Re on the life side.”

— John Larkin, Chairman of theTaoiseach’s Insurance Group, writing

in Finance magazine

“I have oversight over many areasthat affect your insurance rates butI cannot control what your compa-ny is charged for reinsurance. Lackof global reinsurance, in a nutshell,is the principal reason we cannot

attract adequatecapital to our mar-ket and is definitelythe biggest costdriver. Other costdrivers include in-creased labour andconstruction costsbrought about by asignificant demandsurge.”

— Florida StateInsurance Commiss-

ioner Kevin Mc-Carty in the Daytona

News-Journal

“They didn’t offer much encour-agement that more coverage wouldbe offered, or that the prices wouldbe any better. That being said, acouple of years of good weather

will probably make things a lotbrighter.”

— a McCarty spokesman reportingon a trip to Bermuda to talk

with reinsurers

“The Spitzer investigation dra-matically changed the way brokersoperate, the way brokers are com-pensated, clients’ perceptionsabout brokers and the way clientswant to do business with themgoing forward. A significant num-ber of clients [formerly] used onlyone broker for all their business[but] now, as a result of Spitzerand Sarbanes Oxley, they nolonger want to have their businesshandled by one broker.”

— Michael Fisher, ManagingPrincipal of Integro Bermuda in

The Royal Gazette

OBM International

Woodbourne Hall

Gorham Road

Hamilton HM08

Bermuda

T 441 295 5137

E [email protected]

www.OBMI.com

Experts in offshore environments.

Antigua • Bath, UK • Bermuda • British Virgin Islands • Cayman Islands • Madrid • Miami • Trinidad & Tobago • Turks & Caicos Islands

MEDIA WATCH

London’s losses hardly a shockWHILE IRISH EYE THE BERMUDA BOOM WITH ENTHUSIASM RATHER THAN ENVY

“And that’s why we need a computer.”

[ 19 ]


[ 20 ]

PEOPLE

ACE: John Lenzen, formerlyGeneral Counsel of ACEBermuda, has been appointedDeputy General Counsel forLitigation, ACE GroupHoldings. Bermuda-based MrLenzen will direct all litigation byand against the company and willsupervise ACE’s litigation law-yers in Philadelphia, Bermuda,New York and Atlanta. MarkMegaw, who had been GeneralCounsel to the ACE Tempest ReGroup, has been appointedDirector of Reinsurance Liti-gation, ACE Group Holdings.Mr Megaw will be located inPhiladelphia, overseeing all rein-surance litigation by and againstACE, including both “ceded” and“assumed” reinsurance disputes.Kevin Conlon, formerly SeniorVice President & Chief ClaimsOfficer, ACE Tempest Re USA,has been appointed GeneralCounsel to the ACE Tempest ReGroup. Based in Stamford,Connecticut, he will be responsi-ble for the legal operations ofACE’s reinsurance subsidiariesand will advise management con-cerning contracts, regulatorydevelopments, claims and strategy. Patricia Henryhas been appointed to the new position of DeputyGeneral Counsel for Government & Industry Affairs,ACE Group Holdings. Meanwhile, ACE Bermudahas announced the appointment of Anup Seth asManaging Director of ACE European Markets, basedin Dublin. And Lori Samson, Executive ServicesDirector, has been named Chief Administration

Officer for ACE’s Bermuda-based operations. She willtake on the administrative responsibilities of KeithWhite, Executive Officer, Bermuda Companies, whoretires after 17 years.

ASPEN: former General Electric Co executive StuartSinclair has been named President & COO of AspenInsurance Holdings. He most recently served asPresident & CEO of GE Financial Services-GreaterChina. At Aspen, Mr Sinclair will be responsible forthe Bermuda-based reinsurer’s internal performanceand efficiency. Based in London, he will succeedSarah Davies, now Director of Research &Development and Business Change at Aspen.

ENDURANCE: Mark Boucher is to retire as CEOof Endurance Worldwide Insurance, a unit ofEndurance Specialty Holdings. Daniel Izard,President & CEO of Endurance’s Bermuda-basedoperating subsidiary, will serve as interim CEO of theLondon unit until a successor for Mr Boucher isfound.

RENAISSANCERE: Senior Vice President &Treasurer Todd Fonner has been appointed as ChiefRisk Officer & Chief Investment Officer. He will con-tinue to serve as Senior Vice President & Treasurerwhile an external search is undertaken for a successor.

TOWERS PERRIN: Phillip Pettersen has joinedthe firm’s reinsurance business as a Managing Directorbased in the Bermuda office. He will be responsible forbusiness and brand development in the Bermuda mar-ketplace, and will be a member of the FinancialServices Product Development Group.

XL: XL Capital has appointed Chief Executives fortwo of its business segments — Bob Douglas atGlobal Reinsurance Life Operations and DanielSussman at Global Financial Lines Operations.

Lenzen’s law…THE ACE GROUP SELECTS NEW HEAD OF LITIGATION TEAM

The Bermuda-based reinsur-ance unit of the WhiteMountains Insurance Group hasannounced a number ofchanges at executive level.Chuck Chokel has beenappointed Managing Director &Chief Financial Officer at WhiteMountains Re, where he will beresponsible for all financial func-tions for the reinsurance unit.Previously, he served as theGeneral Auditor at WhiteMountains Insurance Group.Mike Tyburski has beennamed President of WhiteMountains Re Services, a unit ofthe reinsurer that provides abroad range of administrativeand functional services acrossthe group globally. He was pre-viously a Managing Director atWhite Mountains Re.Christine Repasy has joinedthe reinsurance group as aManaging Director and willserve as General Counsel.Previously, she was AssociateGeneral Counsel of WhiteMountains Insurance Group aswell as Director of Litigation.Bill Hunter has joined thereinsurance organisation as aManaging Director, assumingwide operational and marketingresponsibilities includingEnterprise Risk Management.

Climbingthe WhiteMountains

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RESULTS & Q2 PROBING - PwC · 2007 ratings, while Bermuda’s pres-ence will be enhanced by AXA Re’s decision to transfer its book of busi-ness to Bermuda-based Paris Re. Overall,