Friday 21st October 2005

Simon Good

MARKET IMPACT OFHURRICANE KATRINA

Bermuda Bogota Dublin Hong Kong London Melbourne Miami Milan Munich Paris Rotterdam Singapore Sydney Zurich. . . . . . . . . . . . .

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Global MarketsMarket Impact of Hurricane Katrina

Katrina will replace Hurricane Andrew as the largest loss froma natural disaster in US history. All insurers writing anyproperty coverage in South Eastern USA, and many reinsurersacross the globe will suffer losses from Katrina.

Current estimates of the possible insured loss range fromUS$40 billion to US$55 billion.

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Global Markets

SOME FACTS

Katrina was the third strongest storm to make landfall in USA.

Had the widest recorded radius of any category 4 hurricane.

It will displace Andrew as the costliest hurricane and likely toeclipse September 11th WTC loss aswell.

An estimated 10,000 claim adjustors have been employed tohandle the anticipated million-plus claims.

Katrina will break the previous record of US$20 billion set byAndrew. (Prior to that, Hugo in 1989 was US$4 billion, andbefore Hugo, no single hurricane cost the insurance industrymore than US$2 billion.)

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Global MarketsINSURANCE LOSSES FROM PASTHURRICANES

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KATRINA INSURED LOSSES

Source: Towers Perrin

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OFFSHORE ENERGY EXPOSURE

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LIABILITY PERSPECTIVE

Tower Perrin estimate for liability loss is US$1billion toUS$3billion.

This includes Directors & Officers, Professional Liability,Environmental and General Liability.

Largest proportion of their estimate comes from potentialliability of hospitals and nursing homes for patients whoseconditions worsened during/after Katrina.

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Global MarketsESTIMATED KATRINA LOSS BY MARKETSECTOR

Insurers US$18.8 billion to US$28.9 billion

Re-insurers US$20.7 billion to US$24.0 billion

Capital Markets US$0/4 billion to US$1.6 billion

Source: Tower Perrin

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Global MarketsSTATED ESTIMATED LOSS TO SPECIFICMARKETS

Berkshire Hathaway US$3 billion

XL US$1.2 billion

ACE US$400 million

Lloyd’s US$2.55 billion

AIG US$1.1 billion

Swiss Re US$1.2 billion

Munich Re US$775 million

Zurich US$600 million

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SECURITY RATING CHANGES

There are 33 companies now placed on credit watch withnegative implications (by either AM Best or Standard &Poor), and 4 companies have already been downgraded(Alea, Olympus Re, PXRe and Advent Syndicate 780).

The Goshawk Syndicate has just announced that it will gointo run off.

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Global Markets

COMPARISON OF SELECTED MARKETS

Pre WTC Post WTC Now

(S&P) (S&P) (S&P)

AIG AAA AAA AA

XL AA AA AA-

ACE A+ A+ A+

Zurich AA+ AA A+

Gerling AA- A+ A-

HDI AA- AA- AA-

Swiss Re AAA AA+ AA

Munich Re AAA AA- A+

OCIL A A A-

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Global Markets

COMPARISON OF SELECTED MARKETSCont’d...

Pre WTC Post WTC Now

(S&P) (S&P) (S&P)

STARR AAA AAA AA+

Lloyd’s A+ A A

Liberty Mutual AA- A+ A

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Global MarketsCOMPARISON WITH SEPTEMBER 11th WTC

Estimated WTC loss: Approx. US$35 billion

Estimated Katrina loss: Approx. US$55 billion

“Surprise / Shock” factor of WTC

Timing within the market cycle

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POTENTIAL MARKET IMPACT

More restrictive treaties

More impact on Property classes

Potential loss of capacity, particularly Natural catastrophe

Increased retentions

Potential increase in premiums

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PREDICTIONS FOR 2006

Property i) USA Category risk, plus 40 - 50%

non Category risk, plus 10 to 15%

ii) ROW Flat

Energy iii) 100% + within the Gulf of Mexico

25 - 50% outside the Gulf of Mexico

Liability iv) USA + or - 15% (depends on capital allocation)

ROW Flat

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Global Markets

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Accessing the worldwide market place, Global Markets has officesand representatives in:

The information contained in this presentation provides only a general overview of subjects covered, is not intended to be taken as advice regardingany individual situation and should not be relied upon as such. Insureds should consult their insurance and legal advisors regarding specific coverageissues.

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