IN STEP WITH BERMUDA Latin America’s lawyers, accountants, financial services and insurance/reinsuranceexecutives are increasingly aware of Bermuda’s international business sector: Page 1

ORCHARD’SNEW BIICHALLENGE

ALL THERESULTS &ANALYSIS

CHARMANCOMMANDSLION’S SHARE

12

19

10BERMUDAINSURANCEQUARTERLY© 2008 Bermuda Media in association with

O c t o b e r 2 0 0 8

Q2BIQ19526A_BIQ:.ps 9/17/08 7:40 PM Page 1

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“Although our revenuedeclined in this competitiveenvironment, we continue toseek out strategic opportuni-ties to better position our-selves. To that end, we arevery excited about ourrecently announced agree-ment to acquire DarwinProfessional Underwriters.This transaction will signifi-cantly accelerate our expan-sion efforts for our US specialty insurance oper-ations by providing us with a well-regarded andcomplementary small account platform wherewe believe rates are less sensitive to swings in themarket.”

— Scott Carmilani, President and CEO ofAllied World Assurance Company

“Despite the extremely competitive market condi-tions, our underwriting results were good and ourreserves from prior accident years continued todevelop favourably. Our business is still generat-ing very strong underwriting profitability.” — John Charman, Chief Executive Officer and

President of AXIS Capital

“Global insurance marketconditions are soft and will re -main so for the foreseeable fut-ure, as will the difficult finan-cial and economic conditions.Nonetheless I remain confi-dent in our ability to producesuperior results. We are wellpositioned for the future.”

— Chairman and ChiefExecutive Officer of ACELimited Evan Greenberg

after a record quarter for ACE with post-taxoperating income rising 11% to $738 million

“Our ability to produce anattractive portfolio of businessin this market is a testamentto our position as a marketleader with strong client andbroker relationships. As wemaintain our strong under-writing discipline, we contin-ue to lay the groundwork forfuture opportunities.”

— Neill Currie, CEO ofRenaissance Re

BERMUDA INSURANCEQUARTERLY

EditorRichard Whitaker

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:submit@bm.bm. Web: bermudamedia.bm.Printed in Canada.

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

Cover image: istockphoto.com

BIQ

Anew survey by the BermudaInternational Business Assoc -iation shows that awareness of

Bermuda’s international businesssector is growing and thatBermuda’s strengths remain itsreputation, ability to handlesophisticated client needs and itsexperienced service providers.

But the Bermuda market stillfaces challenges about the per-ceived high cost, speed and effi-ciency.

The survey of 220 lawyers,accountants, financial services andinsurance/reinsurance executives inthe US, UK, Europe, LatinAmerica and Asia showed that70% of respondents were veryfamiliar or familiar with Bermudaand its international businessofferings.

More than 85% in traditionalmarkets such as the US, Europeand the UK were aware ofBermuda’s international businesssector but encouragingly there was

more than 50% awareness in newermarkets like Asia and LatinAmerica.

Minister of Finance, Paula Cox,said: “I am very pleased with thefindings in the recent BIBA surveythat show the solid awareness ofthe Bermuda brand in our tradi-tional markets of North Americaand Europe.

“It is even more gratifying tosee the increased penetration,especially in markets where a fewyears ago Bermuda’s name was notthen as clearly on the radar. Wehave cachet as a jurisdiction that isrecognised for probity, endurance,innovation and market-drivensolutions and this is now becomingknown increasingly in Asia andLatin America.”

BIBA CEO Cheryl Packwoodsaid: “This is a strong showing forBermuda and its internationalbusiness community, which under-scores the progress our jurisdictionis making in building awarenessamong its clients. More hearteningare the perceived strengths amongthis group of people.”

Meanwhile Bermuda’s credit-worthiness as a leading financialcentre has been given a vote ofconfidence by Fitch Ratings.

Fitch affirmed Bermuda’slong-term foreign currencyIssuer Default Rating (IDR) at‘AA+’ and the long-term localcurrency IDR at ‘AAA’. In addi-tion Fitch has affirmed theshort-term IDR at ‘F1+’ andcountry ceiling at ‘AAA’. The

Island’s Rating Outlook is stable.Fitch said a high per capita

income, low public debt burdenand mature domestic political sys-tem supported Bermuda’s sover-eign creditworthiness.

“The ratings also reflectBermuda’s strong offshore interna-tional financial centre underpinnedby a proven track record of effec-tive management of the economyand business environment,” saidCasey Reckman, Associate Dir -ector in Fitch’s sovereign group.

The report stated: “Bermudaremains one of the world’s mostprosperous economies, with thethird highest GDP per capita atmarket exchange rates amongFitch-rated sovereigns. Bermuda’sGDP and foreign currency earn-ings growth continues to be strongrelative to other high-incomeeconomies. Inflation is consistent-ly in the low single digits and thecurrent account balance has beenin surplus since 1991.

THE QUOTES OF THE QUARTER

V o l u m e 4 , N u m b e r 4O c t o b e r 2 0 0 8

Bermuda market still faces challengesSURVEY SAYS PERCEIVED HIGH COST, SPEED AND EFFICIENCY MUST BE TACKLED

‘Bermuda remains one of the mostprosperous economies … inflation isconsistently in the low single digits’

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19526A_BIQ:.ps 9/17/08 8:50 PM Page 1

NEWS REVIEW

Torus Insurance Holdings Lim -ited (Bermuda), a new specialistenergy insurance company, has

opened for business. Torus In -surance (UK) Limited and TorusInsurance (Bermuda) Limitedhave been assigned A– (excellent)ratings from A M Best. Torus issupported by a $720 million equityfunding from First Reserve, a lead-ing private equity firm that spe-cialises in the energy sector.

David Hope, former CEO ofThe Navigators Group’s Londonoffice, has been appointed ChiefUnderwriting Officer at Torus andwill act as CEO until January 1,2009. The company said agree-ment had been reached “with asenior industry executive who willassume the position at that stage.”

Hope said: “Torus will focus onlarge commercial and specialty

businesses in all major markets,starting with onshore and offshoreenergy and other large industrialproperty and move into other linesduring the next 12 months.

“Over time we plan to build acompany which we believe can dif-ferentiate itself with brokers andcustomers through technicalexpertise, innovation, service and aglobal approach. Certainly in theenergy sector we are very fortunateto have considerable technicalinsight from our investor FirstReserve Corporation.”

Mark McComiskey, Managing

Director of First Reserve Corp -oration, commented: “Torus is anopportunity for First Reserve notonly to fund the creation of a newbusiness, but also to use its exten-sive knowledge of every part of theenergy industry to make a signifi-cant contribution to the company’sdevelopment and its success. Therisks that Torus will underwritewill be large, site specific, uniqueand typically of the type whereunderwriting performance isimproved by a data driven app -roach supported by extensiveknowledge of the underlying asset.”

Energy insurer Torus formedFOCUS ON COMMERCIAL AND SPECIALITY BUSINESSES IN MAJOR MARKETS

[ 2 ]

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‘We plan to build a company whichcan differentiate itself through technical expertise, innovation, service and a global approach’

CastlePointto acquireHermitageTower Group and CastlePointHoldings have announced thatBermuda-based CastlePointReinsurance Company Ltd isto acquire the HermitageInsurance Group, a specialtyproperty and casualty insur-ance company.

CastlePoint will buyHermitage, a subsidiary ofBrookfield Asset ManagementInc, for $27 million in cash,plus the adjusted closingbook value of Hermitage. Thetotal cash value of the deal isexpected to be approximately$135 million.

On August 5, Towerbought CastlePoint for $490million in cash and stock. Thatdeal is expected to close inearly December.

Tower and CastlePointexpect the Hermitage acquisi-tion to close in late Decemberafter the close of the Tower-CastlePoint acquisition.

19526A_BIQ:.ps 9/17/08 7:40 PM Page 2

NEWS REVIEW

Flagstone merges Bermuda, Swiss unitsEXPANSION INTO INDIA PRIMARY INSURANCE MARKET PLANNED IN THE NEXT 12 MONTHS

[ 3 ]

Flagstone Reinsurance HoldingsLtd, the Bermuda-basedNYSE -listed reinsurer, is to

merge its Bermuda and Swiss sub-sidiaries into a single entity, Flag -stone Reassurance Suisse SA.

In a separate announcement,the rapidly expanding 2005 start-up said it is planning to enter theprimary insurance market in Indiawithin the next 12 months.

Flagstone says the merging ofFlagstone Reinsurance Limited ofBermuda and Flagstone Reass -urance Suisse SA into one operat-ing platform will provide clientsand the market as a whole with “asolid single capital base to supportFlagstone’s reinsurance business,while still offering a choice ofeither Bermuda or Swiss under-writing access so as to participatefully in both the importantBermuda market and the globalmarkets served in Switzerland.”

The restructuring means thecompany’s Bermuda reinsuranceoperation will effectively become abranch office of the Swiss opera-tion while the holding companywill continue to be based inBermuda. Total underwriting cap-ital is estimated to be $1.6 billionpro forma as of September 30.

In a statement, Flagstone saidthe change in corporate structurewould not result in any change ofmanagement or corporate control,or any changes in the Board ofDirectors.

Flagstone Chairman MarkByrne noted: “This restructuringconsolidates our capital in onemain operating entity, maximisingour capital efficiency and credit-worthiness. Furthermore, Swisscompanies like Bermuda compa-nies, are expected to obtain ‘pass-port’ rights throughout Europe forreinsurance. We remain commit-ted to Bermuda as an operatingplatform and a key marketplace.We have approximately 50employees in Bermuda and expectthat figure to grow over the years.”

Flagstone’s CEO David Brownadded: “This platform allows us to

provide all our clients access to asingle and larger balance sheet thanpreviously available thereby provid-ing a superior and more transparentcredit. We will continue to serveour clients in the Bermuda andSwiss marketplace in exactly thesame manner as we do today. Webelieve that this move benefits theneeds of our clients and we remaincommitted to our financial

strength and client service.”Meanwhile Byrne said the

company was on the lookout forsuitable partners with good distri-bution networks. “We will join thejoint venture either as a 49% part-ner or with just 26%,” he said.

The company has alreadyinvested about $30 million in itsIndian operations including a rep-resentative office in Mumbai and

flagship office in Hyderabad.Flagstone’s Indian operation

Flagstone Underwriting SupportServices (India) Pvt Ltd, whichemploys 120 people, will operatefrom a new office in Hyderabad’sfinancial district. Pre-underwritinganalysis, underwriting and ITservices for the company’s overseasoperations for 11 countries wouldbe taken up from here.

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19526A_BIQ:.ps 9/17/08 8:25 PM Page 3

NEWS REVIEW

Uncertain future for Syncora HoldingsCOMPANY REPORTS $493 MILLION LOSS; BERMUDA OFFICE TO CLOSE

Syncora Holdings Ltd, theBermuda-based guaranty insur-er formerly known as Security

Capital Assurance Ltd, is to closeits Bermuda office and said itmight not survive despite itsmuch-publicised bailout by XLCapital and Merrill Lynch [seestory on page 6].

The company said that it couldgo out of business unless it can

restructure the rest of its creditdefault swap agreements afterreporting a Q2 loss of $493 mil-lion.

Syncora was saved from goingunder following a deal brokered inJuly with XL Capital Ltd whichhad suffered heavy losses as a resultof its reinsurance of Syncora. XLpaid $1.78 billion plus eight mil-lion shares to eliminate about 98%

of its exposure to Syncora. Syncoraalso paid investment bank MerrillLynch $500 million to cancel $3.5billion in credit default swaps. As aresult of the commutation agree-ment, Syncora now has a surplusof just over $1 billion and is nego-tiating with other counterparties tofurther reduce its exposure.

However unless those negotia-tions are successful, CFO

Elizabeth Keys said in a call withanalysts there was “substantialdoubt” that Syncora would be ableto continue as a going concernbecause it may fall into negativesurplus.

Meanwhile CEO and PresidentPaul Giordano has stepped downand been replaced by SusanComparato, Syncora’s current gen-eral counsel, who will be actingCEO and President.

Chairman Michael Espositosaid Comparato had “played aninstrumental role in helping navi-gate the company during thesechallenging times.”

Syncora saw its Q2 incomeplunge $519 million to a net loss of$493 million. Revenues fell 61%compared to the same period lastyear to $23 million. For the sixmonths, net income fell $653 mil-lion to a net loss of $590 millioncompared to last year. Total rev-enues dropped 87 percent ($109million) to $16 million.

Syncora has been hit hard by itsexposures from insuring complexfinancial instruments, such as col-lateralised debt obligations, backedby assets including mortgage debt,which led to losses as a result of theUS property slump and sub-primemortgage crisis.

Subsequent downgrades by rat-ings agencies effectively preventedSyncora from writing new businessfrom early in 2008.

In a statement Giordano said:“With the successful completionof the first phase of the restructur-ing behind us, I fully understandand agree with the board’s decisionthat now is the right time for newleadership to take the companyforward.”

Commenting on the second-quarter loss, he said: “Our resultsin the second quarter stemmedmainly from significant deteriora-tion in US residential mortgageperformance that adversely affect-ed the asset-backed collateraliseddebt obligations and residentialmortgage backed securities weinsured.”

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NEWS REVIEW

XL leaving troubled times behindNEW CEO CONCENTRATES COMPANY ON DOING WHAT IT DOES BEST. CHRIS GIBBONS REPORTS

XLCapital has finally put theSCA issue behind it and cannow focus on strengthening

its core P&C insurance and rein-surance businesses, according tonew CEO Mike McGavick.

Analysts say the agreement willrelieve the pressure on theBermuda-based company that hasendured a turbulent first fewmonths as McGavick has wrestled

with a number of long-standingissues against the backdrop of aplunging stock price.

McGavick said his three priori-ties on taking over from BrianO’Hara in May were to solve theSCA problem, make XL less proneto large one-off events, andstrengthen and protect its ratingsin the near-term.

In an earnings call with

investors on August 6, McGavicksaid: “[XL] is simply one of thegreat collections of underwritingtalent in the world. But it has hadits history of its great earningsbeing wiped out by big mistakes,especially over these past eightyears, and this is a pattern that canand must end.”

On July 28, XL announced acommutation agreement to bail

out its former subsidiary, financialguarantee insurer Security CapitalAssurance Inc, now known asSyncora Holdings Ltd. Under theagreement XL said it would pay$1.78 billion in cash and issueeight million shares, while coun-terparties such as US investmentbank Merrill Lynch would cancel$3.5 billion in credit default swaps.

On August 5, XL announced ithad raised about $3.38 billion tofund the transaction. An offeringof ordinary shares and equity secu-rity units brought in $2.88 billion,while XL raised a further $500million through issuing 20 millionSeries C Preference OrdinaryShares in connection with theCompany’s exercise of the putoption under its Mangrove Baycontingent capital facility.

XL said the agreement wouldreduce its maximum exposure toSCA-related losses from $65.7 bil-lion as of June 30 to $1.1 billion.XL spun off the bond insurer in2006 and its 2007 results recordedcharges of about $1.5 billion main-ly as a result of its 46% holding inSCA. Like many bond insurers,SCA ran into trouble earlier thisyear through its exposure to com-plex mortgages and collateraliseddebt obligations.

McGavick said in a companystatement: “The support for ourcapital raise has been tremendous.I believe its success is a clearendorsement of the XL franchise,of our re-focused strategy and

‘With SCA behind us … XL will concentrate on doing what it does best,which is underwriting the risks of our customers’

[ 6 ]

19526A_BIQ:.ps 9/17/08 7:40 PM Page 6

[ 7 ]

commitment to our dual insuranceand reinsurance platform, and avote of confidence in our ability tocompete and win business. WithSCA behind us and with ourenhanced commitment to riskmanagement, XL will concentrateon doing what it does best, whichis underwriting the risks of ourcustomers.”

In August, Best removed its XLratings from negative review andaffirmed the financial strength rat-ing of A (Excellent).

McGavick has not been idlesince stepping into the job in May.

In addition to dealing with theSCA issue, he has begun a majoroverhaul designed to make thecompany leaner and more efficientby trimming more than $100 mil-lion from operating costs.

He has announced cuts of 165jobs from XL’s worldwide staff ofaround 4,000 in 27 countries,including 47 from its 320-strongworkforce in Bermuda, mainly insupport services such as marketing.The company has also decided notto fill 120 vacant positions.

McGavick also plans to increaseexecutive accountability by flatten-ing the management structurealong the lines of a traditionaloperating company rather than theprevious complex holding compa-ny model.

Henry Keeling, who retired asCOO, and Michael (Spike)Lodbell, who left his position ofExecutive Vice-President andChief Executive of Global Bus -iness Services, will not be replaced.McGavick said that the majorityof Global Business Services wouldinstead be realigned within thebusiness operations.

Fiona Luck, EVP and Chief ofStaff, will become special adviserto the CEO, based in Bermudaand London and with “a reducedtime commitment”. She will alsono longer be part of the company’ssenior leadership group.

McGavick told investors thatKeeling’s decision, and the willing-ness of others to be reassigned, hadenabled XL to eliminate a layer ofmanagement. He said businessleaders, the Chief Actuary and theheads of other functionaries wouldnow report directly to him.

He said XL is aiming to savebetween $110 million to $120 mil-

lion in operating costs, resulting ina charge of $50 million to $60 mil-lion in the third quarter.”

McGavick added: “Each ofthese management changes areoccurring for different reasons, butXL has great bench strength whichI am determined to retain. To doso and to motivate success, we willmake a limited number of targetedoption awards.

“Options awarded to the mostsenior executives will have a per-formance vesting feature. I havecomplete confidence that our newstreamlined leadership will deliveron our refined strategy.”

And that strategy, he said, was

simple. “To reduce the risk of thelarge losses that have dogged ourfranchise and return the core earn-ings power of the franchise toprominence., we will focus on ourcore P&C businesses’ proven win-ners, as the second quarter resultsshow yet again, despite the down-ward pressure of dealing with themarket with SCA out there.”

He said XL will also explorestrategic opportunities related toits life reinsurance operations andstarted a multi-year programmecalled Operational Trans -formation, to rebuild the underly-ing XL’s global technology plat-form.

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XL CEO Mike McGavick says‘big mistakes’ were made

19526A_BIQ:.ps 9/17/08 7:40 PM Page 7

[ 8 ]

19526A_BIQ:.ps 9/17/08 7:40 PM Page 8

NEWS REVIEW

Managing the underwritingcycle into a soft market as wellas dealing with the fall-out

from the credit crunch, are amongthe big issues confrontingBermuda CEOs today, a new sur-vey of the market’s insurance chiefexecutives reveals.

PricewaterhouseCoopers’ sec-ond Bermuda Market Survey enti-tled “Confronting the down cycle:Seeking opportunity in uncertaintimes” shows how companies arefocused on expansion as they lookbeyond their current businesses tofind ways of sustaining andincreasing shareholder value.

Last year Bermuda reinsurerswere out to achieve top linegrowth. This year the emphasis ison avoiding technically inadequatebusiness.

The survey reveals CEOs areconcentrating on underwritingperformance, stressing cycle man-agement and exposure monitoring.

Uncertainty is a key concern:CEOs simply don’t know howlong the down cycle will last. Withthis in mind, rate monitoring ishigh priority.

They are less certain about theirability to follow through, however.Number three in the list of per-ceived barriers to managing thedownturn was “difficulties inensuring that underwriters adhereto and deliver the underwritingcycle management strategy.”

Bermuda companies can’t hopeto keep investors happy by turningaway business, and the surveyshows CEOs want to grow byexploring new geographical mar-kets and lines of business.

They are expanding their fran-chises by either acquiring incum-bent companies or setting up localrepresentative offices. Forming

new units in reinsurance hubs suchas London (including Lloyd’s),Dublin, Zurich and Dubai is acommon approach.

The addition of new underwrit-ing units and a more diversifiedportfolio brings internal risk man-agement challenges. CEOs’ con-cerns include exposure aggrega-tion, capital management and risktransfer.

Over half of respondents saidthey will consider using capitalmarkets for risk transfer, thoughmany now see a reduced role forsidecars. Insurance linked securi-ties, industry loss warranties andswaps have moved up the riskfinancing agenda.

On the underwriting side, it istoo early to fully tell. For somecompanies a question mark still

hangs over how many will be hitand how badly by professional lia-bility and D & O claims.

Bermuda companies have anenviable reputation for adapting tochange in uncertain times. Theability to seek out and capitaliseupon opportunity in these uncer-tain times will clearly differentiatesome of these companies fromtheir global competitors.

SURVEY REVEALS CEOS WANT TO EXPLORE NEW LINES OF BUSINESS

Seeking opportunity in uncertain times

‘Uncertainty is key:CEOs simplydon’t know howlong the downcycle will last’

[ 9 ]

19526A_BIQ:.ps 9/17/08 7:40 PM Page 9

LAURIE ORCHARD, NEW PRESIDENT OF THE BERMUDA INSURANCE INSTITUTE

PROFILE

As a former world championshiptriathlete, Laurie Orchard is notone to shirk a challenge. So

with a demanding job as AssistantVice President, Operations at XLRe, a 15-month baby and anotherdue in January, the 36-year-old isfar from fazed about taking on thetwo-year presidency of theBermuda Insurance Institute (BII).

“I like being busy and having avariety of things to do,” laughsCanadian-born Orchard, who ismarried to Bermudian MylesOrchard, a property underwriter atAriel Re. “But it is a balancing act.I’ve found that I’ve simply had tobecome more focused. When I amat work this is my focus and whenI’m at home, work stays here andfamily has to be the priority.”

In addition she is now focusedon ensuring that the BII continuesto provide top-class training andprofessional devel-opment for Ber -muda’s reinsuranceindustry, from ind -ustry designationsto topical seminarson subjects like thesub-prime crisis.

Orchard has beenconnected with theBII since she andMyles worked thr -ough their profes-sion qualificationstogether, and saysbecoming furtherinvolved as a volunteer was a natu-ral progression.

“Early on in my career I hadsome very good mentors — seniorpeople in the industry like MikeCasio and Richard Black — andthey took a lot of timeout of theirvery busy professional workdays tojust nurture me and give me guid-ance on what I should be studyingand what opportunities existed inthe market for me. That commit-ment really stuck with me. Theyset me up for success. They gavethe information I needed to deter-mine my career path. It feels veryrewarding to help others.”

And Orchard certainly now hasher own wealth of experience topass on. She has been at XL Re,where she works on ceded reinsur-ance operations and operationalprojects, since 2006. She enteredthe Bermuda market in 1994 outof university at Stockton Re whereshe cut her professional teeth inunderwriting, legal, actuarial andoffice administration. From thereshe joined Commercial RiskReinsurance, where she focused onlegal and the capital markets,before joining Renaissance Rewhere she got into underwriting

management, work-ing with strategicceded partners, oper-ational projects andmarketing.

In 2006 she wasnamed Young Rein -surance Person of theYear award jointlywith Theresa Dunlopof OIL InsuranceLtd, and her BIIwork has includedbeing chair of the BIIeducation committeeand the Bermuda

Insurance Market Exam Comm -ittee.

Although at one time she hadconsidered a career in teaching, shehas not taught courses at the BIIbut as a member of the EducationCommittee she has played anactive role in deciding what cours-es and seminars should be offered.

And while continuing to pro-vide quality local education for theindustry remains a priority, findingan alternative to the BII’s crampedCedar Avenue offices is high onthe agenda.

Last year 1,144 students regis-tered for insurance examinations

— up 38% over 2006 —with 107 students earn-ing insurance designa-tions in 14 differentareas of study, anincrease of 13 percenton 2006. The number ofpeople attending the

BII’s 35 seminars and workshopslast year was up 42% to 1,123.

“We need additional space,”stresses Orchard. “Our lease is dueto expire in September 2009 andwe need to make sure we haveadequate facilities to accommo-date all the people comingthrough the BII.”

In addition, Orchard says hercouncil will be producing a long-term plan designed to make surethe BII continues to meet theneeds of its member companies.“We need to determine how bestwe can best support the educationand what’s neededin this changingmarketplace. It ’salw ays evolving sowe’re always tryingto find ways ofdoing things andnew courses to offer.

“At the sametime we have beenrunning many ofour courses for yearsand they remainpopular. For exam-ple, we run aninduction course fornew employees and one for affiliat-ed professionals. These are verybasic to our industry but they aretaught by people from the industrythat know their section very well.To have that exposure to well-sea-soned professionals about theirareas of expertise is something thatis quite unique in Bermuda. Theyare always fully subscribed.”

Past president Gerald Simonshad publicly voiced his concernsabout the low number of blackmales entering the industry. DoesOrchard believe the BII can domore in that area?

“My main concern, and that of

the BII, is providing a well-educat-ed workforce to support the eco-nomic development of our indus-try regardless of what the demo-graphics are,” she says. “I don’tknow that changing the demo-graphic is the ideal goal but pro-moting the economic developmentof the industry should be.

“To do that I think there’s a lotof education that needs to go onnot only within our industry butwithin the Bermuda community sothat people understand what ourindustry is all about and knowwhat skill sets are best suited forthe different jobs we can offer.

“I think if the community hasand understands that information,then they can make better deci-sions about what education theywill follow and what careers theyshould enter into.”

And if the progress of women isanything to go by inwhat has tradition-ally been a white,ma l e -domina t edindustry, they willfind plenty of opp -ortunities.

Orchard says shehas seen a dramaticincrease in both thenumber of womenin the industry andthe level of theirambition with morewomen than ever inupper management.

At XL for example, five of thecompany’s leadership team are nowwomen, including the generalcounsel and global chief actuary.

“There is a much better male-female balance today,” says Or -chard. “From my experience at theBII, the number of females comingthrough has increased tremen-dously. We definitely have morewomen studying and getting qual-ifications than we do men.

“The women I see today arevery driven, very well educated.They are motivated; they are goodat balancing and managing a vari-ety of responsibilities. And a per-

Conquering a hectic daily scheduleSpecialReportby Chris Gibbons

‘It is a balancingact. I’vefound thatI’ve simplyhad tobecomemorefocused’

‘[At BII …] we definitelyhave morewomenstudying and gettingqualificationsthan we do men’

[ 10 ]

19526A_BIQ:.ps 9/17/08 7:40 PM Page 10

[ 11 ]

son who shows those types ofcharacteristics is very difficult tohold back.”

Orchard says the fact that theBII enables people to study locallyfor internationally-recognisedqualifications is “a huge opportu-nity for women with familiesbecause they don’t have to go over-seas to school.

“Companies here are so sup-portive of continuing educationand that’s something women didn’thave before.”

And Orchard believes educa-tion is key as the Bermuda market

faces increasing competition fromother offshore jurisdictions.

“An educated workforce and acommunity that embraces theindustry are very important,” shenotes. “The good work that the[industry regulator] BermudaMonetary Authority is doing, astrong legislative framework andthe political stability of our coun-try play into it.

“As long as we can maintainthat stability which has given theindustry such success so far, I thinkwe can still be very competitivegoing forward.”

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Laurie Orchard: Juggling the priorities of work and home life Photo: Ryan Prevost

Tokio Millenniumlicenses leadingcrop modelBermuda reinsurer Tokio Millennium Re haslicensed the AIR Worldwide Corporation’sMultiple Peril Crop Insurance (MPCI) modelfor use in AIR’s CATRADER(R), an industrystandard application for analysing catastrophereinsurance and insurance-linked securities.

“We have been using AIR’s scientifically-based MPCI model for the last two years ona service-basis,” said David McComas,CCRA, Vice President, Risk Management andModeling at Tokio Millennium Re. “Now that itis available in CATRADER, we can more effi-ciently integrate model results into our in-house workflow and combine the losses withthe rest of our portfolio.”

The AIR MPCI model uses detailed weatherobservations over the course of past growingseasons, along with the resulting crop yields,to develop a current crop yield probability dis-tribution for each modeled crop in each county.

For major crops in the US, the model gen-erates a catalogue of 10,000 potential year-end outcomes, including crop yields at countyresolution and individual crop prices.

Hannover Re, Benfieldestablish sidecarGlobe Re is the latest sidecar vehicle to beset up in Bermuda. The $113 million capitalwas funded by Hannover Re and brokersBenfield Group Ltd. Benfield Advisory,Benfield’s specialist corporate finance andadvisory business, is the joint structurer andplacement agent for the sidecar, which wascapitalised with $33 million of equity and$100 million of debt securities.

As part of its extended insurance-linkedsecurities activities, property catastrophe risksof a number of Hannover’s US cedants ofHannover Re have been pooled and trans-ferred to the capital market in several tranches.

“With this type of pooling and transformerfunction we enable ceding companies toaccess the capital market — even for risksthat would not lend themselves to this on anindependent basis,” said CEO Wilhelm Zeller.

The transferred portfolio consists exclu-sively of US catastrophe business, predomi-nantly hurricane risks in Florida.

‘Companieshere are sosupportive ofcontinuingeducationand that’ssomethingwomen didn’t havebefore’

19526A_BIQ:.ps 9/17/08 8:56 PM Page 11

[ 12 ]

ANALYSIS / PRICEWATERHOUSECOOPERS Q2 2008

OPERATING RATIOS

FINANCIAL STRENGTH RATINGS

QUARTERLY LOSS RATIOSQ2 2008 Q2 2007 Q2 2006

ACE 58.5% 61.4% 61.6%Arch 57.3% 56.6% 58.0%Aspen 47.4% 60.5% 52.2%Allied World 66.2% 58.1% 58.9%Axis 54.6% 51.7% 54.8%Endurance 60.7% 49.6% 66.3%Everest Re 64.2% 62.0% 60.9%Flagstone Re 39.7% 69.1% 9.7%Hiscox* n/a n/a n/aIPC (7.5%) 88.2% 13.3%Max Capital 55.4% 69.8% 72.5%Montpelier 20.5% 38.8% 43.2%PartnerRe 54.2% 54.6% 61.4%Platinum 36.2% 55.6% 55.6%Renaissance Re 30.3% 38.7% 48.1%Validus 39.5% 32.1% 46.9%White Mtn 68.6% 61.6% 80.1%XL Capital 62.2% 56.9% 62.0%

QUARTERLY EXPENSE RATIOSQ2 2008 Q2 2007 Q2 2006

ACE 29.3% 26.2% 26.6%Arch 29.8% 27.5% 28.3%Aspen 30.8% 27.9% 29.4%Allied World 27.0% 21.9% 19.3%Axis 26.6% 23.7% 23.5%Endurance 28.3% 29.4% 30.8%Everest Re 30.2% 27.2% 26.8%Flagstone Re 36.3% 25.5% 36.6%Hiscox* n/a n/a n/aIPC 17.7% 17.4% 17.7%Max Capital 24.0% 25.8% 17.2%Montpelier 37.2% 31.2% 29.7%PartnerRe 31.7% 30.7% 28.9%Platinum 32.2% 25.2% 27.9%Renaissance Re 23.2% 24.0% 24.1%Validus 31.5% 23.2% 27.3%White Mtn 39.5% 41.9% 34.9%XL Capital 30.1% 29.4% 28.0%

QUARTERLY COMBINED RATIOSQ2 2008 Q2 2007 Q2 2006

ACE 87.8% 87.6% 88.2%Arch 87.1% 84.1% 86.3%Aspen 78.2% 88.4% 81.6%Allied World 93.2% 80.0% 78.2%Axis 81.2% 75.4% 78.3%Endurance 89.0% 79.0% 97.1%Everest Re 94.4% 89.2% 87.7%Flagstone Re 76.0% 94.6% 46.3%Hiscox* n/a n/a n/aIPC 10.2% 105.6% 31.0%Max Capital 79.4% 95.6% 89.7%Montpelier 57.7% 70.0% 72.9%PartnerRe 85.9% 85.3% 90.3%Platinum 68.4% 80.8% 83.5%Renaissance Re 53.5% 62.7% 72.2%Validus 71.0% 55.3% 74.2%White Mtn 108.1% 103.5% 115.0%XL Capital 92.3% 86.3% 90.0%

A M BEST RATING S&P RATINGJune 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007

ACE A+ A + A+ A+Arch A A A AAspen A A – A AAllied World A A A – A –Axis A A A AEndurance A A – A AEverest Re A+ A + AA– AA–Flagstone Re A – n/a NR NRHiscox A – A – NR NRIPC A A A – A –Max Capital A – A – NR NRMontpelier A – A – A – A –PartnerRe A+ A + AA– AA–Platinum A A NR NRRenaissance Re A+ A AA– A+Validus A – A – NR NRWhite Mtn A – A – A– A –XL Capital A A+ A+ A+n/a = not available NR — Not rated by S&P

Premiums� Overall premium was generallydown for the quarter. The antici-pated pressures on pricing wereoffset to an extent by continuedgrowth in agricultural business,more favourable exchange rates,some late demand in the property/short tail specialist area and acq -uired business for some companies.� June 1 was a major property catrenewal date and most companiessaw rate declines within 5–15%.� Several Bermuda companiessaw an increase in their agriculturalbusiness premiums due to increas-ing worldwide commodity prices.

Earnings� Earnings for the group weregenerally favourable compared toexpectations, largely driven byprior year reserve releases.� Expense ratios overall contin-ued to increase for the groupdue to reductions in earned premi-ums as compared to stable or

increasing operating costs.� Investment income was gener-ally down due to lowering yieldson fixed income securities, lowreturns on alternative investments,low short-term interest rates andshare buy backs.� Income was also affected to dif-ferent extent in certain companiesdue to different treatment of unre-alised losses allowed under newaccounting standards.

Capital Management� The Bermuda companies repur-chased about $1 billion of stock inQ2, bringing year-to-date buy-backs to about $2 billion.� Although the expectation is thatthese share repurchases will con-tinue to be a favourable method ofcapital management in 2008, somecompanies indicated that theywere comfortable to retain poten-tially excess capital given the cur-rent state of the capital marketsand the current storm season.

Q2 2008 Q2 2007 Q2 2006

ACE 5,293 4,637 4,583Arch 887 1,102 1,136Aspen 529 504 522Allied World 447 531 518Axis 874 959 995Endurance 518 507 451Everest Re 905 935 910Flagstone Re 271 181 125Hiscox* n/a n/a n/aIPC 105 109 120Max Capital 369 242 284Montpelier 188 188 296PartnerRe 968 908 818Platinum 234 294 330Renaissance Re 808 846 743Validus 380 174 111White Mtn 1,026 1,046 1,094XL Capital 1,947 2,231 2,296

Q2 2008 Q2 2007 Q2 2006

ACE 3,428 3,008 2,906Arch 706 751 797Aspen 397 451 429Allied World 269 303 306Axis 680 694 679Endurance 453 418 407Everest Re 942 999 893Flagstone Re 142 112 37Hiscox* n/a n/a n/aIPC 85 99 101Max Capital 235 138 199Montpelier 119 129 151PartnerRe 956 889 859Platinum 258 296 337Renaissance Re 377 358 431Validus 309 133 66White Mtn 922 961 954XL Capital 1,682 1,930 1,985

GROSS PREMIUMS WRITTEN $M

NET PREMIUMS EARNED $M

* Hiscox does not report quarterly; June 30 data only available

19526A_BIQ:.ps 9/17/08 7:41 PM Page 12

[ 13 ]

Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($)Q2 2008 Q2 2007 Q2 2006 Q2 2008 Q2 2007 Q2 2006

ACE 746 649 573 2.20 1.93 1.72Arch 192 199 138 2.92 2.65 1.81Aspen 127 115 102 1.39 1.19 1.01Allied World 79 123 102 1.56 1.96 2.02Axis 231 252 223 1.47 1.51 1.37Endurance 99 131 60 1.56 1.85 0.85Everest Re 153 283 220 2.47 4.45 3.38Flagstone Re 42 15 26 0.49 0.17 0.36Hiscox* n/a n/a n/a n/a n/a n/aIPC 43 24 104 0.78 0.37 1.50Max Capital 74 94 20 1.26 1.45 0.31Montpelier 44 51 58 0.51 0.53 0.62PartnerRe (35) 96 69 (0.64) 1.66 1.20Platinum 100 88 79 1.82 1.34 1.24Renaissance Re 136 183 130 2.13 2.53 1.81Validus 76 71 30 0.98 1.17 0.51White Mtn (9) 103 116 (0.87) 9.49 10.72XL Capital 238 545 377 1.34 3.00 2.10

Q2 2008 Q2 2007 Q2 2006ACE 16,327 15,184 12,466Arch 3,886 3,704 3,016Aspen 2,854 2,591 2,154Allied World 2,378 2,418 1,565Axis 5,263 4,694 3,819Endurance 2,534 2,380 1,937Everest Re 5,568 5,338 4,379Flagstone Re 1,280 1,086 742Hiscox 1,627 1,463 n/aIPC 2,017 1,965 1,741Max Capital 1,490 1,473 1,212Montpelier 1,572 1,541 1,256PartnerRe 4,409 3,937 3,210Platinum 1,969 1,991 1,639Renaissance Re 3,373 3,460 2,539Validus 2,057 1,324 1,043White Mtn 4,597 4,575 3,864XL Capital 8,769 11,522 8,547

Q2 2008 Q2 2007 Q2 2006Common shares issued Market value $ Common shares issued Market value $ Common shares issued Market value $

ACE 333,249,308 55.09 329,009,343 62.52 325,371,481 50.59Arch 61,943,100 66.32 71,273,285 72.54 73,937,973 59.46Aspen 81,321,201 23.67 88,544,590 28.07 95,250,401 23.29Allied World 48,977,635 39.62 60,405,307 51.25 50,162,842 n/aAxis 139,653,000 29.81 147,924,000 40.65 149,809,873 28.61Endurance 59,641,896 30.79 64,591,095 40.04 66,096,340 32.00Everest Re 61,643,803 79.71 63,198,640 108.64 64,948,041 86.57Flagstone Re 85,346,325 11.79 85,297,891 13.32 n/a n/aHiscox 368,326 4.14 396,578 5.68 n/a n/aIPC 50,280,448 26.55 60,659,489 32.29 63,703,567 24.66Max Capital 56,095,884 21.33 60,127,859 28.30 59,425,278 21.84Montpelier 93,368,434 14.75 103,067,067 18.54 107,875,959 17.29PartnerRe 57,666,349 69.13 57,079,534 77.50 56,799,778 64.05Platinum 48,688,706 32.61 60,077,313 34.75 59,546,050 27.98Renaissance Re 62,862,000 44.67 72,266,000 61.99 71,849,000 48.46Validus 74,243,477 21.15 58,482,600 n/a n/a n/aWhite Mtn 10,552,376 429.00 10,842,538 606.02 10,780,053 487.00XL Capital 179,051,979 20.56 181,884,099 84.29 180,394,236 61.30

MARKET CAPITALISATION

QUARTERLY EARNINGS DATA

SHAREHOLDERS’ EQUITY ($M)n/a = data not publicly available

Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($)Q2 2008 Q2 2007 Q2 2006 Q2 2008 Q2 2007 Q2 2006

ACE 1,123 1,350 1,062 3.31 4.02 3.18Arch 382 398 267 5.71 5.24 3.52Aspen 208 237 164 2.24 2.46 1.61Allied World 210 237 200 4.12 3.81 3.96Axis 469 479 419 2.95 2.88 2.56Endurance 174 229 163 2.70 3.22 2.29Everest Re 231 580 389 3.70 9.05 5.96Flagstone Re 75 50 32 0.87 0.64 0.54Hiscox 167 158 n/a 0.41 0.39 n/aIPC 126 97 163 2.12 1.48 2.36Max Re 82 174 95 1.38 2.70 1.49Montpelier 44 124 97 0.50 1.29 1.07PartnerRe 86 257 254 1.54 4.42 4.40Platinum 202 158 154 3.58 2.42 2.40Renaissance Re 273 374 309 4.18 5.16 4.31Validus 142 128 44 1.83 2.11 0.76White Mtn (66) 195 212 (6.27) 18.03 19.61XL Capital 450 1,094 836 2.54 6.06 4.64

CUMULATIVE YTD EARNINGS DATA

19526A_BIQ:.ps 9/17/08 7:41 PM Page 13

Reinsurance: Property • Casualty • Catastrophe • Agriculture • Marine • Aerospace • Surety & Other SpecialtyInsurance: Property • Casualty • Healthcare Liability • Workers’ Compensation • Professional Lines • Agriculture

No matter where you are inthe world, we understand whatmakes your business tick.

Your risk is our focus.

www.endurance.bm Bermuda London New York Singapore Zurich

Around the globe, each industry faces its own unique set of risks. Our specialized knowledge, sharp client focus and superior analytics enable us to deliver tailored risk management solutions to businesses all over the world – in real time.

Endurance Specialty Holdings Ltd., publicly traded on the NYSE, is a global specialty provider of insurance & reinsurance with over $7.8 billionin assets. We maintain excellent financial strength as evidenced by the ratings of A (Excellent) from A.M. Best (XV size category) and A (Strong) fromStandard and Poor’s on our operating subsidiaries (other than American Agri-Business Insurance Company) and A- (Excellent) from A.M. Best forAmerican Agri-Business Insurance Company.

®

EnduranceCLOCK_Corp_BIQ.eps 8/25/08 2:45:54 PM

19526A_BIQ:.ps 9/17/08 7:41 PM Page 14

[ 15 ]

Chicago-based Aon Corporationis to buy Bermuda-incorporat-ed London reinsurance broker

Benfield Group Limited. Underthe agreement Aon, which also hasoffices on the Island, will buyBenfield for £3.50 ($6.55) pershare in cash and assume £91 mil-lion ($170 million) of Benfield netdebt, representing an enterprisevalue of approximately £935 mil-lion ($1.75 billion) on a fully dilut-ed basis.

Aon will integrate Benfield intoits existing reinsurance operationsto create a global division operat-ing under a new brand, AonBenfield Re.

“This agreement reflects ourongoing efforts to ensure thatAon’s colleagues, capabilities andtechnology remain at the forefrontof our industry,” stated Aon’sPresident and CEO Greg Case.

He added: “Aon and Benfieldshare a common focus on excel-lence in client service, and bothrecognise the importance of beingthe destination of choice for thebest talent in our industry. Thestrong cultural fit between ourfirms will enable us to quicklyrealise the benefits of this transac-tion, and the value added for ourclients and shareholders in a seam-less fashion following the close ofour transaction.”

Grahame Chilton, Benfield’sCEO, will become vice chairmanof the Aon Group reporting toCase.

He said: “We are excited by thisunique opportunity to create apowerful global franchise capableof expanding and redefining inno-vative reinsurance and capital mar-ket solutions. At the same time theBenfield board believes that theoffer provides Benfield’s share-

holders with fair and certain value.We look forward to joining theAon team and working with themas Aon Benfield Re to expand ourjoint expertise and local reach tocustomers around the world.”

The transaction is expected toclose by the end of 2008 subject tocustomary closing conditions andregulatory approvals, as well asapproval by Benfield shareholders.

Aon to buy BenfieldNEWS REVIEW

Navigate the legal risk.

Insurance | Bermuda | Reinsurance

www.aswlaw.com

MOVE KEEPS COMPANY ‘AT FOREFRONT OF INDUSTRY’

Sixteen of the world’s 35 topreinsurers, and five of the top20, are based in Bermuda,according to a survey in theAugust issue of Best’s Review.

Ranked according to grosspremiums written in 2007, thelocal list was headed by EverestRe Group (10th) with $4.1 billion.Others in the top 20 werePartnerRe Group (12th) whowrote $3.8 billion in premiums,XL Capital (13th) with $3.4 bil-lion, RenaissanceRe (17th) with

$1.8 billion and ACE (20th) with$1.6 billion.

All 16 Bermuda companieslisted achieved operating prof-itability in their reinsurance busi-ness last year, with combinedratios under 100%.

Validus was the highest-placed newcomer with $989 mil-lion. Amlin, the London-basedcompany which has a Bermudaoffice, had the best combinedratio of 50.7%, followed byRenaissanceRe (59.3%).

Bermuda ranks among world best

‘We are excitedby this uniqueopportunity tocreate a powerfulglobal franchise’

EnduranceCLOCK_Corp_BIQ.eps 8/25/08 2:45:54 PM

19526A_BIQ:.ps 9/17/08 7:41 PM Page 15

[ 16 ]

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: lmw@milligan.bm

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

Trott & Duncan is a full service law firm thatprovides legal advice and consultation in everyaspect of legal practice, including:

� Commercial Law� Insurance & Reinsurance� Insolvency� Arbitration� Incorporations & Corporate

Administration Services

We invite you to contact Trott & Duncan for acomphrensive review of our capabilities and toexperience the confidential and personalisedway in which we will meet your everyrequirement.

Contact: Delroy B. Duncan, FCI Arb., JP

17A Brunswick StreetPO Box HM 2094Hamilton HM HX

TEL: (441) 295-7444 FAX: (441) 295-6600EMAIL: dduncan@td.bm WEB: www.td.bm

77 Front StreetHamilton HM 12,

Bermuda

Tel: 1(441) 296-5627Fax: 1(441) 296-1749Email: info@bes.bm

Contact: Laura E. Jackson

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

Church St. East, tel: 292-0893www.bermudamotors.bm

The Ultimate Convertible

19526A_BIQ:.ps 9/17/08 10:23 PM Page 16

“Just because these companiesreport large profits it is not appro-priate to suggest that internationalbusiness is a cash cow you can milkfor Government purposes.”

— Opposition UBP MP PatriciaGordon-Pamplin warns govern-

ment not to over-tax the Island’sinternational business sector

“I think the overwhelming sense isa sense of sadness that this is hap-pening. We would all wish that it

were otherwise.”— XL Capital CEO Mike

McGavick on his decision to cut165 jobs, including 47 in Bermuda

“It is hugely costly to XL but it is amove they had to make — theirback was against the wall. Theirfranchise was coming under pres-sure in that its peer group wasstopping doing business with it.”

— CreditSights Inc analyst RobHaines, on the XL bailout of SCA

“I don’t think the Bermuda rein-surance market is going to go any-where else anytime soon, and ourreinsurance platform here isdesigned and engineered to with-stand the next major catastrophe.”

— Hiscox Bermuda Vice PresidentChris Sharpe in Bermuda:Re

magazine

“Bermuda is a very receptivemarket to alternative sources ofcapital, and for us to be there

suggests we may ourselves be ableto access different alternativesources of capital were we to bein the market for raising morecapital, which we’re not at themoment, but we can see thatthere are all sorts of flexibilitiesand the speed at which people areable to raise money there is alsovery attractive.”— Barbara Merry, CEO of Hardy

Underwriting, in Bermuda:Remagazine

[ 17 ]

MEDIA WATCH

Don’t overmilk the cash cow!

ONSHOREOctober 15–1622nd Int’l Reinsurance CongressFairmont Hamilton PrincessHotel, Bermudawww.reinsurancecongress.co.uk

November 12–13Annual PricewaterhouseCoopers/Standard and Poor’sBermuda Insurance ConferenceFairmont Hamilton PrincessHotel, Bermudawww.pwc.com/bermuda

April 5–7, 2009Spring IRU ConferenceFairmont SouthamptonPrincess Hotel, Bermudawww.irua.com

OFFSHOREOctober 26–29PCI Annual ConferenceScottsdale, AZ www.pciaa.org

October 26–30Baden-Baden Reinsurance MtgBaden-Baden, Germanywww.badendirectoryonline.co.uk

November 17–19World Captive ForumPalm Springs, Californiawww.worldcaptiveforum.com

April 19-23, 2009RIMS Annual Conf & ExhibOrlando, Floridawww.rims.org

WHAT’S ON

19526A_BIQ:.ps 9/17/08 7:41 PM Page 17

As the leading non-US supplierof reinsurance to US insurers,Bermuda provides a “critically

important source of risk capital”for the US, according to a reporton the Bermuda market.

“The Bermuda InsuranceMarket: An Economic Analysis”by Dr J David Cummins of TheWharton School, University ofPennsylvania and The FoxSchool, Temple University, saysbecause Bermuda firms areunafraid to place themselves inthe position of taking significantlosses from US catastrophes, theycontribute significantly to theefficiency of US insurance mar-kets.

“The US accounted for 87% ofworldwide insured catastrophelosses in 2005 and for more than60% in 2006,” notes DrCummins. “As a result, US insur-ance markets are heavily depend-ent upon both domestic and for-eign reinsurers. Bermuda has

become the world’s most impor-tant market place in terms of sup-plying reinsurance to US insur-ers.”

He adds: “An analysis of theleading US insurers in terms ofreinsurance ceded to non-USreinsurers shows that Bermuda isthe number one jurisdiction

worldwide for cessions by the topUS firms in all 12 lines of businessincluded in the study. ThusBermuda has gone far beyond itsinitial role during the 1980s andearly-1990s as a source of riskcapital for liability insurance andproperty catastrophes to providebroad-based coverage in many

lines of insurance.”Dr Cummins notes that 12

Bermuda-based reinsurers appearin the Standard & Poor’s GlobalReinsurance Highlights Top 40,accounting for 17% of total netpremiums written of the top 40firms. Just one Bermuda insurerwas in the top 40 in 1996.

NEWS REVIEW

US insurers dependent on Bermuda

Bermuda leads on Solvency II plans

[ 18 ]

THE ISLAND IS THE NUMBER ONE JURISDICTION WORLDWIDE FOR CESSIONS BY THE TOP US FIRMS

The Bermuda Monetary Auth -ority (BMA) has made signifi-cant enhancements to Ber -

muda’s solvency and disclosureregulations for insurance.

The BMA said the changeswould help ensure Bermudaachieves recognition as havingequivalent regulatory standards asEurope’s Solvency II Directive —which aims to revise capital require-ments and risk management stan-dards for the European insuranceindustry. The BMA also announcednew measures to facilitate specialpurpose vehicles (SPVs).

Matthew Elderfield, the BMA’sCEO, said: “These developmentsmean we’re well on track to achiev-ing our objective of equivalence, ormutual recognition status, inEurope and elsewhere. Bermuda isnow one of the countries at thefront of the pack in terms of

preparing for Solvency II.”With the recent passage of the

Insurance Amendment Act 2008,the BMA will introduce theBermuda Solvency Capital Req -uirement (BSCR) for Bermuda’sClass 4 reinsurers.

“The BSCR will assist us tobuild on Bermuda’s existing sol-vency regime by establishing risk-based capital adequacy standardsfor high impact insurers,” saidElderfield. “This will allow for amore risk-sensitive approach tosetting solvency requirements forBermuda’s insurers, in line withinternational developments reg -arding capital adequacy such asSolvency II.

“Implementing the BSCR willalso help with the Authority’stransition to recognising compa-nies’ internal economic capitalmodels. Permitting the use of

internal models for our reinsurancecompanies to determine appropri-ate capital levels for their business,subject to review and approval ofeach model by the Authority, isagain consistent with develop-ments in international insuranceregulation.”

Other initiatives include thepublication of financial statementsusing Generally Accepted Acc -ounting Principles (GAAP), sub-mitted to the Authority by Class 4companies under new reportingrequirements. The BMA says thiswill mean greater disclosure in linewith international standards fortransparency in the industry.

The legislation also facilitatesthe re-classification of Bermuda’sClass 3 insurance sector thatincludes a large number of firmswith a wide range of characteris-tics, from captives writing a limit-

ed amount of third-party busi-ness, to large purely commercialreinsurers.

Elderfield explained: “Thismeans we’re establishing furthersub-categories within the Class 3group, based on their respectiverisk profiles. We will be able torefine our application of risk-basedsupervision to these firms further,to ensure they receive the level ofoversight that is appropriate to thenature of their business.”

The reclassification also intro-duces a new category of ‘SpecialPurpose Insurer’ focused on fullycollateralised special purpose vehi-cles (SPVs) established to conductcertain specific insurance transac-tions, such as asset-backed securi-tisation transactions. The newclassification will make it cheaperfor SPVs to be established inBermuda.

Bermuda-based Allied WorldAssurance Company HoldingsLtd is rapidly expanding its USand global operations.

Earlier this year the companylaunched two new sub-brands inthe US — Allied World Broker -age and Allied World Specialty— that realigned distribution ofits growing number of admittedproducts along retail and whole-sale broking channels respectively.

It then announced a major

acquisition in professional linesspecialist Darwin ProfessionalUnderwriters.

The $550 million acquisitionof Darwin, due to be completedin the 4th quarter of 2008, signif-icantly raises Allied World’s USprofile. Darwin offers a wide arrayof specialty and primary profes-sional lines coverages, whichincludes an industry leadinghealth care professional liabilityfranchise and a strong niche

errors and omissions division.Scott Carmilani, Allied World’s

President and CEO, commented:“This acquisition will more thandouble Allied World’s presence inthe US particularly within the UShealth care market. By bringingtogether two companies thathave complementary productofferings, cultures and commit-ments to client service, we willcontinue to strengthen our globalfranchise.”

Allied World on the move in US and Asia

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NEWS REVIEW

John Charman, the Presidentand CEO of AXIS, has by farthe most valuable share portfo-

lio among Bermuda insuranceexecutives with nearly seven mil-lion shares valued at a whopping$221 million.

Charman, who formed AXIS is2001, easily tops the annual list ofexecutives with shares in their pub-licly-listed companies, compiled bythe KYC News InsideBermudaonline newsletter.

Charman’s nearest rival wasEvan Greenberg, Chairman,President and CEO of ACE, withmore than $66 million in shares,while Arch Capital’s President andCEO Constantine Iordanou, wasthird with $61 million.

Faring less well were former XLexecutives Brian O’Hara andHenry Keeling, whose share valuesfell. XL’s share price plunged fromalmost $82 to less than $18 overthe past year. Former Presidentand CEO O’Hara’s XL sharesplummeted from $133 million ayear ago to $31 million, while for-mer COO Keeling’s value droppedfrom $38 million to $10 million.

Meanwhile, Bermuda insuranceexecutives Don Kramer and JohnCharman are ranked in the top 10in Reinsurance magazine’s latest listof the most powerful industry fig-ures, published in its August issue.

Kramer, head of Ariel Re, andCharman, are ranked sixth andseventh respectively, while LesRock, Chief Underwriting Officerof Ironshore is ninth. BobClements, founder of Bermuda-based Ironshore, is fifteenth.

“There’s an admirable straight-forwardness about Mr Kramer,”says the magazine. “He said hewould do it and he did. Pairing upwith Atrium was a very good moveindeed. They are one of the bestshops in the room, have almost nooverlap with Ariel, and bringinstant diversification. The onlything that will cap this is if he cansomehow conjure up an InitialPublic Offering that gets his stocktrading at a healthy premium to

book value — and to its class of2005 peers. Now that would be achallenge!”

About Charman, the magazinesaid: “Almost eight years on, Axisis still motoring and Mr Charmancan take an awful lot of credit forthat. The Axis underwriters wecome across always seem to givethe impression that they enjoyhigh levels of job satisfaction —

and just check out that combinedratio. Here’s a simple fact thatspeaks volumes: very few other topexecutives’ contract extensiondeliberations are front-page news.Not so for Axis’ chief executive.”

And on Rock: “The legend justkeeps growing, as does the line ofeager brokers stretching downFront Street. We’ll wager thePembroke syndicate will be the

fastest growing entity at Lloyd’scome 2009.”

[ 19 ]

Taking Care of the Lighthouse

Taking Care of YouThe St. David’s Lighthouse has long been a beacon that symbolizes safety, security and peace of mind for seafarers.

For over 50 years, the Argus Group has also been committed to guiding businesses and individuals through rough waters, by providing comprehensive insurance and retirement plans.

We offer a full range of insurance and financial services that allow you to plan for the future, be financially secure and have peace of mind.

With the adoption of the parks at Gibbs Hill Lighthouse and St. David's Lighthouse, we are working to improve the environment of Bermuda for future generations.

Health • Pensions • Life • Disability • Home • Property • Business Interruption Motor • Retirement Plans • Investment Services

12 Wesley St., P. O. Box HM 1064, Hamilton HM EX, BermudaTel: (441) 295-2021 • Fax: (441) 292-6763

e-mail: insurance@argus.bm • www.argus.bm

Customer Service Centre 298-0888

Charman has the lion’s shareAND BERMUDA EXECUTIVES HIT THE POWER LIST TOP 10

John Charman: Still motoring

19526A_BIQ:.ps 9/17/08 7:41 PM Page 19

[ 20 ]

PEOPLE

Henry C V Keeling has retired asEVP and COO of XL CAPITAL.Keeling had previously served asChief Executive of ReinsuranceOperations, Chief Executive ofReinsurance Operations andGlobal Head of Business Services,and Global Head of BusinessServices and Chief Executive,Reinsurance Life Operations.

XL INSURANCE has appointedHarry Mahler as Chief of its

newly formed Global ProductManagement Team and David JMolitano to the new position ofTechnology Errors & Omissions

Manager in its SelectProfessional under-writing group.

Michael Nuenkehas joined Bermu -da-based ALLIEDWORLD as EVPof US Operations.

ARIEL RE has appointed formerPresident George Rivaz asChairman. He will also continue in

his current Ariel Group roles asChairman of Atrium Under -writing and President of ArielHoldings Limited. Tom Hulstwill succeed him as President ofAriel Re.

AXIS CAPITAL has appointedMichael Steel as EVP and ChiefRisk Officer based in its Londonoffice. AXIS has also appointedDean Benner as EVP and ChiefInvestment Officer.

David Kalainoff has been pro-moted to Managing Director andEVP of the reinsurance arm ofMAX BERMUDA LTD. He willcontinue in his prior role as ChiefUnderwriting Officer and Exec -utive of Casualty Reinsurance.

William Babcock has beenappointed Group Finance Dir -ector at Bermuda-based PART-NER RE. Brian Secrett hasbeen promoted to Chief Under -writing Officer, Catastrophe.Laura Davis has been promotedto SVP, Head of Catastrophe,Bermuda.

Bob Piller has been namedPresident of IronSelect, a newlycreated Excess Casualty facility ofBermuda-based IRONSHOREINC.

The ARGUS GROUP hasappointed Paul Williams to theposition of EVP InformationSystems and promoted MichelleBrock-Jackson to the positionof VP Group Insurance.Meanwhile Argus FinancialLimited has appointed CindyCampbell as COO.

In the People section of our lastissue, Elizabeth Keys wasincorrectly referred to as “formerXL CFO” in an item about herappointment as CFO of SecurityCapital Assurance (SCA), the USbond insurer established by XLCapital. She was correctlyreferred to as a former CFOof XL Capital Assurance in therest of the article.

Keeling bows out at XL Capital

Henry Keeling, Laura Davis and David Kalainoff

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Our brokers want responsiveness.Our clients want experience.

We deliver.

ATLANTA | BERMUDA | BOSTON | CHICAGO | DUBLIN | LONDON | NEW YORK | SAN FRANCISCO | ZUGwww.awac.com

Insurance coverage is underwritten by member companies of the Allied World Assurance Group. Coverage is subject to underwriting.Member companies may not be licensed in your state or jurisdiction. To find out if coverage is available, please contact your insurance broker.

From solid financial ratings, to superior customer service, to a strong globalpresence. Allied World Assurance Company is uniquely positioned to deliverthe insurance and reinsurance solutions you need, when you need them.

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