CASUALTY ACTUARIAL SOCIETY

1. CASUALTY ACTUARIAL SOCIETY 2004 Annual Meeting Montreal, Canada November 16, 2004 Security and the Reinsurer

2. Security and the Reinsurer I. Introduction II. Brief Presentation III. Panelist Q/A IV. Audience Q/A Presentation Format

3. Reinsurance Recoverable as a Percent of Surplus Source: Standard & Poors/Fitch

4. Secured vs. Unsecured Reinsurance Recoverables % of Surplus In Billions $ Secured Secured Unsecured Unsecured Source: Standard & Poors

5. Provision For Uncollectible Reinsurance Source: Fitch Ratings

6. Reinsurer Profitability Has Been Poor Source: Standard & Poors

7. Source: Standard & Poors

8. Where Has All the Ceded Gone? Direct Insurer Reserve Increases (examples, asbestos alone) Ace Ltd. $2.2 billion (4Q ‘02 - gross of reinsurance) Travelers Insurance Co. $2.7 billion (4Q ‘02 - net of reinsurance Hartford Financial Services Group Inc. $3.9 billion (1Q ‘03 - gross of reinsurance) CNA Financial Corp. $642 million (1Q ‘03 - net of reinsurance) Chubb Corp. $250 million (4Q ‘03 - net of reinsurance) Source: Standard & Poors

9. Historical Aggregate Recoverable Gap Source: Conning & Co.

10. Global Premium/Rating Shift Source: Morgan Stanley

11. Source: Standard & Poors/AON

12. Rating Trends: North America Reinsurance Source: Standard & Poors

13. US Reinsurers in 1993 Axa Reins Co Employers Re Constitution Reins American Re General Re Group Cologne Reins Co of Amer CIGNA Reins Chatham Rein Corp Folksamerica Group PMA Reins Co. Chartwell Reins Co Scor U.S. Group Gerling Global Reins Frankoana Reins Co Tig Reins Co Signet Star Reins Co Transatlantic/ Putnam Winterthur Reins Co Toa –RE America Sorema NA Reins Co Skandia America Reins Zurich Reins Centre Prudential Re NAC Reins Corp Source: Standard & Poors

14. US Reinsurers Today Employers Re Axa Reins Co Constitution Reins American Re General Re Group CIGNA Reins Co Cologne Re Co of Amer Chartwell Reins Co Chatham Rein Corp Folksamerica Group PMA Reins Co. Scor U.S. Group Gerling Global Reins Frankoana Reins Co Tig Reins Co Signet Star Reins Co/Berkley Ins Co Transatlantic/ Putnam WinterthurReins Co Toa –Re America Sorema NA Reins Co Skandia America Reins Zurich Reins Centre Prudential Re/ Everest Re NAC Reins Corp Source: Standard & Poors

15. Exit - Stage Right • Notable Reinsurer that ceased underwriting over the last several years • Gerling-Konzern Globale Rückversicherungs-AG (GKG) • Trenwick America Reinsurance Corp • Scandinavian Reinsurance Co. Ltd.; • Commercial Risk Reinsurance Co. Ltd. and Commercial Risk Re- Insurance Co. • AXA Corporate Solutions Reinsurance Co. and AXA Corporate Solutions Life Reinsurance Co. • PMA Capital Insurance Co. • CNA Re Source: Standard & Poors

16. Exit - Stage Left • Notable Spin-Offs/Renewal Rights Sales • Zurich Re/Converium • St. Paul Re/Platinum • Hart Re/Endurance

17. Still on Stage • Notable Recent Downgrades • Scor • Converium

18. New Capital Post 9/11 (as of May 21, 2002) $ Billions Capital Raised: 2001 $20.5 2002 $4.1 Total $24.6 Bermuda Start-ups: $8.5 Source: Guy Carpenter

19. Not All Reinsurers Will Survive • Balance Sheet Repair Efforts will be Hindered • New Capacity • Market Showing Signs of Turning • Ample Capacity Available at the Right Price

20. Conclusion • Reinsurance Recoverables make up a significant portion of policyholder surplus • Cedants and Rating Agencies are concerned with the financial strength of reinsurers • The game has changed and the pace of change has increased.

21. Security and the Reinsurer 2004 CAS Annual Meeting Montreal, Canada November 16, 2004 Panelist Questions

22. Security and The Reinsurer Is the focus on reinsurers’ security a new phenomenon or is it an old issue? What is your perspective on the history of reinsurers’ security?

23. Security and The Reinsurer How should reinsurance buyers evaluate reinsurers’ security? What things should they look at and what methods should they employ?

24. Security and The Reinsurer How should buyers differentiate between reinsurers with different credit quality? What are common existing practices and what are some ideas for the future?

25. Security and The Reinsurer How has the insurer/reinsurer relationship changed over the last decade? What has led to the change? How has this impacted reinsurer security?

26. Security and The Reinsurer In the last decade there have been many innovations in the ways to manage run-off insurer and reinsurer businesses. How have these innovations impacted the security of reinsurance recoverables?

27. Security and The Reinsurer What tools do cedants use to mitigate their risk to reinsurance unrecoverable? Are there differences between the US and the Rest of the World in this regard?

28. Security and The Reinsurer Do so-called “ratings triggers” in reinsurance contracts help mitigate credit risk or do they exacerbate the credit exposure?

29. Security and The Reinsurer In recent discussions on managing the cycle, the concept of capital management has been raised as a tool to help reduce the amplitude of the cycle. In fact, several reinsurers have recently initiated share buy backs and increased dividends as a way to return capital to shareholders as they perceive opportunities to deploy that capital to be more limited. Do such capital management strategies help or hurt the security of the reinsurance recoverables?

30. Security and The Reinsurer What is the current quality of reinsurance recoverables in general? Is it getting better or worse in 2004?

31. Security and The Reinsurer What methods should cedants use to establish a provision for reinsurance unrecoverable? Is there a consistent approach used or are there big differences from company to company?

32. Security and The Reinsurer What methods should cedants use to build the cost of uncollectible reinsurance into their rates? Are these methods accepted by regulators in the rate filing process?