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ALL THE RESULTS & ANALYSIS Q1 12 BERMUDA BIQJuly 2009 ‘TAX HAVEN’ BERMUDA LATEST 10 INSURANCE QUARTERLY HAIR TODAY © 2009 Bermuda Media … BUT THEN in association with IT’S GONE! 20

Flagstone Re and ACE have already moved their headquarters from Bermuda to Switzerland. With others likely to follow, why is Switzerland an attractive LURE OF THE ALPS… proposition for a growing number of Bermudian companies? See page 4 20333E_BIQ.qxp:.ps 6/24/09 4:19 PM Page 2

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THE QUOTES OF THE QUARTER

“As the year goes on I expect “While we have seen the BIQ revenue growth to remain green shoots of recovery, we under pressure due to global do not believe the risk-reward BERMUDA INSURANCE recessionary conditions and characteristics have sufficient- foreign exchange. While many ly swung in our favour to QUARTERLY of our customers’ exposures mobilise ourselves for a full are down due to reduced busi- offensive. We believe that, by Volume 5, Number 3 July 2009 ness activity, and many com- year-end, our market-leading panies are in search of more diversification by product and Consulting Editor affordable insurance alterna- geography, together with our Richard Whitaker tives, the quality of our port- strong underwriting skills and Art Director folio of risks continues to improve.” risk management framework, will be fully Paul Shapiro — Evan Greenberg, Chairman and CEO of mobilised across both our insurance and reinsur- Contributing Editor ACE Limited ance segments to deliver high quality out per- Chris Gibbons formance.” Director of Marketing "We are seeing an increasing — John Charman, AXIS Capital Lissa Fisher flow of new business oppor- President and CEO Publisher tunities, particularly within Ian Coles our specialty reinsurance unit “This is another quarter of Published by Bermuda Media, Suite 310, The International Centre, 26 and individual risk segment. solid achievement for XL as Bermudiana Road, Hamilton HM 11, Our strong financial res- we continue to demonstrate Bermuda. Postal address: PO Box HM 2032, Hamilton HM HX, Bermuda. Tel: ources, excellent ratings, rep- we have the wherewithal to 292-7279 Fax: 295-3189 Email: [email protected]. Web: bermudamedia.bm. utation for superior under- navigate these troubled times Printed in Canada. writing and client service along with our ongoing and to deliver on our commit- Published four times a year in associa- efforts to build out our business capabilities, posi- ments to shareholders and to tion with PricewaterhouseCoopers. tion us well to capture these opportunities.” clients.” Cover image: istockphoto.com — Neil Currie, CEO of RenaissanceRe — Mike McGavick, CEO of XL Capital Bermuda ratings under pressure S&P EXPECTS GENERAL GOVERNMENT DEFICITS TO RISE TO FIVE PER CENT IN 2009 AND 2010

he credit crunch and external banking sector, S&P affirmed pressures ease.” remained negative due to the cur- threats to the reinsurance mar- Bermuda’s AA long-term sover- Government would face higher rent turmoil in the financial markets Tket are putting increased pres- eign credit rating, saying Ber- interest on money borrowed if its — but said the Bermuda market sure on the Island’s ratings. muda’s low government indebted- credit ratings were downgraded. was likely to fair better than many. In May, Standard & Poor’s ness was about the lowest of Finance Minister Paula Cox Fitch said while it expects dropped its ratings outlook on nations rated by S&P. But the said she still considered the AA downward rating activity globally Bermuda to negative from stable, agency warned it expects general credit rating a “strong affirmation and across all of its insurance rat- citing concern about risks to government deficits to rise to five of the endurance and resilience of ings in 2009, Bermuda reinsurers Bermuda’s external and fiscal posi- percent in 2009 and 2010 from our economy during these chal- were less likely to face widespread tion from its banking system. The three percent in 2008. lenging times” and that she was rating downgrades than other move followed an earlier ann - S&P Credit Analyst Nikola pleased that S&P balanced its insurance sectors, primarily ouncement by Moody’s Investors Swann said: “Should the Island’s analysis by taking a positive out- because of their comparatively Service lowering its government banking sector weaken or should look on the resilience of Bermuda’s lower asset leverage and higher- bond ratings on Bermuda one the dynamism of its reinsurance international insurance sector. quality investment portfolios. notch from Aaa to Aa2. market wane, the ratings could Meanwhile Fitch Ratings stated The report said challenges for S&P said Butterfield Bank, come under pressure. On the other in a Special Report earlier this year the Bermuda market included with a 51 percent market share of hand, we could revise the outlook that its rating outlook for the ongoing pressure on asset valua- deposits, had $152 million in loss- to stable if the country’s external Bermuda reinsurance market tions, uncertainty surrounding the es on its held-to-maturity invest- market’s ability to recapitalise in ments in 2008, which prompted ‘Challenges included ongoing pressure the event of a major catastrophe, the Bank to raise $200 million of and ongoing threats to the Island’s preferred shares. The Bank of on asset valuations, uncertainty tax advantages. Bermuda was issued with a nega- But Fitch said it foresaw oppor- tive outlook in December on con- surrounding the market’s ability to tunities for companies who histor- cerns about rising pressures to its recapitalise … and ongoing threats ically have taken advantage of peri- earnings in 2009. ods of increased risk to provide Despite concerns about the to the Island’s tax advantages’ new underwriting capacity. [ 1 ] 20333E_BIQ.qxp:.ps 7/3/09 7:47 AM Page 2

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NEWS REVIEW Rates set to harden later in year GREENBERG: ‘INSURANCE BUYERS HAVE SIGNIFICANTLY DIALLED BACK THEIR EXPOSURES’ nalysts and industry experts with pricing reductions since mid- surplus at year-end. “This compares well to the expect US property casualty 2004. Although investment losses David Brown, CEO of Flag- mess that followed in the wake of Arates to harden in the second significantly reduced the reinsurance stone Re, recently told Reinsurance Katrina and indicates that, as an half of 2009, but believe the ongo- sector’s excess capital position, S&P Magazine that although the indus- industry, we have a better handle ing financial crisis and recession believes most US and Bermuda firms try suffered poor or negative and control on our exposures,” he will mean only modest increases. continue to benefit from strong levels book-value growth during the last said. “Furthermore, the most Speaking at Standard & Poor’s of capital adequacy. half of 2008, the Bermudian rein- recent six months have seen the Insurance 2009 Conference in S&P said aggregate capital for surance industry absorbed signifi- impact of the capital losses from New York in June, Grace Osborne, Bermuda-based reinsurers stood at cant losses from Ike and other 2008 create an imbalance between Managing Director and Practice $65 billion at year-end 2008, while events without any serious loss of the demand for reinsurance and Leader for North America US insurers posted a $37 billion capital. the industry’s ability to supply it.” Insurance Financial Services at S&P, said recent pricing surveys had shown progressively smaller year-over-year price declines among primary commercial lines insurers, hinting at rate rises in the second half of the year. Rates have been falling since 2005, particularly since 2007, fol- lowing two strong years of operat- ing results. Evan Greenberg, Chairman and CEO of ACE Ltd, told the conference: “The capital levels in the industry remain adequate — not sufficient, but adequate — and I think that is one reason why rates have not moved as quickly as some had hoped.” He added: “On one hand busi- ness activity has declined, and that means insurance buyers have sig- nificantly dialled back their expo- sures. On the other hand clients simply view insurance as another expense item, and they are cutting back. It’s making it much harder to get rate increases.” S&P said that due to ongoing pressures, it was maintaining its negative outlook on the US com- TALENT EXPANDS POSSIBILITIES mercial lines property/casualty sec-

tor. In the reinsurance sector, pric- At Max, we’ve recruited some extraordinary talent to drive ing has started to firm, with rate our business. From offices in Bermuda, Ireland, the United increases for property and other States and at Lloyd’s, we underwrite a wide range of Property short-tail reinsurance as a result of and Casualty Reinsurance and Insurance transactions, as well as Life and Annuity Reinsurance. Expanding the possibilities higher catastrophe losses in 2008. with financial strength, focused expertise and new approaches www.maxcapgroup.com The company said reinsurance to established convention. casualty rates remain competitive but premium rates have flattened since A.M. Best A - (Excellent) Fitch A (Strong) Moody’s A3 SPECIALTY INSURANCE & REINSURANCE

the beginning of 2009 compared MAX CAPITAL GROUP LTD. BERMUDA IRELAND UNITED STATES LLOYD’S ‘Insurance seen as another expense item’ [ 3 ] 20333E_BIQ.qxp:.ps 6/24/09 4:20 PM Page 4

NEWS REVIEW Heading for the hills… BYRNE: ‘SWITZERLAND STOOD OUT AS PROBABLY THE BEST ONE TO BE IN ON THE CONTINENT’ f Bermuda needed any reminder, of Bermuda-based Endurance ronment is one of the key drivers a leading executive warned that it Specialty Holdings Ltd, told an for the profitability of our business Iwould be easy for insurers to international conference recently and it’s passed on through our leave the Island if threatened that more companies would move pricing. If tax advantages of oper- changes in the US tax code mate- off-Island if there were no longer ating in Bermuda change and rialised. any tax advantages to staying in other jurisdictions provide such Hans-Joachim Guenther, the Bermuda. breaks, then I think our business Zurich-based Chief Underwriting Speaking at the International will start to move.” Officer and Head of Reinsurance Reinsurance Summit 2009 in Flagstone Re and ACE have for Europe and Asia at Endurance Zurich, he was quoted in Business already moved their headquarters Mark Byrne: the right move Specialty Underwriting Ltd, a unit Insurance as saying: “The tax envi- from Bermuda to Switzerland, although they retain a substantial Bermuda presence. Flagstone Re Chairman Mark Byrne, who also spoke at the con- ference, said: “Based on political A Personal Approach reasons related to the evolution of US politics, we didn’t think that staying as a Bermuda company made sense, and when we consid- ered jurisdictions, Switzerland stood out as probably the best one to be in on the continent.” He added: “Clearly it is more efficient to have our capital consol- idated in one place than have it split between two, which was how it worked before. “Second, there are many parts of the world where, if you knock on a door and you are from a Swiss company, you’re better received than if you are from a small island they haven’t heard of.” Bermuda might be known around the world as a well-regulat- ed jurisdiction for property catas- trophe reinsurance, he said: “but if you are trying to sell aviation rein- surance in India, it’s better to have a Swiss business card.” The comments drew a sharp Our professional team’s personal approach and dedicated, individual attention to our clients’ needs distinguish Bermuda Commercial response from Finance Minister Bank from other banks. Paula Cox. “The comments of

BANKING: Dedicated administrators and our 24 x 7 eBanking Swiss resident and European resi- service give our clients the accessibility and attention they need to dent business executives are unsur- effectively manage their assets. prisingly self-serving in promoting CORPORATE: Our subsidiary, International Corporate Switzerland,” she told The Royal Management of Bermuda (ICMOB), is a fully licensed and regulated Gazette. Fund Administrator and offers a complete service for all types of funds including global custodyc and corporate services. She said executives who pro-

TRUSTTRUST: WhetherWheether for estate planning, Personal TTrust,rust, Special Purpose mote Switzerland as safer than VehicleVehicle (SPV), or other trust structures, BCB TTrustrust Company takess a Bermuda were “out of step” with personal approachapproacch to the setup and management of the full trust process. the majority view of Bermuda’s insurance market leaders who see 1919 Par-la-VillePar-la-Ville Road,Road, HamiltonHamilton HMHM 11,11, BermudaBermuda | T.T. (441)(441) 295-5678295-5678 | F.F. (441)(441) 295-4759295-4759 | [email protected]@bcb.bm | www.bcb.bmwww.bcb.bm Bermuda as the platform of choice from which to launch global operations. [ 4 ] 20333E_BIQ.qxp:.ps 6/24/09 4:20 PM Page 5

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NEWS REVIEW Argus settles over Madoff losses BUT NO FINANCIAL SETTLEMENT WILL BE PAID TO POLICYHOLDERS ocal insurance group Argus has Court for the Southern District of the assignment of certain Argus The statement also said: “The reached an agreement in princi- New York by some of Argus’s International claims to a litigation Argus Group and Argus Inter - Lple to settle a class action pend- international life insurance cus- trust, and co-operation by Argus national continue to deny all alle- ing in the US relating to invest- tomers who had seen the value of International in connection with gations of wrongdoing or liability ment losses caused by the Bernard their policies plummet. litigation of the assigned claims. In whatsoever with respect to the liti- Madoff fraud scandal. In a company statement, Argus exchange, the Argus Group and gation, but have agreed in principle The case had been brought said the terms of the settlement, Argus International will obtain to settle the case to eliminate the against Argus and Argus Inter- which are subject to documenta- broad releases relating to the claims burden, expense and uncertainty of national Life Bermuda Ltd, as well tion and court approval, incorpo- in the litigation and other protec- litigation as well as the concomi- as 10 other funds, money managers rate a broad package of relief tions and relief. No financial settle- tant distraction of resources and and companies, in the US District including loans to policyholders, ment will be paid to policyholders. efforts from their businesses.” Argus has also filed a claim with the Supreme Court of Bermuda against Tremont Group CJPOJD! Holdings Inc and Tremont (Ber- muda) Limited. Argus bought EBUB!! Tremont International Insurance QSPUFDUJPO Ltd (TIIL) from the Tremont Group in December 2006, and Bouj.tqbn-!bouj.wjsvt-! subsequently changed the compa- jnbhf!'!dpoufou!dpouspm! tfdvsjuz!tpmvujpo ny’s name to Argus International Life Bermuda Limited. 211&!hvbsbouffe! In addition, Argus has success- qspufdujpo!gspn!! fully petitioned the Cayman fnbjm!wjsvtft Grand Court to appoint liquida- tors over the Tremont-managed Qspufdu-!dpouspm!boe! dfousbmmz!nbobhf!fnbjm!Ñ! funds, Rye Select Broad Market cfgpsf!ju!sfbdift!! Insurance Portfolio LDC and Rye zpvs!ofuxpsl Select Broad Market XL Portfolio Limited. Fodszqu-!bsdijwf!boe! Gerald Simons, President and fbtjmz!sfusjfwf!zpvs!fnbjm-! sfevdjoh!tfswfs!tupsbhf! CEO of the Argus Group said: sfrvjsfnfout “Having done what we can to pro- ! tect the interests of our policyhold- Sfevdf!ps!fmjnjobuf! ers by seeking the appointment of uif!offe!gps!jo.ipvtf! independent liquidator Zolfo nbobhfnfou!boe!tvqqpsu Cooper over the Rye Funds, Argus ! Fydmvtjwf!mpdbm!qspwjefs!! is now turning its attention to its pg!xpsme.mfbejoh! own case against Tremont arising NfttbhfMbct!tfswjdft out of the purchase of TIIL. It is quite clear that TIIL was not worth what Tremont said it was and that Argus has suffered losses and damage as a result.” Some of the Argus Select Funds which support the pension XF!IBWF!UIF!!!!!QSPUFDUJPO policies of the Argus Group have a small investment in the Pioneer Momentum All Weather Fund which in turn had invested in the U/!3:3!2885!!!!!F/!tbmftAdd/cn!!!!!G/!3:7!2323! Bermuda-managed Kingate Glo- XXX/DD/CN bal Fund Ltd, a Madoff feeder fund. Argus is advised that Pioneer is seeking legal advice in both Bermuda and New York to deter- mine its ability to recover losses as a result of the Madoff fraud. [ 6 ] 20333E_BIQ.qxp:.ps 6/24/09 4:20 PM Page 7

NEWS REVIEW BMA publishes key consultation paper AUTHORITY WORKS TOWARDS REGULATORY EQUIVALENCE FOR BERMUDA’S INSURANCE FRAMEWORK he Bermuda Monetary Auth- internal models is in line with inter- in use by companies, and the vency framework for Bermuda’s ority has published another key national proposals on solvency that robustness of those models. This largest insurers. This framework TConsultation Paper in its ongo- are currently in development, such activity was followed up with a trial includes: the Bermuda Solvency ing efforts to ensure Bermuda’s as Europe’s Solvency II Directive review of a small number of compa- Capital Requirement; the Auth - insurance industry meets interna- and the International Association nies’ models. At the end of 2008 the ority’s Standardised Capital Ade- tional regulatory standards. of Insurance Super visors solvency BMA published a report sum- quacy Model that was introduced According to a BMA state- proposals. The BMA began devel- marising the findings from the sur- at the end of 2008; the Internal ment, “Standards and Applications oping its framework in 2008 when vey and reviews. Capital Models framework, and an Framework for the Use of Internal it conducted a survey with all Class The Consultation Paper repre- Own Risk and Solvency Ass- Capital Models for Regulatory 4 reinsurers to evaluate the extent to sents the next step in the develop- essment regime which is currently Capital Purposes” outlines the which internal capital models were ment of the BMA’s enhanced sol- in development. Authority’s proposed application process and model approval crite- ria for Class 4 reinsurers applying to use an internal capital model to determine their regulatory capital. Establishing an internal capital model framework is part of the Authority’s ongoing work to dev- elop a leading international regula- tory framework for Bermuda’s insurance sector. BMA CEO Matthew Elder- field said: “The Authority is work- ing towards the goal of achieving regulatory equivalence for Ber- muda’s insurance framework with- in key international markets. The issuance of this Consultation Paper represents the completion of another milestone for the Auth- ority on the road to mutual recog- nition.” The use of regulator-approved RenRe forms new reinsurer Bermuda reinsurer Renaiss- anceRe has set up a new Bermuda sidecar to provide additional reinsurance capacity for the Florida homeowners market in the current upcom- ing renewal season. RenaissanceRe will cede a defined portfolio of its property catastrophe business covering primarily hurricane risks for Florida insurers during the 2009 hurricane season, to Timicuan Reinsurance II Ltd (Tim Re II). Tim Re II has approximately $60 million of equity capital, including $10 million invested by RenRe.

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NEWS REVIEW IPC shareholders reject Max merger VALIDUS EXPECT IPC’S BOARD TO AGREE PENDING AMALGAMATION AGREEMENT, CHRIS GIBBONS REPORTS hareholders of IPC Holdings Ltd have voted Board’s key criteria for enhancing shareholder against their Board by rejecting a planned value: greater scale and scope, diversification Smerger with Max Capital Group Ltd. The into non-correlated risks, preservation of the move now paves the way for a hostile takeover value of IPC’s existing franchise and increased by rival Bermuda reinsurer Validus Holdings management depth.” Ltd. Validus waged a determined PR and legal On June 12, IPC shareholders voted against campaign to block the IPC-Max deal, and Mr the merger by “a wide margin” according to one Noonan said: “Validus’ superior offer contrasts insider quoted by the Wall Street Journal. A with the proposed Max amalgamation, in which Validus statement put the figure at 72 percent. IPC shareholders would receive less cash, which In a simultaneous meeting, Max shareholders is being paid solely through dividends. These had voted overwhelmingly — 90 percent dividends are essentially just returning IPC according to a company statement — in favour shareholders their own money and Validus of the deal first announced in March. believes, like most special dividends, will not IPC began looking for partners last year to result in a meaningful increase in IPC’s aggre- expand its business, and Chairman Kenneth Marty Becker, Max Chairman and CEO gate shareholder value.” Hammond said in a statement issued after the Three days before the vote, Validus said meeting: “We have heard the message sent by announced, with Mr Noonan declaring: “This RiskMetrics Group, an independent proxy vot- IPC shareholders. The board will review all proposal represents a compelling strategic com- ing and corporate governance advisory firm, had strategic alternatives to maximise shareholder bination that we believe would generate superi- recommended that IPC shareholders reject the value including sale of the company, and as part or value for both Validus and IPC shareholders. Max offer, but IPC accused RiskMetrics of of this review will give consideration to The shareholders of both companies would using “bad math” to come up with its recom- Validus.” benefit from being part of a larger, more diver- mendation. Validus CO Ed Noonan said in a statement: sified, global business which would be a market- It said RiskMetrics ignored book value “By rejecting the Max amalgamation by an leading carrier in Bermuda’s short-tail reinsur- growth for IPC’s operations, the potential incre- overwhelming margin, IPC shareholders have ance and insurance market.” mental returns on $400 million excess capital clearly spoken. We now expect IPC’s Board to The three firms then became locked in an through special dividends, and potential deploy- heed the message sent by IPC’s shareholders by increasingly bitter battle. Four days before the ment for additional earnings growth. IPC said agreeing to Validus’ pending Amalgamation shareholders meetings, Validus upped its bid for another proxy advisory firm, Glass Lewis & Co, Agreement without delay so that IPC’s share- IPC to $1.72 billion. had recommended shareholders vote for the holders can receive the superior value offered by Marty Becker, Chairman and CEO of Max deal. Validus promptly. Capital, commented: “The Board, employees In a letter to the company’s shareholders, a “We are gratified that the Max amalgama- and shareholders of Max were excited about the disappointed Mr Becker said: “In the end, the tion agreement has now been terminated and we deal with IPC, and we are, of course, disap- Max Board of Directors did not believe that fur- urge the IPC Board to work co-operatively with pointed that IPC’s shareholders did not approve ther enhancement of our proposal would be us to achieve an expeditious closing of the it. We believed and continue to believe that the advantageous for our shareholders. While the Validus transaction.” combination of Max and IPC would have creat- IPC combination would have been an attractive Under Validus’ offer, IPC shareholders would ed significant value for both companies’ share- combination to enhance our size and scale, we receive $3.75 in cash and 1.1234 Validus voting holders. However, we also believe that main- wanted to ensure Max shareholders were prop- common shares for each IPC common share, for taining our perspective and discipline as a par- erly rewarded for the value that Max was bring- a total consideration of $30.32 per IPC share ticipant in this process was in the best interest of ing to the transaction. Max is a very vibrant and based on Validus’ closing price on June 11. our shareholders. Max is a strong, diversified successful business with significant shareholder Validus had launched its rival bid on March underwriting company and will continue to upside and more than adequate capital to exe- 31, just weeks after the IPC-Max merger was focus on building the value of our global busi- cute our business plan.” ness for our shareholders.” The merger would have resulted in IPC NOONAN: ‘We urge the shareholders owning about 58 percent of the BECKER: ‘Max will combined company, with Max Capital share- IPC Board to work holders owning the remaining 42 percent. The continue to focus co-operatively with IPC board insisted that the subsequent offer on building the from Validus was inferior and “not in the best us to achieve an interests of IPC and its shareholders as a value of our global whole,” saying the offer was at a significant dis- expeditious closing count to IPC’s book value and offered less book business for our value per share than the IPC/Max transaction. of the … transaction’ In a letter to shareholders on June 2, the IPC shareholders’ Chairman said the deal “meets all of the IPC [ 8 ] 20333E_BIQ.qxp:.ps 6/24/09 4:20 PM Page 9

Study highlights growing Bermuda role in US economy PACKWOOD: ‘BERMUDA PLAYS AN INVALUABLE AND INCOMPARABLE ROLE IN THE UNITED STATES’

new Economic Impact Study and success, but rarely has from Bermuda subsidiaries major- commissioned by the Bermuda Bermuda turned the tables to ity-owned by US interests. A International Business Assoc- focus on the role that Bermuda Over the last 10 years, iation underlines the growing plays in supporting the US econ- Bermuda has also evolved into a importance of the Island’s reinsur- omy. significant international financial ance sector in supporting the US “This study puts some real centre with important ties to the economy. substantive findings behind the US investment community. The The study confirms that Ber- argument that Bermuda plays an study says in 2008 Bermuda had muda is the leading offshore sup- Cheryl Packwood, BIBA CEO invaluable and incomparable role 1,300 domiciled and regulated plier of insurance, reinsurance and in the United States. While that investment funds with almost payer of property and casualty And Investment, used only pub- economic support begins with $200 billion in net assets, with losses to the US, and the fourth licly available economic informa- insurance and reinsurance, it US-owned corporate and tax most important export market for tion and scoring methods used by extends beyond those industries exempt funds accounting for as US financial services and insur- the US Congressional Budget specifically and supports agricul- much as $70 billion of those ance. Office for the study. As such, the ture, energy, shipping and invest- assets, and American individuals The Economic Impact Study study is likely to provide useful ment capital that make a mean- for another $30 billion. The study was conducted in the first quarter ammunition for Bermuda’s lobby- ingful difference in the short and said that most of these Bermudian of 2009 by Stonebridge Interna- ists on Capitol Hill as they seek to long-term health of the US investments are US offshore funds. tional, a leading Washington DC- derail possible tax and regulatory economy.” Bermuda is also the 10th based global business strategy threats to the Island’s reinsurance The study estimates that two- largest portfolio investor in US firm founded by Samuel “Sandy” business. way trade between Bermuda and securities, its portfolio investment Berger, President Bill Clinton’s BIBA CEO Cheryl Packwood the US was worth $60 billion a doubling to $209 billion from 2000 former National Security Advisor. said: “For years Bermuda has year and sustained 300,000 US to 2008. Bermudian investors are BIBA said Lead Researcher known that we are dependent in jobs in 2007 - 100,000 created by the 15th largest holders of US Charles Ludolph, a Senior US large part on the United States for annual US exports to Bermuda, Treasuries and US Government Economist For International Trade our continued economic growth with a further 200,000 derived asset-backed bonds.

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NEWS REVIEW Bermuda ‘dodges bullet’ over tax change US WARNED ‘NOT TO TAR ABUSERS OF ADVANTAGES WITH THE SAME BRUSH’ ermuda’s reinsurance industry ters.” breathed a sigh of relief in mid- In the June issue of Reinsurance BMay when it was not targeted Magazine, Don Kramer, an in US President Barack Obama’s American-born veteran of the plans to raise more than $200 bil- Bermuda market and CEO of lion in tax revenues over the next Bermuda-based Ariel Re, said it 10 years. was “infuriating to hear the President Obama will clamp [CDII] seeking protectionist tax down on tax havens and remove legislation say repeatedly that all tax incentives for moving jobs they want to do is level the playing overseas, but stopped short of field when, in fact, the cession of including the tax code change pro- inter-company reinsurance to posed by Massachusetts Represent- Bermuda involves the assumption ative Richard Neal that would raise of significant risk.” the US tax rate on non-US insur- Don Kramer: infuriated Bradley Kading: “long fight” In the same issue, Ironshire ance companies — a move that would CEO Mitch Blaser said: “Any bill hit Bermuda-based insurance in the [Obama] Administration as well as affiliated). that encourages protectionism will companies with US subsidiaries. that the proposed discriminatory G Reduce the supply of primary ultimately have the biggest nega- At present, the President is tax is a complex issue and needs insurance in the US by 1.8–2.1 tive impact on the consumer: costs focusing on the offshore activity of more study.” percent. would increase as the sources of American companies because, as a Premier Brown said that based G Increase the price of primary capital become more expensive.” White House statement put it: on conversations he had in insurance by 1.8–2.1 percent over- He said it was a misconception “Nearly one-third of all foreign Washington, he did not think the all, and by more than 16 percent in that Bermuda-based companies do profits reported by US corpora- Neal Bill had sufficient support. some lines of business. not pay US taxes. “Federal Excise tions in 2003 came from just three “More than a few members of The study said the burden of Tax at four percent of gross trans- small, low-tax countries: Bermuda, Congress said they had no inten- reduced supply and higher prices lates into taxes of 20 to 40 percent the Netherlands and Ireland.” tion of supporting the Bill because would fall disproportionately on of net income assuming a 10 to 20 While the industry might have they don’t think it’s good for the states most vulnerable to cata- percent profit and there wasn’t as “dodged a bullet” as one headline Bermuda or good for the US,” he strophic losses — California, Flor- much profit in the business over stated, it is still on a war footing, said. ida, New York and Texas. the last two years. However, these and Bermuda will continue the The Coalition for a Domestic “This study confirms the fears taxes are still paid. charm offensive it has mounted in Insurance Industry (CDII), which of the nearly 40 independent “The issue that the US has to recent months. Premier Dr Ewart supports the Bill, claims the tax experts, state government officials, deal with is to be careful not to tar Brown and Finance Minister Paula code change is necessary to “level business owners, and associations abusers of tax advantages with the Cox led a high profile delegation the playing field” for American- who publicly filed opposition let- same brush.” to Washington, DC, in May to based reinsurers. But Bermudian ters to legislation pending in And Max Capital CEO Marty fight the Island’s “tax haven” label. companies say such a move would Congress,” said Mr Kading. Becker said an ABIR survey of “It is important that we continue cut the supply of insurance and “This legislation imposes an members with significant US to tell the Bermuda story on reinsurance in the US and drive up unnecessary and costly tariff on operations, showed that between Capitol Hill,” said Ms Cox. insurance costs for American con- companies that help spread insur- 2004 and 2006 those Bermuda According to the Wall Street sumers. ance risks for consumers and busi- companies were already paying an Journal, a US Treasury spokesman A report by the Brattle Group, a nesses in areas subject to hurri- effective average US tax rate on said the reinsurance issue was still Cambridge, Massachusetts-based canes, earthquakes, crop failures their income related to US opera- under review and that President economic consulting firm commis- and other forms of natural disas- tions of approximately 28 percent. Obama had not yet taken a firm sioned by the Coalition for Com- position on it. petitive Insurance Rates (CCIR), As Bradley Kading, President claimed that the Neal Bill would Government to open DC office of the Association of Bermuda cost consumers an additional $10- The Bermuda government is to open an official office in Washington, Insurers and Reinsurers (ABIR), $12 billion per year to maintain DC, just seven blocks from Capitol Hill. The office, at 325 7th Street and the industry’s Washington- their current insurance coverage. NW, is expected to officially open in September. based lobbyist, told The Royal According to the study, the Government made the announcement in May following Premier Dr Gazette: “It’s a long fight. We’ve Neal Bill would also: Ewart Brown’s trip to Washington at the head of a Bermuda delegation just passed one more milestone in G Reduce the supply of reinsur- to meet with key members of Congress to put Bermuda’s business the road. The US Government is ance in the US by $19–$22 billion, case in the face of growing tax and regulatory threats. Dr Brown told hungrily seeking revenue from all which represents 20 percent of all the House of Assembly that the new office would help bolster moves to sources. reinsurance and 40 percent of all change the misconception of Bermuda as a tax haven. “We think there is a recognition foreign reinsurance (non-affiliated [ 10 ] 20333E_BIQ.qxp:.ps 6/24/09 4:20 PM Page 11

BERMUDA TAKEN OFF GREY LIST ermuda has officially been removed Bfrom the Organisation for Economic Co-operation and Development’s (OECD) controversial grey list of tax havens after completing the required 12 tax information exchange agreements (TIEA). Finance Minister Paula Cox signed Bermuda’s 12th TIEA at the Dutch Embassy in London on June 8. Bermuda was included in the list at the G20 Economic Summit in London as world leaders pledged to clamp down on tax havens. The list compiled by the OECD named jurisdictions that had committed to international tax transparency standards but had not yet implemented them. Jurisdictions on the list were ordered to complete 12 TIEAs by September 2009 or face further sanctions. Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, called the signing a “very significant devel- opment” for Bermuda. The Finance Ministry’s Treaty Unit has concluded negotiations on three more TIEAs, with Germany, Mexico and Canada, which are expected to be signed by the end of the year, and Government plans to sign TIEAs with all G7 countries. In a statement, the OECD said: “Bermuda was one of the first jurisdictions to commit to the international standard of transparency and exchange of information in May 2000.” Minister Cox pledged that Bermuda would “build upon our long standing posi- tion of transparency and co-operation which has, through the years, differentiat- ed Bermuda from other jurisdictions.” She added: “Most importantly, Bermuda continues to not only meet but exceed standards set by the OECD Global Forum’s annual assessments, and we are confident that we have the legislative framework in place to well position our- selves for the forthcoming model peer review process as our TIEA partners repeatedly publicly commend Bermuda on how well we effectively exchange information.” However, the Opposition UBP criticised government’s apparent sluggishness in dealing with the issue. Shadow Finance Minister Bob Richards said: “We hope the Minister has learned a lesson from this exercise — that there can be no complacency when it comes to upholding Bermuda’s international reputation.”

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3 OPERATING RATIOS QUARTERLY LOSS RATIOS Q1 2009 Q1 2008 Q1 2007 ACE 59.7% 55.6% 62.1% Arch 57.2% 57.1% 56.3% Aspen 56.1% 52.9% 51.4% Allied World 45.8% 52.5% 57.9% ANALYSIS / PRICEWATERHOUSECOOPERS Q1 2009 Axis 58.3% 54.9% 57.3% Endurance 58.2% 50.9% 55.9% Outlook more than expected for the group. Everest Re 61.1% 59.8% 56.3% G Q1 of 2009 has seen some rate There was also low cat activity. Flagstone Re 44.3% 29.4% 47.2% hardening in several classes of G Signs of stabilisation in the IPC 39.6% 5.9% 50.6% Max Capital 65.7% 69.2% 69.5% business, with primary rates lag- credit markets have led some com- Montpelier 34.7% 54.5% 41.8% ging pricing movements in rein- panies to start to redeploy cash PartnerRe 55.9% 64.8% 59.9% surance. Pricing trends have gener- into high quality fixed maturities Platinum 58.2% 53.1% 63.9% ally been in line with expectations. to improve yields. Renaissance Re 28.6% 26.6% 40.2% G Validus 41.4% 48.0% 41.7% The companies in the group White Mtn 59.6% 68.7% 65.4% with stronger capital bases and rat- Other XL Capital 59.8% 64.5% 61.4% ings have increased their market G FAS 157-4 and FAS 115-2 share and this trend looks set to were issued by the FASB and QUARTERLY EXPENSE RATIOS Q1 2009 Q1 2008 Q1 2007 continue. modify certain fair value and ACE 27.8% 29.0% 25.0% G That said, the overall trend in OTTI requirements. Adoption is Arch 29.5% 29.1% 27.1% premium growth is downward, required for Q2 but early adoption Aspen 28.4% 32.5% 28.0% due mainly to the impact of the was permitted for Q1. Most com- Allied World 29.5% 25.7% 21.8% Axis 28.3% 26.3% 23.4% current economic environment as panies indicated that they do not Endurance 34.0% 33.5% 30.8% well as the well publicised ‘capital expect adoption of these standards Everest Re 28.6% 29.3% 26.1% crunch.’ to have a material impact on results Flagstone Re 36.1% 37.5% 27.1% G Continued hardening for prop- but expect that the required split of IPC 34.6% 17.6% 16.5% Max Capital 24.0% 19.6% 21.5% erty catastrophe renewals in June OTTI into that arising from credit Montpelier 39.4% 35.2% 23.8% and July is expected especially in loss and other factors will be very PartnerRe 31.1% 32.6% 23.9% respect of Gulf of Mexico exposures. subjective. Most companies in our Platinum 21.9% 25.3% 23.1% sample did not early adopt. Renaissance Re 27.9% 24.8% 25.4% Earnings G Several companies repurchased Validus 33.6% 34.4% 22.8% G White Mtn 32.7% 32.7% 35.2% Most P&C companies released debt, preferred shares or common XL Capital 33.2% 29.1% 27.7% reserves this quarter. Net favour- stock at a discount during the able development was generally quarter. QUARTERLY COMBINED RATIOS Q1 2009 Q1 2008 Q1 2007 ACE 87.5% 84.6% 87.1% GROSS PREMIUMS WRITTEN $M Arch 86.7% 86.2% 83.4% Q1 2009 Q1 2008 Q1 2007 Aspen 84.5% 85.4% 79.4% ACE 4,535 4,409 4,496 Allied World 75.3% 78.2% 79.7% Arch 1,029 1,053 1,210 Axis 86.6% 81.2% 80.7% Aspen 637 596 637 Endurance 92.2% 84.4% 86.7% Allied World 480 397 438 Everest Re 89.7% 89.1% 82.4% Axis 1,324 1,264 1,303 Flagstone Re 80.4% 66.9% 74.3% Endurance 783 869 573 IPC 74.2% 23.5% 67.1% Everest Re 998 878 1,017 Max Capital 89.7% 88.8% 91.0% Flagstone Re 361 242 207 Montpelier 74.1% 89.7% 65.6% IPC 235 198 236 PartnerRe 87.0% 97.4% 83.8% Max Capital 434 307 214 Platinum 80.1% 78.4% 87.0% Montpelier 251 257 261 Renaissance Re 56.5% 51.4% 65.6% PartnerRe 1,340 1,439 1,302 Validus 75.0% 82.4% 65.4% Platinum 249 300 303 White Mtn 92.3% 101.4% 100.6% Renaissance Re 598 527 633 XL Capital 93.0% 93.6% 89.1% Validus 610 522 378 White Mtn 1,146 1,178 1,202 FINANCIAL STRENGTH RATINGS XL Capital 2,013 2,936 3,273 A M BEST RATING S&P RATING NET PREMIUMS EARNED $M May 15, 09 May 15, 08 May 15, 09 May 15, 08 Q1 2009 Q1 2008 Q1 2007 ACE A+ A+ A+ A+ ACE 3,194 2,940 3,082 Arch AA AA Arch 701 708 745 Aspen AA AA Aspen 447 392 439 Allied World AA A–A– Allied World 324 273 287 Axis AA A+A Axis 665 659 685 Endurance AA AA Endurance 378 372 377 Everest Re A+ A+ A+ AA– Everest Re 932 912 1,005 Flagstone Re A– A– NR NR IPC AA A–A– Flagstone Re 173 135 101 Max Capital A– A– NR NR IPC 99 90 105 Montpelier A– A– A– A– Max Capital 190 136 139 PartnerRe A+ A+ AA– A Montpelier 133 140 143 Platinum A A NR NR PartnerRe 867 910 842 Renaissance Re A+ A+ AA– AA– Platinum 248 302 285 Validus A– A– NR NR Renaissance Re 302 309 363 White Mtn A– NR3 A– A– Validus 319 292 111 XL Capital AA AA+ White Mtn 911 929 938 NR — Not rated by S&P XL Capital 1,452 1,712 1,791 NR3 — Not rated by A M Best

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Q4 EARNINGS (LOSS) DATA Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($) Q1 2009 Q1 2008 Q1 2007 Q1 2009 Q1 2008 Q1 2007 ACE 567 377 701 1.69 1.10 2.10 Arch 140 189 199 2.24 2.78 2.59 Aspen 91 81 122 1.39 0.85 1.27 Allied World 131 131 114 2.57 2.55 1.83 Axis 116 238 228 0.78 1.48 1.37 Endurance 74 74 98 1.24 1.13 1.36 Everest Re 109 78 298 1.77 1.24 4.59 Flagstone Re 36 33 36 0.42 0.38 0.50 IPC 8 83 73 0.15 1.31 1.07 Max Capital 45 8 80 0.78 0.13 1.24 Montpelier 52 0 73 0.61 – 0.76 PartnerRe 133 120 161 2.32 2.16 2.76 Platinum 84 103 70 1.58 1.76 1.08 Renaissance Re 97 137 191 1.57 2.05 2.63 Validus 95 66 57 1.20 0.85 0.94 White Mtn 30 (57) 92 3.44 (5.38) 8.54 XL Capital 178 212 550 0.53 1.19 3.06

COMPREHENSIVE INCOME FOR THE QUARTER Comprehensive income ($m) Q1 2009 Q1 2008 Q1 2007 ACE 337 88 775 Arch 202 157 233 Aspen 77 122 138 Allied World 74 130 139 Axis 64 224 259 Endurance 71 83 116 Everest Re 106 74 294 Flagstone Re 38 31 35 IPC 88777 Max Capital (18) 18 76 Montpelier 51 (2) 73 PartnerRe 113 190 185 Platinum 83 101 82 Renaissance Re 102 168 204 Validus 95 67 57 White Mtn (27) (21) 109 XL Capital (873) (602) 491

MARKET CAPITALISATION Q1 2009 Q1 2008 Q1 2007 Common shares issued Market value $ Common shares issued Market value $ Common shares issued Market value $ ACE 335,890,644 40.40 332,506,547 55.06 328,309,225 57.06 Arch 60,532,222 53.86 64,649,618 68.67 73,746,726 68.21 Aspen 82,762,673 22.46 85,395,154 26.38 88,133,866 26.21 Allied World 49,522,766 38.03 48,841,837 39.70 60,390,269 42.75 Axis 137,622,000 22.54 144,590,000 33.98 150,417,000 33.86 Endurance 57,473,048 24.94 60,097,750 36.60 65,967,559 35.74 Everest Re 65,700,000 70.80 65,500,000 89.53 63,200,000 96.17 Flagstone Re 84,864,844 7.79 85,316,924 12.10 84,547,891 13.48 IPC 56,092,672 27.04 55,947,610 28.00 63,848,158 28.85 Max Capital 55,883,024 17.24 56,450,598 26.19 60,305,517 25.48 Montpelier 87,448,434 12.96 94,505,314 16.05 111,778,122 17.34 PartnerRe 57,874,268 62.07 57,580,543 76.30 56,704,414 68.54 Platinum 51,163,377 28.36 48,923,952 32.46 59,825,816 32.08 Renaissance Re 62,324,000 49.44 64,927,000 51.91 72,289,000 50.14 Validus 75,828,922 23.68 74,230,410 23.43 n/a n/a White Mtn 8,854,086 171.91 10,570,234 480.00 10,833,788 566.50 XL Capital 342,109,626 5.46 179,033,752 29.55 178,252,037 69.96

n/a = data not publicly available SHAREHOLDERS’ EQUITY ($M) Q1 2009 Q1 2008 Q1 2007 ACE 14,718 16,735 14,959 Arch 3,630 4,005 3,783 Aspen 2,832 2,923 2,509 Allied World 2,492 2,395 2,356 Axis 4,493 5,371 4,642 Endurance 2,254 2,538 2,367 Everest Re 5,040 5,633 5,197 Flagstone Re 1,024 1,242 1,061 IPC 1,849 2,148 2,054 Max Capital 1,263 1,512 1,448 Montpelier 1,437 1,570 1,560 PartnerRe 4,282 4,473 3,907 Platinum 1,830 1,929 1,937 Renaissance Re 3,121 3,386 3,304 Validus 2,023 1,991 n/a White Mtn 2,866 4,679 4,543 XL Capital 6,141 9,255 11,313

n/a = data not available [ 13 ] 20333E_BIQ.qxp:.ps 6/24/09 4:21 PM Page 14

BII AWARDS Thiele takes top award in ‘challenging year’ CHRIS GIBBONS MEETS THE WINNERS OF THIS YEAR’S BERMUDA INSURANCE AWARDS

atrick Thiele, President and CEO of fully transformed from a cat-only reinsurer to a PartnerRe Ltd, said being named Bermuda’s diversified global reinsurance company with 14 PReinsurance Person of the Year was all the offices worldwide offering coverage for property more satisfying after the challenges the industry and casualty, catastrophe, specialty lines, life and faced in 2008. alternative risk products. PartnerRe’s total assets “It does mean more because of the difficulties currently exceed $16 billion, with total capital everyone’s had in the last year,” Mr Thiele said greater than $4 billion. For the year ended at the awards ceremony at the Fairmont December 31, 2008, revenues were almost $4 Hamilton Princess. “It feels a little more special billion. to be honoured at this time.” Since 2002 PartnerRe has grown its book The Bermuda Insurance Institute said it value per share at an 11 percent compound rate, honoured the genial and highly respected mid- its economic value per share at 13 percent, and westerner from Wisconsin for “his outstanding increased its shareholder dividend every year leadership, consistently positive company results since incorporation, including 2009, when the and his unwavering support and promotion of company still managed to deliver a 12 percent Bermuda as a domicile.” It called his leadership operating return on beginning equity for the Patrick Thiele: Reinsurance Person of the style “understated, modest and founded on his year. The company also maintained a strong bal- Year and President and CEO of PartnerRe Ltd own personal commitment to creating a well- ance sheet and achieved a positive total return managed company.” on its investment portfolio. As Director and Deputy Chairman of The Mr Thiele came to Bermuda in 2000 to take The BII citation read: “In 2008 — a chal- Association of Bermuda Insurers and over the reins of PartnerRe from its mercurial lenging year all-round — PartnerRe maintained Reinsurers, he has consistently called for appro- founder Herbert Haag. He had previously been its strong position in the market, preserved its priate regulation and greater transparency, has Group Director of Development of CGNU, and reputation and its client base and produced an provided support for the Bermuda Monetary CEO and President of St Paul Companies’ acceptable set of results, all of which reflect Authority’s transparency working group, and worldwide insurance operations. Patrick’s commitment to intelligent risk man- talked to the IMF on Bermuda’s regulatory He has spent eight and a half years as head of agement and success over the long-term. framework in their review of Bermuda. PartnerRe, “which apparently makes me the third PartnerRe’s track record speaks directly to Mr Thiele also constantly emphasises the longest serving reinsurance CEO in the world,” Patrick’s excellent leadership and this success fact that PartnerRe is “a Bermuda company” he quipped. “It’s not a long-lived profession!” can only reflect positively on Bermuda in its role that boasts an 80 percent Bermudian workforce, His — and PartnerRe’s — success, he said, on the world stage, especially in the troubled cli- including two-thirds of the senior management had been down to “inheriting a very good com- mate of today.” team in Bermuda. His corporate-giving policy pany from Herbert Haag and a little bit of luck. Mr Thiele’s thoughtful approach and com- ensures a percentage of PartnerRe’s earnings are I joined PartnerRe at the end of 2000 just as the mitment to risk management and transparency donated to local charities each year. market was turning. It was bad luck to have 9/11 means his opinion is sought and respected on “Yes we’re a global company, but Bermuda is happen nine months after I took over, but the industry issues. Last year he represented the our home,” he said. “The real value that market was in recovery and prices rose and we Bermuda market at the International Bermuda gives us is not so much the tax advan- were able to replenish our capital and move for- Regulatory Dialogue in Brussels. tages, the proximity to the US markets, but that ward. it gives us a neutral home base. If I was based in “Since then it has been a case of the under- ‘Outstanding leadership, Paris, we’d be a French company, or if I was stated virtues of stubbornness and conservatism. based in Zurich the company would have a Reinsurance business is all about risk, taking consistently positive Swiss culture, but each of our offices can have risk prudently and evaluating and valuing risk their unique culture under the neutral umbrella properly. The achievement I’m most proud of is company results and that Bermuda gives us. our risk culture. We take our risk very seriously “People often ask me if the tax situation or and promise with absolute certainty that we will unwavering support and the regulatory environment changed would the be around for the claims and earn a decent promotion of Bermuda company move. I always tell them it would take return for our shareholders.” a lot to make us move because of everything Under his leadership, PartnerRe has success- as a domicile’ Bermuda gives us.” [ 14 ] 20333E_BIQ.qxp:.ps 6/24/09 4:21 PM Page 15

Butt not ready to call time just yet… ‘I DON'T CARE HOW I’M REMEMBERED. I CARE MUCH MORE ABOUT WHAT’S HAPPENING NOW’

e may have received a Lifetime Achievement most important thing you can do is to build and Award from the Bermuda Insurance maintain your personal reputation for integrity. HInstitute but Michael Butt says it’s prema- Don’t let anyone compromise that. You might ture to call time on his more than 40 year career have tough times short-term, but long-term just yet. that’s the real value.” The urbane 67-year-old Englishman won’t Mr Butt played a pivotal role in the devel- be retiring as Chairman of AXIS Capital opment of Bermuda as a global reinsurance Holdings Limited and AXIS Specialty Limited centre, although he is the first to admit that his for another two and a half years, and he quipped success has largely been about “being in the that the award should be changed to the “Life right place at the right time and knowing the Sentence Award” as previous recipients Don right people.” Kramer, Bob Newhouse, Bob Clements and One of those people was Bob Newhouse, the Brian O’Hara are still active. former Chairman of Marsh & McLennan, and Besides, he said, he and CEO John Charman the place and time was Bermuda in Spring still have plenty of work to do taking AXIS, the 1992. Mr Newhouse invited Mr Butt to join the company they formed in 2002, “to the next Board of a new property cat reinsurer he was Michael Butt: Lifetime Achievement Award level.” forming called Mid Ocean Re, the first of the winner and Chairman of AXIS Capital He said: “The rocket’s taken off and we’ve billion-dollar ‘Class of 93’ start-ups. Holdings Ltd and AXIS Specialty Ltd gone into orbit. Now the question is ‘do we stay “In September 1992, Hurricane Andrew hit in the same orbit or go into another one?’ It’s and a small idea became a big idea,” he recalled. with significant US and European platforms. been relatively easy to grow the business recent- He was asked to take over as CEO of the new Mid Ocean and AXIS, he said, had been ly if you wanted to, but the profit factor wasn’t company in January 1993. The company went “fantastic career opportunities.” necessarily evident. As always it’s a challenge public that summer and the rest is history. He started his career in the London market finding the right balance. Bought by XL in 1998, it became the core of XL as Chairman of Sedgwick Limited and then “I think there are going to be a large number Re and from 1998 to 2002, until he joined Chairman and CEO of Eagle Star Holdings of opportunities for quality capital and good AXIS, Mr Butt was a Director of XL Capital plc and Eagle Star Insurance Company. management teams to continue to add value and Ltd, and a senior member of Brian O’Hara’s Although he didn’t plan on being in Bermuda grow. It doesn’t have to be by acquisition.” advisory team that grew XL into a company for 17 years, he is not surprised that the market The BII award described Mr Butt “as a has flourished. statesman, the consummate diplomat” respected “From the mid-1970s onwards I could see professionally and personally at all levels of the ‘The rocket’s taken off there were going to be different capital solutions industry. As Chairman of both The Association so I didn’t come to Bermuda being sceptical, I of Bermuda Insurers and Reinsurers (ABIR) and we’ve gone into was optimistic that Bermuda could achieve a and the World Insurance Forum, and a long- orbit. Now the question significant role through the ability of capital to time member of the Geneva Association, he has flow more freely and it to become a centre of “long been a tireless contributor to Bermuda” as is, Do we stay in the expertise. Was I sure it was going to happen? “a non-partisan sounding board for legislators No, but I saw it was a very real possibility. I still and a leader in the efforts to establish Bermuda same orbit or go into believe it’s the centre of Bermuda’s success. as a substantial and respected financial services Bermuda was originally a US solution up until jurisdiction.” another one? It’s been the 1980s and we transformed it into a global Mr Butt said: “One of the things I’m most relatively easy to grow solution. proud of is helping people to grow and helping “We are now the single largest concentration the industry as a result. That matters to me a lot. the business recently if of capital in our industry and that’s creating a People did it for me so it’s only fair to recipro- self-reinforcing clustering effect of the market- cate and try and multiply the effect.” you wanted to, but the place, which has really happened since 2001.” As a mentor, he stressed that “in this indus- profit factor wasn’t As for his own legacy, Mr Butt insists that: try personal reputation over time is a critical fac- “I don’t care how I’m remembered. I care much tor. I once told a group of young brokers that the necessarily evident’ more about what’s happening now.” [ 15 ] 20333E_BIQ.qxp:.ps 7/3/09 7:52 AM Page 16

BII AWARDS Special award for unsung hero THE MAN WHO LAID THE GROUNDWORK FOR THE ISLAND’S RISE AS A LEADING GLOBAL REINSURANCE CENTRE or 30 years, Bala Nadarajah has “Back then Bermuda was pri- been one of the unsung heroes marily a captive domicile. Most Fof Bermuda’s insurance and were captives of Fortune 500 com- reinsurance sector. panies and it was important that Quietly working behind the the wrong type of company didn’t scenes, the Sri Lankan-born get into the mix and damage the lawyer has been involved in virtu- entire jurisdiction’s reputation. If ally every piece of legislation and legislation that governed the cap- regulation shaping the industry tive was inadequate or non-exis- since the historic Insurance Act of tent, no one would reinsure the 1978, including the Bermuda captive.” Companies Act. He continued: “Not only did Such has been his contribution Bermuda’s insurance law provide a that at this year’s annual Bermuda solid foundation but we foresaw Insurance Institute Awards, the the need for adaptability and what selection committee presented him has become a global regulatory with a Special Award in recogni- yardstick these days called “risk- tion of his “outstanding service to based assessment” was fundamen- the Bermuda reinsurance industry” tally ingrained in Bermuda’s insur- and his “tireless work and great ance regulations and that’s why, in personal sacrifices.” 1995 when we created the Ber- Euromoney Expert Guide recent- muda insurance class system, it was ly called him “one of the world’s possible to do so without having to leading insurance lawyers” and Bala Nadarajah: Special Award for “outstanding service to the rehash completely the work we had while Mr Nadarajah is modest Bermuda reinsurance industry” and “tireless work” previously done. about his achievements and says he “The strength of the Bermuda is “humbled” by the award, his practiced English-based law for 16 the Private Bills Committee. regulations was that they can bend expertise and wise counsel were years. During a spell as a consultant in without breaking. They were critical in laying the vital ground- He said: “I found Bermuda pro- Washington, DC, from 1986- adaptable, they were reasonable, work for the Island’s rise as a lead- vided an interesting challenge 1993, he advised the Ministry of they were facilitative and it had the ing global reinsurance centre. because at the time there was no Finance on US-Bermuda business necessary sanctions. David Ezekiel, the Head of the insurance law in operation. The issues and relations before return- “One of the other strengths was Association of Bermuda Insurance captive growth was taking place in ing to Bermuda as a senior corpo- the disclosure required of compa- Companies, who has worked an environment with no insurance rate and insurance attorney in pri- nies in good faith. It was not a closely with Mr Nadarajah for regulation. In that respect I vate practice. At Attride-Stirling “catch me if you can” type of law. many years, said he had been became a useful conduit and facili- & Woloniecki (ASW), where he Solvency Declarations had to be “invaluable” to the industry and tator between the industry and the established the firm’s Corporate signed by directors; the auditors Bermuda. legal draftsmen. There was a lot of Unit, he held the position of Head were given additional responsibili- “He was able to make the finer insurance expertise around but it of Corporate. At 74, he is still ties to confirm that statutory legal points together with a practi- needed to be harnessed and used to working as Special Legal Counsel financial statements and returns cal knowledge of the insurance good effect. to ASW. were prepared in accordance with industry. That made him pretty “This award needs to be shared Mr Nadarajah witnessed the the Act and Regulations. invaluable, especially at the plan- with all those insurance industry development of Bermuda’s insur- “Of course self-disclosure alone ning stages of our industry.” experts, accountants and lawyers ance industry from a captive domi- was not sufficient, so appropriate Mr Nadarajah first came to too numerous to name, who inter- cile into one of the world’s leading sanctions were made available to Bermuda in April 1979 at the invi- acted very effectively with me, property catastrophe reinsurance the Regulators from the very start, tation of the late Shelton Burgess, Shelton and others in govern- jurisdictions. “We foresaw that the initially to the Minister of Fin- then Registrar of Companies, to ment.” jurisdiction would expand into ance, and from 2002 to the BMA. help formulate the regulations Mr Nadarajah served as a Legal other lines of business but not to The Bermuda Regulators have without which the Insurance Act Advisor to the Ministry of Fin- the extent it did. That has been always performed their roles could not be implemented. ance, the Registrar of Companies, very satisfying to witness.” admirably. With the expansion of At the time, Mr Nadarajah had the Bermuda Monetary Authority That the legislation could Bermuda’s insurance business into successfully completed a Master’s (he was Director from 2002-06 accommodate such growth, he the commercial reinsurance mar- degree in Law at Georgetown when it became the industry regu- said, was testament to its adapt- ket, ensuring that Bermuda was in University in Washington DC, lator), and the Insurance Advisory ability, along with its foresight on step with global regulation became having moved to the US from his Committee. He represented the other issues, such as jurisdictional essential, and Bermuda has risen to native Sri Lanka where he had Attorney General’s Chambers in credibility and reputation. the occasion.” [ 16 ] 20333E_BIQ.qxp:.ps 6/24/09 4:21 PM Page 17

At the Awards

Nigel Crow, Bradley Kading and Leila Madeiros Lawyer Rod Attride-Stirling with BMA CEO Matthew Elderfield PHOTOS: CHRIS GIBBONS, KALEIDOSCOPE MEDIA Andre Perez, of the Horseshoe Group, and wife Catherine Elizabeth Kramer, Ariel Re CEO Don Kramer and Zoe Butt Erica earns top young award

rica Symonds, Assistant mental in organising educa- EVice President and tional workshops, seminars Excess Liability Underwriter and lunches for Bermuda’s at XL Insurance (Bermuda) young people. Ltd, has been named She said her proudest Bermuda’s Young moment to date as President BES LTD. is a leading provider of Reinsurance Person of was to bring the President of Recruitment, Human Resources and the Year. the worldwide CPCU Society Business Solutions The 35-year-old to Bermuda for the first time G Permanent Search & Selection Bermudian, who graduated in January 2009 to a recep- G Temporary & Contract Staffing from Rutgers University in tion to recognise a group of G Human Resource Consulting 1998 with a degree in local young people who G Immigration Processing G Marketing, started her rein- recently received their CPCU Secretarial & Transcribing Services surance career as a Technical designations. All services are tailored to meet the Assistant at the now defunct Her other passion is individual Business needs of each client New Cap Re, and worked as working with Bermuda’s a Casualty Broker for Aon Erica Symonds: career success young people. Through the Providing a cost effective, professional before joining XL Insurance Bermuda school-based and confidential service (Bermuda) Ltd in 2002 as an Assistant mentoring programme YouthNet, she serves www.bermudaemployment.com Underwriter. She was promoted to her current as a mentor to two 10-year-old girls at the position in April 2009, and is responsible for a Victor Scott Primary School. She believes that Contact: Laura E. Jackson significant book of business comprised of every young Bermudian should be open to Fortune 1000 companies. opportunities and strive for excellence. 77 Front Street She serves as the President of the “In the insurance industry we are competing Hamilton HM 12, Bermuda Bermuda International Chapter of the with people all over the world,” she said. Chartered Property Casualty Underwriters “Being open to educational and career oppor- Tel: 1(441) 296-5627 (CPCU) Society. She received her CPCU tunities is all a part of becoming a successful Fax: 1(441) 296-1749 designation in 2006, and has also been instru- global citizen.” Email: [email protected]

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PEOPLE Reeves joins XL Capital XL CAPITAL LTD has appoint- Catlin for its London-based avia- Andrew Carrier has been named Bailie, who has been a Non- ed Elizabeth L Reeves as tion business. The London team Director of Underwriting at ARGO Executive Director of Hardy Executive Vice President and will be headed by Simon Murray INTERNATIONAL (formerly Underwriting Bermuda since its Head of Global Human as Regional Manager – Aviation. Heritage Managing Agency Ltd), establishment in December 2007, Resources. She joins XL from Liz He will be joined by Class a member of Argo Group Inter- will take up his new position in Claiborne Inc where she was Underwriters James Owen and national Holdings. September. Senior Vice President and Chief Andrew Innes. Mr Murray has Human Resources Officer. She over 20 years’ underwriting experi- HARDY UNDERWRITING ACE LIMITED has announced succeeds Celia Brown who is ence in the London insurance BERMUDA has appointed Paul that Brian Dowd, CEO, retiring after 20 years. market, most recently as Senior Bailie, the former Chairman of Insurance – North America, will Aviation Underwriter. Mr Owen JLT Insurance Management take up the additional position of XL INSURANCE has hired three and Mr Innes have 15 and 14 (Bermuda) Ltd, as Managing Vice Chairman, ACE Limited and 4")!D ")1ND1TRPDF  0- additional underwriters from years’ experience respectively. Director of Hardy Bermuda. Mr ACE Group Holdings. In addition to his current responsibilities, which encompass ACE’s property and casualty insurance operations in the US, Canada and Bermuda, Mr Dowd will now assume corpo- rate-wide executive responsibility for the ACE Group’s global prod- uct underwriting boards and the strategy and purchase of the com- pany’s reinsurance programmes.

Bermuda-headquartered IRON- SHORE has appointed John Reusch as Vice President of Property & Casualty Claims. He will be based in Simsbury, Connecticut, and joins Ironshore from Allied World Assurance Company where he managed their US direct, excess and reinsurance commercial property and casualty claim operation.

IRON-STARR EXCESS AGE- N CY LTD has named former AIG executive Michael War - wicker as Chief Operating Officer of Iron-Starr Excess Agency Ltd, a joint venture between Ironshore Inc and Starr Underwriting Agencies LLC.

The Bermuda-based EVEREST RE GROUP has appointed Dominic J Addesso as Exec- utive Vice President and Chief Financial Officer. Mr Addesso joins Everest from Munich Re America.

Constantine (Dinos) Iordan- ou, President and CEO of ARCH CAPITAL, has been appointed to the additional position of Chairman of the Board, from November. [ 18 ] 20333E_BIQ.qxp:.ps 6/24/09 5:19 PM Page 19

MEDIA WATCH Help the wounded animals! “This is the year you don’t bet the bank. You over the last two years regardless of regulatory or out of step with the majority view of Bermuda’s preserve capital … At Axis we (keep) surplus tax-related issues. Bermuda is the third-largest insurance market leaders who view Bermuda as capital because we like to be opportunistic … insurance market and the ability for trading the platform of choice from which to launch We are being killed on the yield, but when you partners to meet and conduct business in an global operations.” are concerned about stability of financial mar- open market that is friendly to the encourage- — Paula Cox, Finance Minister, on the kets, better to be killed on the yield.“ ment of international business, is the key to redomiciling of some Bermuda-based companies, — John Charman, AXIS Capital President & both the continuance and potential flourishing in The Royal Gazette CEO, in a panel discussion at Standard & Poor’s of this market.” annual Insurance Conference in Brooklyn (Reuters) — Mitch Blaser, Ironshore Bermuda CEO, in “There are a lot of wounded animals out there Reinsurance Magazine and people who are trying to preserve their “I don’t think that regulatory concerns are the market share.” issue for capital in Bermuda — the issue is that “Bermuda-resident executives who may pro- — Brian Nocco, XL Capital CFO, at Standard capital has not been available in any geography mote Switzerland as safer than Bermuda, are & Poor’s annual Insurance Conference WHAT’S ON

ONSHORE September 9–11 11th ALARYS Latin American 10 YEARYEA ANNIVERSARY Risk Management and Insurance Congress Fairmont Southampton, Bermuda Our researchre identifies two dominant www.bermuda-insurance.org firms from the leading offshore market of Bermuda. FlyingF colours for Attride-Stirling November (date TBC) & Woloniecki...RodWolon Attride-Stirling and Annual Standard & Poor’s/ Jan WoWoloniecki won approval of clients PricewaterhouseCoopers Bermuda and competitors across the globe. Reinsurance Conference Fairmont Hamilton Princess, Bermuda Who’s Who Legal – The International Who’s Who of Insurance www.pwc.com/bermuda and Reinsurance Lawyers 2007

November (date TBC) Goldman Sachs Asset Management’s 5th Annual Conference for Bermuda Reinsurers Fairmont Hamilton Princess

OFFSHORE August 11–13 Vermont Captive Insurance Association Burlington, Vermont www.vcia.com

September 4–10 Les Rendez-Vous de Septembre Monte Carlo InsuranceIns ance | BermudaBeBermud mda d | ReinsuranceReins ance www.rvs-monte-carlo.com

October 22–24 American Society for Healthcare Risk Management (ASHRM) Denver Convention Centre www.ashrm.org

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CHARITY Giving back to the community espite the recession, Bermuda’s Management International and insurance market continues to Chairman of the Bermuda Dbe a major supporter of worthy Insurance Development Council causes both on the Island and (IDC) — took 16 days to complete overseas. the walk, and at press time had In May, former ACE executive raised more than $33,000 for the Roger Gillett completed a 296 Bermuda Cancer and Health mile walk around the coast of his Centre. He was accompanied on native Cornwall, England, to raise the walk by another recent retiree, funds for cancer research. Mr Roger Scotton, former Head of

PHOTO SUPPLIED BY ROGER GILLETT Gillett, who recently retired after XL’s Media Relations, and under- Mission accomplished for Roger Gillett, right, and Roger Scotton, at 30 years in the Bermuda market — took the walk in memory of his the end of their walk around Cornwall he was President of ACE Risk best friend Graham Sotheran, who died of a brain tumour in October 2008 aged 55. Donations can still be made through the BCHC website at www.chc.bm/RogerGillettsWalkfor Charity.asp. Meanwhile, BIQ Contributing Editor Chris Gibbons and wife Tracey, Vice President, North American Casualty Treaty Re- insurance for Allied World Assurance Company, were among the many industry executives who took part in the annual St. Baldrick’s event by shaving their heads in aid of children’s cancer research and treatment. The cou- ple, joined by six year old son Toby, raised more than $40,000 for their hair-raising experience and, in total, the Bermuda event raised around $500,000. World - wide, the event raised more than $15 million in nearly 600 loca- tions. St. Baldrick’s was started in 1999 by three American insurance executives, John Bender, now COO of Allied World Re, Tim Kenny, President and CEO of QBE Insurance Group, and Enda McDonnell, President of Access Re. It has now raised more than $50 million.

Charity baldies Chris, Tracey and Toby Gibbons

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