…AFTER TWO UNEXPECTED YEARS? in 2007? We Offer a Variety of Fascinating Opinions on Pages 1 and 11 18075B BIQ.Qxp:BIQ Pg 4/9/07 8:21 AM Page 2

18075B_BIQ.qxp:18075B_BIQ_Pg_ 4/9/07 7:39 AM Page 1

It couldn’t get much better than 2006 for the Bermuda market after the misery of the previous year — see PricewaterhouseCooper’s painstakingly prepared annual figures on pages 12 and 13 — but what is in store for us …AFTER TWO UNEXPECTED YEARS? in 2007? We offer a variety of fascinating opinions on pages 1 and 11 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 8:21 AM Page 2

There is an artful balance in property OPPORTUNITY catastrophe reinsurance between acting IN THE EXTREME. on opportunity and mitigating risk, especially in extreme conditions. At IPCRe, we do both with firm discipline and a solid business model.

Our clients work with IPCRe because we've earned their confidence through an experienced and consistent team, a transparent balance sheet, and the added value of excellent service.

www.ipcre.bm 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 8:23 AM Page 1

THE QUOTES OF THE QUARTER “We are seeing softening “We achieved [record] results in a transitional in several markets, and year [in which] we reduced catastrophe exposures discipline will be critical… by about 50% while maintaining significant retro- BIQ Uncertainty created by cessional spend. This underscores the strengths of BERMUDA INSURANCE recent legislative changes our diversified business model.” in Florida will reduce — Chris O’Kane, Aspen QUARTERLY demand for some prod- Volume 3, Number 2 ucts. We are responding “In addition to record April 2007 … by shrinking in areas earnings, we took signifi- that do not meet our standards and growing in cant steps to further Editor areas we find attractive.” expand and balance our Charles Barclay — Neill Currie, RenaissanceRe book of business through Art Director growth in our specialty Paul Shapiro “Our operating return on equity was 20.1%, lines and we significantly

Contributing Editor which was the main driver behind the 19.9% reduced our catastrophe Chris Gibbons increase in book value for 2006.” risk profile.” — Brian O’Hara, XL — Kenneth LeStrange, Endurance Director of Marketing Lissa Fisher “Record earnings for 2006 “We are working to main- Publisher Ian Coles [have resulted] in an tain our underwriting dis- increase in diluted book cipline through the cur- Published by Bermuda Media, Suite 310, The International Centre, 26 value per common share rent market conditions, Bermudiana Road, Hamilton HM 11, Bermuda. Postal address: PO Box HM of 25% … [Barring] major bolstered by a very strong 2032, Hamilton HM HX, Bermuda. Tel: catastrophic events, we balance sheet, strong 292-7279 Fax: 295-3189 Email: [email protected]. Web: bermudamedia.bm. expect 2007 to be very financial ratings, and an Printed in Canada. positive.” invested asset base Published four times a year In associa- — John Charman, AXIS tion with PricewaterhouseCoopers. approaching $6 billion.” Cover image courtesy of Getty Images — Scott Carmilani, Allied World It’s a great place to be again GUEST OPINION: OUTLOOK SUNNY FOR BERMUDA WITH JUST A FEW POTENTIAL CLOUDS THREATENING ermuda’s reinsurance market writers generally agreed on what may not be enough capacity for surance market is looking like a gets top marks from respected the correct price should be and peak risk zones. IPCRe’s Jim Bryce great place to be again.” Bindustry publication Reactions buyers looking to get bargains says in the magazine: “Just because Still, the magazine believes the for its resilience and recovery from would have struggled. But pro- a programme gets placed doesn’t Class of 2005 start-ups face some the heavy 2005 losses and also for grammes got done once rates mean you have adequate supply.” challenges if, as expected, the mar- continuing to be at the forefront of reached levels that were accept- He adds: “All this capacity can only ket softens in 2008, comparing the merging capital markets and able,” the magazine says. be tested by a loss. Even with the them to the Class of 1993, rather insurance. “This was thanks in part to the crash derby of sidecars and hedge than 2001: “[Like 1993], the Class The magazine’s annual Ber - capital that has flowed into funds, we still don’t have enough of 2005 was set up to capitalise on muda market review reports that Bermuda since the 2005 hurricane capacity. A lot of this synthetic rocketing catastrophe rates follow- capacity is still pouring into the season. The island is now firmly capital will probably disappear if ing record insured losses from the island and that January’s renewals established as the go-to place for there is a severe event.” 2005 hurricane season. were far more relaxed than last new reinsurance capital.” For now, though, the magazine “By contrast, the firms set up July’s tense negotiations when However, some market veterans notes that “all participants in the after September 11 were able to reinsurers pushed through big are warning that despite the tide of Bermuda market, new and old, are take advantage of rates hardening price hikes ahead of the then capital — increasingly coming raking in the cash. After a catas- across almost all insurance lines, imminent — but ultimately benign from hedge funds — there still trophe-free 2006, the island’s rein- and quickly established themselves — hurricane season. as multi-line insurance and rein- Despite reinsurers being under surance groups. pressure from increased capital ‘The Class of 2005’s narrow focus will “The Class of 2005’s narrow demands by rating agencies and focus will present it with chal- increased loss projections from the present it with challenges. Companies lenges. Companies will be looking risk modellers, programmes were will be looking to grow against a back- to grow against a background of not only filled but oversubscrip- declining premiums in most mar- tions even led some reinsurers to ground of declining premiums in most kets, and will need to find areas sign-down their risks. that are profitable.” “The consensus among the markets and we will need to find areas For more information, go to island’s reinsurers is that under- that are profitable’ www.reactionsnet.com [ 1 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:06 PM Page 2

NEWS REVIEW Sidecars still revving up BUT THE NEWER MODELS HAVE A DIFFERENCE

he race to establish Bermuda- Insurance retrocessional team based sidecar vehicles shows no operating from Bermuda. Brit Tsigns of letting up with several CEO Dane Douetil said: “Terms new companies formed in the last and conditions and pricing in the few months. But the new arrivals, retrocession market have strength- focusing on providing back-up to ened further and we and our fellow retrocessional business, seem to be investors regard this as the optimal starting a new trend in sidecars — time to launch the new carrier. the name given to flexible financial “This will be our first invest- predominantly short-tail property Harbor Point says New Point structures that reinsure one cedant ment in an offshore underwriting reinsurance and insurance, special- Re, its new Class 3 reinsurer capi- under a quota-share reinsurance business. [It] is a potential blue- ising in catastrophe coverage. talised with approximately $250 agreement. print … for other classes of busi- Paris Re will cede 24% of its million, was formed specifically for Last December, UK insurer and ness with similar characteristics.” property catastrophe excess-of-loss writing collateralised retrocessional reinsurer Brit launched Norton Re Class 3 reinsurer Advent Re has and risk excess-of-loss reinsurance contracts, including collateralised to write catastrophe retrocessional been set up with $37.5 million in business for 2007 and 2008 to industry loss warranties (ILWs). business while Bermuda reinsurer capital to take advantage of attrac- Triomphe Re, its new Class 3 Harbor Point also announced the Harbor Point launched New Point tive market conditions to under- Bermuda sidecar. The quota share formation of a wholly-owned sub- Re, followed in January by Advent write a limited number of retroces- will be collateralised by a trust sidiary, Harbor Point Agency, to Re, set up by Lloyd’s firm Advent sional contracts, a segment of the established by Triomphe Re that provide all underwriting and man- Capital Holdings, and Triomphe reinsurance market in which the will include the total capitalisation agement services to New Point Re. Re, launched by Bermuda reinsur- Advent Group has participated as of Triomphe Re, as well as the John Berger, CEO of Harbor er Paris Re. Meanwhile, insurance a leading underwriter for over 30 ceded reinsurance premiums Point, said: “This is another oppor- broker Marsh has established a years. received from Paris Re. tunity for us to leverage our under- Bermuda property cat sidecar, Advent Capital (Holdings) is a Triomphe Re was capitalised writing expertise while meeting MaRI, which will reinsure ACE Lloyd’s insurer that manages and with approximately $185 million. client-specific needs.” on a quota-share basis. participates in Syndicate 780 and Norton Re, with initial capital for 2007 it will now also be able to of $107 million, will use the write business through Advent Re Marsh, ACE in ‘unique’ venture underwriting expertise of the Brit in Bermuda. Advent’s business is nsurance broker Marsh has erage,” Marsh said. Iannounced the creation of “Traditionally… a sidecar MaRI (Marsh Risk Innovations), a allows reinsurers to offer more Kiln joins Lloyd’s exodus “first-of-its-kind” insurance facili- capacity to their clients, the retail ollowing the lead of Hiscox and operations will ty designed to provide additional insurers. What makes the MaRI FCatlin, Kiln is the latest Lloyd’s be complemen- capacity to the depleted proper- structure innovative is that it pro- insurance firm set to join the move tary to Kiln’s ty catastrophe insurance market. vides Marsh clients with direct to Bermuda. Kiln, a Class 3 insur- existing Lloyd’s Marsh says it is unique in that access to the capital markets er, will be capitalised at $308.9 business. Lloyd’s it delivers capital market capacity through a highly-rated ACE million. remains, in our through an A+ rated insurer with delivery vehicle.” Kiln will also relocate its HQ to view, a comm- admitted paper directly to major Brian Storms, Marsh the island where it will be run by erc ially advant - corporations in need of addition- Chairman & CEO, said: present CFO Peter Haynes. Still, ageous platform Peter Haynes: al property catastrophe cover- “Obtaining sufficient insurance many of its executives, including which will con- heading Kiln in age. The additional capacity will coverage for catastrophic loss CEO Edward Creasy, will remain tinue to form an Bermuda be made available through rein- has been extraordinarily difficult based in London. important part surance provided by MaRI, a for many of our clients.” In In the past year, the company of our insurance activities.” newly formed Bermuda-based some US regions, property has opened offices in Hong Kong, Meanwhile, Amlin will not fol- reinsurance sidecar, to ACE. catastrophe insurance rates Singapore and Belgium, and the low its rivals and redomicile in Marsh collaborated with ACE have quadrupled since the 2005 Bermuda office will enable Kiln to Bermuda. CEO Charles Phillips and Morgan Stanley to create hurricane season. Marsh be closer to the US, where it is explained: “We have 620 people in MaRI. “It provides large corpo- expects the ACE/MaRI pro- considering an onshore presence. our London office and 14 people rate clients of Marsh with exclu- gramme to deliver $400 million Mr Creasey said: “Bermuda in our Bermudian office.” sive access to insurance capaci- in extra capacity to its clients offers a favourable environment in Amlin recently reported an 84% ty intended to fill gaps that are during Q1, 2007 and could pro- which to develop as a growing increase in full-year pretax profits to creating instability and shortfalls vide more than $1 billion over international business and we £342.7 million — with £100 million in property catastrophe risk cov- the next year. expect that our new Bermudian contributed by its Bermuda unit.

[ 2 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 8:25 AM Page 3

Voice your choice.

The largest selection of VOIP equipment in Bermuda

BTC not only has the With BTC you get sophisticated telephone systems largest selection of and services for businesses of all sizes: phones, we also have the • Advanced solutions that converge all of your most qualified staff for voice and data applications installation and customer • Reliable communication systems for your support in Bermuda. business – convenient and efficient • 1 year warranty and maintenance offer after warranty expires • Desktop Messaging • Call Accounting • Wireless Capabilities • Teleworker – working securely from anywhere through your company IP Phone system

Find out more at www.btc.bm or by calling Business Sales Support at 299-3292 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 8:46 AM Page 4

Experts in offshore environments.

OBM International Woodbourne Hall 1 Gorham Road Hamilton HM08 Bermuda

T 441 295 5137 E [email protected] www.OBMI.com Antigua • Bath, UK • Bermuda • British Virgin Islands • Cayman Islands • Madrid • Miami • Trinidad & Tobago • Turks & Caicos Islands

[ 4 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:16 PM Page 5

Catlin to NEWS REVIEW offer ‘affordable’ NCBR Scottish Re sale agreed hareholders of Scottish Re coverage Group, the troubled Bermuda- $600M DEAL SAVES IT FROM REGULATORS Sbased global life reinsurance spe- MassMutual Capital and Cerberus ported the deal. Scottish Re, which Catlin Insurance Company, a cialist, have approved a takeover bid will have a controlling voting equi- has operating businesses in subsidiary of Catlin Group, from MassMutual Capital Partners ty interest in Scottish Re. Bermuda, Grand Cayman, has developed an insurance and Cerberus Capital Management. Some investors had opposed Guernsey, Ireland, Singapore, the and reinsurance product that Insurance regulators had threat- the deal, claiming an offering in United Kingdom and the United provides “affordable cover- ened to shut the company down if which current shareholders could States, hit trouble in July 2006 age” for nuclear, chemical, the sale did not go through. Under buy more would keep Scottish Re when it announced a large Q2 loss biological or radiological terms of the deal, MassMutual afloat and provide them with more and the resignation of CEO Scott (NCBR) terrorism. Capital and Cerberus will each value. But company management Willkomm. Its stock has plunged Insurers are often reluctant invest $300 million into the com- and its largest shareholder, private from $25.42 in May 2006 to around to provide coverage for NCBR pany. Upon closing of the deal, equity firm Cypress Group, sup- $4.34 on March 2, 2007. events, partly due to the unacceptable accumulation of risk. But Catlin Bermuda says it has developed a product which overcomes this problem by restricting the coverage to NCBR events which occur in a specified geographic area pre-defined by the insured or cedant. It said: “The coverage can be provided on an insurance or reinsurance basis and can cover most underlying forms of insurance (such as work- ers’ compensation, property damage, business interrup- tion, etc). By restricting the geographic area covered, Catlin Bermuda has created a product whereby significantly more insurance and reinsurance capacity should now be available for NCBR terrorism at much more reasonable pricing levels.” RenRe settlement RenaissanceRe has reached a $15 million settlement with the TALENT EXPANDS POSSIBILITIES SEC over securities fraud charges stemming from a At Max Re, we've recruited some extraordinary talent to finite reinsurance deal in drive our business. From offices in Bermuda, Ireland and 2001. Under the settlement, the United States, we underwrite a wide range of Property RenRe will pay a civil penalty and Casualty Reinsurance and Insurance transactions, as of $15 million and a $1 dis- well as Life and Annuity Reinsurance. Expanding the gorgement of ill-gotten gains. possibilities with financial strength, focused expertise and The settlement does not www.maxre.bm new approaches to established convention. affect civil fraud charges pending in a Manhattan court BERMUDA IRELAND UNITED STATES against three former top com-

pany executives — James A.M. Best’s A - (Excellent) Fitch A (Strong) INSURANCE/REINSURANCE Stanard, Martin Merritt and Michael Cash — for their alleged roles in the same deal.

[ 5 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:18 PM Page 6

NEWS REVIEW A blow for Bermuda

ermuda’s property catastrophe been unpopular with the insurance companies face losing consider- FLORIDA MOVE AFFECTS LOCAL REINSURERS and reinsurance industry, which Bable premium income following been blocked. The legislation also tive could add as many as 700,000 paid billions of dollars in Florida controversial changes to Florida’s increases the low-cost reinsurance policies to the 1.4 million it already claims in recent years and was insurance laws. The changes were offered to private insurers under has — about half of the entire hoping to recoup some of that designed to cut spiralling property the state-run Florida Hurricane property insurance market at year’s money by raising prices but now insurance rates for Florida’s bat- Catastrophe Fund from $16 billion end. As one local newspaper com- may lose around $2 billion in tered homeowners. State-run to as much as $36 billion, effective- mentator put it: “By then, Florida catastrophe premium. Citizens Property Insurance ly replacing the professional rein- will not only be in the insurance Among the Bermuda reinsurers Corporation will be allowed to surance market. business. It will be the insurance affected, Everest Re expects to lose compete with private insurers and State regulators estimate that business.” $50 million of cat premiums in big rate increases due this year have allowing Citizens to be competi- Not surprisingly, the move has Florida this year but hopes to hold on to $200 million pro-rata business for Florida homeowners through US clients. Endurance Specialty, meanwhile, estimates it will lose $60 million in Florida premiums. Renaissance Re is also expected to be hit hard. As Endurance Chief Under- writing Officer David Cash pointed out: “It’s clear there will be an impact on the Bermuda players but if you roll up your sleeves and go and work with some of the companies there I think there will be opportunities as well.” He added that Endurance would redeploy capital to direct commercial lines and other personal side reinsurance. Investors misled? Bermuda-based insurer and reinsurer Quanta Capital Holdings stands accused of misleading investors over the company’s losses from Hurricanes Katrina and Rita in 2005, according to a class action lawsuit filed in New York in February. It alleges that Quanta released false prospectus statements in con- nection with a December 2005 offer of nearly 15 million common and preferred shares. Quanta estimated net losses of $68.5 million as a result of the hurricanes in Q4 2005 but later boosted the losses to $78.7 million. The news prompted Quanta’s stock price to plunge nearly 40% the following March.

[ 6 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:30 PM Page 7

NEWS REVIEW Even greater innovation expected from Bermuda, says Conning AXIS regroups ermuda has become the place teristics of the Bermuda model XIS Capital has announced a where the capital markets and and analyses the growth opportu- strategic reorganisation des- CHARMAN SEES Bthe market for insurance and nities for Bermuda insurers and Aigned to strengthen the global reinsurance talent most closely reinsurers as well as the threats to operations of AXIS Insurance. ‘OPPORTUNITY TO intersect, according to a new Bermuda’s prominence. Dennis Reding, currently study by Hartford-based insur- “Swift and efficient allocation Chairman of AXIS Insurance, ENHANCE POSITION’ ance specialists Conning of capital is at the core of the will move to the new position of Insurance along areas of expert- Research & Consulting, Inc. And Bermuda insurance model, and it Chief Operating Officer of ise regardless of geographic loca- thanks to a quiet 2006 hurricane became even more efficient with AXIS Capital, reporting to the tion furthers our ability to con- season, the report predicts record the Class of 2005 and the increas- CEO & President of AXIS tinue to achieve this objective in net income of around $10 billion ing influence of hedge funds,” said Capital, John Charman. the segment, to continue to pro- for Bermuda firms. Mr Christiansen, adding that AXIS Insurance will have four vide our international client base Stephan Christiansen, Director Bermuda’s record earnings for divisions managed across all geo- [with] multi-product global of Research at Conning, wrote: “By 2006 would “help propel [the graphic locations: Specialty solutions and to build our posi- 2004, Bermuda accounted for near- island] to continue to innovate in Lines, Professional Lines, tion in select new opportunities ly 12% of the unaffiliated reinsur- risk transfer efficiency with Capital Risk Solutions and globally.” ance ceded from the US market, increased usage of capital markets AXIS Select Markets. The reorganisation also sees worth $8 billion, up from just over mechanisms such as catastrophe Mr Charman said: “We have John Gressier succeed Mr 9% ($7.1 billion) in 2003.” bonds, sidecar reinsurers, and a clear opportunity to enhance Reding as Chairman of AXIS The study, Bermuda: The New industry loss warrants.” our position as a global leader in Insurance. Marshall Turner, pre- Capital of Insurance?, reviews this Further information from specialty lines insurance busi- viously CEO of AXIS US growth, identifies the key charac- www.conningresearch.com ness. This strategic organisa- Insurance, becomes President of tional repositioning of AXIS AXIS Insurance.

The Ultimate Driving Machine

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

[ 7 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:17 AM Page 8

NEWS REVIEW PXRE merges with Argonaut

he troubled Bermuda-based cialty underwriter. With com- property reinsurer PXRE has bined assets exceeding $5 billion Tannounced a merger with Texan and shareholders’ equity of specialty underwriters Argonaut. approximately $1.3 billion, plus The new company, Argo Group operations based in Bermuda, the International Holdings, will United States and Europe, we become the Bermuda holding believe Argo Group will be well company for PXRE’s existing positioned to develop and grow a insurance subsidiaries, Argonaut sustainable and profitable global Group’s US operations, and a new business platform. We view this Class 3 Bermuda reinsurer named transaction as a solid investment Peleus Reinsurance. consistent with our goal of secur- Argo Group will trade on ing the future for our shareholders Nasdaq under the Argonaut and clients.” Group’s existing ticker symbol, Jeffrey Radke, President & AGII. Mark Watson, President & CEO of PXRE Group, said: “I haven’t the slightest idea who he is. He came bundled with the software.” CEO of Argonaut Group, will “With its financial strength and become the President & CEO of specialty focus, the new Argo Argo Group, subject to obtaining Group will be able to leverage $500M NOTES SALE Bermuda regulatory approval. PXRE’s substantial assets, inter- ACE INA Holdings, a subsidiary of ACE Limited, intends to sell up to $500 Mr Watson said: “Argonaut national platform and reinsurance million of senior notes. The notes are fully and unconditionally guaranteed Group’s merger with PXRE is a capabilities to their fullest on by ACE Limited. According to a February 5 statement, net proceeds from natural progression in our long- behalf of its newly expanded the sale will be used to pay off existing debt. The lead underwriters are term strategy as a growing spe- shareholder base.” Banc of America Securities LLC and Deutsche Bank Securities Inc. MCS Solving Your Accounting & LIMITED Information System Issues

MCS Limited provides sophisticated and measurable accounting and information technology solutions to local and international businesses. With over two decades of experience, MCS is professionally staffed in Bermuda, Toronto and Halifax assisting small business to Fortune 500 clientele. Our expertise will guide you in capitalising on your company’s strengths and eliminating its weaknesses. The result—a stronger, more efficient organisation.

Certified Professionals We Offer Full-Service, Problem-Solving Expertise A Microsoft Gold Certified Partner – • Reinsurance Accounting We are among the top 1% of • Captive Management • Advanced Financial Reporting & Consolidation Management Microsoft’s Business Solution • Multicurrency Reporting Partners worldwide specialising in • Real-time Inventory Management Microsoft Dynamics GP and CRM. • Human Resource Management & Bermudian Payroll Microsoft® “Inner Circle” award • Project Billing, Professional Services and Job Cost winners for the past two years. • Customer Relationship Management (CRM) • Accounting Services • Time Clock Solutions

For certified, professional service, contact MCS Limited. We provide real solutions. MCS Limited Tel: 441.295.0913 Robert M. Burns, President 27 Woodlands Road Fax: 441.292.3998 Tim Kerr, Vice President Hamilton HM 09 www.mcs.bm Business Development

[ 8 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:30 PM Page 9

WHAT’S ON NEWS REVIEW May 12 Bermuda Insurance Institute Annual Awards Fairmont Hamilton Princess Bermuda www.bii.bm Northern exposure

May 20 to 24 he ACE Tempest Re Group ACE Tempest Re Canada is American Association of at ACE Limited has estab- authorised to write reinsurance Managing General Agents Tlished ACE Tempest Re on behalf of ACE’s licensed and Annual Meeting Canada, a wholly-owned man- admitted Canadian insurance Atlantis aging underwriter that will companies. Paradise Island, Bahamas write all lines of property and In addition, it is a Lloyd’s www.aamga.org casualty reinsurance for the approved coverholder and can Canadian market. Constantin offer its clients access to June 6 to 9 Petalas, former CEO of AXA Syndicate 2488, a wholly- International Reinsurance Re, Canada, has been appoint- owned ACE syndicate, also Summit ed President of the Montreal- licensed and admitted in Constantin Petalas: heading up ACE Fairmont Hamilton Princess based operation. Canada. Tempest Re Canada Bermuda www.falconbury.co.uk

September 16 to 19 Bermuda Captive Conference The Fairmont Southampton Bermuda www.bermudacaptive.bm CREATE A BRIGHTER FUTURE. MAKE PROGRESS. ACE in Peru deal The ACE Group of Companies has acquired Altas Cumbres Life Insurance Company, formerly a wholly-owned Peruvian subsidiary of Grupo Altas Cumbres of Chile. Altas Cumbres is one of Peru’s fastest-growing life insurance companies, with more than 700,000 cus- tomers, specialising in accident, group and credit life insurance. Distribution channels for its products include captive agencies, brokers and bancassurance through more than 100 branches of Banco del Trabajo, one of Peru’s largest banks and owned by Grupo Altas Cumbres. RIMS lends hand Bermuda’s delegates at RIMS will get a chance to experience first- hand some of the hardship and devastation wreaked by Hurricane Katrina in 2005 when the group’s Taking on the responsibility of risk is what we do at ACE. With our expert underwriting , annual conference is held in New superior claims handling, and local market experience, you can focus on the Orleans at the end of April. possibilities, not the liabilities, to make progress in your business. For more on the ACE Group of insurance and reinsurance companies, visit www.insuringprogress.com Although the French Quarter and downtown areas were largely PROPERTY & CASUALTY ACCIDENT & HEALTH LIFE | spared, many parts of the city remain too ravaged for residents to return. The Lakeview district is Coverages underwritten by one or more of the ACE Group of Companies. Not all coverages available in all jurisdictions. among those areas still in disarray and RIMS is staging a community service day during which participants will help fix homes and clear yards of overgrown vegetation. [ 9 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:30 PM Page 10

NEWS REVIEW Max Re launching US platform

ax Re Capital has announced plans to establish a US-based ‘WE CAN’T AFFORD TO NOT PARTICIPATE IN A BIGGER WAY’ Mexcess and surplus lines plat- Marston Becker, Chairman & ketplace for more than two President & CEO of Max form to complement its existing CEO of Max Re Capital, said Max decades now. Insurance products Specialty will be Stephen Vaccaro, insurance and reinsurance opera- Specialty will add a significant new have become more targeted and a 30-year insurance industry vet- tions based in Bermuda and distribution channel and base of specialised, and many times it is eran who oversaw a dramatic Dublin. potential clients to Max Re easier to introduce such a product growth in Essex Insurance, an The new subsidiary, Max Capital’s global insurance and through the E&S market than the affiliate of the Markel Specialty Insurance Company, will reinsurance businesses. admitted market. As Max Re con- Corporation, from 1993 to 2004. be based in Richmond, Virginia He told Reactions: “The E&S tinues to build its global platform, Mr Becker said: “Steve has a with regional offices in Atlanta, industry has been the fastest- we can’t afford to not participate in proven ability to lead insurance San Francisco and Philadelphia. growing segment of the US mar- the US market in a bigger way.” operations and consistently deliver underwriting profits in both soft and hard market conditions.”

RMS moves on climate change The growing acceptance of climate change as a major risk factor has been highlighted by the fact that leading cat risk modeller Risk Management Solutions has appointed climate scientist Celine Herweijer as Principal Scientist, Future Climate. The California-based company, which has an office in Bermuda, said the appoint- ment reflected its commitment “to explore the evaluation of future climate risk for today’s economic, business, and political decisions”. It said Dr Herweijer is recognised for her work on modelling drought and the impact of oceans on climate. She will lead RMS work around the wide-ranging implications of future climate risk.

[ 10 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:33 AM Page 11

ANALYSIS

pate in the reinsurance market may catastrophe exposures relative to have longer-term implications for capital at risk, given that the the (re)insurance cycle.” benign catastrophe season is However, Benfield added that unlikely to be repeated in 2007.” Good times… declining prices may reduce their Best felt that market conditions limited influence and said tradi- will continue to deteriorate, partic- tional reinsurers are displaying “a ularly for non-catastrophe-exposed BUT MAJOR CHALLENGES ARE ALREADY APPEARING more prudent approach to capital business lines. Also, many cedents and underwriting, particularly the are retaining more risk, which he European windstorm Kyrill of newcomers and the determina- management of aggregate expo- reduces the overall demand for notwithstanding, most of Ber - tion of established reinsurers to sures, and this should temper com- reinsurance. Tmuda’s reinsurers were feeling a protect market share. Short-term petitive pressures”. Meanwhile, Ernst & Young’s lot more comfortable at the end of alternative capital structures played A M Best, in upgrading its Global Insurance Centre predicted 2006 than a year earlier. An a key role in US mid-year renewals 2007 outlook for the global rein- 2007 will see growing importance unusually benign hurricane season and continue to support the retro- surance sector from negative to for better capital management and and increased rates meant record cession market. stable, cautioned: “The eventual a drive for innovation, and E&Y earnings in most cases but the “The increasing ease with outcome always will be based on saw the Bermuda market leading calm is deceptive. Jim Bryce, which these vehicles can partici- how well reinsurers manage their the way. President & CEO of IPCRe, is among those who think that, despite impressive underwriting results and relatively orderly January 2007 renewals, the industry is coming to a crossroads. He said: “As a result of the excellent earnings generated in 2006, the reinsurance market has more capacity to offer, at the same time that demand for capacity is being impacted by a number of external factors, including recent legislative developments in Florida, which among other things provide for significantly greater reinsurance capacity being offered by the state hurricane catastrophe fund.” He felt important decisions would have to be made to maintain underwriting discipline and these might make companies undertake WinningWWiiinnniinnngg startssttaarttss withwwiitthh a clearclear visionvviiission. capital management actions to sus- tain adequate returns to shareholders. “The alternative is for the PropertyProperty CatastropheCatastrophe ReinsuranceReinsurance RiskRisk isis asas unpredictableunpredictable asas thethe windwind itself.itself. TheThe keykey toto cconsistentonsistent industry to forget or ignore the CCatastropheatastrophe EExposedxposed WWorker’sorker’s hhighigh performance?p erformance? size of losses that were incurred in CCompensationompensation 2004 and 2005, and allow market AAnticipation,nticipation, goodgood judgmentjudgment andand a fullfull rangerange of skillsskills andand tools.tools. SSuretyurety forces to put downward pressure AAtt RRenaissanceRe,enaissanceRe, wewe offeroffer youyou threethree top-ratedtop-rated companiescompanies on pricing. Hopefully, Kyrill will TTeTerrorismerrorism ttoo hehelplp mmanageanage yoyourur ppropertyroperty ccatastropheatastrophhe rrisk.isk. have served as a reminder that cat- MMedicaledical MalpracticeMalpractice WWee aalsolso ofofferfer a bbroadroad sspectrumpectrum of solutionssolutions forfor youryour astrophic events can occur at any CCasualtyasualty sspecialtypecialty rreinsuranceeinsurance neneeds.eds. time, anywhere in the world, and OOthertherS Specialtypecialty LinesLines AlAlll areare creativelycreatively uunderwrittennderwritten aandnd ssupportedupported pricing levels that will enable us to wwithith sserviceervice aass ggoodood aass iitt ggets.ets. pay for such events occurring with NNoo mattermatter wwhathat thethe weather.weather. increased frequency need to be RRiskisk coveragecoverage thatthat addsadds maintained.” ttoo yoyourur eedge.dge. Benfield, in its January 2007 AAb byy AA.M..M.B Bestest AA++b byy A.M.A.M.B Bestest AbA byy AA.M..M.B Bestest AA++b byy SStandardtandard&P & Poor’soor’s AAAAb byby SStandardtandard&P & Poor’soor’s AbA byy SStandardtandard&P & Poor’soor’s review of the global reinsurance AA22 bbyy MMoody’soody’s market, espoused its belief that the RenaissanceRenaissanceH House,ouse, 8-208-20E EastastB Broadwayroadway post-2005 caution has not disap- PPembrokeembroke HMHM 1919 BermudaBermuda peared completely. “Competition Tel:Tel:4 441-295-451341-295-4513 FFax:ax:4 441-292-945341-292-9453 www.renre.comwww.renre.com in both property and casualty is being fuelled by the drive for greater diversification, the appetite

[ 11 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:34 AM Page 12

OPERATING RATIOS ANNUAL LOSS RATIOS 2006 ANALYSIS / PRICEWATERHOUSECOOPERS 2006 2005 2004 ACE 61.2% 74.5% 70.7% Arch 58.1% 67.2% 64.4% Aspen 53.0% 90.1% 58.7% A detailed look into an AWAC 59.0% 105.7% 76.5% Axis 52.9% 80.3% 61.4% Endurance 50.5% 95.8% 57.4% extraordinary year Everest Re 63.2% 94.0% 74.4% IPC 14.7% 237.0% 60.8% Premiums line with premiums. Max Re 67.7% 98.0% 74.5% Overall GPW growth was flat Investment income was a signif- Montpelier 29.6% 178.0% 51.4% for the year. icant contributor to net income due PartnerRe 55.1% 86.9% 65.4% January 1, 2007 renewals were in to increased invested assets, post- Platinum 56.9% 87.8% 70.4% line with expectations. Although KRW capital raising and higher Renaissance Re 29.2% 116.6% 81.9% peak zone coverage rates were interest rates. White Mtn 66.1% 75.2% 67.8% above the previous year’s, there was Excellent earnings went some XL Capital 60.7% 107.1% 68.6% capacity, and non-peak zone rates way to replenishing capital lost were slightly down. from KRW for several companies. ANNUAL EXPENSE RATIOS Trends were affected by lack of 2006 2005 2004 reinstatement premiums and con- Ratings ACE 26.9% 25.0% 25.6% version of QS cover into excess of New S&P capital model was Arch 27.3% 28.6% 27.7% loss/straightforward catastrophe cover. launched for comment in Aspen 29.0% 27.1% 24.7% The new Florida legislation on November 2006 and is expected to AWAC 19.8% 18.7% 19.4% property direct rates is expected to be finalised shortly. The main Axis 24.4% 21.5% 23.0% impact negatively on some of the changes from the previous model Endurance 31.0% 27.7% 28.4% Bermuda cat reinsurers and/or are as expected. Everest Re 26.5% 26.2% 24.5% some of the sidecars in 2007. IPC 18.1% 14.8% 17.1% Capital management Max Re 18.7% 12.7% 18.7% Earnings Given the strong results and Montpelier 30.7% 22.7% 26.4% PartnerRe 29.5% 29.0% 28.9% All companies exceeded their increased competition, this is Platinum 26.7% 26.7% 26.3% earnings estimates due to the low expected to get considerable focus Renaissance Re 25.5% 23.1% 22.5% level of catastrophe losses. in the near future. White Mtn 39.8% 36.4% 42.3% Combined ratios show signifi- Founder exits have taken place XL Capital 27.8% 25.8% 27.4% cant improvement from 2005, again from some of the existing SEC list- due to the lack of catastrophe losses. ed reinsurers and several IPOs are ANNUAL COMBINED RATIOS Expense ratios have crept up expected from the Class of 2005 2006 2005 2004 as expenses did not decline in during 2007. ACE 88.1% 99.5% 96.3% Arch 85.4% 95.8% 92.1% ANNUAL GROSS PREMIUMS WRITTEN $M Aspen 82.0% 117.2% 83.4% 2006 2005 2004 AWAC 78.8% 124.4% 95.9% ACE 17,401 16,811 16,094 Axis 77.3% 101.8% 84.4% Arch 4,282 4,015 3,668 Endurance 81.5% 123.5% 85.8% Aspen 1,946 2,093 1,586 Everest Re 89.7% 120.2% 98.8% AWAC 1,659 1,560 1,708 IPC 32.8% 251.3% 77.9% Axis 3,609 3,394 3,012 Max Re 86.4% 110.8% 93.2% Endurance 1,790 1,669 1,711 Montpelier 60.3% 200.7% 77.8% Everest Re 4,001 4,109 4,704 PartnerRe 84.6% 115.9% 94.3% IPC 430 472 378 Platinum 83.6% 114.5% 96.7% Max Re 865 1,246 1,044 Renaissance Re 54.7% 139.7% 104.4% Montpelier 728 979 837 White Mtn 105.9% 111.7% 110.2% PartnerRe 3,734 3,665 3,888 XL Capital 88.5% 132.9% 96.0% Platinum 1,275 1,765 1,660 Renaissance Re 1,944 1,809 1,544 White Mtn 4,312 4,602 4,792 FINANCIAL STRENGTH RATINGS XL Capital 9,786 11,849 11,092 A M BEST RATING S&P RATING ANNUAL NET PREMIUMS EARNED $M March 9, 2007 Nov 15, 2006 March 9, 2007 Nov 15, 2006 ACE A+ A+ A+ A+ 2006 2005 2004 Arch AA–A–A– ACE 11,825 11,748 11,110 Aspen A– A– A A Arch 3,082 2,978 2,916 AWAC AA A–A– Aspen 1,676 1,508 1,233 Axis AA AA AWAC 1,252 1,272 1,325 Endurance A– A– A A– Axis 2,694 2,554 2,028 Everest Re A+ A + AA– AA– Endurance 1,639 1,724 1,633 IPC AA AA Everest Re 3,853 3,963 4,425 Max Re A – A – NR NR IPC 397 453 355 Montpelier A– A– A– A– Max Re 665 1,053 900 PartnerRe A+ A + AA– AA– Montpelier 583 848 788 Platinum A A NR NR PartnerRe 3,667 3,599 3,734 Renaissance Re AA A+A+ Platinum 1,337 1,715 1,448 White Mtn A– A– A– A – Renaissance Re 1,530 1,403 1,338 XL Capital A+ A+ A+ A+ White Mtn 3,713 3,799 3,821 Notes: NR3 — Not rated by AM Best; NR — Not rated by S&P XL Capital 7,570 9,617 8,550

[ 12 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:34 AM Page 13

QUARTERLY EARNINGS DATA Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($) Q4 2006 Q4 2005 Q4 2004 Q4 2006 Q4 2005 Q4 2004 ACE 665 236 278 1.99 0.69 0.93 Arch 239 101 107 3.12 1.34 1.45 Aspen 120 30 72 1.20 0.33 1.01 AWAC 134 (5) 103 2.12 (0.11) 0.68 Axis 281 233 181 1.69 1.47 1.09 Endurance 195 (52) 113 2.70 (0.80) 1.71 Everest Re 206 (162) 93 3.15 (2.63) 1.64 IPC 104 (75) 9 1.55 (1.28) 0.18 Max Re 95 (11) 87 1.51 (0.20) 1.82 Montpelier 122 (61) 102 1.26 (0.68) 1.53 PartnerRe 234 (42) 137 4.03 (0.76) 2.54 Platinum 83 (103) 50 1.28 (1.94) 1.03 Renaissance Re 201 (210) 191 2.78 (2.97) 2.66 White Mtn 278 33 165 60.33 2.82 13.48 XL Capital 471 (822) 288 2.62 (5.51) 2.07

ANNUAL YTD EARNINGS DATA Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($) 2006 2005 2004 2006 2005 2004 ACE 2,305 1,028 1,153 6.91 3.31 3.88 Arch 693 256 317 9.08 3.43 4.37 Aspen 378 (178) 195 3.75 (2.40) 2.74 AWAC 443 (160) 197 8.27 (2.94) 1.30 Axis 926 90 495 5.63 0.57 2.98 Endurance 483 (223) 356 6.73 (3.60) 5.28 Everest Re 841 (219) 495 12.87 (3.79) 8.71 IPC 377 (626) 139 5.54 (12.30) 2.87 Max Re 217 10 142 3.43 0.18 2.92 Montpelier 303 (753) 240 3.23 (10.49) 3.55 PartnerRe 715 (86) 471 12.37 (1.56) 8.71 Platinum 319 (138) 85 4.96 (3.01) 1.81 Renaissance Re 762 (281) 133 10.57 (3.99) 1.85 White Mtn 673 290 419 62.32 26.56 39.92 XL Capital 1,722 (1,292) 1,126 9.60 (9.14) 8.13

COMPARISON OF BOOK VALUE & MARKET VALUE PER SHARE ($) December 31, 2006 December 31, 2005 December 31, 2004 BOOK VALUE MARKET VALUE BOOK VALUE MARKET VALUE BOOK VALUE MARKET VALUE ACE 43.74 60.57 36.53 53.44 34.61 42.75 Arch 43.97 67.61 33.82 54.75 64.23 38.70 Aspen 22.44 26.36 19.39 23.67 21.37 24.52 AWAC 36.82 42.63 28.31 N/A 42.63 N/A Axis 26.09 33.37 20.24 31.28 21.20 27.36 Endurance 31.45 36.58 25.18 35.85 30.30 34.20 Everest Re 78.53 98.11 64.04 100.35 66.06 89.56 IPC 31.29 31.45 31.76 27.38 35.55 43.51 Max Re 23.06 24.82 20.16 25.97 20.45 21.31 Montpelier 15.46 18.61 11.86 18.90 26.75 38.45 PartnerRe 66.63 71.03 56.28 65.67 62.66 61.94 Platinum 28.33 30.94 23.22 31.07 26.30 31.10 Renaissance Re 34.38 60.00 24.51 44.11 30.19 52.08 White Mtn 406.00 579.43 342.00 558.55 360.53 646.00 XL Capital 53.12 72.02 44.31 67.38 51.98 77.65

SHAREHOLDERS’ EQUITY ($M) at December 31 2006 2005 2004 ACE 14,278 11,812 9,845 Arch 3,590 2,480 2,242 Aspen 2,389 2,040 1,482 AWAC 2,220 1,420 2,139 Axis 4,413 3,512 3,238 Endurance 2,298 1,873 1,862 Everest Re 5,108 4,140 3,713 IPC 1,991 1,616 1,668 Max Re 1,390 1,186 903 Montpelier 1,493 1,058 1,752 PartnerRe 3,786 3,093 3,352 Platinum 1,858 1,540 1,133 Renaissance Re 3,280 2,254 2,644 White Mtn 4,455 3,833 3,884 XL Capital 10,131 8,472 7,739

[ 13 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:34 AM Page 14

REGULATION We are upgrading, says Bermuda

he Bermuda Monetary Auth- to be seen as a global leader to light. That’s why, in part, companies jurisdictions around the world are ority, which oversees the island’s match our increasing global mar- such as mine trade with a so-called feeling the pressure to have a home Tinsurance industry, has taken ket influence. Bermuda discount — a reduction, I regulator at the leading edge. And issue with comments by Evan He explained: “Investors don’t believe, that is undeserved. the long-term competitiveness of Greenberg, President & CEO of like unpredictable risk, and some “A strong and enlightened reg- Bermuda as an insurance market ACE Limited, that improvements perceive risk to the future prosperi- ulatory environment … will help could be threatened if it is not con- to regulations are not happening ty of the island. They fear the capri- validate the legitimacy of Bermuda sidered a leader in modern regula- fast enough. cious and potentially damaging and ensure its prosperity for many tion with the improved image of In a recent speech, Mr actions of politicians who perceive years to come. legitimacy this brings.” Greenberg said Bermuda’s regula- Bermuda as a destination where “Global companies such as Mr Greenberg said the BMA tory environment was perceived as companies are allowed to game the ACE who are based here and doing needed to: “middle of the pack” but needed tax system or where regulation is business in all of the important Regulate more rigorously and efficiently for solvency, governance and proper risk management of insurance companies; Complete the separation of the private sector from the regulatory process; Adopt minimum international standards such as Solvency 2 in Europe; Appoint an experienced, world- class regulator as CEO to replace Cheryl Lister, who retires in May. Increase the number and professional standard of its staff; Complete its risk-based capital project as soon as possible. Mr Greenberg’s comments stung Finance Minister Paula Cox, who works for ACE as a corporate counsel. She said Bermuda’s regulations were “efficient and effective” and suggested Mr Greenberg was not “current with the legislative amendments and operational changes that consistently have been taking place within the BMA”. Meanwhile, the BMA said: “Bermuda’s supervisory approach … has been extensively amended, in particular to reflect the continu- ally evolving regulatory require- ments being adopted by the global standard-setting body, the International Association of Insurance Supervisors (IAIS). This has resulted in the Authority pro- moting a series of major amendments to the Insurance Act designed to provide us with the full range of powers that are now needed to ensure effective supervision.” The BMA also noted that it has been invited to join the IAIS’s Technical Committee, which sets standards worldwide.

[ 14 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/12/07 2:18 PM Page 15

IN DEPTH Flagstone’s amazing global office

By Chris Gibbons for example — but everyone in our hen Class 4 reinsurer Flagstone HOW A BERMUDA START-UP ACCELERATED FROM offices works for Flagstone. They Re talks about being a global just happen to be in different coun- Wcompany, it’s no idle boast. ZERO TO 117 STAFF USING THE COMBINED STRENGTHS tries. For example, we have more From day one, the post-2005 start- than 12 people in India who do up had a virtual infrastructure that OF HYDERABAD, HALIFAX, MARTIGNY, ZURICH — nothing all day but analyse catas- may become the business model for trophe risk for us. That means we both future companies and estab- can turn around submissions lished players. With most of its OH, AND HAMILTON TOO! quicker than our competitors. The accountants and IT people in quality of people we have in India Halifax, Nova Scotia, catastrophe tional infrastructure straight away. can’t offer expats a lifelong career is phenomenal — many of our peo- risk modellers and research and “It does require a certain mind- but we can in Canada or India.” ple have worked for the top model- development teams in Hyderabad, set and commitment to technology “It means a low percentage of ling companies like RMS or India, and additional underwriters on the part of the company to make our workforce is on work permits Equecat. There is a tremendous in Switzerland, at Martigny and sure people use tools like video which makes for a much more sta- culture of education in India and Zurich, only about a third of the conferencing,” Mr Brown pointed ble workforce,” says Brenton Slade, many of the people who work for company’s 117 employees work out, “but for us it has paid divi- the company’s Director of Business us are people that have been edu- directly out of its Church Street, dends and the lower costs have Development. “Indeed, most of our cated in the US and have gone back Hamilton offices. to India because of the rapid devel- Flagstone CEO David Brown opment taking place.” says he and Chairman Mark Byrne Mr Slade added: “When we set decided on the set-up out of both up we were always going to be necessity and choice, claiming that data-driven and very technical. today’s technology offers the com- Rather than build up our quanta- pany flexibility, resources and tive process, it was there from day growth potential that it couldn’t one. By having that and focusing hope to achieve in Bermuda alone. on it, we’re at the leading edge “Having worked here for a long because we have the resources and time, both Mark and I realised that the aptitude to do it.” in building a company like ours, Flagstone works hard at main- there just wasn’t the local talent in taining a cohesive office culture Bermuda for certain skill sets,” across the globe, encouraging explained Mr Brown. “To have our employees to fly to other offices to accounting department here would make sure they have a personal con- mean having to hire a number of nection to a voice or an email. “It expats, which is expensive. makes it a much more dynamic Obviously, certain things have to be company because you’re learning here from a regulation standpoint ‘The quality of people we have in India from other people with different [key decision makers and under- outlooks,” Mr Slade pointed out. It writers must be based in the domi- is phenomenal — many have worked is also important, he said, to under- cile, for example] but with certain for the top modelling companies like stand the culture of other places and functions that don’t need to be here ensure that the working environ- and for which there isn’t a ready RMS or Equecat’ ment is appropriate. “Things move supply of local talent, it makes sense very fast in India,” he noted, “and to put those somewhere else.” enabled us to get up and running so senior people are either Bermudian, people will move on very quickly if The pair had already estab- much quicker. To go from zero to spouses of Bermudians or long- they are not treated well or view lished a similar and successful set- 117 in a year in Bermuda would term residents.” their environment as simply an out- up with West End Capital have been extremely difficult. We Mr Brown says Flagstone’s set- source centre. You can’t just set up Management (Bermuda) so have far more people for our size of up, while cost effective, was not something overnight.” extending it to Flagstone was logi- capital than is usual. designed simply to save money but Although technology shrinks the cal. While Flagstone certainly isn’t “What we’ve done is also social- to maximise resources. Neither, he world in many respects, Mr Brown the first local insurer to establish ly responsible as it means we as a says, is Flagstone simply outsourc- said the personal touch is crucial. overseas back-offices — XL new company are not putting as ing jobs in the way other companies The day we talked, Mark Byrne was Capital, for example, now employs much pressure on housing, school may outsource IT to an overseas- in Hyderabad en route to around 160 people in the Indian places and Bermuda’s basic infra- based company or a call centre. Switzerland. “You have to make sure “cyber city” of Gurgaon — it is structure. Term limits on work per- “The jobs didn’t exist in the first you stay on top of everything,” he believed to be the first start-up mits make it more difficult to place. Yes, we use some outside said, “but for us the benefits far out- that has set up such an interna- attract good staff and also mean we companies — network consulting, weigh any cost or inconvenience.”

[ 15 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:34 AM Page 16

INSIGHT Ironshore breaks new ground

s you would expect from the top industry talent, filling a capaci- Greenhill Capital Partners. Cayman coral — plans to write a razor-sharp mind of Bob ty gap in the property cat market, CEO is Robert Deutsch, for- worldwide book of property busi- AClements, the industry legend etc. Except that Ironshore, unsual- mer CFO of US insurer CAN, ness. Initial focus will be on com- who helped found ACE, XL, Mid- ly, will only write primary business. who heads a team that includes mercial risks with wind exposures Ocean, Arch and Integro, new Few people spot and fill a gap in Chief Underwriting Officer Les in high-risk regions — like US Bermuda-based company Ironshore the market quicker than Mr Rock (previously with Heritage coastal states, the Caribbean and is something out of the ordinary. Clements, who formed the Class 4 Syndicate 1200 at Lloyd’s) and Mexico’s Yucatan peninsula — as On the surface, it seems a story insurer on January 3 with son John CFO Mitchell Blaser, who had well as earthquake coverage in familiar to anyone who has fol- and backing from Bear Stearns held a similar position at Swiss Re. California. It expects to write $500 lowed the Bermuda property catas- Merchant Banking, Corporate Ironshore — like its Cayman- million in gross premiums in 2007. trophe market in recent years: $1 Partners, Fremont Partners, based parent Ironshore Inc, named Mr Clements believes there is billion of clean capital, a team of TowerBrook Capital Partners and after a particularly tough type of still a supply shortage in the coastal US despite a quiet 2006 season and he is banking on the primary cat market remaining hard because of little capital flowing into the primary market at a time when rating agencies are demanding that insurers put up more against cat business and risk modellers are projecting even higher losses. The result is that many insurers, facing higher reinsurance rates, are reducing their cat exposures and writing less business in high-risk areas. In a recent interview, Mr Deutsch said there was “a crying need” for Ironshore’s product. “Virtually all of the capital that has been brought into the industry since the storms of 2004 and 2005 has gone into the reinsurance market as opposed to the insurance market.” He said the company estimated that less than $1 billion of the estimated $25 billion of post-2005 capital had gone into the primary business. A M Best has already given Ironshore an A– rating while warning that the company faces “increased competition from both established excess and surplus companies and possibly from recent start-ups entering its targeted markets as a result of the recent Florida insurance legislation”. Ironshore may also face a more immediate logistical problem. Primary insurance is more labour intensive than reinsurance and there is little existing primary talent in the island so much of it will have to be imported and that means the company must grapple with two thorny issues: ever-restrictive work permits for foreigners and escalating housing costs.

[ 16 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:51 AM Page 17

PROFILE Robert Stubbs, Power Broker! BERMUDIAN SCORES A REMARKABLE TRIUMPH JUST AFTER STARTING HIS OWN BUSINESS. CHRIS GIBBONS REPORTS

obert Stubbs was the only excess liability and D&O. We agement roles, I have always been Bermuda-based broker named could never work with a start-up and will always be what I consid- Ras one of Risk & Insurance under normal conditions, but er to be a ‘front-line broker’, magazine’s Power Brokers of the Robert was able to take care of a which is one that is always work- Year. The Bermudian-born Mr very big placement for us soon ing in the marketplace and Stubbs, President of Foram after forming Foram.” instrumental in not only the Brokerage in Hamilton, was one Mr Stubbs was unaware he design but also the placement of of five brokers honoured in the had even been nominated until insurance programmes.” energy category — just a year he received a call from the maga- With a track record of excel- after setting up his own company. zine’s editor. “It was a surprise, lent results for clients, Mr Stubbs According to the magazine, first simply because I had not decided that the same if not bet- Mr Stubbs, a former President of heard of the Power Broker fea- ter results could be achieved JLT Risk Solutions and VP with ture before and then secondly, working on his own and so he set Triangle Brokerage with nearly having looked at recipients from up Foram, an independent opera- 20 years’ broking experience, “has the previous year, they are nearly tion named after foraminifera, the already achieved notable success if not all US-based brokers and I single-celled marine creature in what was predicted to be a very also did not think that a candi- responsible for the famous pink difficult year for even the well- date from a new and relatively Robert Stubbs: accolade is “a hue of Bermuda’s beaches. Foram established large brokers”. small brokerage firm would have huge asset to us both in main- currently consists of three It continued: “Part of the rea- been included.” taining the business we have Bermudian partners: Mr Stubbs, son is his breadth of experience in Indeed, more than 66% of this currently but also attracting fellow broker Stephenie Konyec- many different lines. His opera- year’s 150 winners across 27 cate- new business” sni and CFO/COO Peter Card. tions outside the energy sector gories came from the four major Mr Stubbs said: “Our philoso- often serve as cross-training for broking firms with Marsh lead- energy industry in particular, we phy is built around three core val- the bulk of his business in energy. ing the way with 47 winners, are predominantly dealing with ues: knowledge of the client, Not surprisingly, he is active in ahead of Aon (33). extremely large companies and experience in the market and programme design, not just Mr Stubbs said: “Obviously to this accolade will not only help service, all of which we have or placement. That includes cover- have been nominated and subse- increase the awareness of Foram offer in abundance. It is clear that age in casualty, professional lia- quently recognised by clients on Brokerage within that industry the broking landscape has bility and property programmes, such a high level is a tremendous but validate the decision of those changed in the last couple of oftentimes for the same client.” achievement not only for myself clients who have chosen a small- years and being bigger is no More than 350 risk managers personally but also for my partners er but extremely experienced firm longer necessarily better. were asked to cite specific exam- with whom I work very closely to represent them in the Working for a smaller company ples of what a broker accom- and our brokerage firm as well. Bermuda insurance market.” with no internal distractions plished during 2006 to deserve “From a business perspective, Mr Stubbs added that his allows us not only the liberty to recognition. One client, a major international recognition in a almost 20 years as a broker have believe in our core values but also energy player, told the magazine publication with widespread cir- spanned all lines of business, the ability to ensure that we have that Mr Stubbs has “the ultimate culation within the insurance “which is very beneficial as I can time to adhere to those values inside track. He is a native industry will be a huge asset to us talk to and offer our services to and deliver both the service and Bermudian. He knows absolutely both in maintaining the business clients for all of their coverage results that we have promised to everyone. I have known him for we have currently but also needs in the Bermuda market. In our clients and they, rightly, have years, and he has handled our attracting new business. In the addition, despite different man- come to expect from us.”

[ 17 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 10:11 AM Page 18

MILESTONES Hello, Allied World AWAC JOINS THE TOP TABLE WITH RECORD RESULTS, A PURPOSE-BUILT HQ AND STRONGER BRANDING fter posting record profits, the company formerly known as AWAC has offi- cially opened its new seven-storey offices on the fringes of Hamilton and Alaunched a brand makeover that will now see it referred to as Allied World. Faye Cook, Allied World’s AVP, Marketing & Communications, said the launch completes an extensive brand valuation process. “We reached out to both our brokers and our employees to evaluate our brand’s former look and feel, and to determine if it matched who we were as a company and our existing image in the marketplace.” Apparently it didn’t, hence the bold new logo and the replacement of the ambiguous AWAC acronym. Meanwhile, the company has moved its 161 Bermuda employees from five offices scattered around Hamilton to its new global HQ on Richmond Road. The company — a Class of 2001 insurer formed here in the wake of September 11 — now employs over 270 people in Bermuda, Boston, Chicago, Dublin, London, New York and San Francisco. President & CEO Scott Carmilani said: “Because we were in five locations, I don’t think we were truly recognised as having a large presence as we do in Bermuda. Our new headquarters allows us to have a much more powerful organisation.” Meanwhile, Allied World has set aside $2.1 million to cover an anticipated settlement relating to a Civil Investigative Demand from the Texas AG’s Scott Carmilani and Marston Becker: changing perceptions office in November 2005 that led to the resignation of casualty underwriting manager Jordan Gantz. The investigation con- Jack Kripl cerns possible restraint of trade issues arising from Allied World’s relationships with www.BermudaRealtor.com founders AIG and Chubb as well as insurance 441-737-4480 brokerage practices. Allied World is involved in another contin- or 441-292-1793 x 237 uing case in New Jersey, in which it is one of 78 Certified named insurers, but the company believes any International liability from that case will not be as high as the Trott & Duncan Property anticipated Texas settlement. Buy Allied World is also pursuing a civil action Specialist in Massachusetts against Lexington Insurance. 20 Brunswick Street, Hamilton Sell FIABCI PO Box HM 2094 Lexington secured $15 million of reinsurance from Allied World in 2002 and is seeking to bill Hamilton HM HX Homes for a claim on that contract. Allied World has Condos started court proceedings to have the original Telephone: (441) 295-7444 agreements nullified, alleging breaches on the Facsimile: (441) 295-6600 part of Lexington. Email: [email protected] Web: www.td.bm Max is Re-vised Contact: Kim N. Wilson, JP Max Re Capital is planning to change its Trott & Duncan provides a comprehensive name to Max Capital Group with Max’s range of legal services. The firm blends an Bermuda-based operating company, cur- innovative approach to the practice of law rently known as Max Re, becoming Max with over 150 years of combined legal Bermuda. The proposal will be put to knowledge and experience. The firm’s client shareholders at the company’s annual base spans Bermuda, Europe, the United meeting on May 4. States, the United Kingdom, the West Indies Chairman & CEO Marston Becker said: and Canada. “Max Capital Group will more closely align the company’s name with its products and BERMUDA REALTY services now that we have expanded well

Each office is independently owned and operated. Coldwell Banker beyond reinsurance operations.” Bermuda Realty is a trade name of Bermuda Realty Company Limited.

[ 18 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:51 AM Page 19

MEDIA WATCH Why Bermuda? Because it works AN INDUSTRY VETERAN PUTS THE SIMPLE BUT TRUE CASE FOR THE ISLAND “What really fosters if a group of newcomers were to start hiring we were having in March last year, whether with development in Ber- Bermuda underwriters from their competition.” journalists or analysts. They were saying: ‘Are muda is not tax, it is — Bermuda Reinsurance magazine on the you guys really going to stay in the cat business?’ dysfunctional regula- island’s continued growing pains Now everyone thinks the cat business is a won- tion in other jurisdic- derful place to be.” tions. We started our “The reinsurance market’s rapid recovery from — Neill Currie, CEO of RenaissanceRe, in operations on Dec- major loss events in 2001 and 2005 suggests Reactions’ Bermuda Market Review ember 16, 2005 and by that, contrary to received wisdom, it is adapting December 16, 2006 we to the demands imposed by escalating catastro- “You cannot attack had $300 million on phe losses. This is just as well, as most forecasts Bermuda without also our books. If I had started in New York, I’d still suggest that another benign year for catastro- attacking Switzerland, be processing the application and I’d still only be phes is unlikely in 2007.” Germany and everyone in two states.” — Benfield Global Reinsurance Market else. It’s a globalised — Ariel Re CEO Don Kramer hits back at Review industry now. [After Bermuda’s critics Katrina, Rita and “They are unicycles, not attached to anything. Wilma], the US indus- “The single limiting factor on large new You have to be careful with unicycles because try lost only $5 billion. Bermuda companies at this point is the intellec- you occasionally get a clown on them.” That’s because it exported $30 billion worth of tual talent. Demand and therefore the money — Jim Bryce, CEO of IPCRe, on unrated firms losses to the rest of the world.” are there, and office and residential space can be writing collateralised reinsurance — XL CEO Brian O’Hara reacting to questions found, at a price. Locating new market leaders is about the possibility of future US tax threats to the problem, together with the knock-on effect “One thing I find humorous is the discussions Bermuda

LYNDA MILLIGAN-WHYTE & ASSOCIATES BARRISTERS & ATTORNEYS

A full service international business law firm

P.O. Box HM 1913 www.bermudaemployment.com Hamilton, Bermuda HM HX

77 Front Street Tel: 441-295-1302 Hamilton HM 12, Fax: 441-295-8555 Bermuda Email: [email protected]

Tel: 1(441) 296-5627 Lynda Milligan-Whyte & Associates is Fax: 1(441) 296-1749 Email: [email protected] a full service international business law firm with attorneys who have over 20 Contact: Laura E. Jackson years of experience in practicing corporate/commercial law in Bermuda BES LIMITED is a leading provider of and internationally particularly in com- permanent and temporary recruitment pany and trust formation, insurance services to Bermuda’s Business Sector. registration, mutual fund regulation, Specializing in a broad range of indus- civil litigation/insolvency matters and tries including the insurance and reinsur- corporate governance/government ance business arena, BES provides inno- compliance areas. vative and flexible recruitment services including comprehensive employment The law firm was founded by Lynda and relocation assistance to new start-up Milligan- Whyte, J.P., the former U.B.P. companies. All services are tailored to Government Leader in the Bermuda meet the individual business needs of each client. Senate.

[ 19 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 12:06 PM Page 20

PEOPLE The opposite of evanescence GREENBERG CONSOLIDATES HIS POWER AT ACE LIMITED

ACE: Evan Green- joined AIG as AON: Dennis Ma - the new unit’s CEO while continu- berg, the CEO of Senior Vice Pres - honey, former CEO ing as CEO of Aon Risk Services ACE Limited, has ident, Finance. Mr of Aon UK, has Americas, based in Chicago. been elected Chair- de St Paer will relocated to Ber- AXIS: Janet Jordan-Foster has man, succeeding report to Chief Fin - muda to become joined as Executive Vice President Brian Duperreault, who will ancial Officer Steven Bensinger. Chairman of Aon Global, a new of AXIS E&S Casualty, which spe- remain on the ACE board. AMLIN: Stuart MacKellar has business unit designed by the bro- cialises in underwriting commercial AIG: Jerry de St Paer, formerly been appointed Managing Director ker to offer clients a unified service liability risks on a primary basis. EVP and CFO at XL Capital, has of Amlin Bermuda. platform. Steve McGill will be She will be based in New York City. EVEREST RE: Larry Frakes, President of Everest National Insurance, is to retire. Thomas Gallagher will manage the operation while a replacement is sought. MAX RE CAPITAL: James Tees, previously Senior Vice President, Treasurer & Secretary, has been named Executive Vice President & Chief Risk Officer. Sarene Bourdages, previously Senior Vice President & General Counsel, has been promoted to Executive Vice President & General Counsel. Meanwhile, Keith Hynes, Chief Financial Officer, has retired. He will be succeeded by Joe Roberts, currently Senior Vice President & Controller. MONTPELIER RE: Raymond Barrette has resigned as a director following his recent election as Chairman & CEO of White Mountains Insurance Group. QUANTA CAPITAL HOLD- INGS: William Bolinder is to become a director following the resignation of Nigel Morris. WHITE MOUNTAINS INS- URANCE GROUP: former CEO Ray Barrette succeeds Jack Byrne as Chairman and Steve Fass as CEO. Allan Waters has been elected CEO of White Mountains Re Group, succeeding Tom Hutton, who remains Deputy Chairman and will serve as a Senior Advisor to Mr Waters. XL CAPITAL: Frederick Loeloff has been appointed Senior Vice President of Ratings & Finance Development. Please send Bermuda-related awards, appoint- ments and promotions with digital pictures to [email protected], writing “BIQ People” in the subject line.

[ 20 ] 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:35 AM Page 21 18075B_BIQ.qxp:BIQ_Pg_ 4/9/07 9:54 AM Page 22

Our brokers want a fast turnaround. Our clients want a long-term relationship.

We deliver.

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

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.