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2010 Entrepreneurial Insurance SymposiumThe New Landscape; Building Competitive Advantage

Tuesday, September 14, 2010

Kevin H. KelleyChief Executive OfficerIronshore, Inc.

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Uncertainty Is The Hallmark OfThe First Decades Of This Century

• September 11, 2001

• Hurricane Katrina

• Credit Crisis

• British Petroleum – Deepwater Horizon

• Unchartered Waters

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Uncertainty Will Drive Behavior;Increase Risk Premium

• Drive Syndication / Diversification

• Counter-Party Concerns

• Many Examples:British Petroleum, Lehman Brothers, AIG, etc.

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Challenge Of Regulation

• Regulation Will Deal With The Past,Creating A Different Future

• Managing Size Will Be A Supreme Challenge

• Opportunity Cost Of Compliance Could Be Fatal

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So What?

• The Big Will Be Smaller

• Markets Will Be Less Concentrated

“Basic Change Is The Result Of A Confluence Of Forces, Rarely Just One Force. Always Ask Yourself If There Are Enough Different Forces Pushing In The Same Direction Before You Make A Judgment.” - John Naisbitt

Source: Capitalism 4.0 The Birth Of A New Economy In The Aftermath Of Crisis - By Anatole Kaletsky

Market Dynamics Are Shifting

Top Other Liability (Claims Made) Writers Top Excess & Surplus Lines Writers

Source: A.M. Best.

Financial crisis caused instability at many top insurers...creating significant opportunity to capture business and hire talented professionals

(US$ in millions) 20082008 YoY % Market

Group DPW Change Share

American International Group $7,216 (12.8%) 21.0 %

Lloyd’s 6,062 (4.7%) 17.6 %

Zurich 1,546 (6.2%) 4.5 %

Nationwide Group 1,264 (12.1%) 3.7 %

ACE Ltd. 1,026 (16.4%) 3.0 %

Markel 1,006 (10.5%) 2.9 %

W.R. Berkley 962 (17.3%) 2.8 %

CNA 713 (6.1%) 2.1 %

Berkshire 708 (24.0%) 2.1 %

Alleghany 658 (31.4%) 1.9 %

Argonaut 614 (6.9%) 1.8 %

AXIS 581 (17.1%) 1.7 %

Arch Capital 471 (26.5%) 1.4 %

Travelers 445 (18.0%) 1.3 %

XL Capital 406 (10.9%) 1.2 %

Top 15 $23,678 (11.9%) 68.9 %

All Others 10,687 9.6% 31.1 %

Industy $34,365 (6.2%) 100.0 %

Source: SNL Statutory Information.

(US$ in millions) 20092009 YoY % Market

Group DPW Change Share

American International Group $2,977 (14.5)% 16.5 %

Chubb Corp. 1,660 (4.4)% 9.2 %

CNA Financial Corp. 1,411 (2.4)% 7.8 %

XL Capital Ltd 1,148 (6.2)% 6.4 %

Travelers Cos 1,069 (4.7)% 5.9 %

Zurich Financial Services AG 1,000 2.9 % 5.6 %

ACE Ltd. 846 8.1 % 4.7 %

HCC Insurance Holdings Inc. 714 12.3 % 4.0 %

AXIS Capital Holdings Ltd. 524 21.8 % 2.9 %

Hartford Financial Services 481 (19.9)% 2.7 %

Liberty Mutual Holding Co. 430 (1.1)% 2.4 %

Arch Capital Group Ltd. 385 1.5 % 2.1 %

Attorneys' Liab Assr Society 322 (16.5)% 1.8 %

Allied World Assurance Co. 306 18.8 % 1.7 %

W.R. Berkley Corp. 304 31.4 % 1.7 %

Top 15 $13,579 (3.8)% 75.4 %

All Others 4,420 9.0 % 24.6 %

Industry $17,999 (1.0)% 100.0 %

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Creative Disruption

• Creative Disruption Versus Destruction

• Opportunity Or Threat

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Traits Needed To Succeed

• Agility And Nimbleness = Pace

• Flexible Operating Strategies

• Innovation

• Efficient Delivery Of Increased Expectations

• Instinct Versus Models

• Economic Models That Match Reward And Risk

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Building Competitive AdvantageWithin This New Normal; The Alpha

• Distribution – Defining The Objective

• Cost – Control

• Product Leadership Ambition

• People – Getting, Developing And Keeping – Culture

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The Entrepreneurial Class IsAmerica’s Competitive Advantage

• Entrepreneurialism Changes Lives

• Risk And Reward

• Concepts That Support; The Business Judgment Rule

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Building An Entrepreneurial Culture

• Performance Based

• Individual Accountability – Small Units

• Ownership

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Opportunity

• See It

• Seize It

• Create Value From It