Dr. Bru n0 P0 rro

Chief Ris k eD fficer, Swiss Re

IMIA 20 02 in Rii sehlikn n

Group Product Mana gem entEnginee rin9Zurich, September 2002

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• •

• Res uIts

• P0 S iti0 nin 9 0 fEn gin eerin9

• The underwriting

• Cia im s

• Risk management

• Conv ergence with prop erty

• The en9 in eer

• 0 utlo 0 k

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• From 1998 to 2001, the line of business Engineeringpro duced 4 yea rsin a row 0 f negativere suits .

• Des pite cIea r imp r0 vemen tin re- underwriting, res uIts arestill critical for 2002

• So ft market

- The LoB was riding the soft cycle ... not steering thecycle

- Everyo ne involved ha d its ow n responsibility ... thisincIude s, 0 f c0 urse, th e reins ure rs

• Res uIts we re well baIancedin th e pa st, bu t we have noweate nail th e mea t ... and are d0 wn to th e b0 ne!

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• Itremains a niche product

• Important as a global reinsu rer

- We wan t to 0 ffe r ail pro ducts ran ge ...

• In EN the b0 undary betwe en insuran ce and reinsurance isless rigid.

• Globalisati0 n 0 f risks

- Big in te rn ati0 nalisati0 n 0 f te chnicaI supplie rs, as well asinsuran ce suppliers (risks are globa lly placed)

- Are 0 ur structu res adapted to th e situati0 n ?

• As line of business EN is kno w-ho w intensive

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• Is bein gin crea sin 9Iy imp r0 ve d as wardin 9san d con tractsare mare pro fe ssion ally deve lop ed,

- But we sti11 have difficui t se9men ts:

- Tunnels and und erqro und con structions

- Gas Tu rbines

- EntrepreneuriaI risk

• Pre miu mob ta in ed not ad equate to risk

• Cavers and wordings

• Is treaty bus in ess th e appro priate fa rm fa r suchas pecia Iline ?

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- Are we sure we only paid the covere d losses?

- Are we sure we always paid only th e quantum as perpolicy wording ?

- How is the Underwritin 9 in te ntio n 9rante d ?

• Chan ge in th e cons truction indus try environment

- Pro ject finance

- Very tig ht tim e sche dules

- Pushin 9 to wards te chn0 lo gicaI risky soluti0 ns

• Insurers together with the reinsurance ind ustry need tofo cuson pro active cIaims hand Iin9.

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• Increa sin gIy c0 mpie x riskiand scap e in th e con structi0 nindustry demand sophisticated integrated riskma nagement

• How to im prove risk co ntro l during the construction inorder to achieve a be tte r collaboration be tween insuredand insura nce I reinsurance

• If not possible for insurance/re insurance because lack ofres 0 urces . > 0 uts 0 urcin g

• Will not 0 nIy av0 id Ire duce 10 sses but enhance th eadjustment (tim e, quantu m, fairn ess I

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• The que stio n sh0 uId not be: sh0 uId MB be writte n inProperty but rath erho w can we ins urep r0 per UW.

• This conve rgence as a resultof the so ft market created:

- polluting the result in propertv

- reducin g profitability in EN loB

• This shift has co me to halt, due to re-un derwriting inso me markets and even reve rse trends are partiallyob served.

• EN as LoB is very intensive in technic al and insurancete chnique s know-how

- can we make bette r use 0 f it ?

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• Lack of marketing sense in the engineers community

• A certain lack of recogni tion

• Norm aI men ta Iity is th at 0 f a risk ta ker ...

• Finally duringas 0 ft cycle peri0 d marketin9 was rath er inth e drivin g seat, it is therefore not easy for Engineers .. .who are at first 9Iancelite chnicall y Iabelled"to imp 0 seth eir vie w.

- But now th in 9s look bette r sowe sh0 uId not miss th isopp0 rtunity !

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• Reb0 und in te rm s 0 f con ditio ns

- afte r soft-mark eta nd Iax underwriting

- insurers are in the driving seats when it come to priceand te rm s

• Fres h cap itaI has bee n flow in g in insuran ce Ire. industry

- in response to tight cap acity.

- rlsmg premium

- but not yet in EN niche segmen t

• Reinforce a strict and very discipline d Underwriting