RESULTS & Q1 PRAISE FOR - PwC · 2015-06-03 · 2007, 2008, 2009 and 2010.” ABIR member individual and aggr egate results can be obtained from [email protected] ABIR reports

CATALOGUE OF CATASTROPHEAfter the devastating tsunami and quake in Japan,the New Zealand quake and the Australian floods,Bermuda insurers count the cost: Pages 8 & 9

PRAISE FORBII AWARDWINNERS

ALL THERESULTS &ANALYSIS

AVOIDINGBANANASKINS…

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BERMUDAINSURANCEQUARTERLY© 2011 Bermuda Media in association with

J u l y 2 0 1 1

BIQ Q16

22334D_BIQ_J11.qxp:Layout 1 6/28/11 10:43 AM Page 1

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We welcome everyone at Orion Investment Management to the Capital G family.


“Despite heavy losses in thecurrent quarter, we continueto believe in the value of geo-graphic diversification of ourcatastrophe portfolio as ameans of optimising our long-term risk-adjusted returns.The strength of our balance sheet has enabled usto absorb these losses and maintain a strong cap-ital position. With PartnerRe’s financial strengthand stability and global franchise, we remainwell-positioned to provide continued capital sup-port to our clients and appropriate risk-adjustedreturns to our shareholders.”— Costas Miranthis, PartnerRe President & CEO

“ACE had a very good quar-ter that was overshadowed bysignificant catastrophe losses.We produced $268 million inoperating income and grewbook value two percent. Weare more confident … aboutour prospects for full-year premium growth thanwe were last quarter and now believe growth will bebetween upper single-digit and low double-digit.”

— Evan Greenberg, President & CEO, ACE

“The first quarter of 2011 hasbeen an extraordinarily chal-lenging quarter not only forAXIS but also for the indus-try as a whole, marked by anunprecedented series of natu-ral catastrophes includingone of the largest earthquakes ever recorded.”

— John Charman, President & CEO, AXISCapital

“This quarter’s catastrophic events have causedenormous human tragedy, and we extend oursympathies to all those affected. As we havethroughout the history of our company, we areresponding to the needs of our clients quickly,whether it is paying validclaims with industry leadingspeed, or providing addition-al coverage in the wake ofthese events. In the aftermathof the large catastrophes thathave occurred over the lastyear, and as our clients’ view of risk evolves, weanticipate demand for our products will increaseover time.”

— Neill Currie, CEO, RenaissanceRe

BERMUDA INSURANCEQUARTERLY

EditorRichard Whitaker

Art DirectorPaul Shapiro

WritersStuart Collins, Roger Crombie

Director of MarketingLissa Fisher

PublisherIan Coles

Published by Bermuda Media, Suite310, The International Centre, 26Bermudiana Road, Hamilton HM 11,Bermuda. Postal address: PO BoxHM 2032, Hami l ton HM HX ,Bermuda. Tel: 292-7279 Fax: 295-3189 Email: [email protected]. Web:bermudamedia.bm Printed in Canada.

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BIQ

Last year turned out to be a betteryear for Bermuda-based insurersand reinsurers than originally

anticipated, according to a new sur-vey of the Bermuda market.

The 17th Annual BermudaInsurance Survey of 22 firms, pro-duced by Bermudian Business maga-zine, Deloitte and Standard &Poor’s, revealed that despite declin-ing premium rates in most lines ofbusiness and higher than normalcatastrophe activity early in the year,a relatively benign North Atlantichurricane season and few catastro-phe losses during the second half of2010 contributed to strong overallperformance for the year.

The survey said that partici-pants reported an average commit-ted ratio of 84 percent for 2010,with return on equity (ROE)reaching 13.5 percent, and aggre-gate capital and surplus growing bya healthy seven percent.

It added: “Despite this betterthan expected performance, 2010

still pales in comparison to record-breaking operating profitabilityreported by market players in 2009.

“During that year, very lightcatastrophe activity and stronginvestment performance led oursurvey participants to report astrong average combined ratio of73 percent, a much higher ROE of22 percent, and an impressiveincrease of 37 percent in theiraggregate capital and surplus.

“Although not as good as 2009,the sector’s performance in 2010helped further strengthen the capitalposition of Bermuda writers, most ofwhom offer a combination of insur-ance and reinsurance coveragesaround the world. Following a 16percent drop in our survey partici-pants’ aggregate capital and surplusto $61 billion at year-end 2008(mostly driven by realised and unre-alised investment losses stemming

from the capital market crisis), thesector’s results in 2009 and 2010,which we consider strong, droveaggregate capital and surplus to arecord $90 billion at year-end 2010.”

ACE and XL dominated theTop 10 list in the survey ranking asthe first and second-largest playersbased on total capital and surplus of$23 billion and $10.7 billion respec-tively at year-end 2010. PartnerRewas the third with $7.2 billion.

THE QUOTES OF THE QUARTER

V o l u m e 7 , N u m b e r 3J u l y 2 0 1 1

Survey reveals ‘better year’ for Bermuda firmsBUT 2010 PALES IN COMPARISON TO A RECORD-BREAKING 2009

[ 1 ]

Florida’s Office of InsuranceRegulation has signed a consentorder allowing AXIS Specialty tooperate as an eligible reinsurer inFlorida with reduced collateral.This makes AXIS the 13thBermuda reinsurer to operateunder similar terms in Florida.

AXIS posted $4.2 billion capitaland surplus, which is more thanthe necessary $100 million. The

firm said it represented securefinancial strength by exhibitingfavourable ratings from two statis-tical rating organisations.

The other eligible reinsurers inFlorida include XL Re, TokioMillennium Re, RenaissanceRe,PartnerRe, Montpelier Re, HiscoxInsurance, Hannover Re(Germany), Hannover Re(Bermuda), Aspen Insurance,

Arch Reinsurance, AlterraBermuda, Allied WorldAssurance Company and AceTempest Reinsurance.

Florida’s legislature passedsweeping reforms in September2008 enabling the office to setlower collateral requirements fornon-US reinsurers that aredeemed financially sound andhighly rated.

AXIS Specialty can operate in Florida


NEWS REVIEW

The Association of BermudaInsurers and Reinsurers (ABIR)has released the 2010 global

underwriting results for its 22member reinsurers — companiesthat write insurance and reinsur-ance from underwriting centres inBermuda, Europe and the US.

The ABIR said they “wrotenearly $62 billion in global grosswritten premium on a capital and

surplus base of $90 billion. Theyreported net income of $11.4 bil-lion. The gross premium to equityratio for the group as a whole was.69 to 1.”

According to the data, ACELtd is the dominant and strongestof Bermuda-based insurance com-panies, with nearly one-third oftotal gross premiums written in2010 — $19.5 billion. The compa-

ny had total equity of almost $23billion in 2010, with XL Groupsecond with total equity of $10.6billion. The figures indicate thatACE had net income of $3.1 bil-lion in 2010.

The ABIR said that as 2010“was characterised by large catastro-phe losses that have continued withthe Japanese and New Zealandearthquakes of 2011,” the combined

results were quite satisfactory.“The growth in capital and sur-

plus despite large loss eventsdemonstrates the strong capitalposition of these companies. Afterreviewing published preliminaryloss estimates for major insurancegroups, the global catastrophe lossinformation documents the impor-tance of Bermuda as a propertycatastrophe underwriting centre.”

The organisation gave the fol-lowing loss statistics for its members:� 37 percent of the reportedclaims liabilities for Europe’s 2010Windstorm Xynthia.� 38 percent of the reportedclaims liabilities for Chile’s 2010earthquake.� 51 percent of the reportedclaims liabilities for New Zealand’s2010 earthquake.� 14 percent of the reportedclaims liabilities for the interna-tionally reinsured share of Japan’s2011 earthquake and tsunami.

However, the ABIR also said“premium written has remainedflat during the four year period2007, 2008, 2009 and 2010.”ABIR member individual and agg regate results can be obtained [email protected]

ABIR reports 2010 results ‘satisfactory’ACE LTD THE DOMINANT AND STRONGEST OF BERMUDA-BASED INSURANCE COMPANIES

[ 2 ]

Three newsidecarsSpecialty insurer and reinsurerLancashire Holdings Ltd has estab-lished a sidecar — AccordionReinsurance Ltd — to provide up to$250 million in additional capacity.

Meanwhile, Bermuda-basedreinsurer Alterra Capital HoldingsLtd and private equity firm StonePoint Capital LLC said they had putup to $200 million towards a side-car — New Point IV — that alsoprovides retrocessional propertycatastrophe coverage.

Validus Holdings has announcedthat it has joined with other invest -ors in capitalising AlphaCat Re2011, a new special purpose side-car reinsurer. The vehicle will writecollateralised reinsurance and retro-cessional reinsurance.


NEWS REVIEW

XL Group has opened its newProperty and Casualty non-lifesubsidiary in Shanghai.XL Insurance (China) Com -

pany Limited offers products andservices in property, casualty, spe-cialty and professional lines. Thesubsidiary is led by Chairman andCEO, Zheqiang (Al) Xie.

During the opening ceremonyXL CEO Mike McGavick, said:“This is a significant step in theimplementation of XL’s strategy tostrengthen its presence in emergingmarkets. I am delighted to be here inChina to open our insurance opera-tion and personally thank the ChinaInsurance Regulatory Commission(CIRC) and the Shanghai govern-ment for their support in getting usto this day. We are excited to becomepart of the Shanghai insurance mar-ket and to contribute our know-howto the further development of theChinese economy.”

Dave Duclos, CEO of XL’s

Insurance Operations, comment-ed: “We provide commercial insur-ance to the world’s largest organi-sations. As the Chinese govern-ment looks to build Shanghai intoan international financial and ship-ping centre, our team in Shanghaiwill provide its underwriting andclaims expertise, working closelywith our global network, to antici-pate and respond to the needs ofour clients and brokers in thistremendously vibrant city.”

XL Shanghai launch

[ 3 ]

Bermuda-based energy industrymutual insurer Oil Insurance Ltd(OIL) recorded net income of$781.8 million last year.

OIL was not hit hard by theDeepwater Horizon oil rig loss inthe Gulf of Mexico because itsmember companies do notinclude the Macondo well ownerBP or rig operator Transocean.

The company had $783.7million of written and earnedpremium last year whileincurred losses totalled $422.7million. Inclusive of loss adjust-ment expenses, OIL’s netunderwriting income was $361.8million. Net investment incomewas $435.7 million.

“In nearly 40 years OIL hasgrown to the point of insuringnearly $2 trillion of members’global assets, which is securedby over $3.2 billion in sharehold-er’s equity with company totalassets at year-end standing at$5.9 billion,” said President andCEO Robert Stauffer.

Oil Insurance nets$781 million

XL executives with the Chinese delegation


RIMS REVIEW

Deft hand underscores Island credibilityRIMS is the largest conference

of its type for the insuranceindustry. There are more peo-

ple meeting in one place to talkabout insurance during that weekthan at any other time during theyear. One VIP visitor at this year’sRIMS conference in Vancouver wasthe Premier of Bermuda, Paula Cox.

BIQ: As you have had your meet-ings and discussions over the lastfew days, what would you say arethe key topics for the insuranceindustry?Premier: What I have heard isinnovation, innovation, innovationand also quality. The industry lead-ers were at pains to highlight thatthey are comfortable and satisfiedand committed to Bermuda. Theyadded that some of the distin-guishing features for them werethe fact that we had speed to mar-ket, a sound regulatory frameworkand an environment that wasenabling and innovative.

Industry leaders said that whenthey put key people in Bermuda itis more likely that they hire peoplewho are going to be from and inBermuda, so that also provides anopportunity for growth.

We also talked about how wecould expand the education oppor-tunities for young Bermudians at amuch earlier age to see the benefitsof being involved in the insur-ance/reinsurance sector even at theprimary and middle school levels.Before they formalise whichcareers they want to get in to it isbetter to let them see how insur-ance and reinsurance is relevant.

I think that was the questionthat kept coming up: how can youensure relevance and make surethat people see it as relevant forthem as a career path but also howdo we as a jurisdiction welcomeinternational business in the insur-ance sector? How can we continueto make sure that we are relevantand how do we up our game? Is iton the regulation side, is it on thered carpet versus red tape, or whatother options do we have to con-

tinue to demonstrate our willing-ness, our welcoming nature, andalso the fact that we can providesomething that differentiates us anddistinguishes us from all of thosethat are wannabe competitors?BIQ: What can the Governmentof Bermuda do to help the insur-ance industry grow in Bermuda?Premier: We have to continue todemonstrate support. I think wehave to recognise that the Ber -

muda brand is a thoroughbredbrand and imitation is the mostsincere form of flattery. Bermuda issetting the pace, others are follow-ing but we can’t rest on our laurelsbecause those who are snapping atour heels are getting closer. Sowhat do we need to do? We needto find that Bermuda-plus factorand that is not just legislation it isalso continued attitudinal shiftwhich demonstrates the fact thatwe recognise the value added prod-uct that the insurance/reinsurancesector adds to Bermuda and thatwe want to make sure that we con-tinue to reinforce the partnership.

I think the partnership is fur-ther fuelled when we work on joint

projects. I think it is demonstrat-ing that we are prepared to dowhat it takes to ensure that interms of raising the regulatory bar,we do it but we do it with a recog-nition of the need to be both com-petitive and efficient so that mar-ket participants can also enhanceproductivity while they add valueto Bermuda and to their stake-holders and shareholders.BIQ: Bermuda has had a reputa-

tion for what could be described asa light regulatory touch.Premier: Oh no, that was theBermuda of old when insurancewas starting out. The one thingthat Bermuda is not known fornow is light touch regulation. Weare known for a deft hand, a surehand, and making sure that ourregulations are ones that maintainstandards, applaud quality andunderscore our reputation of cred-ibility.BIQ: Moving on to Solvency II,what is the current situation withregard to Bermuda obtaining eq -uivalence?Premier: The Bermuda MonetaryAuthority (BMA) is to be com-

mended because we are certainly inthe first wave, and for Bermuda toeven be in that first wave of assess-ments is, I think, significant, note-worthy and commendable.

I believe that what the BMAhas done with the help of the gov-ernment is to pass necessary legis-lation and also make sure that ithas the resources so that it isn’t justan empty gesture, it’s showing thatwe also have the will and the forti-tude to be able to provide what isrequired so that we can have equiv-alence. Is it important for Ber -muda? Clearly, because what wehave is a very lucrative, significant,reputable and incredible insur-ance/reinsurance sector. But theycan go anywhere in the world, any-where, and we cannot take themfor granted.BIQ: Bermuda has not been iso-lated from the worldwide economicdownturn and for the first time ina generation we’re seeing someunemployment. What is your gov-ernment able to do to encouragegrowth in employment in business,and especially for internationalbusinesses based in Bermuda?Premier: Job creation is numberone. The fact that we are seeingnew jobs being created, particular-ly at a senior level in the insurancesector, is critically important be -cause when you have senior man-agement jobs based in Bermudathe likelihood and the impact ofother jobs coming as a result whichcan both fuel local employment aswell as some expatriate employ-ment, is helpful.

You have also got to make surethat the cost of doing business inBermuda isn’t prohibitive, that iswhy I took the unprecedented stepof giving up revenue in the lastbudget. The payroll tax rollbackssend a significant signal. I didn’thave to roll it back but it’s a ques-tion of how do you show goodfaith and also send a significantand symbolic signal that we wantto do more to encourage you tostay and also to bring jobs toBermuda.

[ 4 ]

PREMIER: ‘INDUSTRY LEADERS ARE COMFORTABLE … AND COMMITTED TO BERMUDA’

‘What we have is a very lucrative, significant, reputable and incredibleinsurance/reinsurance sector. Butthey can go anywhere in the world,anywhere, and we cannot take them for granted’

‘Industry leaders said that whenthey put key people in Bermudait is more likely that they hirepeople who are going to be fromand in Bermuda, so that providesan opportunity for growth’


JOSEPH REGOPresident and CEO,Aon (Bermuda) Ltd

“There is alot of talk ar -ound the im -pact of therecent catas-trophe loss.We can seeas the firstquarter res -

ults from carriers are beingreleased, that events in NewZealand, Australia and Japan had asignificant impact on earnings.There is a lot of discussion aboutwhat this means for the marketgoing forward. There is a mixedview on that. The loss estimates arebetween $50 and $90 billion to theindustry — obviously a significantevent — but we are also looking atthat against record levels of capital.I would say that we are seeing aslowing of the rate of rate declineacross most lines of business but, asa general development, the marketis not seeing rate increases acrossthe board at this point.”

ALLISON TOWLSONChairman, BermudaInsurance DevelopmentCouncil

“Because theconference isin Vancouverthis year, andwith Bermu -da having sig -ned the tradee x c h a n g ea g re e m e n t

or TIA with Canada, we are hear-

ing from risk managers that theyare very interested in looking atcaptives in Bermuda. We see thatas a huge opportunity for us. We’rehearing that it is the service and theexpertise that Bermuda has thatreally does set us apart. A lot of thatexpertise now is homegrown talent,which is great. Bermuda also, ofcourse, has a wealth of products.One of the things that theBermuda insurance industry islooking at is that with a potentialhardening of the market we mustmake sure that we have innovation.Not just innovation in terms ofproducts but that we are also inno-vative in terms of our services andour delivery of those products. Weneed to make sure that we giveevery client a reason to continue todo business in Bermuda. It’simportant that Bermuda retainsand is sustainable in terms of itsrelevance and importance in theglobal stage, and that’s the messagewe’re communicating here atRIMS and elsewhere.”

MICHAEL KERNERCEO, Global Corporate,North America, Zurich

“I would sayfirst and fore -most the qu -es tion beingasked is “wh-ere is the ma r-ket going?” Ithink in pri -or meetings

there was probably a consensusthat the market was going to besoft and pricing somewhat re -duced. At this meeting I think risk

managers are a little uncertain as towhere the market is going given allof the events that have taken placein Asia/Pacific and the tornadosthat took place in the US. Thosecircumstances suggest that themarket is go ing to firm as we goforward. One of the other issuesthat comes up is the new RMS 11model. This has a relatively largeimpact especially for certain carri-ers on their assessment of catastro-phe risk and risk managers are con-cerned and curious as to how weare going to fold that into theunderwriting process. One of theother things that we talked aboutquite a lot this week is the emer-gence of additional regulatoryissues. In the States we have theimplementation of the Dodd-Frank legislation, and in Europe wehave Solvency II which is gettingmuch closer to implementation.”

DAVID DUCLOSExecutive Vice President,CEO — Insurance, XL

“I think th -ree or fourthemes arecoming outof the meet-ings. First,the observa-tion fromclients and

brokers alike that XL is not justback but we are on the move andthat makes all of us feel good espe-cially given what we have gonethrough in the last few years sofrom that standpoint that is huge-ly rewarding. More important, thetopical issues that we are picking

up from clients and brokers proba-bly relate to the market: what toexpect in terms of pricing andcomments and questions aboutcapacity related to the cat loses inthe first quarter.”

BRIAN ELOWEManaging Director, Marsh USA Inc

“The very hottopics are th -ings like con-tingent busi-ness interru -ption, the av -ailability ofcapital for pr-operty insur-

ance in the markets, resiliency andsupply chain management. Thereare other discussions around theemergence of cyber risk such ashow is cyber risk coming to lightand how are organisations grap-pling with these new types of riskthat are coming at them? We hearabout them every day now in thepress and I think it’s an area thatrisk managers are spending a lot oftime on. A third area is what isgoing on in the insurance market.It’s always a topic that risk managerswant to know more about. Our viewis that there’s certainly plenty ofcapital in the insurance markets,availability of insurance is there inmost areas. There are a few areasthat are a little bit more difficultthan others such as earthquake andwindstorm, because of the cata-strophic events that have been goingon. But our view is that there is stillcapital out there to be able to helporganisations protect themselves.”

Reflections from RIMSREPORTER’S NOTEBOOK: A SNAPSHOT OF VIEWS FROM BERMUDA BUSINESSPEOPLE AT THE VANCOUVER CONFERENCE

RIMS REVIEW

[ 5 ]

‘We need to make sure that we giveevery client a reason to continue to do business in Bermuda. It’simportant that Bermuda retains andis sustainable in terms of relevanceand importance in the global stage’

‘I think risk managers are a littleuncertain as to where the market is going given all the events thathave taken place in Asia/Pacific and the tornadoes that took place in the US’


The recipients of the BermudaInsurance Institute’s (BII) 13thAnnual Insurance Industry

Awards were honoured at a galadinner at the Fairmont HamiltonPrincess.

RenaissanceRe CEO NeillCurrie received The IndustryLeader of the Year Award for whatthe BII described as “his excep-tional leadership and service as anambassador for both Reinsuranceand the Bermuda market.”

Former AIG Legal CounselMichael Murphy was honouredwith the Lifetime AchievementAward, while Gavin Bishop, ofValidus Re, and Vivienne Moniz,of XL Group, were joint recipientsof the Young Industry Leader ofthe Year Award.

The BII said of Mr Currie’scontribution: “After co-foundingRenaissanceRe in 1993 andassuming the CEO role in 2005,Neill successfully stewarded thecompany through a period ofintense catastrophic activity andfinancial market volatility, andrecently led a strategic initiativethat refocused RenaissanceRewhere it excels: underwriting low-frequency, high-severity risks.”

Mr Currie said his award recog-nised RenaissanceRe’s track recordof success more than his own.

“While I am honoured to havebeen chosen, I believe theaward is more a statement aboutRenaissanceRe’s achievements thanmy own, confirming the organisa-tion as a leader among Bermudianreinsurers.

“I wish to express my apprecia-tion to the BII not only for thisaward but for its contributionstowards making Bermuda’s insur-ance market a premier centre forbusiness.”

The BII said: “Under his direc-tion, RenaissanceRe has supportedground-breaking catastrophe re -search and mitigation activitieswhich have highlighted the privatemarket’s focus on the safety of dis-aster-exposed communities. Neill

represents the industry on a num-ber of international Boards,including the CEO Forum of theFinancial Services Roundtable, theGeneva Association and theGlobal Reinsurance Forum.

As Chairman of the 2010World Insurance Forum in Ber -muda, Mr Currie helped convenedistinguished speakers and atten-dees to debate critical issues facingthe industry.

The BII added: “Both Neill andRenaissanceRe are establishedgood corporate citizens ofBermuda, and have shown theircommitment by employing anddeveloping Bermudian talent,

underwriting educational initia-tives like the company’s under-graduate scholarship, and support-ing training through industrygroups like the BII and RAA (TheReinsurance Association ofAmerica).”

Michael Murphy, former AIGLegal Counsel, received theLifetime Achievement Award thatrecognises a person who has dis-tinguished him/herself in theindustry over the course of theircareer, and has influenced anddeveloped organisations, products,talent or industry networks with aview to building the future successof the Bermuda market.

“Since 1970, Michael has beena pivotal thought leader who hasoffered his skills pro-bono to theBermuda community,” the BIIstated.

“His ideas, lobbying and end-less hard work helped establishsome of the critical movementsand decisions that led to the suc-cess of the Bermuda marketincluding the development of thecaptive insurance market in the1970’s, the creation of Bermuda’sfirst insurance law in 1978, the rat-ification of the tax treaty with theUS which led to the openexchange of financial informationin the mid-1980’s, the streamliningof US domestic tax legislation tominimise the number of separateUS taxes being applied toAmerican-owned foreign insurersthat might be construed as doingbusiness in the US, and the ongo-ing defence against US cross-bor-der taxation.

“He provided Bermuda regula-tors with the idea of the Class Fourcategory for insurers, and assistedin drafting and implementing

BII AWARDS

Industry celebrates achievementCURRIE: ‘I BELIEVE THE AWARD IS MORE A STATEMENT ABOUT RENAISSANCERE’S ACHIEVEMENTS THAN MY OWN’

BII 2010 award winners (from left) Michael Murphy (Lifetime Achievement Award), Vivienne Moniz (co-recipient

Young Industry Leader Of The Year), Neill Currie (Industry Leader Of The Year) and Gavin Bishop (co-recipient

Young Industry Leader Of The Year)

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‘The achievements of the recipientshighlight the exemplary level of lead-ership and commitment to building a solid reputation of excellence in the Bermuda market and developingthe talent required to support successful business development’

[ 6 ]


NEWS REVIEW

[ 7 ]

Ironshore expands on London marketWHEELER: AN ‘ACCESS POINT THAT WILL BE CRITICAL FOR GROWTH GOING FORWARD’

Bermuda’s mutual legal assistanceagreement with the US and theTax Information ExchangeAgreement with Australia thatserved as the model for such agree-ments with other countries.

“In 1982 he formed and man-aged the trade association knowntoday as the Association ofBermuda Insurers and Reinsurers(ABIR), and operated as CEOuntil 2005. This group has beenthe vehicle that represents majorBermuda companies before USCongress and several internationalbodies. Today, he continues to offerhis pro-bono services to theBermuda Government, and con-tinues his significant work onbehalf of Bermuda.”

The Young Industry Leader ofthe Year Award recognises an indi-vidual under the age of 35 who,over the previous year, has made asignificant contribution to theirown organisation, and promotedprofessionalism, ethics and thedevelopment of talent and techni-cal expertise, and focused onachievement in both their careerand in the wider community inBermuda. Gavin Bishop andVivienne Moniz were co-recipi-

ents of the 2010 Award.Gavin Bishop is Vice President

and Controller of Validus Re -insurance Ltd and is responsiblefor heading the Finance andOperations Departments oversee-ing a team of 20 people.

The BII said: “Gavin is aChartered Accountant who joinedthe insurance industry in Bermudain 2003. He completed his CPCUdesignation in 2006 and throughcontinuous study has completedupwards of 12 additional insurancedesignations, including the ACIIin 2010.

“Gavin is a former President ofthe Bermuda Chapter of theCPCU Society, and is an activeparticipant in CPCU Society andindustry events. His passion forencouraging ongoing learning anddevelopment has resonatedthroughout his technically profi-cient team, most of whom havecompleted their Associate inReinsurance and/or Associate inInsurance Services designationswith great support from the man-agement of Validus.

“During 2010, Gavin led astudy group for Validus employeesand summer students working

towards the completion of the AISexam, resulting in a 100 percentpass rate. Gavin is a terrific rolemodel who promotes ethics, pro-fessionalism and talent develop-ment. He enthusiastically leads byexample, and gives up his personaltime to help others develop to theirfull potential.”

Co-recipient Vivienne Moniz isan Excess Liability Underwriterfor XL Insurance (Bermuda) Ltd,a subsidiary of XL Group plc, andis responsible for a portfolio ofCasualty Insurance business. Inaddition to her increasing respon-sibilities in this role, her volunteerwork and her personal pursuits, sherepresented XL at conferences in2010. She also helped with the cre-ation and updating of theHealthcare Regulations andGuidelines for XL and reviewedthe new Bermuda Healthcare formthat was released in October 2010.

Ms Moniz chaired theBermuda Healthcare MarketAnnual Education Lunch for the2009 ASHRM Conference inDenver, Colorado, and participat-ed on the 2010 committee. She isan active member of the BermudaChapter of the CPCU Society

after attaining the CPCU andAssociate in Claims designations.She has also volunteered for theKaleidoscope Arts Foundation,Meals on Wheels and served as amentor with YouthNet.

Ms Moniz captained the XLCommercial League Tennis Teamand completed the New Yorkmarathon in 2009.

The BII stated: “Vivienne is abright, ambitious, conscientiousinsurance industry professionalwho is an outstanding role modeland motivator for her fellowBermudians and internationalpeer group. She is held in thehighest regard by her colleagues,brokers, clients and the generalcommunity.”

BII President John Wight said:“The achievements of the 2010awards recipients highlight theexemplary level of leadership andcommitment to building a solidreputation of excellence in theBermuda market, and to develop-ing the talent required to supportsuccessful business developmentover the long term. The BII ispleased to recognise these individ-uals for their market leading con-tributions.”

Ironshore Inc has announced that IronshoreEurope Limited, domiciled in Dublin,Ireland, has received approval from the

Central Bank of Ireland to open a branchoffice in London.

Paul Betts will lead the London initiativeas branch manager, reporting to Fiona Marry,CEO of Ironshore Europe Limited.

The London office will allow IronshoreEurope Ltd to expand its presence within theEuropean insurance market. It will initiallylook at underwriting select lines of commer-cial insurance business with a focus on finan-cial, professional and property insurance.

“Ironshore Europe’s presence in theLondon market, which is central to the inter-national insurance industry, offers yet anotherdistribution channel and access point thatwill be critical for growth going forward,”said Mark Wheeler, CEO of IronshoreInternational.

“While we will focus on selected business

lines at the outset, Ironshore Europe willeventually broaden its underwriting expertiseto build a platform that encompassesIronshore’s comprehensive suite of specialtyinsurance products.”

Mr Betts has more than 20 years in theinsurance industry having served as a leadunderwriter for Professional and FinancialLines for such companies as Chartis, SwissRe, and SVB Syndicates Ltd. Most recently,he served as Vice President at ChartisInternational and was the European Managerfor Financial Institutions, responsible forunderwriting insurance risk across 28 countries.

“We are thrilled to have someone of Paul’scalibre and reputation join Ironshore Europeto build our presence within the Europeanmarketplace through our new London opera-tions,” said Ms Marry. “Paul’s long-term expe-rience meeting client needs in underwritingcomplex, corporate risk worldwide is a testa-ment to his recognised leadership in the inter-

national insurance markets.”A M Best recently assigned a rating of A–

(Excellent) for financial strength and an issuercredit rating of a– to Ironshore EuropeLimited. The assigned ratings reflectIronshore Europe’s strong risk-adjusted capi-talisation and the explicit support provided byIronshore Inc’s Bermuda-based insurancecompany, Ironshore Insurance Ltd, whichprovides significant reinsurance support toIronshore Europe.

Ironshore provides broker-sourced special-ty property and casualty insurance coveragesfor varying risks on a global basis through itsplatforms in Bermuda, the UK, Canada,Ireland and the US. The Ironshore group ofcompanies is rated A– (Excellent) by A M Best.

Ironshore’s Pembroke Syndicate 4000operates within Lloyd’s where the marketrating is A (Excellent) by A M Best andA+ (Strong) from both Standard & Poor’sand Fitch.


[ 8 ]

A t the end of the first quarter of2010 and for the balance of theyear, the talk among reinsurers

was of excess capital.Despite major events in that

quarter, including an earthquake inChile, windstorm Xynthia and ahailstorm in Melbourne, the glob-al reinsurance industry was stilldeemed to be heavily overcapi-talised, with estimates of the sur-plus capital ranging from $50 to$150 billion.

Fast forward just 12 months tothe close of the first quarter of2011: reinsurers are singing a dif-ferent tune.

The first quarter of 2011 wasmarked by an unusually high inci-dence of catastrophic events. In theUK sector of the North Sea, theGryphon Alpha floating produc-tion, storage and offloading facilitybecame unmoored. Four of thefacility’s 10 mooring lines failed in30ft seas and high winds, allowingthe vessel to roll up to 12 degrees.

The CNRL Horizon miningfacility north of Fort McMurray,Alberta, suffered a serious explo-sion. A major winter storm broughtrecord amounts of snow, ice andsevere thunderstorms across a near-ly 2,500 mile stretch of the US fromColorado to Maine, leaving severalpeople dead and tens of millionsaffected.

But three even more significantevents dominated the headlines inthe first quarter of 2011 andcaused significant economic losses,both overall and at the insuredlevel. In Australia, flood damagefrom Cyclone Yasi was estimatedby Aon Benfield to have resultedin $6.5 billion of insured losses; theearthquake in Christchurch, NewZealand some $12 billion; and theTohoku earthquake and tsunami$30 billion. It remains too early fordefinitive figures, since losses con-tinue to develop.

The first quarter of any yearusually sees relatively little cata-strophic activity, but 2011 is thesecond year in a row that Ber -muda’s major reinsurance compa-

nies have reported significant first-quarter losses. What sort of effectwill these events far from Bermudahave had on the companies?

AustraliaTropical Cyclone Yasi developed inthe South Pacific and made land-fall in Queensland, Australia earlyin February. The storm reached itspeak as a borderline CategoryFour/Five cyclone, packing windsof up to 155 mph.

As the storm came ashore, itwas determined that a large stormsurge, of as much as 16 feet, hadaccompanied landfall in coastalcommunities south of Cairns.Hundreds of homes across theregion sustained major damage.Hundreds of boats and yachts werealso damaged near the landfalllocation. Widespread damage wasreported to businesses. Govern -ment officials reported that anestimated 90 percent of Australia’sbanana crop was destroyed andhundreds of acres of sugar canewere inundated.

New ZealandA 6.3 magnitude earthquakestruck New Zealand’s South Island

near the end of February, causingwidespread damage and injuries.Multiple fatalities were recorded.The epicentre of the quake wasnear Christchurch, New Zealand’ssecond-largest city, at a shallowdepth of about three miles.

A number of aftershocks struckthe region in the hours that fol-lowed, including one of 5.6 magni-tute and another of 5.5 magnitude.The main earthquake violentlyshook the region for nearly a fullminute. Shaking was felt as farnorth as Waiuku (just south ofAuckland) and as far south asDunedin.

Buildings collapsed into roads;parked cars were buried under rub-ble; water mains burst; streets andsidewalks split; fires burned freelyin Christchurch. Several roadswere lifted vertically by as much asthree feet. Christchurch’s city cen-tre sustained significant damage,where older buildings were eitherseriously compromised or simplycollapsed. An estimated 712,000people were exposed to various lev-els of shaking from the quake.

Residents in the greater Christ -church metropolitan area were stillrecovering from an earthquake on

September 4 last year. More than14,000 earthquakes a year strikeNew Zealand, although only about150 are felt by residents, and fewerthan 10 on average, cause anappreciable level of damage.

JapanSince 1900, only five M9.0 or larg-er earthquakes have occurred. AnM9.0 earthquake, its epicentre 231miles northeast of Tokyo, struck onMarch 11, at a depth of about 20miles. The ground shook for up totwo minutes. Dry land areas near-est to the quake moved with aground-motion force of threetimes the force of gravity.

The quake was felt as far awayas Beijing, more than 1,500 milesfrom the epicentre. Reports sug-gested this was the strongest earth-quake ever recorded in Japan andlikely the most powerful in theregion in more than 1,200 years.

Italy’s National Institute ofGeophysics and Volcanology saidthat the earthquake was so strongthat it shifted the earth’s axis byabout four inches and shortened anormal day’s time by at least one-millionth of a second. The USGeological Survey reported that

Q1: the damage doneANALYSIS

HOW A SERIES OF CATASTROPHES ON THE FAR SIDE OF THE WORLD AFFECTED THE BERMUDA MARKET. BY ROGER CROMBIE

The epicentre of February’s earthquake in New Zealand was near Christchurch, the country’s second-largest city


[ 9 ]

Japan’s main Honshu Island hadbeen permanently shifted by abouteight feet.

Some of the most significantdamage was reported in the Tohokuarea to the north of Tokyo. Indowntown Tokyo, high-rises andskyscrapers shook violently as resi-dents and workers evacuated intothe streets. The quake triggeredmultiple fires throughout Honshu.

Following the quake, tsunamiwaves reaching heights of morethan 32 feet swept away thousandsof homes, boats, cars, buildingsand excessive amounts of debris.The waves rushed miles inland,flattening nearly everything intheir path. Several large ships wereswept away and later crashed intobreakwaters.

Tidal rises as high as 12ft wererecorded along coastal sections ofRussia, Canada, the US, Mexicoand Latin America, where reportsindicated that 300 homes weredamaged in the towns of PuebloNuevo de Colan and Pisco in Peru.

The possibility of nuclear melt-down followed, although the eco-nomic cost of that potential catas-trophe would have been for theJapanese Government’s account.

Effects on the BermudamarketJust about all the major Bermudareinsurers are active underwritersin each of the three countriesaffected by these catastrophes. Thecompanies saw earnings for thequarter wiped out and net lossessustained that will render 2011 abreak-even year at best. A fairlyintense Atlantic hurricane seasonis forecast.

None of the Bermuda compa-nies would appear to be mortallythreatened by the losses theyincurred from these events. All thecompanies have geographical andper-event limits, and not even thecombined effect of three majorevents in one quarter would beenough to permanently derail anyof these well-managed companies.

The credit windows are cau-tiously open and any of the compa-nies that finds itself holding lessthan its desired capital level oughtto be able to access replacementcapital without great difficulty.Had these events marked the firstquarter of, say, 2008 or 2009,

replacement capital might haveproved wildly expensive or simplyimpossible to obtain, but lendinginstitutions have regained theirability to function.

It seems almost ghoulish topoint out that, despite the dreadfulhuman losses the first-quarterevents of 2011 incurred, in a pure-ly economic sense they might beseen to be beneficial for the com-panies in the longer run. Theindustry has indeed been doggedfor some time by excess capacity.Events in Australia, New Zealandand Japan will have reduced thatexcess, perhaps to the point wherepremium rates, which have beensoft for some years, might assumean upward trajectory.

As the accompanying tableshows, 20 of Bermuda’s largestreinsurers have estimated theirlosses from the three events inexcess of $6 billion. The basis ofthose estimates may not be uni-form, but in sum they provide aballpark figure of the effect of thethree events on the Bermuda mar-ket, based on current information.

By definition, these estimatesare imprecise. The Tohoku eventshappened less than three weeksbefore the quarter-end, and theintensity of the earthquake and thetsunami that followed made esti-mating losses an even more per-ilous exercise than usual. To thatmust be added, as time goes by, theeffect of demand surge, the tenden-

cy of costs to rise as demand for rel-atively rare rebuilding resourcesincreases the cost of such services.

Once all the bills are in, and thelosses of smaller Bermuda reinsur-ers are added to those already esti-mated by the major companies, itis not unreasonable to suspect thatthe total cost of the three events tothe Bermuda market might app -roach $8 billion. Given that thecapital and surplus of the Bermudamarket is above $120 billion, sucha loss would not be enough toimpair the day-to-day functioningof the market.

A M Best is maintaining its sta-ble outlook on the global reinsur-ance market. This reflects the ideathat companies generally have fac-tored probable maximum losses(PMLs) into their capital resourcesand that no single loss thus far hasexceeded a company’s stated riskappetite. However, Best says, theaccumulation of first-quarterevents, which will potentially pro-duce industry losses of $50 billionor more, is causing underwritinglosses to approach companies’ sin-gle-event PMLs.

Accordingly, while reinsurerscontinue to maintain sound capitalpositions, Best reports, the excesscapacity that existed at the prioryear-end has clearly been dimin-ished. That is certainly true of theBermuda majors.

As ofAustralian Dec 31, 2010Floods & New shareholders’

Cyclone Yasi Zealand Japan Total equity %Q4 2010 Q4 2009 Q4 2008 Q4 2010 Q4 200

ACE 96 119 213 428 1.9Arch 33 65 79 177 3.9Aspen 30 60 160 250 7.7Allied World 19 38 75 132 4.3Alterra 9 14 108 131 4.5Argo Group 13 40 60 113 6.9Axis 87 203 287 577 10.3Caitlin 50 125 200 375 10.9Endurance 15 45 125 185 6.5Everest Re 37 150 320 507 8.1Flagstone Re 31 76 100 207 18.2Hiscox 24 96 160 280 13.8Lancashire 0 14 75 89 6.9Montpelier 5 65 130 200 12.3PartnerRe 97 252 722 1,071 14.9Platinum 25 137 87 249 13.1RenaissanceRe 40 191 314 545 13.8Validus 31 42 149 222 6.3White Mountains 3 42 80 125 3.4XL Capital 67 75 243 385 3.6

$712m $1,849m $3,687m $6,248m 6.7%

ESTIMATED LOSSES FROM SPECIFIED EVENTS Q1 2011 (IN MILLIONS)

Floods in December and January in Queensland and Victoria, Australia,

led to a state of emergency in many areas

Sources: Unaudited company reports and press releases. Where companies supplied estimated ranges, an average was used. Hiscox earnings translated at £1 = $1.60


Bermuda is well placed to takeadvantage of any potential up -tick in rates if the insurance mar-

ket hardens in response to a string ofcatastrophes, but it faces stiff compe-tition from other domiciles.

Following a record first quartercatastrophe bill — which includedthe earthquake and Tsunami inJapan — insurers and reinsurersare anticipating an increase insome reinsurance pricing. How -ever, a market-wide turn in rateswill depend on losses during theremaining months of 2011, includ-ing the US and European wind-storm seasons.

Bermuda has capitalised onprevious market swings and is wellpositioned to do so again, accord-ing to Bermuda Premier PaulaCox. Speaking at the BermudaFinancial Services Conference inLondon, she said a major factor inthe success of the insurance marketin Bermuda to date has been itsability to recognise moments ofopportunity.

“Bermuda’s success has been tounderstand that when the musicchanges, so too must the dance.And the music has changed andthere are new dance steps to belearned,” she said.

Insurers in Bermuda have suf-fered losses from the Japaneseearthquake, but these have notimpacted the market’s ability towrite business, the Premier said.“Insurance is the business of man-aging risk — and the businessmodel in Bermuda is by no meansbroken,” she said.

“We don’t expect to see a hard-ening of rates immediately, so weare now waiting to see what hap-pens. But Bermuda is in the insur-ance game and we are in the market.”

In the current economic andpolitically uncertain times, Ber -muda is something of a “safe haven.”

“Bermuda offers certainty whenother domiciles are experiencinginstability and disruption,” saidPremier Cox.

However, the Premier recognis-es that Bermuda faces increasing

competition for business likeinsurance from other domiciles.“Competition is increasing andBermuda needs to be on its game,”she said.

Bermuda offers a robust regula-tory environment, certainty in law,innovation, expertise and reputa-tional integrity, the Premier said.“Bermuda is open to, and open forbusiness. And we recognise that chal-lenging times present a pivotal oppor-tunity for constructive change.”

Bermuda’s insurers and reinsur-ers have not been disproportion-ately hit by recent catastrophe loss-es, including those in Japan,according to Jeremy Cox, CEO ofthe Bermuda Monetary Authority(BMA), the insurance industryregulator.

Immediately after the earth-quake, the BMA contacted theIsland’s insurers and reinsurers andwas quickly able to get comfortable

with the situation. To date the reg-ulator has not had to take any reg-ulatory action as a direct result ofthe losses, he said.

“The initial evaluation suggeststhat Bermudian companies haveweathered the storm well, but there isstill a lot more [analysis] to be done,”said Mr Cox in London. “There arefurther surveys and targeted ques-tions needed to get a greater sense ofcompany’s exposures.”

The BMA was in contact withkey regulators and exchangedinformation from day one, said MrCox. There was not a great deal ofinformation available in the earlystages, but regulators were able toget a base level of comfort based onstatutory data, he said.

Given the health of the market,Bermuda would expect to see somenew business opportunities if thereis significant market hardening,according to Cheryl Packwood,

CEO of Business Bermuda.“Of course we are hoping for

another wave of insurance compa-ny’s coming to Bermuda, in muchthe same way as they did afterHurricanes Andrew and Katrina.The capital is there and theappetite is there and Bermudaposes as the jurisdiction of choice,”she said.

The first quarter losses couldmean the soft insurance market isabout to change, although it is stillearly days to say for sure, saidCaroline Foulger, Partner at PwC.And Bermuda’s dominant role innatural catastrophe reinsurancewould mean any uptick wouldbenefit its reinsurers.

If the insurance market turns,Bermuda would expect to see anincrease in new captive formations,said Thomas McMahon, Presidentof captive management firm CedarManagement.

“The market has been verycompetitive and we have seen anumber of captives go into storageor out to commercial insurers, butwe would expect the number ofcaptive formations to increase ifthe market turns.”

NEWS REVIEW

Bermuda the jurisdiction of choicePREMIER: WE OFFER ‘CERTAINTY WHEN OTHER DOMICILES ARE EXPERIENCING INSTABILITY AND DISRUPTION’

Premier Paula Cox told the London

conference: ‘Competition is increasing

and Bermuda needs to be on its game’

[ 10 ]

STUART COLLINS REPORTS FROM THE BERMUDA FINANCIAL SERVICES CONFERENCE IN LONDON


NEWS REVIEW

BERMUDA IS NOW AN ATTRACTIVE PLACE TO ESTABLISH A REINSURANCE COMPANY, A CAT BOND OR A SIDECAR

Cat bond listings take off after changeBermuda now offers insurers and

reinsurers the complete pack-age, following moves that

make it easier for companies to setup and list special purpose vehicle(SPVs).

In April, the Bermuda StockExchange reported that almost$2 billion cat bonds had now list-ed on the exchange since legisla-tive changes were made inOctober 2009. Bermuda hadbeen losing out to other domi-ciles like the Cayman Islandsbecause its SPV legislation wasproving unattractive.

The vehicles are used in catbonds and sidecars, two importantmechanisms used by insurers toraise capital or buy additional pro-tection, especially in a hardeningmarket.

The timing of the changes

worked favourably given theconcerns of some internationalregulators over SPVs in theglobal financial crisis, saidJeremy Cox, Bermuda Monetary

Authority CEO.SPV was a dirty word after the

collapse of Enron and LehmanBrothers, so it was important tohave not made the changes earlier,

said Caroline Foulger, Partner atPwC. “It takes a generation tobuild a reputation but only a sec-ond to lose it.”

Bermuda is now an attractiveplace to establish a reinsurancecompany, a cat bond or a sidecar,the panellists said.

“For ILS and side cars, whywould you go anywhere else otherthan the world’s top catastrophemarket in Bermuda,” said MsFoulger. “It would be foolish to goelsewhere.”

There have already been anumber of discussions on formingSPVs under the new legislation —including the sidecar launched byAlterra in April, said Mr Cox.“Now that all of the pieces of thepuzzle are in place, companies cankeep everything in the same com-munity,” he said.

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Bermuda is lobbying hard to protect captivesfrom the potential ill effects of its bid to gainsupervisory equivalence with Europe’s newcapital rules Solvency II, according to mem-bers of the insurance and reinsurance panelat the conference in London.

Bermuda’s stable political and economicenvironment, insurance expertise and itsinclusion on the OECD White List continuesto make the Island attractive to captives, saidThomas McMahon, President of captivemanagement firm Cedar Management andPresident of the Bermuda InsuranceManagement Association (BIMA). TheIsland’s reputation was proving particularlyimportant as it looks to new captive marketsin Canada and Latin America, he said.

However, there is a question mark overhow the developing European solvency ruleswill impact Bermuda’s 845 captives.

“The concern is that Solvency II does notdistinguish between a captive and a com-mercial insurance company,” said MrMcMahon. In particular, the compliance costsof Solvency II could make captives “uneco-nomical” he said.

Captive insurers support Bermuda’sefforts to gain supervisory equivalence withEurope, but they are worried about the

impact Solvency II will have on Bermuda-based captives, he said.

“We have been assured by the BermudaMonetary Authority that it will protect captivesas best as possible,” he added.

“The industry – led by BIMA – is in dia-logue with the European Commission andhas met [EC officials] in Brussels to explainwhy captives are different to insurers andwhy they should be regulated separately andwith proportionality.”

However, there is still a great deal ofuncertainty over how the Commission willeventually treat captives under Solvency IIand equivalence.

“Regulators are cognisant that it does notmake sense for captives – which arebespoke limited purpose insurers – to besubject to the same levels of regulation ascommercial insurers,” said McMahon.

The debate is just starting in Europe onwhether full-blown Solvency II should applyto captives, he said. “It is the market’s ambi-tion in its discussions with regulators to havesensible supervision of captives, and in thelast two to three months we have seen theEuropean Insurance and OccupationalPensions Authority more willing to enter dia-logue on the issue of captives.”

Captives fight back on Solvency II

Caroline Foulger, Partner, PwC: ‘it

takes a generation to build a rep-

utation but only a second to lose it’

Jeremy Cox, the BMA’s CEO:

discussions have begun about

forming SPVs under the new rules


[ 12 ]

3

ANALYSIS / PWC Q1 2011

OPERATING RATIOS

FINANCIAL STRENGTH RATINGS

QUARTERLY LOSS RATIOSQ1 2011 Q1 2010 Q1 2009

ACE 73.4% 61.9% 59.7%Allied World 90.9% 68.6% 45.8%Alterra* 80.2% 64.6% 65.7%Arch 77.9% 63.9% 57.2%Aspen 116.9% 81.0% 56.1%Axis 129.4% 67.3% 58.3%Endurance 105.0% 63.7% 58.2%Everest Re 123.6% 97.8% 61.1%Flagstone Re 139.6% 58.8% 44.3%IPC Holdings N/A N/A 39.6%Max Capital* N/A 64.6% 65.7%Montpelier 149.5% 91.0% 34.7%PartnerRe 166.0% 89.1% 55.9%Platinum 174.8% 74.7% 58.2%Renaissance Re 205.7% 38.8% 28.6%Validus 110.9% 104.6% 41.4%White Mountains 75.7% 81.3% 59.6%

95.1% 70.6% 59.8%

QUARTERLY EXPENSE RATIOSQ1 2011 Q1 2010 Q1 2009


30.7% 29.9% 33.2%

QUARTERLY COMBINED RATIOSQ1 2011 Q1 2010 Q1 2009


125.8% 100.5% 93.0%NA — No data applicable *Alterra is the successor entity of Max Capital

A M BEST RATING S&P RATINGMay 10, 2011 May 7, 2010 May 10, 2011 May 7, 2010

ACE A+ A+ AA– A+Allied World A A A– A –Alterra* A A– A– A –Arch A A A+ AAspen A A A AAxis A A A+ A+Endurance A A A AEverest Re A+ A+ A+ A+Flagstone Re A– A– NR NRIPC Holdings NA NA NA NAMax Capital* NA A– NA A –Montpelier A– A– A– A –PartnerRe A+ A+ AA– AA–Platinum A A A ARenaissance Re A+ A+ AA– AA–Validus A– A– A– NRWhite Mountains A– A– A– NR

A A A ANR — Not rated by S&P NA — No data applicable

Outlook� Given the extent of catastro-phes in Q1 2011 combined withchanges to the RMS US andEuropean wind risk models, inter-national catastrophe reinsurancerates may begin to harden.� Some companies have indicatedthat they will increase their prop-erty catastrophe exposure due toincreasing rates, whereas others areholding it flat/decreasing due toincreased PMLs resulting fromrecalibrated risk models.� There is potential for adversedevelopment with respect to theNew Zealand and Japan earth-quake reserves as additional data iscollected.� Q2 2011 has kicked off withvery significant US storms, al -though losses may largely beretained by primary companies.

Earnings� Gross premiums written de -creased by 2 percent compared tothe first quarter 2010, with expo-

sure reductions partially offset byreinstatement premiums.� Q1 2011 was the most activequarter since Q3 2005, with theaverage combined ratio increasingto 150 percent from 103 percent inQ1 2010. � Investment income for mostreinsurers remained roughly flat aslower investments yields have beenoffset by growth in invested assetsand alternative investment per-formance.� Overall, the impact of the aboveitems caused a net loss of $2.6 bil-lion for the group compared to netearnings of $1.6 billion in Q1 2010.

Capital Management� Financial strength ratings heldsteady for the group. � It has been observed that mostcompanies have placed their sharerepurchase programmes on holdfollowing the Q1 catastropheevents, and in anticipation ofunderwriting opportunities and theupcoming US hurricane season.

Q1 2011 Q1 2010 Q1 2009ACE 4,644 4,790 4,535Allied World 561 504 480Alterra 628 371 434Arch 965 954 1,029Aspen 671 703 637Axis 1,548 1,425 1,324Endurance 1,000 819 783Everest Re 1,065 1,021 998Flagstone Re 422 400 361IPC Holdings NA NA 235Max Capital NA 371 434Montpelier 254 275 251PartnerRe 1,558 1,909 1,340Platinum 207 253 249Renaissance Re 611 516 598Validus 850 871 610White Mountains 983 1,193 1,146

2,197 2,035 2,013

Q1 2011 Q1 2010 Q1 2009ACE 3,309 3,277 3,194Allied World 335 338 324Alterra 380 194 190Arch 634 670 701Aspen 452 468 447Axis 788 696 665Endurance 383 365 378Everest Re 1,011 927 932Flagstone Re 250 217 173IPC Holdings NA NA 99Max Capital NA 194 190Montpelier 166 159 133PartnerRe 1,065 1,154 867Platinum 183 220 248Renaissance Re 306 251 302Validus 430 458 319White Mountains 696 865 911

1,361 1,368 1,452NA — No data applicable *Alterra is the successor entity of Max Capital

GROSS PREMIUMS WRITTEN $M

NET PREMIUMS EARNED $M


XL Group

XL Group

XL Group

XL Group XL Group

XL Group

[ 13 ]

Based on a famously staged tourism photograph, this portrait (above) refers to a law of the time that underscored Bermuda’s conservative dress code.

Net income (loss) attributable to common shareholders ($m) Fully diluted earnings (loss) per share ($)Q1 2011 Q1 2010 Q1 2009 Q1 2011 Q1 2010 Q1 2009

ACE 259 755 567 0.76 2.22 1.69Allied World 9 134 131 0.21 2.52 2.57Alterra* (47) 36 45 (0.44) 0.63 0.78Arch 19 211 140 0.41 3.79 2.24Aspen (152) 18 91 (2.23) 0.16 1.39Axis (384) 112 116 (3.39) 0.79 0.78Endurance (91) 52 74 (2.25) 0.91 1.24Everest Re (316) (23) 109 (5.81) (0.38) 1.77Flagstone Re (161) 32 36 (2.32) 0.38 0.42IPC Holdings NA NA 8 NA NA 0.15Max Capital* NA 36 45 NA 0.63 0.78Montpelier (104) 10 52 (1.67) 0.13 0.61PartnerRe (816) 71 156 (11.99) 0.85 2.32Platinum (157) 15 84 (4.20) 0.32 1.58Renaissance Re (248) 165 97 (4.69) 2.73 1.57Validus (172) (118) 95 (1.78) (0.95) 1.20White Mountains (28) (40) 30 (3.51) (4.48) 3.44

(227) 128 178 (0.73) 0.37 0.53NA — No data applicable *Alterra is the successor entity of Max Capital

Q1 2011 Q1 2010 Q1 2009ACE 23,376 20,636 14,718Allied World 2,951 3,339 2,492Alterra* 2,723 1,613 1,263Arch 4,326 4,379 3,630Aspen 3,051 3,140 2,832Axis 5,190 5,376 4,493Endurance 2,408 2,821 2,254Everest Re 5,914 6,037 5,040Flagstone Re 969 1,208 1,024IPC Holdings NA NA 1,849Max Capital* NA 1,613 1,263Montpelier 1,472 1,559 1,437PartnerRe 6,175 7,389 4,282Platinum 1,665 2,084 1,830Renaissance Re 3,503 3,791 3,121Validus 3,315 3,760 2,023White Mountains 3,595 3,598 2,866

10,269 10,042 6,141

MARKET CAPITALISATION

QUARTERLY EARNINGS (LOSS) DATA

SHAREHOLDERS’ EQUITY ($M)

Q1 2011 Q1 2010 Q1 2009Common shares issued Market value $ Common shares issued Market value $ Common shares issued Market value $

ACE 337,173,864 64.70 338,610,718 52.30 335,890,644 40.40Allied World 37,899,699 62.69 50,459,000 44.85 49,522,766 38.03Alterra* 105,733,610 22.26 56,979,568 22.99 55,883,024 17.24Arch 43,950,213 99.19 52,709,934 76.25 60,532,222 53.86Aspen 70,731,042 27.56 77,258,437 28.84 82,762,673 22.46Axis 113,902,000 34.92 154,473,000 31.26 137,622,000 22.54Endurance 40,325,476 48.82 54,229,674 37.85 57,473,048 24.94Everest Re 54,224,000 88.18 58,922,000 80.93 65,700,000 70.80Flagstone Re 70,054,875 9.01 80,001,073 11.46 84,864,844 7.79IPC Holdings NA NA NA NA 56,092,672 27.04Max Capital* NA NA 56,979,568 22.99 55,883,024 17.24Montpelier 62,347,071 17.67 73,538,093 16.81 87,448,434 12.96PartnerRe 67,439,641 79.24 83,027,283 79.72 57,874,268 62.07Platinum 37,269,612 38.09 44,721,561 37.08 51,163,377 28.36Renaissance Re 51,742,000 68.99 58,320,000 56.76 62,324,000 49.44Validus 98,288,177 33.33 123,910,430 27.53 75,828,922 23.68White Mountains 7,975,452 364.20 8,775,632 355.00 8,854,086 171.91

309,361,883 24.60 342,083,631 18.90 342,109,626 5.46NA — No data applicable *Alterra is the successor entity of Max Capital

Q1 2011 Q1 2010 Q1 2009ACE 447 1,058 337Allied World (16) 126 74Alterra* (56) 61 (18)Arch 47 219 202Aspen (175) 50 77Axis (396) 201 64Endurance (93) 99 71Everest Re (311) 6 106Flagstone Re (158) 28 38IPC Holdings NA NA 8Max Capital* NA 61 (18)Montpelier (104) 6 51PartnerRe (769) 7 113Platinum (145) 63 83Renaissance Re (239) 165 102Validus (171) (120) 95White Mountains 34 (18) (27)

(153) 652 (873)NA — No data applicable *Alterra is the successor entity of Max Capital

COMPREHENSIVE INCOME FOR THE QUARTER ($M)


XL Group

XL Group

XL Group

NA — No data applicable *Alterra is the successor entity of Max Capital

XL Group

Q1 ANALYSIS

The reasons to be cheerfulNot a single company in PwC’s

Bermuda survey group record-ed a combined ratio below 100

percent for the first quarter of2011. Only a handful kept theircombined ratio below 125 percent.A couple were above 200 percent,meaning that in the period, thosecompanies incurred two dollars ofclaims for every dollar earned.

Only two companies in thePwC group reported net earningsfor the quarter; all the others sawtheir capital base eroded, with oneor two down by more than 10 per-cent, the level at which eventsbecome ‘material’ in accountingparlance.

Does all this make Q1 2011 justabout the worst-case scenario?

In most industries it would, butreinsurance is an odd animal inthat regard. Insurance, especiallyBermuda’s dominant strain —property catastrophe reinsurance–—is a highly volatile business.Assuming the risk of others meansincurring enormous losses fromtime to time, when the wind blowsor the land shakes.

Scott Carmilani, Chairman,President and CEO of AlliedWorld, summed it up nicely:“Property insurance and reinsur-ance results have always been sub-ject to the whims of MotherNature and the worldwide catmarket has certainly experiencedits share since early last year,” hesaid. “With the tragic events inJapan, the first quarter of 2011proved to be one of the costliest inour industry, with losses on parwith the hurricanes of 2005 andthe September 11 attacks.”

Mission accomplishedBeyond the red ink, Q1 2011 con-tained a number of positives forthe Bermuda market. First andforemost is a concept everyonetakes for granted: that the compa-nies will meet all appropriateclaims without any threat to theircontinued existence. The major

events of Q1 2011 are not the firsttime that the Bermuda market hasproven resilient in the face ofcatastrophe; indeed, doing so is thecompanies’ raison d’etre.

Few industries accept such ahigh degree of volatility. Althoughthe Q1 losses did not exceed 20percent of shareholders’ equity atany of the Bermuda majors, this isan industry that, after the eventsof September 11 2001, sufferedlosses as high in some cases, as 60percent of capital and surplus —yet almost all the affected compa-nies survived to tell the tale. Justabout all were able to rechargetheir capital within a few monthsof 9/11. Imagine a carmaker, say,or a builder suffering the loss ofhalf its capital and then beinggreeted with open arms by theinvestment community when, likeOliver Twist, it asked for more.

Reinsurance is the bedrock onwhich societies stand. The Ber -muda companies are routinely onthe hook for as much as a third ofthe cost of catastrophes around theworld, and they routinely meet all

appropriate claims. The world relieson little Bermuda in a big way.

Going upThe hope must be that the almostcontinual series of costly cata-strophic events in 2010 and 2011(with perhaps the costliest US tor-nadoes in history occurring in Q2)will lead to the end of the softmarket and the onset of a moresensible pricing environment.Bermuda executives have beentalking this idea up, as these select-ed comments show:

AXIS Capital President andCEO John Charman: “Theseindustry-wide pressures, comingon the back of four to five years ofaggressive price competition, arenow driving an earlier exit fromthe absolute bottom of the propertyand casualty pricing cycle in anumber of lines.”

PartnerRe President and CEOCostas Miranthis: “While thepricing reaction in loss affectedareas is predictable, the broaderreevaluation of catastrophe risk isbeginning to change the pricing

dynamics in all property catastro-phe markets. For longer-tail lines,we do not have the same pricingmomentum, but we have seen abottoming out in rate levels andencouraging signs that opportuni-ties will arise as economies begintheir recovery.”

RenaissanceRe CEO NeillCurrie: “In the aftermath of thelarge catastrophes that have occ -urred over the last year, and as ourclients’ view of risk evolves, weanticipate demand for our prod-ucts will increase over time.”

Validus Chairman and CEO EdNoonan: “The significant elevatedworldwide loss activity since thebeginning of 2010, in conjunctionwith changes to certain commercialvendors’ catastrophe models, isresulting in improved pricing anddemand for catastrophe reinsurance.”

You get the idea.

Experience countsThe test of a company, a govern-ment or even a marriage, is whathappens when things go wrong.Anyone, it is said, can manage inthe good times: just open the doorsand take the money. But when thegoing gets tough, the ability tomanage is the key differentiator.

No amount of sophisticatedcomputer models will mean much,without the experience and know-how of the operator. As MrNoonan pointed out, cat modelshave improved, but by itself, that isnot enough. Executives have toknow how to interpret the data themodels turn out. If that were notthe case, anyone could buy an AIRor an RMS cat modelling pro-gramme and be in business. Q12011 will improve the experiencebase of all the reinsurance players.

‘The test of a company … is what happens when things go wrong. When the going gets tough, the ability to manage is the key differentiator’

[ 14 ]

IN A NEW FEATURE, ROGER CROMBIE ANALYSES THE PREVIOUSQUARTER’S FIGURES. HE SAYS Q1’S RECORD LOSSES MAY HAVESILVER LININGS — BUT THE OUTLOOK IS TOUGH


Q1 ANALYSISNo two insurance years are ever

alike. In 1992, Hurricane Andrew,then the costliest disaster in history,changed the rules for propertycatastrophe insurance. The eventsof September 11, 2001 changedour understanding of risk. Thehurricanes that hit in a “machinegun” series in 2004 altered the pro -cess for reinstatements. Hurr icanesKatrina, Rita and Wilma in 2005brought forward new modes ofthinking about and modelling risk.

Now, doubtless, events in thefirst quarters of 2010 and 2011 willhave alerted insurers to the factthat, if they are to run global fran-chises, they must educate theircustomers to understand that a lostyen or Australian dollar is just ascostly as a lost US dollar. Untilthey are able to do that, losses out-side the US will continue to haveless effect on pricing pressure thanthose within the US. Many Am -erican businessmen operating near-er the centre of the country thanNew York City think of foreigncurrencies as ‘funny money’ and donot see a connection between theirown premium rates and losses halfway across the world.

SidecarsWhen Alterra Capital Holdingsformed New Point IV, a sidecar, inApril, there was no immediate rea-son to think that other companieswould necessarily do the same. Butwhen Validus announced the for-mation of AlphaCat Re 2011 atthe start of June, it became clearthat a wave of new sidecars was inmotion. Reinsurers are cautiouspeople and if two of their success-ful peers have concluded that asidecar is necessary, it won’t belong before everyone has one.

Interestingly enough, bothAlterra and Validus reported lossesat a lower level, when measured asa percentage of shareholders’ equi-ty, than their peer group average.The two companies’ sidecars, plusthe others that will follow, may bethe most tangible, if transitory,legacy (most sidecars having rela-tively short and defined lifespans)of the events of Q1 2011, in termsof the insurance industry.

IssuesRegulation remains the numberone drain on Bermuda reinsurers’

time. As well as adapting them-selves to the dictates of SolvencyII, the Bermuda companies havebeen dealing with new capitalmodels from the Bermuda Mon -etary Authority and the ratingagencies. These efforts must suc-ceed if the companies are to beallowed to do business, but the costof compliance is rising all the time.Such expenses are invisible toclients and cannot therefore berecouped in higher pricing.

Investment management hasbeen a challenge in the past fewyears, and remains so as the inter-est rate environment remains slug-gish. Equities, which offer insur-

ance portfolio managers a chanceto juice up overall returns, havealso been moving sideways. Thewidely forecast fall in bond valuesthat would accompany increasinginflation looks all but inevitable.

The panjandrums at theOECD, on a visit to Bermuda atthe end of May, made the extraor-dinary announcement that theorganisation would push muchharder for what would amount to aworld tax regime. Uniform taxa-tion around the world, the OECDargues, would improve everyone’slives. Not so for Bermudians,whose economy would collapseunder such a regime as insurers

found the added cost of doingbusiness in Bermuda came withoutany tax benefits.

While Bermuda reinsurers aredoubtless considering these issues,they tend to concentrate more onreal than speculative problems. Asthey count the costs of Q2 2011,the major Bermuda companies willbe focussed on translating theirrecord first-half losses intoimproved pricing. With pressure atall points of the economic model— weak pricing, heavy claims,poor investment conditions — itmay be possible, before 2011 ends,to identify the very best run com-panies from the less so.

Our multi-local solutions address the challenges unique to insurance asset management.Increasingly, insurers are turning to us, one of the largest third-party managers of insurance assets*, to provide peace of mind. With over 140 dedicated professionals worldwide, we work relentlessly to help create shareholder value by enhancing performance, reducing costs, improving reporting and reducing your operational risk. Put our customized solutions to work for you and rest assured.*Insurance Asset Manager Annual Survey, December 2009, based on assets of December 2008

For more information please contact: North America - [email protected] | Europe - [email protected] | Asia - [email protected]

Deutsche Insurance Asset Management is the insurance asset management division of Deutsche Asset Management, the asset management arm of Deutsche Bank AG. This was prepared without

investment decision. It does not constitute investment advice or a

Let someone else lose sleep.Deutsche Insurance Asset Management.

2010

[ 15 ]


Investment performance continues to top therisks ranked as most significant by Bermuda-based reinsurers, according to the latest Centre

for the Study of Financial Innovation (CSFI)Insurance Banana Skins survey, conducted inassociation with PwC. This result mirrors the2009 survey, with interest rates and macro-eco-nomic trends also featuring in the top five.

From a global perspective, regulation tops thelist, reflecting the raft of new regulations beingintroduced simultaneously at international andlocal levels.

The survey concludes that at a global level,new rules governing issues such as solvency andmarket conduct could swamp the industry withcosts and compliance problems. It could alsodistract management from the more urgent taskof running profitable businesses at a time whenthe industry is already under stress.

In Bermuda, regulation figures highly, butnot at the very top of the list, perhaps reflectingon the constructive relationship that reinsurershave with the regulator.

The survey polled nearly 500 insurance prac-titioners and industry observers in 40 countriesto find out where they saw the greatest risks overthe next two-three years.

Bermuda results were from a highly special-ist respondent group consisting exclusively ofproperty/casualty insurers and reinsurers.Nonetheless, many of the top concerns echoedthose at a global level.

The Bermuda industry’s more specialisedconcerns appeared in the higher than averageranking of natural catastrophe and otherunderwriting risks such as terrorism and cli-mate change, though terrorism ranked lowerthan in 2009.

Political risk ranks more highly in Bermudain sixth place than the 11th position globally,likely reflecting on the threat posed by potentialchanges in the US tax regime.

Concern about reinsurance risk was alsohigher than elsewhere. On the other hand, theBermuda market was much less concerned thanothers about the availability of high quality talent.

Capital ranks 19th in Bermuda, comparedwith second globally and third in Bermuda in2009, reflecting the sophisticated capital man-agement techniques in play; and perhaps thedepressed pricing at the time of the survey,

which took place before the events in Japan andthe US tornados.

Despite a high incidence of floods, bomb-ings and oil spills over the last couple of years,concern about climate change, terrorism andpollution risks remain lower than the risks asso-ciated with regulation. These are seen to bemanageable underwriting risks, and ironicallyare seen as less threatening to the market thanregulatory change.

The EU’s Solvency II Directive, due forimplementation by the end of this year, was thefocus of strong concern for many jurisdictionsincluding Bermuda, as the market workstowards equivalency. Interestingly, respondersfrom Bermuda were more confident about howprepared the industry was to deal with such risks

than responders from other countries.Commenting on the results at an event for

Bermuda-based long-term insurers, AndrewSmith, from PwC’s regulatory advisory team,said: “It is clear the attention of many ChiefRisk Officers is currently on regulatory change.To gain a competitive advantage, reinsurersneed to move the regulatory burden away fromdealing with each regulatory challenge individ-ually to something that becomes a natural con-sequence of the way risk is embedded in thebusiness.”

The CSFI is a non-profit think-tank found-ed in 1993, which looks at challenges to andopportunities for the financial sector. It has anaffiliate organisation in New York, the NewYork CSFI.

[ 16 ]

NEWS REVIEW

SURVEY SHOWS INVESTMENT PERFORMANCE IS TOP RISK FOR BERMUDA-BASED REINSURERS

Stepping over the banana skins

‘The Bermuda industry’s more specialised concerns appeared in the higherthan average ranking of natural catastrophe and the underwriting risks suchas terrorism and climate change, though terrorism ranked lower than in 2009’

Andrew Smith, from PwC’s regulatory advisory

team: “It is clear the attention of many Chief

Risk Officers is currently on regulatory change”

InsuranceBanana Skins 2011

(2009 in brackets)

1 INVESTMENT PERFORMANCE (1)2 REGULATION (8)3 NATURAL CATASTROPHES (–)4 INTEREST RATES (6)5 MACRO-ECONOMIC TRENDS (2)6 POLITICAL RISK (–)7 CORPORATE GOVERNANCE (–)8 REINSURANCE (5)9 COMPLEX INSTRUMENTS (–)10 REPUTATION (–)11 LONG TAIL LIABILITIES (–)12 RISK MANAGEMENT (–)13 TALENT (–)14 TERRORISM (9)15 ACTUARIAL ASSUMPTIONS (–)

‘The survey tells us a lot about where we are inthe economic cycle and the regulatory changeagenda’ — Andrew Smith

22334D_BIQ_Pg_.qxp:Layout 1 6/29/11 3:37 PM Page 16

[ 17 ]

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The countdown to equivalenceArthur Wightman: Solvency II rules have man-dated a big shift in the robustness of companies’risk management frameworks. How is the BMAresponding?

David Thompson: The BMA’s stance all alonghas been to establish a pragmatic set of regula-tions that allow for proportional supervision andthat reflect the nature of the Bermuda market.That isn’t to say that their expectations of thelarge commercial companies (most of the Class4 community) won’t be very similar to thosecurrently being set, for example, by the UK’sFinancial Services Authority (FSA). Even giventhe perceived strength of the reinsurance indus-try when it comes to risk management tech-niques, one of the fundamental aims of SolvencyII regulation is to raise the bar for those near theweaker end of the spectrum.

Tim Landick: We think that the BMA will startto apply their Code of Conduct guidance in ameasured fashion. This may mean initially thathaving a plan to identify and address risk man-agement weaknesses will be sufficient. However,if you look forward a couple of years, I would besurprised if we don’t see a much stronger stancebeing taken with those companies that havemade limited progress against that plan.

Arthur Wightman: In view of the rating agen-cies’ views on ERM, should a rating of ‘Strong’or better indicate that a company has little leftto accomplish?

Andrew Smith: Not necessarily. The perspec-tives of the rating agencies and the regulatorsoften differ when it comes to risk management,especially in terms of how conservative a com-pany may be in protecting their policyholders.Regulators, whether under Solvency II or not,are making it quite clear that policyholder pro-tection is paramount and will want to see a riskmanagement framework that is established andoperates with that in mind. However, many ofthe risk management elements viewed as goodpractice by the rating agencies would beendorsed by the regulators. So, for those compa-nies looking at strengthening their rating, nowis a good time to focus on enhancements toERM programmes.

David Thompson: Given the weight that theBMA is placing on independent oversight, howwill the roles and responsibilities of directorsand management change?

Tim Landick: Directors that we’ve spoken withare already starting to take regulatory filings

more seriously, especially those with experienceof some of the European regulators. Althoughthe Bermuda Solvency Capital Requirement(BSCR) and Commercial Insurer’s Solvency SelfAssessment (CISSA) filings are not under theumbrella of the external audit, the BMA is man-dating a regular, independent verification of theprocesses supporting the CISSA filings. Forboards and senior management teams this exer-cise, particularly where it brings a flavour of whatpeer group companies are doing, should help toprovide the level of comfort that they seek.

Andrew Smith: How will the current proposalsfrom the Financial Accounting Standards Board(FASB) and International AccountingStandards Board (IASB) on accounting forinsurance contracts potentially change the waythat regulators view available capital?

Arthur Wightman: It’s slightly unfortunate thatthe Solvency II rules have got ahead of theaccounting standard setters, although the latesttransitional guidance in Omnibus II provides anopportunity for them to line up. It would be ineveryone’s best interest for the accounting andregulatory balance sheets to be as closely alignedas possible, especially in the more complex areassuch as reserves. The way that Solvency II looks attechnical provisions is fairly similar to the propos-al of the IASB, and therefore I’m hopeful thatthere is convergence in this area in the near future.

David Thompson: An added complication forBermuda is the pace at which the FASB may ormay not converge with the IASB in this area.Since the vast majority of Bermuda’s commer-cial insurance sector report under US generallyaccepted accounting principles, the BMA is cur-rently in the difficult position of trying to intro-

duce an economic view of a balance sheet thatwould look markedly different from existing USGAAP. These differences may have a substantialimpact on companies’ reporting processes.

Tim Landick: It seems that all the changes we’rediscussing will result in substantial increases inthe amount of data that the BMA will collect.Can the BMA deal effectively with all this addi-tional information?

Andrew Smith: The increase in data and the rel-atively short period of time available to preparewould significantly challenge any regulator.However, based on the changes that I see theBMA making, I generally feel comfortable thatwithin a couple of years they will have the tech-nology, resources and internal processes to dealefficiently and effectively with the data beingcollected. Having said that, clearly the substan-tially greater responsibilities that both groupsupervision and enhanced entity supervisionwill bring are going to stretch the BMA in thenear term.

Arthur Wightman: The BMA will work withthe European Insurance & OccupationalPensions Authority as part of the equivalenceprocess. How will the relationship be changedby the release of Omnibus II?

Andrew Smith: Omnibus II is potentially themost significant Solvency II document issued todate. The equivalence process is just one of anumber of areas where final implementationessentially could be delayed for a number ofyears. In addition, for countries that state theirintention to work with EIOPA, a decision couldbe made to treat that country as equivalent forup to five years, starting in 2013.

David Thompson: I would add that the nextcouple of years are also critical in deciding on andsetting up the process for group supervision.Those decisions and their ramifications couldlook very different depending on whether apotential group supervisor is in a country deemedequivalent or not. Therefore it would appear thatthe European Commission has created aheadache for itself, should it choose to use someof the transitional provisions in Omnibus II.

SOLVENCY II

As the Bermuda Monetary Authority(BMA) adds the finishing touches to regula-tory changes that are expected to result inSolvency II equivalence, PwC Bermuda’sRegulatory Advisory Team, led by ArthurWightman, Partner, together with threeDirectors, discuss some of the more demand-ing changes ahead

‘Regulators, whether under Solvency II or not, aremaking it quite clear that policyholder protection isparamount and will want to see a risk managementframework … established … with that in mind’

[ 18 ]


QUOTE UNQUOTE

“I do absolutely believe the broker deserves tomake a good profit for what he does with thedistribution of business, but I think he shouldlearn to be competitive and transparent aboutthe processes that he does, so that we can seewhat he does for whom and what it’s costing.”

— Stephen Catlin, CEO of Catlin Group,speaking at the Insurance Day Summit in

London (The Royal Gazette)

“The likely-lad traders that characterised — andalmost brought down — the Lloyd’s and London

market in the 1980s have largely disappeared. Butthis is still a people business and plenty of strongpersonalities populate the market.”— Michael Loney, Reactions Editor, reflects on

changes in the global insurance and reinsur-ance industry in the last three decades

“Due to the accumulation of international catas-trophe losses in the past 15 months, in combi-nation with changes to vendors’ catastrophemodels, we generally expect property catastro-phe reinsurance rates to improve for the balance

of the year and the upcoming renewal periodwill allow us to benefit from a rising rate envi-ronment. While it has been a challenging startto 2011, we are well positioned to take advan-tage of quality reinsurance underwriting oppor-tunities as they may arise.”

— Michael Price, Platinum’s CEO, afterPlatinum Underwriters Holdings Ltd posts anet loss of $157.2 million in the first quarter

after taking a near quarter billion dollar hitfrom catastrophes during the first three months

of 2011 (The Royal Gazette)

[ 19 ]

Whatever happened to the Likely Lads?

ONSHOREOctober 18Sedgwick’s Ninth Annual HotTopics SeminarBermuda UnderwaterExploration Institute

October 18Goldman Sachs AssetManagement’s 8th [email protected]

OFFSHOREAugust 9–11Vermont Captive InsuranceAssociationBurlington, Vermontwww.vcia.com

September 10–15Les Rendez-Vous De SeptembreMonte Carlowww.rvs-monte-carlo.com

October 16American Society for HealthcareRisk Management (ASHRM)Phoenix Convention Centre,Arizonawww.ashrm.org

October 23-26Property Casualty InsurersAssociation of AmericaNew Orleans, Louisianawww.pciaa.org

WHAT’S ON


EVEREST RE GROUP LIMIT-ED has announced the appoint-ment of John P Phelan to itsBoard of Directors.

Mr Phelan formerly served asChairman, President and ChiefExecutive Officer of Munich ReAmerica Corporation and MunichReinsurance America Inc, and as amember of Munich ReinsuranceCompany’s Board of Managementuntil his retirement in 2007. Priorto assuming these positions in

2002, Mr Phelan was President ofMunich Reinsurance Company ofCanada for 16 years. Havingjoined Munich Re in 1973, he heldvarious senior executive positionsboth in Canada and the US.

Joseph V Taranto, Chairmanand Chief Executive Officer, said:“I am pleased to welcome John tothe Everest Board of Directors. Heis an admired leader with a signifi-cant wealth of industry experience.His counsel will be invaluable, par-

ticularly as we navigate throughtoday’s market challenges. Everesthas an outstanding Board and Johnis certainly a wonderful addition.”

TIME WARNER CABLE INChas appointed XL GROUP CFOIrene M Esteves as its newCFO, replacing Robert Marcuswho has been promoted. MikeMcGavick, XL CEO, said: “Wethank Irene for the impact shemade while at XL, wish her all the

best and look forward to a smoothtransition.”

AON RISK SOLUTIONS, theglobal risk management business ofAon Corporation, has appointedPeter Mullen as the new CEO ofAon Global Risk Consulting’sCaptive and Insurance Manage -ment Operations. Mr Mullen willbe based in Aon’s Bermuda office.In addition to his new role, he willjoin the global board of AonGlobal Risk Consulting, withresponsibility for Aon GRIPSolutions in Bermuda and, on aninterim basis, lead Aon insurancemanagers in Bermuda. He will joinAon from Bermuda-based ArtexRisk Solutions and brings over 25years of experience in insurancemanagement and underwriting.

ARCH REINSURANCE LIM-ITED has promoted MichelleSeymour-Smith to CFO andSally Pimentel to Vice Pres -ident, Controller.

Three new people join the seniormanagement team at the ARGUSGROUP. Peter Crayford isAssistant Vice President, Propertyand Casualty, Lisa Jackson isappointed Assistant Vice Pres -ident, Pension Client Relationsand Anthony Donaghy is theInternal Audit Manager, GroupRisk and Compliance.

ASPEN INSURANCE HOLD-INGS LIMITED has appointedKerry Calaiaro as Senior VicePresident, Investor Relations. MsCalaiaro has extensive experiencein the financial services industryencompassing investor relations,finance and audit. She joins Aspenfrom Willis Group where she hadheld the position of Director,Investor Relations since 2001.

ENDURANCE SPECIALTYHOLDINGS has named JohnDavis as Senior Vice President andManager of Endurance WorldwideReinsurance’s US Treaty Casualtyand Workers’ Compensation busi-ness unit.

PEOPLE

New face at Everest Re’s top table

[ 20 ]


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Documents

RESULTS & Q1 PRAISE FOR - PwC · 2015-06-03 · 2007, 2008, 2009 and 2010.” ABIR member individual and aggr egate results can be obtained from [email protected] ABIR reports