1. The Insurance Market 2002 Hedley French

2. Evidence of Market “Hardening” Rate increases Restrictions in terms and conditions

3. Driving factor behind Market “Hardening” Inadequate pricing Surplus capacity Low premium investment returns Adverse development of reserves Underwriting for market share

4. Market Conditions SOFT HARD TIME 11 September 2001

5. Post 11 th September 2001…

6. Loss Breakdown Perspective US$bn - Current Day Value Note: Based on the recent estimate of the total loss, by the New York City Partnership and Chamber of Commerce of US$52bn. California Earthquake NY Hurricane BetsyAgnes European Windstorm HugoDariaVivianMurielleAndrewNorthridgeGeorgesLotharBart US Terrorism

7. Loss Estimates New York City Partnership & Chamber of Commerce estimate the loss at US$52bn Range of loss estimates between US$30bn up to US$100bn

8. Loss Breakdown Perspective California Earthquake NY Hurricane BetsyAgnes European Windstorm HugoDariaVivianMurielleAndrewNorthridgeGeorgesLotharBart US Terrorism US$bn - Current Day Value US$ 52bn

9. Insurer Loss Estimates (US$ Net Loss) InsurerEarly Estimate Latest Estimate % Change of Loss ACE400m637m 59% AIG500m820m 64% Allianz635m1,323m108% Berkshire Hathaway2,200m2,400m9% Chubb150m 645m330% Hannover Re363m363mUnchanged Lloyd’s1,908m2,486m30% Munich Re908m1,468m62% Partner Re375m 400m 7% Royal & SunAlliance217m340m57% SCOR175m 200m14% Swiss Re1,200m1,607m34% XL650m 750m15% Note: Where the Early Estimate was a range of figures the mid point has been taken.

10. US Terrorism Incident Reported Losses US$52bn US$34bn Reinsurers US$23bn Primary Insurers US$11bn Unreported US$18bn

11. Market Cycle - Post 11 September 2001 SOFT HARD Jan 2001 Jan 2002 Jan 2003 11 September 2001 Jan 2004

13. New Capital entering the Market Approx $30bn raised since the US Terrorism Incidents US$11 into Bermuda (US$9.6bn to finance start-up operations.)

14. New Ventures in Bermuda AXIS Specialty AWAC Endurance Specialty Da Vinci Re Arch Reinsurance Montpellier Re GoshawK

15. Other Long Term Consequences Insurer Insolvencies Reinsurer Failures Exhaustion of Reinsurance Programmes Coverage for Sabotage & Terrorism “Distressed Business” Non-concurrency –Coverage –Limits

16. Sabotage and Terrorism coverage non-concurrency Original Placement Includes Sabotage & Terrorism Exposure Treaty Reinsurance Includes Sabotage & Terrorism Exposure 1st Jan 20011st Jan 20021st Jan 2003 Coverage Gap Treaty Reinsurance Excludes Sabotage & Terrorism Exposure

17. The Insurance Market 2002 Conclusion