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2005 – A Year in Review Casualty Actuarial Society Seminar on Reinsurance June 1, 2006

Kenneth J. LeStrange Chairman, President, CEO Endurance Specialty Holdings. 2005 – A Year in Review Casualty Actuarial Society Seminar on Reinsurance June 1, 2006. 9/11/01 – “The Perfect Storm” . WTC Disaster Largest insured loss of all time Correlation risk across many lines of business

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2005 – A Year in Review Casualty Actuarial Society Seminar on Reinsurance June 1, 2006

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  1. Kenneth J. LeStrangeChairman, President, CEOEndurance Specialty Holdings 2005 – A Year in Review Casualty Actuarial Society Seminar on Reinsurance June 1, 2006

  2. 9/11/01 – “The Perfect Storm” • WTC Disaster • Largest insured loss of all time • Correlation risk across many lines of business • Concentration Risk • Terrorism exposure • Inadequate Reserves • 1997 – 2001 soft market • Asbestos • Finite Risk • Investments • Abrupt decline in equity values • Interest Rate declines • Corporate scandals trigger bond defaults/surety losses/D&O claims

  3. 9/11/01 – “The Perfect Storm” • In many insurance and reinsurance segments on a global basis. • Insurers and Reinsurers were forced to recapitalize. • Class of 2001 created in Bermuda. This “Perfect Storm” created a hard market.

  4. 2003 – 2004 Equilibrium • Prices return to adequacy and perhaps redundancy in most segments. • Property insurance pricing quickly comes off of peak level of 2002. • Reinsurance pricing terms and conditions decline. • Excess capital generated, and in some cases returned through share repurchase and dividends. • Hurricane losses in fall of 2004 have little impact on an increasingly competitive market

  5. 2005 KRW • Katrina becomes largest insured loss. • Rita – bullet dodged • Wilma – 48 hours over the Yucatan • Resorts in Cancun and Cozumel • Surprising damage in Eastern Florida

  6. KRW Lessons Learned • Models • Frequency • Severity • Storm Surge • Demand Surge • Insurance to Value • Construction • Data Quality • Rating Agencies • Capital Adequacy models challenged • Not all PML’s are created equal • Downgrades • New Criteria

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