1. Current Issues in General Insurance 29th April, 2002 State of the London Market David Lang Limit Underwriting Limited

2. 2 1. Introduction Where the London Market has been Where the London Market is now What is the future of the London Market?

3. 3 2. Background 1993 to 1996- excellent underwriting conditions and good loss experience 1997 to 2000-softening in terms/conditions and poor loss experience 2001-11th September 2001 Terrorist Attacks

4. 4 3. Warren Buffet observations Berkshire Hathaway Inc. News Release 9th November 2001 WTC loss of US$2.3bn Three basic rules to running an insurance company: 1)Only accept risks you are able to properly evaluate 2)Limit business accepted so that not exposed to aggregation of losses from one event or related event that will threaten your solvency 3)Avoid business involving moral risk

5. 5 4. Premium rate movements - 31 December 2001 Renewal Season

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8. 8 5. Policy terms and conditions Terrorist exclusion Aviation reinsurance - moving to LOD WTC - policy wordings agreed as early as possible WTC - highlights need to have tight unambiguous policy wording LMP

9. 9 6. Exposures/Aggregate monitoring WTC highlighted need to be focused on exposures/aggregates Critically the aggregation of retentions from single event impacting several books of business Match of inwards exposures and outwards reinsurance protections Solvency/security of reinsurers important

10. 10 7. Flight to quality Premier reinsurers (Munich Re, Swiss Re, Berkshire Hathaway) were very much in demand for security reasons Increasing line sizes by these entities to take advantage of this situation More selection over which insureds prepared to offer cover for

11. 11 8. Influx of new capital Corporate investors waiting for this point of insurance cycle to provide fresh capital Bermuda did this in 1993 and attempted to repeat Servicing of this capital caused market to soften in certain areas between Christmas and New Year 2001

12. 12 9. Lloyd’s market Chairman’s Strategy Group Continuation of market in current form

13. 13 10. Risks to improvements continuing Excitement at hard market Good loss experience over short period Memory span short for bad experience/results Technology speeds up knowledge and decision making Desire to please clients/brokers

14. 14 11. Conclusion