1. 2005 – A Year in Review Casualty Actuarial Society Seminar on Reinsurance June 1, 2006 Kenneth J. LeStrange Chairman, President, CEO Endurance Specialty Holdings

2. 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. 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. 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. 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. 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