Market Effects

RAA Statutory Results 2001 — 3Q 2005 (In Thousands)

Impact of Hurricane Katrina
(Net Loss as a % of Shareholders’ Equity)

Daw Jones Industrial Average as of September 16, 2005

Existing Reinsurers
Capital Raising Initiatives as of 11/8/2005

Reinsurer	Amount*	Date	Comments
ACE	$1.5Bn	Oct 3	28.6 million shares sold for gross proceeds of $1.3Bn via Citigroup Global Markets Inc and Goldman, Sachs & Co.
		Oct 4	Additional 4.3 million shares sold to Citigroup and Goldman, Sachs & Co. for $200Mn gross.
Amlin		Nov 1	Rights Issue to raise GBP 215Mn net.
Aspen Re	$400Mn	Oct 5	$400Mn raised through sale of 17.6 million shares to Lehman Brothers.
Axis Re	$250Mn	Sept 28	$250Mn of 7.25% Series A Preferred Shares sold.
		Oct 3	Shelf registration to periodically sell up to $1.5Bn in debt, common shares, and other securities.
Endurance Specialty	$600Mn	Oct 3	$200Mn via block trade to Goldman, Sachs & Co.
		Oct 11	$200Mn preferred securities.
		Oct 18	$200Mn senior notes.
Everest Re	$475Mn	Oct 6	$475 of common stock agreed to be sold to Goldman, Sachs & Co and on to public investors.
		Oct 7	Additional $76Mn of various securities filed to sell.
Fairfax	$300Mn	Sept 27	$300Mn of subordinate voting shares issued to institutional investors on behalf of Odyssey Re.
		Oct 7	Shelf registration filed to periodically sell up to $1.25Bn in debt securities, common shares, and other securities.
IPC Re		Oct 7	Shelf registration filed to periodically sell up to $1.25Bn in debt securities, common shares, and other securities.
Kiln plc	$130Mn	Nov 2	Plans to raise GBP 72.8Mn (net) by Rights Issue.
Max Re	$543Mn	Oct 11	11 million common shares sold in public offering at a net amount of $246Mn.
		Nov 2	Citigroup Global Market Inc. and Bank of America Securities LLC purchase additional 1.165 million shares for a total of $297Mn.
Montpelier Re	$620.4Mn	Sept 20	Raised $620.4Mn from public stock offering.
		Sept 27	Shelf registration outlining options to sell up to $1Bn in common or preferred stock, depository shares, debt securities, warrants or other securities.
Odyssey Re	$102Mn	Oct 12	$102 million raised from sale of common stock to Wachovia Capital Markets LLC.
		Oct 17	Plans to sell two types of preferred shares and anticipates raising about $50 million from each.
Partner Re	$550Mn	Oct 26	$400Mn raised via loan agreement and forward sale agreement. Separately, $150Mn common shares sold to Citigroup Global Markets Inc. in a block trade.
Platinum Re	$161.9Mn	Sept 22	$161.8Mn common shares sold.
		Oct 21	$200Mn three year credit arrangement with syndicate of lenders. ($100Mn for Letters of Credit; $100Mn for LOC's and revolving borrowings, including working capital.) Arranged by Wachovia Capital Markets LLC.
		Oct 21	Filed an unallocated universal shelf registration statement with the SEC to sell in one or more offerings, up to $750 Million of debt, equity and other types of securities or any combination.
PXRE	$456Mn	Sept 15	Filed shelf registration to sell up to $300Mn of debt securities, common shares, preferred shares, depositary shares, warrants and trust preferred securities.
		Sept 30	$100Mn common stock public offering sold through Goldman, Sachs & Co.
		Oct 7	$114.7Mn in common shares sold to Credit Suisse First Boston LLC.
		Oct 7	$375Mn of private placement from Series D perpetual preferred shares.
		Oct 11	Plans to sell 11 million common shares for net proceeds of $246 million.
Quanta		Oct 27	Preparing to sell up to $125 Million in trust preferred securities or preferred securities.
*Amount not inclusive of shelf registrations and other planned capital raising initiatives.

New Bermuda-Based Reinsurers
Class of 2005 as of 11/8/2005

Name	Capitalization	Backers & Comments	Lines of Business
Amlin Bermuda, Ltd.	$1Bn	Lloyd's Amlin Syndicate via rights issue of GBP 224Mn.	Regional US & International catastrophe reinsurance.
		Projected to write $350Mn premium in 2006.
		All business to be underwritten in London.
Harbor Point Re., Ltd.	$1.5Bn	Chubb Corporation, Trident III as well as Harbor Point management and other outside investors.	Global Property and Casualty Reinsurance.
		Transfer of continuing reinsurance business, renewal rights and new business as of 1/1/06.
		To be managed by John Berger, CEO of Chubb Re.
		Non-executive chairman will be Stephen Freidman (formerly Goldman Sachs Chairman).
Lancashire Insurance Co., Ltd.	$750Mn - $1Bn	Lloyd's underwriter Richard Brindle (Ascot) and Capital Z Financial Partners.	Insurance & Reinsurance: Marine; Aviation; Direct Property; Property Catastrophe; Retrocessional; Energy.
		Brindle to be CEO.
Hiscox Insurance Co. (Bermuda), Ltd.	$500Mn	Lloyd's Syndicate Hiscox through a rights issue of GBP 170Mn.	Retail and Reinsurance.
		Projected to write $325Mn premium in 2006, $235Mn of which will be incremental to the group.
Validus Reinsurance, Ltd.	Excess of $1Bn	Aquline Capital and private equity firm formed by former MMC CEO Jeff Greenberg.	Property Catastrophe Reinsurance.
		Former American Re CEO Ed Noonan to be CEO.
New Castle Re	$500Mn	Citdel Investment Group.	Property Catastrophe Reinsurance.
		Assigned financial strength rating of 'A-' from AM Best To be headed by former CEO of ACE Tempest Re Christopher R. McKeown
TBA	Excess of $750Mn	Former Ace Vice Chairman Don Kramer and other private investors.	TBA
		To be formed through the sale of Goshawk's Rosemont Re.
Arrow Capital Insurance Co., Ltd.	TBA	Goldman Sachs.	TBA

Market Conditions
Rating Agency Actions

S&P, AM Best and Fitch have begun to weigh in heavily following the market losses sustained in Katrina, Rita and Wilma (See attached).

• To date, nine companies have been downgraded (including eight reinsurers) and 17 are under review, with negative implications. Others have had their ratings affirmed but have been assigned a negative outlook.

Greater risk-based capital charges on Property Cat writings will require higher surplus levels to maintain BCAR scores and ratings.

• Both frequency and severity of catastrophic events appear to be on the rise, leading to an increased rating agency perception of the risk inherent in property cat business and, hence, the greater capital requirements to write such business.

Companies may be required to buy reinsurance protection up to a higher modeled return period loss estimate. And, the losses for a given return period will increase significantly.

In this way, rating agencies will play their part in decreasing supply and increasing demand, putting further upward pressure on prices.

Rating Actions

Market Effects

The market quoted both third-event covers for the remainder of insurers’ contract term, and also “Live Cat” covers for individual named storms. Prices are rising, terms are limited, and quotations have short time limits.

January 1st Catastrophe renewals are increasing across the board, with increases well over 100% on some unprofitable renewals.

Retrocessional capacity is down sharply, prices are up sharply, and there are coverage limitations.

Lloyd’s syndicates are growing their 2006 capacity, rather than to reduce it as planned earlier. We expect other reinsurers to take similar steps, although their business plan information is not as public as the information on Lloyd’s syndicates’ stamp capacity.

The demand for Catastrophe reinsurance has increased at upcoming renewals. Also, more buyers will request or require ECO/XPL, Ex Gratia or follow-thefortunes language in their Cat covers to prevent disputes on gray-areas claims, such as Mierzwa.

Some insurers, not necessarily exposed to Katrina, are already testing rate increases in the primary market. How much increase will stick — and where — is not clear.

Some Cat bonds were hit by Katrina. Many hedge funds sustained direct losses on retrocessions. Some hedge funds have also taken simultaneous losses on energy speculation.

Clearly, reinsurers’ profit margins in good years have not funded the bad years. Reinsurers overall either need to charge more or to cover less. Market negotiations will decide the specifics of how this happens.

Impact on Catastrophe Models and Analysis

The majority of this loss was not modeled under current technology ($19Bn – $27Bn vs. $45Bn – $65Bn). This is true of many prior events, as well. Reinsurers are learning that models are only one tool to assess risk. They will rely more on deterministic scenarios to establish their capacity, and on traditional underwriting techniques to evaluate risk and pricing.

Cat Models have now called the losses in 1999, 2001, 2004 and 2005 as 1-in- 50+ year scenarios. In the last 48 months there has been over $150Bn in insured loss on fifteen events of over $1Bn each. Would 2001’s models have even recognized that as a possibility? The extreme probability events within the models are limited by the imagination of the model engineers. Nature has more than we can imagine.

Catastrophe risk clearly isn’t “Zero Beta.” Is there an implication for investors’ interest in Cat bonds? For the FHCF’s Bonding capacity.

Hurricane models are not meaningful if they don’t reflect year-by-year variations in storm activity (such as Dr. Gray’s forecasts).

Demand surge cannot be calculated on an individual event, or even individual year, basis.

Reinsurers’ Expectation for Hurricane Frequency:
2006 – 2010

Influence	Summary	Recent History	Current Outlook
Greenhouse Gasses	Human activity increases the amount of CO2 in the atmosphere, causing warmer conditions, including at the ocean surface.	Global temperatures increasing by approximately 1 degree (F) per century. This could extend the hurricane season by about 10% if continued through 2100.	+1.25% cumulative increase over 1990s baseline average.
Other Warming	Sunspots, trend following end of the last ice age, other natural and human factors.	Similar or smaller in magnitude.	Unclear if this will continue: +0 - 1.0% increase.
El Nino / La Nina	Warm Pacific waters tend to bring Atlantic high pressure closer to the U.S., so fewer storms make landfall during El Nino periods	Weak El Nino conditions since 1996 allowed more U.S. Landfalls. 1990 – 1995 had strong El Ninos and few landfalls.	Varying. The next five years will likely have one or more strong El Ninos. Net effect may be to lessen landfalls.
Multi-Decade Atlantic Cycle	Long-term effects, including the saltiness of the Gulf Stream current, effect water temperature patterns and the number of storms that are created.	The 1970s – 1990s were periods of lower hurricane activity when compared to the 1940s-1960s when there were 33% more U.S. landfalls per decade.	We appear to have begun a cycle of increased hurricane activity that could last for several decades. Likely effect will be more landfalls.
Combined Effect	Various trend factors combine with random events to set frequency.	Conditions from 1970 – 1995 caused fewer storms to reach the U.S.	Long term cycle will create more storms. El Nino will change, perhaps within a single year, and cannot be forecast. Other effects are relatively weaker or variable.
			Expect 25% or more storms than in the 1990s.