NOVEMBER 2013

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A U . S . R E I N S U R A N C E N E W S L E T T E R

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ISSUE THEME: A WORLD OF UNCERTAINTY INSIDE THIS ISSUE:

THE TERRORISM RISK INSURANCE ACTWHERE IT STANDS MEMBER SPOTLIGHT: ALEXANDER ABBOTT INTERVIEW WITH MICHAEL MCGAVICK, XL RE CEO RE UNDER 40S SPRING 2013 TOUR RECAP RE UNDER 40S EVENT HIGHLIGHTS MEET YOUR 20132014 BOARD MEMBERS

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Given the challenging competitive environment in the reinsurance marketplace; the delay in both Solvency II implementation and the FIO reports on the (re)insurance industry; and the unknown surrounding TRIA and the proposed changes in accounting standards under ComFrame, we certainly live in a world of uncertainty. In this issue, Re Under 40s highlights some of the topics that have been keeping us on the proverbial edge of our seat, and to which we will be paying close attention in the coming year.
THANK YOU TO OUR SPONSORS

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RATING CORNER
Congratulations to our friends at AXIS . On September 25, 2013, A.M. BEST upgraded AXISs financial strength rating (FSR) to A+ (Superior) .

THE TERRORISM RISK INSURANCE ACT WHERE IT STANDS

BY: SCOTT G. PARIS

The Terrorism Risk Insurance Program (The Program) is currently scheduled to lapse after December 31, 2014. The insurance industry continues to argue that without a federal backstop, such as the Terrorism Risk Insurance Act (TRIA) provides, terrorism risk is simply not insurable. But there is skepticism in Congress and among some public commentators, both liberal and conservative, that a private market for terrorism risk would not emerge even without the federal law. To follow the debate as it unfolds over the next year and a half, it is important to be clear about what the current iteration of TRIA contains. TRIA requires commercial property and casualty insurers to provide terrorism coverage on terms similar to non-terrorism coverage. The program does not apply to the following lines of insurance: federal crop, livestock, farmowners multiple peril, commercial auto, surety, [continued on page 2]

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THE TERRORISM RISK INSURANCE ACT WHERE IT STANDS

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burglary and theft, professional liability, private mortgage, title, financial guaranty, medical malpractice, health, life, and federal flood insurance as well as reinsurance. If the total damages resulting from an "act of terrorism" exceed $100 million, the program will reimburse insurers for 85 percent of their losses above a deductible of 20 percent of the company's direct earned premiums from U.S. commercial property and casualty business during the prior year. The 20 percent deductible is based on an insurer's consolidated direct earned premiums, which include the earned premiums from any parent company, affiliates and subsidiaries. TRIA caps federal reimbursement at $100 billion. The House Financial Services Committee stated in its Oversight plan released in February 2013 that it will examine the private sectors capacity to assess and price for terrorism risk and consider whether to reauthorize the Terrorism Risk Insurance Program as well as proposals that would reduce the potential Federal exposure and participation in the Program. So far this year three bills have been introduced into Congress to extend TRIA. H.R. 508 H.R. 508, the Terrorism Risk Insurance Act of 2002 Reauthorization Act of 2013, was introduced by Rep. Michael Grimm (RNY) on February 5, 2013. The bill would extend TRIA through 2019 and changes the date for recoupment of any TRIA assistance from 2017 to 2024. H.R. 2146 H.R. 2146, a bill To extend the Terrorism Risk Insurance Program of the Department of the Treasury for 10 years was introduced by Rep. Michael E. Capuano (D-Mass.) on May 23, 2013, and would extend TRIA through 2024. The bill changes the date for the recoupment of any assistance provided under TRIA from 2017 to 2024. It would also require the Presidents Working Group on Financial Markets (PWGFM) to issue reports regarding the long-term availability and affordability of insurance for terrorism risk in 2017, 2020 and 2023. The reports would be drafted in consultation with the National Association of Insurance Commissioners (NAIC), and representatives of the insurance industry, securities industry and policyholders. H.R. 1945 H.R. 1945, The Fostering Resilience to Terrorism Act of 2013 was introduced by Rep. Bennie Thompson (D-Miss). This bill would extend TRIA for ten years. It would transfer the responsibility for certifying an act of terrorism from the Secretary of Treasury to the Secretary of Homeland Security. The bill changes the date for the recoupment of any assistance provided through TRIA from 2017 to 2024. The legislation would also require the PWGFM to issue reports regarding the long-term availability and affordability of insurance for terrorism risk in 2017, 2020 and 2023. H.R. 1945 contains a provision that would require the Secretary of Homeland Security to provide insureds with timely homeland security information, including terrorism risk information, at the appropriate classification level and information on best practices to foster resilience to an act of terrorism. The Secretary of Homeland Security is to prepare a report on the extent to which insureds, particularly those insuring critical infrastructure sectors, are incorporating the information provided by the Sec[continued on page 5]

DID YOU KNOW?

ReUnder40shasheldeventsinNewYork, Boston,Chicago,Philadelphia,andeven Minneapolis!Visitusath p://reunder40s.org/ eventsforupcomingevents,oremailusat events@reunder40s.orgtosuggestaneventin yourarea.

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MEMBER SPOTLIGHT: ALEXANDER ABBOTT

In an effort to become more familiar with our members, we highlight one member in each issue of our newsletter. If you are interested in being interviewed for the Member Spotlight section, please email us at newsletter@reunder40s.org. Re Under 40s caught up with Alex Abbott, Associate Claims Account Manager with XL Group. Heres what he had to say: Q: How did you get involved with the re/insurance industry? How long have you been in the industry? A: It was almost inevitable that I found myself in the re/insurance industry. Having been born and raised in one of the largest captive markets in the world, Bermuda, a job in insurance is almost a birthright. I thought Id give it a shot. Before I flew off to University, I had a brilliant opportunity to intern at one of Bermudas largest insurance companies XL Group. Ive been an employee here for over 4 years (since 2008). I recently became a full time employee in March of 2013 in their New York Office. I think it is safe to say that I have been involved with the industry since 2008. Q: What type of work do you do? How did you get to where you are now? A: Currently I am a Claims Account Manager for our US Risk Management department. I work with and manage Third Party Administrators (TPAs) who handle our US Risk Management Claims in the primary markets, which include: Worker Compensation, Auto and General Liability. I also handle regulatory transactions for our department which arise between various States and the TPAs. I gained entry into an internship program with XL through the Bermuda Foundation for Insurance Studies (BFIS) in 2008. I interned in the XL Bermuda office for quite some time, gaining experience in different departments including: Claims, Investments, and Underwriting. I secured a summer position in their Claims Department and then moved into a Global Claims Management position where I assisted in various projects for about one year. I managed to surround myself with the right people who helped me excel and then subsequently I secured another internship, still at XL, while studying at St. Johns University in New York City. After graduation I was given the opportunity to work full time in the XL New York office in the US Risk Management Claims Department and the rest is soon to come. Q: What aspect of your job do you enjoy the most? A: I really enjoy the investigative part of my position, specifically in regulatory discrepancies. There are times when problem solving skills become a vital role in resolving issues with the various State Insurance Regulatory Departments around the United States. It makes me feel like a detective! Q: Have you had any mentors or anyone who provided useful guidance as you made your way to where you are now? If so, is there anything you learned that you would pass on to others making their way in the industry? A: Mentors, I believe are the most important people you meet when entering into the work field. I have had many mentors throughout my experience who have given me priceless advice and guidance along my journey. I still utilize them today. If there is anything that I can pass on to others on making an entry into this industry it would be to learn all that you can from the pros and to surround yourself with the right people whether through a mentor or on your own personal account. This industry, for the most part, is based on relationships and the more positive relationships you have the further and faster you can advance. Q: If you werent working in re/insurance, what would you be doing? A: If I wasnt working in the insurance industry, I would be working for the United Nations as a conflict consultant on account of my very strong concern for the world around me. Every day you hear about conflicts between countries, cultures and religions. I would work to facilitate an understanding between these opposing positions in the best way that I can. I enjoy resolving issues and I know that I would excel in this field. Q: If you could have any super power what would it be? A: If I could have any super power, it would be the ability to teleport to any location that I desire while being able to teleport anyone I want to take with me. I say this because I believe that everyone should get a chance to see the world and all of its different cultures. I feel that once people experience others, we can then learn to understand each other on a global basis. I would use my ability to teleport people, who in their ordinary lives will never have the opportunity to visit such places for free. [continued on page 4]

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MEMBER SPOTLIGHT: ALEXANDER ABBOTT

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This would in turn leave me with no time to have a real job and/or make me an enemy of the airline companies! Q: A: List 5 personal items in your office. Soccer Cleats Soccer Ball iPad Mini Bermuda $2 Bill My Lucky Pen What were the most embarrassing moment and proudest achievement of your career?

Q:

A: One of the most embarrassing moments of my career that I can remember was probably when I was an intern. XL has a yearly Global Day of Giving in which the entire company, as a whole, takes a single day and does charity work in their perspective communities. One year, I absolutely forgot about this day and showed up to work full clothed in my work attire only to find an empty office and a staggering 1 million missed calls because I was due to help lead an excursion to help tidy up an island. It was very embarrassing. The proudest achievement of my career to-date would be the moment I secured a fulltime position in the international insurance market. Another aspect that is vitally important about this industry is international experience. This can prove invaluable when trying to move up the corporate ladder and can add an important element of diversity. Q: What advice would you give to new professionals entering the re/insurance industry?

A: I would highlight the fact that this industry is very broad. No matter what career path youve chosen in University, there is a position for you in the insurance industry whether in Public Relations, Human Resources, Finance, Underwriting, or Law you can still find your place. Even Science has a place. I know a Geologist who works in Environmental Underwriting. With that being said, take time to really figure out what area of the industry interests you. If you are not sure about what discipline youd like to make a start in, feel out a few of them if possible. Eventually you will find the one that holds your interest.

HOW CAN YOU SUPPORT U.S. RE UNDER 40S?

In order to bring as many people in the industry together as we can, we have never charged for membership and we do not have any plans to do so in the future. We rely on our friends in the industry people like you to help support our Group. On that note, we respectfully youR if I your W A N T T ask O W T Eorganization A N A Ris Tinterested I C L E in becoming a sponsor for Re Under 40s. We have received several sponsorships over the F O R T H E R E U N D E R 4 0 Syears from insurers/reinsurers, brokers, consultants and law firms, but one of our most significant challenges is raising funds NEWSLETTER? (or continued sponsorships) to ensure that the Group can achieve its goals moving forward. We have several types of sponsorships. Our education events are always sponsored so that our members can attend,S and learn, without EN D U S Aany N cost. E M Others A I L have A T made financial contributions by providing funds that we utilize for our operating expenses. We recognize our sponsors at events, NE W on SL E website. T T E R Social @RE UND E Tour R 4 participation 0SG in our Newsletter, and our events and can also be sponsored, and we would be happy to discuss other opportunities with you.

We look forward to your contributions in order to continue to make the U.S. Reinsurance Under 40s Group a cornerstone for ambitious professionals looking to expand their knowledge base and relationships within the (re)insurance industry.

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THE TERRORISM RISK INSURANCE ACT WHERE IT STANDS

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-retary of Homeland Security into their business operations.

Report on Terrorism Risk Insurance

The TRIA Reauthorization Act of 2007 requires the PWGFM to issue a report in 2013 on the long-term availability and affordability of insurance for terrorism risk. The PWGFM previously issued reports on terrorism risk insurance in 2006 and 2010. The FIO is charged with drafting the 2013 terrorism risk insurance report. The FIO has asked for comments on many issues including the effects of the termination of TRIA, take-up rates, suggested changes for any future programs, availability of reinsurance and consideration of additional risks. Specifically, FIO would like commenters to: (1) Explain in detail any and all possible ramifications from the termination of the Terrorism Risk Insurance Program (the Program) on December 31, 2014, including any available evidence to support the predicted result, regarding: (a) The availability and affordability of insurance for terrorism risk in the U.S. generally; (b) The availability and affordability of insurance for terrorism risk in the U.S. specifically by: line of business, geographic location, including the rating tiers defined by the Insurance Services Office, Inc. and other relevant characteristics; and (c) Additional specific effects on commerce in the U.S. (2) Explain in detail any revisions or modifications to the Program, if it were to continue beyond December 31, 2014, that would promote the availability and affordability of terrorism insurance, including any accompanying challenges that might arise from any proposed revisions or modifications to the Program. All views regarding the appropriate role of the federal government in supporting the availability and affordability of insurance for terrorism risk are welcome. (3) Explain the insurance industrys ability to model, quantify, and underwrite terrorism risk, and the resulting impact of such analysis on the availability and affordability of terrorism insurance, including an examination of the price (by line of business, location of risk and other relevant characteristics) and coverage options for terrorism insurance. (4) Explain, with supporting information where available, any additional insurance market considerations that could impact the long-term availability and affordability of terrorism insurance (e.g. implications for coverage of insurance for nuclear, biological, chemical and radiological acts of terrorism; cyber acts of terrorism; and terrorism in workers' compensation policies). (5) Explain in general the demand (or take-up) of terrorism insurance and provide specific data and information, where available, regarding the take-up rate by line of business, location of the risk and other relevant characteristics. (6) Explain in detail the long-term availability and affordability of private reinsurance for terrorism risk. Analyze, with supporting information, the impact of the Program, and any changes to the Program, on the private reinsurance market for terrorism risk, including any accompanying challenges that might arise from revisions or modifications to the Program. (7) Describe any other developments, considerations or market issues that might affect the long-term availability and affordability of terrorism risk insurance.

What happens next?

The fate of TRIA is currently unknowable. All of the introduced bills are currently under consideration by Congressional committees. Later this year, the FIO, which is tasked under the Dodd-Frank Act to assist the Treasury Secretary in administering the Program, is scheduled to release a report on the long-term availability and affordability of insurance for terrorism risk. The report will undoubtedly influence TRIA debate. Scott G. Paris is an Associate with the Law Firm of Nelson Levine de Luca & Hamilton

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Maintaining a competitive edge in the current reinsurance market is a challenge. Re Under 40s asked Michael McGavick, CEO of XL Group, to weigh in on his views regarding the current competitive landscape. We thank Mr. McGavick for his valuable insight and willingness to contribute to the Re Under 40s newsletter.

INTERVIEW WITH MICHAEL MCGAVICK, CEO OF XL GROUP

1. In what markets/products do you see current opportunities for growth? 4. What, in your mind, is the key to turning new business into repeat business in the re/insurance market?

Growth is a tough word in the reinsurance sector right now. The steady rate recovery were seeing in the primary market has been slower to develop in reinsurance and that makes innovative, tailored solutions for clients where providers can demonstrate their underwriting talent and insight all the more critical. So, in addition to securing the right rates for our reinsurance treaties we continue to see an important role for smart facultative coverage where we can really work with our client and broker partners to leverage our deep understandings of the market and their risk needs. 2.

If a client or broker comes to a company simply in search of a spare balance sheet, that provider can always be replaced, and often at better terms. Demonstrating added value for a client, contributing to their success in ways they cant anticipate, is how you create a sticky and long-lasting relationship. 5. If television aired a special called A Day in the Life of Michael McGavick, what would viewers see as it relates to your day-to -day work?

If you were to select an emerging market or product that is Being the CEO of a global company, the special might be more likely to have a significant impact on the re/insurance indus- akin to a travel log of international conference rooms as I have the try, what market or product would you choose? great pleasure of spending many days on-the-road, meeting with our teams across the world. But, most surprising to people outside The convergence of reinsurance and sources of third- party capital the industry, might be the degree of difference in each day and the have made a significant impact particularly in the last two years variety of challenges and new ideas we confront day-in and out. where weve seen what was generally an after event trend of new Being in a sector that literally touches most every other industry in capital sources flooding the market turn to a growing permanent the world, you never quite know what each day will bring. Of fixture of the sector. Along with the use of advanced analytics and course, for those of us in the industry, we know this and its exactly models, this trend is likely to significantly change what we think of what gets us up in the morning. as traditional reinsurance underwriting. Its easy to feel threatened by this development, but for those who harness the trend to their 6. What steps have you taken in your career that helped you the advantage, there is also tremendous opportunity. most to get to where you are now? 3. Based on your experience, what do companies and/or individ- I learned two important lessons early on that have helped me treuals need to do to remain competitive in your industry? mendously question your assumptions regularly and because work is hard, do something you enjoy. Ive tried to rely on those The increasing size of companies and the rapid pace of change two lessons as guidance. Its what first led me to the (re)insurance mean that insurance, traditionally an industry that has been slower industry and happily, following those lessons led me to XL. to innovate, faces a relevance vulnerability and is at risk of participating less in the modern, technology driven today. Reversing this 7. Do you have any advice for young professionals rising in the vulnerability requires a renewed focus on innovation in the (re) insurance and reinsurance industry? insurance industry. We have to continually challenge our comfortable assumptions, our traditions of operating and what has been First, you cant underestimate the long-term work and life benefit generally successful, and be willing to take appropriate risks in of having instrumental mentors and role models. Find those your support of our clients. And we have to concentrate our industry trust and admire and put yourself in-front of them, regularly. Sectalent on pushing the sector forward, even when that means conond, study those you consider to be strong leaders. Ask yourself centration on promising, but potentially not-yet profitable portions why their style of leadership works and figure-out how to emulate of our businesses. it, question it, and make it your own. Third, focus on your ability to communicate. Youll find clear, powerful communications is at the heart of most every significant success.

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This past April, a group of Re Under 40s members traveled to Zurich, Switzerland and Munich, Germany, for our second Tour. The Tour presented a fantastic experience for all of the participants who attended various meetings with insurers, reinsurers, law firms, brokers and various industry groups. In addition, the Tour Group enjoyed a very interesting tour of Zurich that focused on the citys financial history of and enjoyed the Little Sister of Oktoberfest while in Munich. The Tour provided an opportunity to learn about two important European insurance markets as well as industry trends, and meet in person our European counterparts who we often deal with on the phone and email. The Group is in Thank You to Our Hosts! the process of finalizing the 2013 Tour Report, which will be available on our website when complete. Our Tour Chairs are now planning our third Tour. The location and timing of the Tour is still to be determined, but we plan to visit with a diverse group of industry members similar to what we have done in the past. We believe that is it important for us, as the next generation of industry leaders, to understand the underpinnings of the global insurance markets.

The following companies presented on a variety of topics that broadened our understanding of the global (re)insurance marketplace:
Tokio Millennium: European Modeling TransRe: Casualty Trends Zurich: Reinsurance Strategy, Market Over-

view, Future of Reinsurance

Aspen Insurance: Aspen Activities, Target

Markets, LOB's, etc.

Insurance Institute of Switzerland: Supply

Chain Risks, Risk Management, Insurance Training erty, Casualty, Agriculture and Credit and Surety

Aspen Re: Activity in Europe including Prop-

Partner Re: Marine and Offshore Energy AXIS Re: Zurich Marketplace, Risk Manage-

ment and Claims

Guy Carpenter: Regulatory Environment,

Solvency II and Other Modeling Issues and Trends

Willis Re: Natural Catastrophe in Germany Munich Re: Solvency II, Euro Crisis and

Global Warming
Noerr Law Firm: Claims Issues, Infor-

mation Duties of Cedants, German Reinsurance Law

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RE EDUCATION
Re Under 40s recently held an educational event at BNY Mellons offices, which included a presentation by John Bender, President and COO of Allied World, who gave an excellent speech and hit on several of the core matters of importance to the Re Under 40s group.

BNY was a great sponsor and provided an excellent space... very modern, very open, and at the same time very intimate.
- Sean Ramlal, Education Co-Chair

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CHICAGO
August 19th, Rockit Bar & Grill October 24th, Rockit Bar & Grill

NEW YORK
August 6th, Frying Pan October 16th, Towers Watson

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Thank you to our editors:

Kelly Nickerson, FTI Consulting Michael Kurtis, Nelson Levine de Luca & Hamilton

VISIT US ON THE WEB @

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U.S. RE UNDER 40S BOARD MEMBERS

PresidentRobert DiUbaldo Vice PresentDouglas Sifert TreasurerRobert Cummings SecretaryAmanda Lyons Education Co-ChairNicholas Scott Education Co-ChairSean Ramlal Fundraising Co-ChairBrian Green Fundraising Co-ChairChris Cocuzzo

Membership & Communication ChairLizzie Edelstein Newsletter Co-ChairMichael Kurtis Newsletter Co-ChairKelly Nickerson Social Co-ChairMichelle Catalano Social Co-ChairMarln Ortega Technology ChairNicholas DiMuzio Tour Co-ChairBlake Berman Tour Co-ChairWill Jacob