Swiss Re, Tokio Marine Conclude $450 Million Cat Swap

August 17, 2001

A.M. Best Co. affirmed the “A” (Excellent) rating of Lloyd’s and removed its negative outlook. This negative outlook was affirmed on June 28, 2001to reflect A.M. Best’s concerns over the accelerating rate of asbestos-related claims, which could lead to a significant shortfall in Equitas’ reserves.

On July 20, 2001 Equitas announced its results for the year ending March 2001, which resulted in a GBP 84 million decrease in accumulated surplus to GBP 700 million and a decrease in solvency — measured by accumulated surplus as a percentage of net claims outstanding — to 9.5 percent from 11.2 percent.

The negative outlook has been removed because A.M. Best’s assessment of these results and scenario stress testing undertaken on key variables have led us to believe that Lloyd’s is unlikely to be adversely affected by Equitas in the foreseeable future. A.M. Best’s modeling also provides comfort that Lloyd’s has the systems in place to manage any possible shortfall at Equitas should the current expectations of asbestos claims development be exceeded beyond the capacity of its balance sheet.

Nevertheless, we believe it will be many years before it is possible to determine whether Equitas can adequately run-off its liabilities. The current uncertainty over Equitas’ reserve development will remain a long-term factor in A.M. Best’s rating analysis. If Equitas were to become insolvent, Lloyd’s could be put under pressure by regulators to meet any shortfall in Equitas’ reserves through a drawdown of the existing Premiums Trust Funds. The Premiums Trust Funds and Funds at Lloyd’s of members who underwrote prior to 1993 would also be exposed.

The current rating reflects Lloyd’s excellent financial strength, strong business profile, strengthening of regulatory control and prospective improvements in operating performance. The rating applies to the business underwritten by all active syndicates, and to all policies underwritten since the 1993 year of account. The rating does not apply to the obligations of Equitas Ltd.

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