Trenwick in Deal with Chubb Re, Begins Audit Study of Reserves

October 28, 2002

Bermuda-based Trenwick Group announced that its subsidiary, Trenwick America Reinsurance Corp., has entered into an underwriting facility with Chubb Re, Inc., a subsidiary of The Chubb Corporation. Trenwick also said that it was undertaking a review of its reserves for loss and loss adjustment expenses at each of its operating subsidiaries.

The agreement with Chubb Re gives Trenwick the opportunity to underwrite up to $400 million of U.S. reinsurance business on its behalf in the remainder of 2002 and 2003. “Chubb Re will retain final underwriting authority and claims authority with respect to all business generated through the underwriting facility,” said the bulletin, which will be “in addition to Chubb Re’s current underwritings.”

The companies will divide profits on facility generated business with Trenwick receiving two-thirds and Chubb Re one-third. In addition Chubb Re will receive a 5 percent “fronting fee” on two-thirds of the business written through the underwriting facility.

Trenwick has also agreed to reinsure Chubb Re “for 100% of the losses incurred under the underwriting facility in excess of the premiums collected and investment income earned in the underwriting facility.” To implement this provision Trenwick agreed that all premiums collected from the facility shall be paid to Chubb Re, and it will also post a $50 million security deposit.

Stephen H. Binet, President and Chief Executive Officer of Trenwick America Reinsurance Corporation, stated, “We are enthused about establishing a relationship with Chubb Re that enables Trenwick to continue to serve our longstanding clients and fully participate in the current robust reinsurance market.”

John Berger, President and Chief Executive Officer of Chubb Re, stated, “This is a very good deal for both parties. Over Trenwick’s history, their United States treaty operation has developed a very loyal following on a book of business which is complementary to the business done by Chubb Re. We see this as an opportunity to participate in Trenwick’s business at an opportune time and will have the benefit of receiving a fronting fee and protection from a secured stop loss contract.”

In an apparently unrelated decision Trenwick announced that it has engaged independent actuaries to review of its loss and loss adjustment expenses reserves at each of its operating subsidiaries. It said the study would take between 60 and 90 days to complete, and that it would “record any appropriate adjustments to its reserves based upon the information provided by the reserve study in its reported results for the fourth quarter of 2002.”

W. Marston Becker, Trenwick’s Acting Chairman and Acting CEO, stated, “The underwriting facility and the reserve review are two important steps towards improving Trenwick’s position with its clients, investors and rating agencies. We will continue to proactively address the issues facing Trenwick and strive to maintain the levels of customer service and innovative thinking for which the company has historically been known.”

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