Swiss Re Panel Sees Modest Economic Growth, Continuing Hard Market

December 11, 2002

Swiss Re’s third annual “Economic and Insurance Industry Review and Outlook” was held yesterday in New York City. The meeting featured a panel discussion between Swiss Re economists, investment professionals and industry experts, who analyzed key data for 2002 and unveiled their 2003 forecasts.

Speakers included Chris Stroup, CEO, Swiss Re Life & Health America, Inc.; Andreas Beerli, CEO, Swiss Re Americas Division; Andre Moutenot, Executive Vice President, Swiss Re Asset Management; Kurt Karl, Chief Economist, Swiss Re Economic Research and Consulting, and Thomas Holzheu, Senior Economist, Swiss Re Economic Research and Consulting.

The company’s Press Bulletin singled out the following “key findings and observations” as among the most significant:

Chris Stroup: “The key to both surviving — and thriving — in the life reinsurance market can be summed up in two words: capital and commitment. I firmly believe that ceding companies will seek long-term relationships with highly rated companies that are fully committed to the life reinsurance business.”

Andreas Beerli: “Restoring profitability will come from skillful underwriting, adequate pricing, intensified risk research and controlled exposures — in other words, getting back to basics. For the industry to regain its collective health, getting the combined ratio of all lines under 100 percent is paramount. That figure can be reached through better identifying perils, restricting covers and assessing the correlations among lines of business, assets and liabilities.”

Andre Moutenot: “The ebb and flow between consumption and production suggests a modest economic recovery with little possibility of a tilt towards a deflationary spiral. Accordingly, we anticipate an upward drift to interest rates during calendar year 2003 with the yield curve expected to flatten as the FOMC moves from an accommodative stance to neutral and ultimately a slight tighter bias.”

Kurt Karl: “Monetary policy has been eased substantially and that will continue to have an impact next year. The US government will be increasing spending on defense and security, and deficit spending will boost short-term economic growth. Hence, the probability in 2003 of growth of more than 3.5 percent is about 20 percent.”

Thomas Holzheu: “Global capital funds of the property/casualty insurers declined approximately USD 180 billion — or 25 percent — since their historical peak in early 2000. Thus the volatile capital markets continue to reinforce the hardening of the market, which is expected to last longer than previous cycles, due to both the global shortage of quality capital along with increased risk exposures.”

All presentations from the event, along with information about the speakers and other relevant documents/publications, are available on www.swissre.com. A similar event is scheduled to be held today in London.

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