STRIMA CONFERENCE

September 19, 2011

Edward J. RyanVice President Reinsurance Division, ClaimsMunich Reinsurance America, Inc.

Overview and Objectives

Introduction to Reinsurance

Property Per Risk Reinsurance

Catastrophe Reinsurance

Reinsurance vs. Primary/Excess Insurance

Right To Associate vs. Obligation to Investigate

Follow the Fortunes

“Lead” Carrier Concept

Method of Dispute Resolution

Captives

Overview and Objectives

Adjustment Process and Potential Issues

Named Adjusters

Vendors and Their Purposes

Communication

Coverage Issues

Payments

Per Risk Treaty Clauses and Concepts

Property Per Risk Reinsurance

Definition of Risk

Ceding Company as Sole Judge of What Constitutes Risk

Obligation to Cede Consistent With Underwriting

Per Occurrence Limits

Loss Notices and Reporting

Company Obligation to Report “Promptly”

Property Loss Reporting Criteria

Property vs. Casualty Criteria

Per Risk Treaty Clauses and Concepts

Opportunity To Associate

It is understood that when so requested the Company will afford the Reinsurer an opportunity to be associated with the Company at the expense of the Reinsurer in the defense or control of any claim or suit or proceeding involving this reinsurance

Usually found under the Claims Clause

Arbitration Clause

Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators

Catastrophe Treaty Features

Catastrophe Treaty Features

Two Risk Warranty

It is warranted that two or more separate risks must be involved in and contribute to the same loss occurrence before any claim may be made under this Agreement for the said loss occurrence. The Company shall be the sole judge of what constitutes one risk.

Definition of Loss Occurrence

The term "loss occurrence" shall mean the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event.

Company election for date “loss occurrence” commences

Hours Clauses by Peril

Catastrophe Treaty Features

Ultimate Net Loss

shall mean the sum actually paid by the Company in settlement of losses for which it is liable, including Allocated Loss Adjustment Expenses, as defined below…

May include Extra Contractual Obligations and/or Ex-Gratia

Should provide for deductions of all recoveries, including all other reinsurance

State funds (FHCF) considered as inuring reinsurance

Allocated Loss Adjustment Expenses as defined

Reinsurance vs. Primary/Excess Claim Handling

Reinsurer

No duty to investigate underlying claim – right to associate

Follow the Fortunes

Primary Carrier

Obligation to conduct Good Faith investigation

Requirement for their own reinsurance recovery

Expenses

Excess Carrier

Duty to investigate when primary exhausted

Right to make separate coverage determination

Reinsurance vs. Primary/Excess Claim Handling

“Lead” Carrier Concept

Custom and practice in London Market

Not binding on US Carriers, absent specific policy language

Method of Dispute Resolution

Arbitration clause in reinsurance treaty

Appraisal

Suit

Alternate Dispute Resolution

Adjustment Process and Potential Issues

Named Adjusters

Program adjuster vs. co-adjuster

Vendors

Construction consultants

Engineers

Cause of loss verification and/or repairability

Code expertise

Accountants

Salvors

Mold Remediation

Counsel

Adjustment Process and Potential Issues

Communication

Team meetings

Joint inspections

Coverage Issues

Insured’s duties in event of loss

Protect property from further loss or damage

Furnish complete inventory of lost, damaged and destroyed property showing in detail the quantities, costs, actual cash value, replacement cost and amount of loss claimed

Submit signed and sworn proof of loss

Adjustment Process and Potential Issues

Coverage Issues – continued

Non-concurrent terms

Flood vs. Wind reinsurance example

Sub-limits

Deductibles

Percentage of TIV

Hurricane deductibles

Reservation of Rights

Adjustment Process and Potential Issues

Payments

Advance payments

Extra Expense

Undisputed damages

Bid Process

Emergency provisions

Payees and Banking Instructions